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Hard-Hitting Rates Submission To ARC

RAM media release 20.12.04

Hard-hitting rates submission to ARC

Tonight's Auckland Regional Council meeting will hear a hard-hitting rates policy submission from RAM - Residents Action Movement.

The RAM submission will ask the ARC to reduce home rates to around 2002/03 levels by restoring a realistic business differential.

As well, RAM asks the ARC to convene a Citizen's Assembly on rating policy.

"Measures like a large reduction in home rates, restorating a significant business differential and convening a Citizen's Assembly on rating policy are necessary to not only deliver fairness and democracy to Auckland citizens, but also restore public trust and confidence in the ARC after last year's Rates Revolt," said Grant Morgan, organiser for RAM.

The full RAM submission is reprinted below.

RAM submission on ARC rating policy December 2004

After the introduction of the Local Government Act 2002, the ARC began direct billing for rates.

When local councils previously collected ARC rates, they had incorporated a range of business differentials. As we all know, the ARC decided in 2003 to abolish all differentials.

Home rate increases in 2003 went as high as 650%, and were typically between 100% and 300%.

Time and again the ARC told us that these astronomical rises were for an increase in transport funding. But that was such a small part of the truth that it amounted to a political lie.

Dissenting ARC councillor Sandra Coney (Herald 18.07.03) blamed "the shifting of the rates burden from business to residents". She used her own bill to demonstrate that five-sevenths of the increase resulted from the no differential policy ­ not increased transport funding.

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Buried in a July 2003 ARC pamphlet on rating changes was this one little sentence: "And there will be no differentials." Nothing at all was said about the ramifications of that decision. Such attempts to hide the issue and mislead the public badly eroded public trust in the ARC.

Only in late 2004 did the previous ARC finally admit the truth. Page 127 of the ARC's 2004-14 Long-Term Council Community Plan stated: "For the vast majority of residential ratepayers the [2003-04] rate increase was due to the removal of business differentials..."

Shifting the burden from business to residential ratepayers resulted in a huge drop in the contribution from the corporate sector. Businesses already had the differential built into their cost structures. But they happily pocketed this council handout, which came at a time of high profitability, without any murmer of disquiet at the extra hardships shoved onto grassroots homeowners.

Barry Wilson, president of the Auckland Council for Civil Liberties, said the ARC failed to understand the hardship the rate rises put on low income people. He spoke strongly against axing the business differential. (Herald 8.8.03.) Many other community representatives expressed similar views.

Business is the main beneficiary of ARC funding. Most ARC rates are used for public transport, which is essential to business in terms of getting their staff to work and providing services to ease congestion on the roads for commercial vehicles. At times of low business activity, Auckland's roads have light traffic volumes. So it's fair that business should pay a rates differential.

Most people see it this way. When the ARC axed business differentials in 2003, there was a massive public backlash. 100,000 ratepayers, one-quarter of all homeowners, boycotted their rates for a period. Some continue to do so to this day.

In mid-2004, the previous ARC narrowly voted for a tiny 1.5 business differential. But the GST refunds and tax rebates that business claims on its rates outweighs the derisory figure of 1.5. This policy of smoke and mirrors was motivated by a desperate bid to buy votes ­ which largely failed.

The most politically significant organisation to arise from the Rates Revolt was RAM ­ Residents Action Movement. Symbolically, the election of RAM's Robyn Hughes to the ARC ejected none other than previous chair Gwen Bull.

And so we come to the present.

The newly-elected ARC has a window of opportunity to put things right and regain the trust and respect of the people.

On the front page of a recent ARC newsletter, new chair Mike Lee said that he had "heard the people".

In RAM's opinion, that means lifting the business differential to a meaningful level which reverses the unfair rating policy introduced in 2003. This single act would win massive popularity for the ARC because it serves the interests of the vast majority of Aucklanders.

Conversely, staying close to the status quo would sap public confidence in the new ARC.

RAM asks the ARC to support these specific rating proposals:

(1) The ARC should foreshadow a realistic business differential that allows home rates to fall to around 2002/03 levels. We know this can only be approximate because of the previous spread of local council differentials, which ranged from 9.35 to 2.4. Somewhere near the mid-point between 9.35 and 2.4 would seem to be a fair compromise.

(2) The ARC should make its opposition known to Uniform Annual General Charges. Like all flat taxes, UAGC's are extremely regressive, hitting the bottom four-fifths much more severely than the top fifth. This has already been clearly detailed in reports by ARC officers.

(3) The ARC should vigorously pursue the government to have GST removed from council rates. A tax on a tax is inherently unfair.

(4) In regards to collecting unpaid rates:

(a) The ARC should NOT request banks and other mortgagees to pay rate debts, which they then recover from homeowners. In popular terms, this is known as "raiding people's bank accounts". The relatively minor debts collected by the ARC in this way would come at the cost of huge public hostility.

(b) In future, the ARC should consider the social and political consequences of their rate collection sanctions, and only use penalties as a very last resort. (In contrast, the previous ARC used penalties as a first resort, which made that council even more unpopular.)

(c) Wherever possible, the ARC should use positive incentives rather than a "big stick" to collect unpaid rates. The best positive incentive would be for the ARC to foreshadow a large drop in home rates by the restoration of a realistic business differential, and ask boycotters to pay up as a act of mutual good faith.

(5) At the start of the 2005 rates consultation process, the ARC should invite the widest possible range of community organisations to a 3-day Citizen's Assembly on rating policy. Involving grassroots people in mass, interactive, democratic discussions will do much to restore popular confidence in the ARC.

RAM requests the opportunity to discuss these proposals in more detail at the February meeting of the ARC Finance Committee and at other ARC rating policy forums.

This RAM submission draws on the RAM Manifesto and detailed input from Robyn Hughes, Grant Morgan, Steve Mountjoy, Len Parker, Ross Southwell and Peter Vaughan.


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