Rating policy of user-pays is regressive

Well I don't know where you live, but in my town we have just had another election meeting. I was an observer with a strong philosophy and didn't this time ask questions about the rating system. But I engaged in a conversation afterwards with a real estate agent friend and it went like this.

Me: Tell me what is the price of land here in Otaki compared with the price of land in Waikanae or Paraparaumu?

Him: Well it's about double. A section here costs just over $100,000 whereas in either of those places it is over $200,000. I will get you the exact figures tomorrow.

Me: Thanks a heap. So if 71% of our rates is in Fixed Annual Charges nowadays, it means that the rates in Otaki are rather similar to the rates on a property in Waikanae or Paraparaumu, but our section prices are only half that value. Isn't that hard on the poorer people of Otaki?

Him: But in a user pays system what services are you not getting from the Council?

Me: Actually you have asked the wrong question. We should be asking if there is another way to fund local authorities which is fairer. It is a question of philosophy about revenue raising. I believe that people should pay according to the value of their land, so that it doesn't penalise you if you want to improve your house and so that you get concentrated development to save expenditure on infrastructure. Empty sections near shops and services should all be used.

section $100k OtakiAnd since then I have been thinking about the parallel situation in central government. I don't know in what year it became ridiculous to say people should pay for their own education, but I would have guessed the arguments progressive politicians would have used is that it is in the whole of society's interest that we have an educated population. So Government revenue needs to pay for education. It would be ridiculous now to return to saying people should pay for their own education. It is in nobody's interest to have an illiterate uneducated population.

The advantages of a rates system based on unimproved land value are many. Not only is it more just, but it encourages the use of valuable land rather than letting it lie idle. Once upon a time the majority of rating systems favoured land based rates, not capital based rates. All referenda which were held favoured land based rates. But in the last few decades we have seen the creeping introduction of first capital value rates (it is now compulsory in Auckland) and then user pays. In Kapiti District Council it is a mix of all three but the dominant one is user-pays.

Otaki house Dunstan large sectionWell, user pays should certainly not be for basic infrastructure. I can see that for conservation reasons it is fair to charge for water after a certain amount of free water has been delivered. But basic infrastucture like water purification is a public good not a personal good. For health reasons alone sewerage and water and street lights are public goods.

You see our town won't really thrive until the railway from Waikanae to Otaki has been double tracked and electrified. Land values will increase and we can pay more in rates. Sure we have a superb Wananga (or Maori university) and some excellent kura here and we know people move to the town so they can go to the Wananga or send their kids to one of the kura. But frankly our little village is full of second hand shops and fast food shops. Prominent are WINZ, Budget Advice and the Food Bank. Our retailers are struggling and shops lie empty, while outlet shops on the main through-highway thrive. Many of our old people move away to retirement villages and our young move to a city or to Australia. Homeowners struggle to pay their house insurance and rates are over $2000 for a very ordinary property. The standard of housing isn't high and there is a large percentage of rental properties. I am told that there is a growing trend for landlords to sell up because rents are so low as to make it unviable.

The effect of land value rating on rural land is interesting. Just outside each town on Kapiti Coast there are lifestyle blocks supporting the odd horse and a few sheep while the owners commute to Wellington jobs. As services from council are fewer, their rates are very low under user pays. Rates on these properties would rise, forcing them to amalgamate to viable farming units with high productivity.

I guess our town is like many others and the arguments in yours are similar.

(I understand now the Education Act in New Zealand was passed in 1877, when education became free, compulsory and secular)