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Property revaluations for council rates must be reformed

Property revaluations for council rates must be reformed.

Opportunity to bring controls on rating value changes and more equitable level of annual rates increase

Early indications of the latest 3-year revaluation for council rating purposes show that once again there are going to be winners and losers when next year’s rates are set.

Despite loud noises about rates reform from Auckland’s Mayor and other councils, and promises of action from Local Government New Zealand, nothing looks like changing, and the property revaluation exercises every three years only increases the level of unfairness in the current system.

Most councils receive more than 60% of their operating costs from rates and water rates, despite warnings that such a level of rates income will soon make rates unaffordable for many ratepayers.

Reform is needed and soon, and a start should be made on the revaluation system which causes rates to rise disproportionally and affecting ratepayers who have had no or little change in their financial circumstances.

In any reform of local government funding it is inevitable and generally accepted, that some form of property tax will form part of a total funding package.

With that in mind I suggest a change in the valuation process, initially for residential properties.

Call the new system Council Tax Value.

· All residential properties would be given a Council Tax Value [CTV] as at the latest revaluation date.
· Each year all values would be increased by 2% on the previous year’s value.
· Values of individual homes would also be changed when they were sold and the actual sales price would become the new CTV.
· The CTV would also be changed if additions or alterations requiring a building and/or resource consent were carried.
· The change would generally be upward to reflect increase in value from the additions, but would apply if property was subdivided and value reduced as a consequence. In that event the new property created would be given an initial CTV.
· This process would remove the requirement for tri-ennial revaluations, and would avoid the swings in Rating Valuations under the present system which leads to, often significant, changes in rating incidence on individual properties.
· Under the CTV system most residential ratepayers would face percentage rate increases very close to the average.
· This would result in a more stable valuation environment without the three-yearly bout of stress faced by many ratepayers who appear bewildered by the justification for changes to their rates bill.
· It would be imperative under a CTV system that Real Estate Agents were prohibited from using the CTV as a guide to market value. [Real Estate agents amass their own sales statistics for use in marketing and selling.]


The CTV system also offers an opportunity to set limits to rate rises by setting a percentage of the CTV as the fixed annual increase a council can levy for a specified period.

This is similar to the so-called Proposition 13 arrangement in California.

For example a levy of 0.3% on a property with a CTV of $450,000 would produce $1350. The following year the annual 2% increase on CTV would add $9000 to the value and the tax would increase to $1377.

This type of approach could be used to reduce the reliance of councils on rates and concentrate everyone’s efforts to finding alternative funding sources.


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