Where city rates bills are headed

The Christchurch City Council’s statement announcing a 5.5 per cent rate rise from July 1 contained only two numbers representing actual costs for ratepayers. One was the amount the ratepayer owning an average Christchurch house would pay. This was a reassuringly low ‘‘extra $2.64 a week’’. The other was how much people would pay for the levy to fund the council’s $10 million contribution towards the Christ Church Cathedral rebuild – also a small $7.19 a year for 10 years.

So, that’s all right then. The average ratepayer may be able to tighten her or his belt and wear the extra costs which, after all, total less than the price of a cup of coffee a week.

But a closer reading of the council’s Long-Term Plan, which will soon go out for public consultation, reveals long-term costs that run into thousands of dollars within its 10-year life.

The average ratepayer currently pays about $2500 a year in rates. After July 1 this is expected to rise to $2636 – an increase of $137.52. This divided by 52 confirms the council’s claim that the rise will be a mere $2.64 each week.

But the long-term plan proposes that the average rate rise over the next 10 years will be 4.37 per cent. Rate rises compound year on year. This means ratepayers can be expected to be paying 53.4 per cent more than now by the

2027-28 financial year. The average ratepayer would then be looking at rates of $3828 a year – $1332 above the current level.

A counter-argument may be that a dollar in 2027 will be worth less than now, and that is correct. But the council’s projected rate increases will far outstrip inflation.

The Reserve Bank target is to hold inflation at between 1 and 3 per cent a year, and ideally about 2 per cent. This would suggest that in an ideal parallel universe, in which Christchurch rates rise only in step with the consumer price index, we might expect a 22 per cent rise over 10 years. The average rates bill would rise from

$2496 to $3042.

The Long-Term Plan lays out the council’s rationale. It can be boiled down essentially to the fact that it is trying to steer a middle course between the proverbial rock and hard place.

A lower rate-rise option of 3.6 per cent a year – still significantly above inflation – would lead to rapidly deteriorating infrastructure, particularly for sewerage, wastewater drains and roads. These are the things that were under-resourced in the central Government’s trumpeted post-quake rebuild.

A higher rate rise option would involve increases of

6.2 per cent a year – sufficient to push the average rates bill up 82 per cent to $4555 by 2027. This would reduce flood risk to pre-quake levels, and shorten the decades required to bring roads back to a proper New Zealand standard.

This is the real challenge facing the city – it needs to spend $4 billion on infrastructure, much of it because of the quakes. The cathedral levy is a mere distraction. And the council has been too reassuring in its statement that the rise is only $2.64 a week.

The consultation process will open shortly. If any of this bothers you, now is the time to have your say.