Monday, May 08, 2006

Tony Watkins: Rates system past its use-by date

Asking someone if they want the blue door, the red door or the green door is an old and transparent way of avoiding asking them if they want the door.

The whole point of long-term planning is that it provides an opportunity to ask fundamental questions. In the short term you paint the door; in the long term you ask if you still need the door.

In the short term you admit that our property-based rating system has passed its use-by date. In the long term you ponder what you are going to do about it.

The concept of everyone paying rates based on the value of their property made good sense when New Zealand was an egalitarian society with every citizen having the reasonable expectation of owning, and possibly even building, their own home.

Those times have gone, and a gulf has opened between rich and poor. Houses have become investments. We now have a property market, but not everyone is a player.

Those who want a home rather than a house, and those who love living in a place where they belong, are driven out by a process which has nothing to do with them. The injustice needs to be addressed.

Mayor Dick Hubbard put it succinctly when he suggested that the good news about alternatives to our rates-based method of financing local government is that central Government is trying to work out solutions, while the bad news is that in spite of all the reports no progress has been made.

One possible alternative to rates lies within the endlessly repeated conventional wisdom that everyone wants a low valuation to reduce their rates, and a high valuation so they can profit from capital gains.

Property sales could be "rated". Every time a property is sold, about 20 per cent of the sale price could be taken by the council. This alternative would reflect an actual rather than a theoretical ability to pay.

It could be argued that any sale price reflects not only the value of the property itself but also the value of council infrastructure and services which provide a context for the property. The council would be merely taking its due and would no longer need to subsidise those making a profit from the property market.

In one sense this process already exists. Real estate agents, lawyers and financiers benefit from every sale, and if the property turns over regularly the yield can be considerable.

Achieving a high price would fuel another round of inflation which in turn would increase the rates take. Inflation adjustment of rates could be a thing of the past.

Those who felt this system was unjust could simply decide not to sell. In a political sense people would be empowered because they would be able to take control of their own lives.

If the result was more stability in our population that would be an enormous social benefit.

A world-class city knows its stories and respects the keepers of its unique traditions. At the United Nations Cities Summit in Istanbul, placelessness was identified as the most important issue for cities in our time. Placelessness leads to lack of commitment at best and violence at worst. Sustainable development means sustaining and developing our whakapapa.

Good footpaths do not make good communities. Good communities make good footpaths. We need a method of financing which will build good communities.

It would be a simple move to leave behind a tax on a theoretical but unrealised value and to replace it with a tax on realised profit.

Rates rebates may alleviate inequity but they fail to address the real issues.

Auckland City Council needs to take the lead in approaching central Government.

A world-class city will never result from the inaction of providing the right answer to the wrong question.

* Tony Watkins is a ratepayer with more than 30 years' experience in planning.

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