Rates post­pone­ment scheme poorly pub­li­cised

Auckland City Harbour News - - OPINION -

One in four Auck­land homes is see­ing its rates rise by 10 per cent or more.

They’ll be ex­pect­ing some­thing sim­i­lar next year.

And many home­own­ers will start hav­ing to pay ei­ther road-user charges or new per-bin col­lec­tion charges in the com­ing years.

This is the ‘‘steady as she goes’’ rates pol­icy of Len Brown which has swept like a tidal wave of gloom among Auck­land hu­man­ity.

Peo­ple I speak to gen­er­ally splut­ter with ei­ther the im­po­tent rage of the well-to-do sub­urbs, which feel like ‘‘Red Len’’ is es­pe­cially tar­get­ing them, or call foul over the fi­nan­cial pain of the mid­dle and lower-in­come sub­urbs where wages rises have been muted.

I feel for both but not as badly as for se­nior cit­i­zens re­ly­ing on New Zealand Su­per and their in­vest­ments for their in­comes.

They’d be for­given for feel­ing as though Auck­land is done with them and is pric­ing them out.

Be­cause of that I pre­dict that un­less the spend­ing plans of Auck­land Coun­cil are slashed (there’s a whiff of re­bel­lion in the air), there will be a sharp rise in older peo­ple opt­ing to pay their rates from the eq­uity in their homes.

Some are al­ready do­ing it.

Auck­land Coun­cil has a rates post­pone­ment scheme which gets vir­tu­ally no pub­lic­ity.

Other coun­cils have sim­i­lar schemes but not all, so if you are not in the su­per-city bound­aries, you may not have the op­tion.

A call to your lo­cal coun­cil will tell you.

So lit­tle-known is the su­per-city scheme that coun­cil call cen­tre staff don’t know much about it and the in­for­ma­tion on the web­site is pretty limited.

What the scheme does is al­lows peo­ple who own homes to stop pay­ing their rates and in­cur a debt to the coun­cil in­stead. To fund this debt, the coun­cil bor­rows a lit­tle bit more but re­ally it is a drop in the mega-debt ocean the coun­cil now has.

This debt only has to be paid back on the ratepayer’s death, when they sell up their home, when they stop us­ing the home as a res­i­dence or at the date they have agreed with the coun­cil.

There’s a $50 le­gal charge for us­ing the scheme and each year the debt in­curs an in­ter­est charge.

This year it is 2.5 per cent but that can move de­pend­ing on the coun­cil’s cost of bor­row­ing and the cost of run­ning the scheme.

This is a re­verse mort­gage scheme, very much like that of­fered by Heart­land Bank only much, much cheaper be­cause the coun­cil isn’t run­ning it as a for-profit scheme.

De­spite that, fi­nan­cial ad­vice is re­ally needed be­fore opt­ing for it be­cause the in­ter­est on the sum owed com­pounds.

And just be­cause coun­cil bor­row­ing costs are low now, does not mean they al­ways will be.

The scheme is a bit cum­ber­some as you have to ap­ply each year to post­pone your rates ($50 fee each year), and it is only open to those who have 80 per cent or more eq­uity in their own homes.

There’s noth­ing in the coun­cil lit­er­a­ture to speak of it be­ing of par­tic­u­lar use for re­tirees but if rates rises con­tinue the way they are go­ing, then I pre­dict ap­pli­ca­tion num­bers will sky­rocket.

I would also rec­om­mend those who are strug­gling to pay their rates call the coun­cil about whether they qual­ify for a rates re­bate, a tax­payer-funded scheme which pays more than $50 mil­lion a year to help lower-in­come peo­ple pay rates.

The scheme is poorly ad­ver­tised and mas­sively un­der-used.

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