Rate rises = Home sales
Councils are required to present to their ratepayers a proposed long term plan which prioritises in its budget, the services residents and businesses receive now and into the future, paid for by rates levied on the property owners within the council boundaries.
Most councils realise they can’t afford to do what they are currently doing or anything extra, without rates increases on a yearly basis. The councils in effect realise that they are living beyond their current means; in other words they are “trading while insolvent”.
They are only saved from being illegal by the fact that they can and do increase the rates levied on the ratepayers to fund their excesses.
If we did that in the commercial world as a business model, it wouldn’t be long before we would be trading while insolvent and likely end up in jail for doing so.
Councils are required to keep within a debt to revenue ratio and this means is that they can borrow money based on a percentage increase over their current rates income.
Debt-to-revenue ratio is the monthly debt repayment obligations compared to the gross monthly income (before taxes), expressed as a percentage. A good debt-to-income ratio is less than or equal to 36%. Any debt-to-income ratio above 43% is considered to be too much debt.
So who is ultimately responsible for paying the bills for the council spending?
The ratepayers of course!!!!
The people that are hardest hit by regular rate rises are those property owners who are on fixed incomes such as retirees etc. They have no control over any rates increases yet they are required by law to pay any such increases or they risk forfeiting their property to the local authority. Often these increases in rates are the result of the need for further infrastructure development caused by rising population levels which have no direct relevance to the existing ratepayers of the area.
Councils have over the years accepted more and more tasks as being part of their role to provide with many of these originally being part of central governments responsibilities and the councils have grown their empires to accommodate the workloads that go with these roles/tasks.
It is both unfair and undemocratic to expect the ratepayers alone to have to fund much of this when the non-ratepaying citizens get the same benefits without any of the costs. Councils should be required to trim their empires and focus their service delivery on those functions which are in direct relationship to the ratepayers needs.
But what actually happens is that when times get tough financially the council just passes the buck down to the ratepayers by voting for an increase in the rates and the ratepayers don’t have any choice they just have to pay or council can foreclose on their properties.
The elected councilors can either resign or be voted out of office and unless they have deliberately broken the law while in office, they then just disappear and the responsibilities for their decisions rest with their replacements.
In the current economic climate in New Zealand we are rapidly reaching a time where the average ratepayers cannot afford to keep increasing the amount they are paying in rates and we need to seriously look at the system of local government funding or we will face a hugely increased number of property owners looking at foreclosure on their properties by their local authorities for non-payment of rates.
Given the extremely poor performance of most councils, in keeping to their budgets as per their long term plans, it should be part of performance KPI’s that when costs go over the budget such that a rates rise is required then the councilors and council management staff should be held accountable.
I am sure that such a requirement would go a long way towards focusing the bureaucrat’s minds on ensuring that the long term plan requirements are successfully completed on time and within budget.
Given the current predictions for a greatly increased ageing population with a much higher level of retirees in the near future the problem of rate rises affecting those on fixed incomes is only going to increase.
It is now time we looked at what local governments are required to do and what services they are required to provide for the ratepayers and set parameters for the future that are going to be realistic, achievable and based on what is definitely needed as opposed to a lot of services that are nice to have but not necessarily required.