Central city rates questioned
Are businesses getting enough for their rates in a central city still being rebuilt?
or every one dollar a Christchurch homeowner pays as city council rates, the owner of business premises pays $1.66.
With the central city still getting on its feet, the business sector is calling for more help from council in return for those extra dollars.
Several landlords are known to be reducing rents or providing other financial help for tenants but will not say so publicly. Small eating places and shops have changed hands frequently in some areas.
A new city council committee headed by Cr James Gough will focus on the central city and look at such topics as possible council incentives or relief from costs for both businesses and residents.
‘‘I think people don’t realise a lot of the costs involved for businesses,’’ says Annabel Parrant, owner of Unichem Pharmacy on Cashel St and new chairperson of the Central City Business Association (CCBA).
‘‘There’s a lot of compliance costs, especially when you’re starting from scratch. My insurance is huge. A rates decrease would certainly be helpful.’’
Like others in the central city, Parrant is battling changing spending and shopping patterns plus uneven foot traffic and quiet winters.
‘‘It’s hard, especially with retail, everywhere is really, really hard. With bricks and mortar retail, there’s lots of online competition.’’ she says.
‘‘It’s really really important that the central city is done right.’’
Nick Hunt, landlord of the BNZ Centre and Briscoes central city premises, says while ‘‘anything would be welcome’’, the sort of help central city businesses need is good access and parking.
‘‘Costs are too high – some of the businesses in the city are really struggling.’’
Hunt points out that while offices are leasing well, many organisations only move their staff into central city offices because the staff like the shops, cafes and bars.
He agrees with Parrant that many of the central city’s problems are down to changes in retailing, with people shopping online and then going to the shops to eat and drink.
Even in the suburban malls, foodcourts are busy while many shops are quiet, he says.
‘‘Retail is changing dramatically so it is very difficult for the small shops to survive. What we used to think were fairly major shops are having trouble as well.
‘‘It’s a difficult world for retailing and it’s not just Christchurch.’’
Shops doing well are those such as gift stores, souvenir shops and book shops that serve tourists or provide an experience, he says. However, he understands the council’s financials and doubts easy answers are available.
‘‘We don’t want the council to go bankrupt which wouldn’t help anybody. We want the stadium and so on and it all has to be paid for.’’ PAYING OUT
All the city’s ratepayers are facing about a 50 per cent increase in rates over the next decade.
In the central city, higher property values compound the effect of the council’s differential rating system. Average central city business rates now range from several thousand dollars for small premises, to $20,000 a year for a medium-sized 250sq m store or cafe, to over $500,000 for a major office building.
Typically, business owners pay their landlord’s rates as part of their operating expenses, known as opex, alongside their rent.
Maureen Taane, owner of gift store Hapa, that has outlets in both Woolston’s The Tannery and a lane off Colombo St, says the central city is difficult for small and establishing businesses.
Even after 20 years in business, she encountered unforeseen hurdles getting going in the central city.
‘‘As experienced as we are, we still ran into some challenges in terms of putting a business into a new building. There’s a raft of fees – fire inspections and bits and pieces that we have to deal with and pay, and some of them were unexpected.’’
Taane believes council could help by providing information, such as signs and maps so shoppers can find what interests them, like a trail of art and craft or gift stores.
Existing Christchurch City Council support for the central city is already provided in the shape of a rebate for development contributions that can otherwise exceed $1 million for a big building project.
And in a new initiative, councilfunded promotional agency ChristchurchNZ is helping the CCBA with money and expertise for marketing and promotion.
Canterbury Employers Chamber of Commerce chief executive Leeann Watson says the central city has good growth, but urges more support.
‘‘Businesses pay a significantly higher proportion of rates than residents, often for not a great deal more. We have to be mindful of increased pressure, particularly in the central city.’’
Watson says with the rebuild slow, businesses have set up in an environment ‘‘different from what was promised in the central city blueprint’’.
‘‘We’ve got to give tourists and everybody else reasons to come into the central city, at least until the convention centre and stadium are ready.’’
Events like the lantern festival are much needed attractions, and information on access and parking are also needed, she says.
‘‘What we are seeing is really good – foot numbers and spending is up but that’s off a low base. We’re heading in the right direction but we need to make sure we don’t take our foot off the gas just yet in terms of support.’’
Restaurant Association figures indicate while spending on eating and drinking is up 1.5 per cent in Canterbury in the past year this increase is well behind other centres, with rises of 4 per cent in
Auckland and 5.8 per cent in Queenstown.
New food and drink places are closing or changing hands almost as fast as they are opening as they balance revenue and costs, the association’s figures show.
The New Zealand Property Council, which represents property owners, says not a lot of clarity exists about how businesses face higher property taxes.
A recent report from Local Government New Zealand said the ‘‘rationale behind rating differentials is not always transparent’’.
‘‘We’d like to see rating differentials phased out and replaced with an alternative system, something like a targeted rate,’’ says Property Council spokeswoman Kelly Taylor.
‘‘A targeted rate would ringfence the money for a particular area. If there was a targeted rate for the city, businesses could see that was spent in a particular area rather than going into the general pool.
‘‘The councils are all short of money so they are all trying to get enough money out of rates.
‘‘But you can’t just keep putting costs onto businesses. If we keep adding costs and costs to businesses they won’t survive,’’ Taylor says.
‘‘In Christchurch it’s really important to bring people and business back into the city after the earthquakes. If we make costs too high they cannot afford to be there.’’ BUSINESS RATES
Almost half New Zealand’s local councils, and all the main cities charge a differential rating for businesses.
While Christchurch’s business rating differential is 166 per cent, across the country these average 250 per cent, according to the Productivity Commission.
Selwyn district does not charge a business differential, while Waimakariri adds a targeted addon for those in the Kaiapoi and Rangiora town centres.
In this financial year’s rates take, Christchurch’s 12,000 commercial premises are expected to contribute $111m in rates, while its 158,000 residential ratepayers will pay a total of $239m. Rural ratepayers pay the smallest amount per dollar of property value.
In the city council’s budget for this year, 44 per cent of revenue comes from rates. The other main sources of money, in order, are borrowing, fees and charges, cash in reserve, interest and dividends, and grants and subsidies.
Compared with most other councils, Christchurch’s reliance on rates as a contributor to revenue is low. Most councils gather a half to three-quarters of their revenue from rates and for some smaller councils the percentage is between 80 and 90 per cent.