Massive Rates Rise: Yet Again

In a study by the Grey Power Federation of NZ retirees, rates were the second biggest financial concern after utilities. So, what is happening with Hamilton Rates? If you have been reading the Waikato Times in recent weeks, you would have seen two very informative articles by Stephen Ward1&2. When reading them your heart probably sank. The first states that the council is looking to raise rates by at least 10% over each of the next three years1. The second notes that Hamilton Council’s chief executive apparently hinted at rates for a middle-of the-road home going up by as much as 18% for each of the next three years2. Given a median rate of around $2800 this represents an increase of over $500 in the first year and, given compounding rates bills, around $595 in year two, and over $700 in year three. At 18%, the median rates bill will rise to around $4600 after three years, an increase of over $1800.

Now apparently Hamilton rates are comparably low in relation to some other cities, such as Wellington, but you must also take into account Waikato Regional Rates. Essentially, total median rates in Hamilton will be well over $100 each and every week if this 18% increase goes ahead. Of course, this 18% figure may just be priming. Priming is where you prime people with a very high figure and then we are all meant to feel better when the actual % comes in lower. This may sound cynical, but in Hamilton there have been occasions of very large initial rates proposals that are then reduced to just large rates increases.

Irrespective of these rates rises, Hamilton city is in major financial strife. Debts have ballooned and Standards and Poor’s (S&P) rating agency has recently signalled that the city’s long term credit rating may move from stable to negative3. The implications are that we face financial instability. The advantage the HCC has is that at the end of the day any rates increases needed to pay that debt are covered, as our homes act as ultimate collateral.

So, what would either an 18% or a 10% rate increase mean for Hamiltonians? In a country facing a cost-of-living crisis the impacts for many will be dire. Whether it is the additional $1800 from an 18% increase, or approximately $925 for a 10% increase, this is a huge amount of money for those on low fixed incomes. When your after-tax pension is just less than $500 a week, annual rates increases of $1800 are the better part of a month’s total income, and an annual rates bill of over $5000 is almost two and a half months of your total after tax pension. This literally represents the difference between turning your heater on in winter, or eating that extra meal each day. You cannot escape these costs, as if you are renting, rates are inevitably passed on.

An additional $20 to $35 a week may not seem much if you are a high paid official, such as Hamilton council’s CEO, who according to the council news site had a starting salary package (including a vehicle and Council’s Kiwisaver Contribution) of $370,800 a year back in 20214. However, for a single pensioner receiving less than 10% of that (approx. $30k pre-tax), it is a huge expense. Rather than a $5000 rates bill representing two and a half months of an after-tax pension, for someone with a gross income of around $370,000 (which roughly equates to an after tax income of around $240,000), $5000 represents just over one week’s salary.

This highlights perhaps a bigger issue in NZ, the fact that while it was well within living memory that the politicians that set taxes earned around the same as schoolteachers, the pay gap has exploded to massive proportions. How can a person receiving a package worth 10x or more of a pensioner’s income, understand their situation?

So what is the solution? Well firstly it is very important that as Hamiltonian’s we are aware of council decisions and their implications on our everyday lives. Unfortunately, in my view, a lot of the information we get on council policy does not contain sufficient financial information to make an informed decision. We must ask our councillors to provide it. In addition, as mentioned in a number of articles, local councils around NZ seem to be building gold plated infrastructure to deal with issues such as, three waters5, cycleways6, stadiums7 or pumped hydrogen schemes8… Ratepayers must ask councils tighten their belts, as they are having to do, and start providing services without any superfluous tinsel. Legislative change is probably needed to ensure that every dollar spent is open to greater scrutiny and not hidden behind the veil of ‘commercial sensitivity’. It is your money after all. In sum, we need more transparency in order to be able to hold elected and public officials to account for their decisions.

In addition, there needs to be a debate about % salary increases. Perhaps salaries of high paid officials should also be a % of those on low fixed incomes such as pensioners, rather than on their current salary. If a 10% rate rise leads a public official to receive a 10% pay increase, then if their salary is $400,000 they get an extra $40,000. In stark contrast for a pensioner on the current pension of approx. $30,000 a 10% increase is only $3000. Percentages are wonderful for those on the top as they make the gap just get bigger and bigger. We need to make public officials start to care about the money they are spending as if it were their own and had a material effect on them. If we do not, the ever-decreasing number of kiwi’s who are fortunate enough to own their own homes may soon find they are rated out of them and unable to rent…

1 Stephan Ward, Waikato Times, Oct 17th 2023, “City signals 10%-plus rates rises for at least next three years”, https://www.waikatotimes.co.nz/a/nz-news/350092373/city-signals-10-plus-rates-rises-least-next-three-years

2 Stephan Ward, Waikato Times, Oct 18th 2023, “City rate rises ‘well over’ 10% suggested”, https://www.waikatotimes.co.nz/a/nz-news/350093186/city-rate-rises-well-over-10-suggested#:~:text=A%20senior%20city%20councillor%20warns,for%20the%20next%20three%20years.

3Hamilton City Council Press Release, 26th Sep 2023, Scoop Regional News, “Council Maintains Stable Credit Rating, But Economic Challenges Are Ahead” https://www.scoop.co.nz/stories/AK2309/S00508/council-maintains-stable-credit-rating-but-economic-challenges-are-ahead.htm

4 Office of the Mayor News Release, 2nd Sep 2021, “City Appoints New Chief Executive”, https://hamilton.govt.nz/your-council/news/community-environment/city-appoints-new-chief-executive),

5 Johnathan Milne, 2nd Mar, 2023, Newsroom, “Credit Agency Warns NZers are Blind to ‘Astronomical’ Cost of Fixing Three Waters”, https://www.newsroom.co.nz/credit-agency-warns-nzers-are-blind-to-astronomical-costs-of-fixing-three-waters

6 Tina Law, 9th Sep 2023, The Press, “Councillors ‘Shocked and Surprised’ at Move to Scrap Cycleway Funding”, https://www.thepress.co.nz/a/nz-news/350067521/councillors-shocked-and-surprised-move-scrap-cycleway-funding

7 Steven Watson, 4th June 2022, Stuff.co.nz, “Why the Christchurch Stadium Budget Exploded in Just a Matter of Months”, https://www.stuff.co.nz/national/explained/128850416/why-the-christchurch-stadium-budget-exploded-in-just-a-matter-of-months

8 Tom Pullar, 9th August 2023, Stuff.co.nz, “Government Narrows Down Alternatives to $28b Lake Onslow Power Scheme”, https://www.stuff.co.nz/business/132712441/government-narrows-down-alternatives-to-28b-lake-onslow-power-scheme