CCC proposes average rate rise just over five per cent

5 March 2008

The Christchurch City Council is proposing an average residential rate rise of just over five per cent in its draft Annual Plan 2008/09 which will be released for public consultation on 17 March.

The proposed rate increase includes funding a new kerbside collection system which will be funded partly in the general rate and partly by a fixed annual charge of $82.

Christchurch Mayor Bob Parker said  he was delighted the Council was able to keep the proposed increase to around five per cent.

“This is half the rate increase signalled in the 2006/-16 Long Term Council Community Plan. The Council has been very clear that rate increases were to be kept  down to that five per cent level.”  The LTCCP had predicted a 9.14% increase with a further 2.8% for the collection scheme.

The 2008/09 Plan signals an average 5.1% rate increase for residential properties (which includes the cost of the new three bin collection system),  8.34% average increase for businesses (plus an $82 annual charge for the collection system where it operates), and an average 3.1% increase for rural properties (which includes the cost of the new collection system).  

Some rates will increase above the  average while others will be below. This depends on the capital value increase of each property compared to the average.

The commercial sector rate increase is higher than the residential because following the 2007 revaluation of  the city, the increase in valuations for the commercial sector was by comparison on average much higher. Also, the business sector is apportioned a higher proportion of roading costs, which continues to be an area affected by large cost increases.

The average house in Christchurch valued at $377,000 (this property was last year valued at $260,000 based on the 2004 valuation) will pay $1,362 a year in rates, compared with its rates bill last year of $1,255. This equates to about an extra $2 a week. Christchurch’s residential rates are still lower than any of New Zealand’s other major metropolitan areas.

Savings have been made on costs estimated in the LTCCP through a number of factors including increasing the dividend from Christchurch City Holdings Ltd ($3.5m), delaying sending biosolids to Kate Valley, reducing the amount paid in insurances ($1.4m) and a reduction in interest costs.

The biggest contributors to the rates increase are depreciation, staff costs, and inflation impact on capital works and contracts.

The Council is required to revalue its assets on a rolling three year basis. Last year streets were revalued, and this year it will be land and buildings. In both cases the increased value has been considerably higher than was anticipated.  As part of the Annual Plan, depreciation (writing off the asset over its useful life) is provided for and if the revaluation is greater than planned, the resulting depreciation is greater. As a result, depreciation for the Annual Plan is projected to be $7.1million over the LTCCP.

The increase in maintenance contracts due to inflation was estimated in the LTCCP to be 2.9%. That estimate has since been lifted to 4.5%, with the  impact on contracts estimated to be $7.6 million above the LTCCP.  The change is because maintenance contracts are linked to the Construction Price Index rather than the Consumer Price Index.

The Construction Price Index measures price changes in the kinds of goods that councils buy (fuel, concrete, plant and machinery etc). These costs have gone up year on year for the past three years with many of these items going up considerably more than the Consumer Price Index which measures costs for things like clothing, food, and entertainment.

“These costs are out of the Council's control and are being experienced across New Zealand, and for that matter, the rest of the world,” Mr Parker said

Fifty five per cent of roading costs are applied against the business sector under the rating differential rules and so the increase in construction material and contract costs along with the impact of streets revaluation has resulted in a significantly higher increase in commercial rates over those in the residential sector.

 “We will know we will be judged on how we provided the services that our residents value, while at the same time making sure that rate increases are affordable,” Mr Parker said.

“As a Council we are focussed on providing services in an affordable and innovative manner. We are focussing particularly on the basics – roading, water, sewerage, rubbish. Council services should function well and be accessible to our citizens.”

What is the Annual Plan?

• The Annual Plan  is how the Council updates the LTCCP forecast for the fiscal year commencing 1 July using the most up-to-date financial and project information available. The LTCCP shows what the Council will be doing over the 10-year period of the plan, why it is going to do these things, and what the costs will be.

What are the key milestones for the Draft Annual Plan 2008/09?

• Council  finalises the Draft 2008/09 Annual Plan 4 and 5 March
• Draft Annual Plan is released for consultation from 17 March – 21 April 2008
• Draft Annual Plan hearings and Council deliberations are proposed for 12 May  – 16 2008
• Council is expected to adopt the Annual Plan/Amendments to the 2006-16 LTCCP on 25 June 2008

For further information phone Mayor Bob Parker on 0274 434 575 or Tony Marryatt, CEO, 941 8554

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