16.4.1 The Funding Mechanisms Available
There are significant areas of publicly owned or Crown land, which either benefit from maintenance of scheme assets or which contribute towards the costs of scheme maintenance, that cannot be rated under current law.
At the present time Council has no arrangement to recover costs from the Roading Authority (Utility). As these costs relate to benefit within the local community, Council policy therefore is to fund these costs from the local community. However, until such time as the local community is able to recover a share of these costs from the Roading Authority, these costs are funded equally from the local community (zone) and Regional community.
Council has a Regional general rate, based on capital value, for collecting revenue to meet the costs of activities that are of public benefit. Council considered that the Regional benefit should be funded from the Regional general rate.
The RPA provides Council with a specific mechanism for rating drainage and river protection, including the only mechanism regional councils currently have for differential rating. Council considers that this differential rating mechanism is appropriate to achieve the funding of Project Watershed.
The RPA gives Council the ability to levy works and services rates. Council considered that works and services rates should be levied for the following:
- Catchment benefit allocation, on a capital value basis
- Zone benefit allocation, on a capital value basis
- Contribution allocation, excluding hydro, over the whole Project Watershed catchment, on a land value basis
- Hydro generator benefit and contribution on a capital value basis.
Council considers that levying the contribution allocation over the whole catchment is, in the circumstances, more practical than levying it on a zone basis or combination of zone and catchment.
In determining the most appropriate basis for each rate Council considered the most appropriate mechanisms from three perspectives. Firstly, the incidence of the rate and the charge to a property owner. Secondly, the analysis of beneficiary and contributor and how best that analysis can be achieved. Finally, the need to ensure a balance between the cost and administration of any rating system and the amount being collected from each ratepayer.
With the proposed rates Council has in general achieved an appropriate balance to all of the above considerations and each ratepayer is being rated at least in an equitable manner given that rates are a tax. In most territorial local authorities (TLA’s) there is some smoothing and the general rate and catchment and zone differentials provide for some of that smoothing.
In determining the base for levying the contributor differential Council considered capital value, capital value with urban/rural differentials, land area or land value as options. In brief the options have the following features:
- Capital value - places a heavy incidence on urban areas, does not correlate to land use or land area that contributes to the need for the expenditure, and perhaps overly weights ability to pay. In summary, it is a simple system but might not be fair and equitable.
- Capital value with urban/rural differentials would reflect contribution more closely but likely to be more complex to develop and implement. In summary, it would be fair and equitable but is unlikely to be practical.
- Land area - would reflect contribution more accurately and align funding with cost drivers. However it would not reflect the nature or use of the land and would be difficult to administer. In summary, it would be fair and equitable but not practical.
- Land value - reflects the value of services provided by the schemes that protect and enhance the land. Reflects landowner’s contribution to need more accurately than capital value, would provide a better balance between urban and rural. In summary, would be simple, fair and equitable.
The RPA gives Council the power to levy or negotiate direct charges. For Project Watershed this particularly relates to charges for soil conservation work in accordance with Land Improvement Agreements. Council considered it appropriate to levy direct charges for:
- Soil conservation landowner benefit
- River improvements landowner benefit
- TLA direct benefit allocations (Lakeshore Protection, Lake Taupo zone - Taupo District Council, River Improvements Main, Middle Waikato zone - Hamilton City Council, Flood Protection, Waipa zone - Otorohanga District Council, Huntly Flood Protection, Lower Waikato zone - Waikato District Council).
Within the Project Watershed differential rating system Council considers it appropriate to have specific differential rating systems for river management and flood protection direct benefit allocations for:
- Lower Waikato Waipa Flood Protection, on a land area basis
- Tauranga-Taupo River Management and Flood Protection, on a capital value basis
- Tongariro River Management and Flood Protection, on a capital value basis.
Council considered the options available for the basis of the differential rates (capital value, land value, annual value and land area) and adopted an area based rating system for Lower Waikato, rather than a value based system. This eliminates the distortions and inequities that can result from fluctuating rural land values, and promotes simplicity and ease of administration.
For Huntly (Lower Waikato) and Otorohanga (Waipa) flood protection Council considered uniform targeted rates to ensure that properties pay the same amount for effectively the same level of service provided, and to remove the effects associated with rating on a capital value basis. These rates will be effective from 1 July 2003.
For Tauranga-Taupo and Tongariro Council considered capital value as the appropriate basis, given the generally urban nature of the area, protection provided to improvements (rather than rural land) and the notion that higher value property receives greater benefit.
Council considered that it is not practical to establish a differential rating system for Eastern and South Western River Management (Lake Taupo zone) and that the allocation to River Management and Flood Protection direct benefit should be funded from the Lake Taupo zone.
Council considered that it is not practical to establish a differential rating system for the allocation to Flood Protection for the Mangapu investigations (Waipa zone) and that this allocation should be funded from the Waipa zone.
Council considered that in terms of section 122H(a) of LGAA the rating mechanisms set out in section 16.4.5 below will be used.