A three-part analysis of the budget system driving Kāpiti’s rates increases

EVEN IF COUNCILLORS WANTED TO REDUCE THE LEVEL OF RATES INCREASES IN KAPITI, THE WAY THE COUNCIL DOES ITS BUDGETS MAKES IT ALMOST IMPOSSIBLE FOR THEM TO DO SO

By: Michael Papesch and Kathryn Ennis-Carter, members of the Concerned Ratepayers Kapiti Committee

We have spent our professional lives working on central and local governments’ budget processes, co-ordinating planning and budget bids, and leading reviews to reduce spending.  We have also worked on local and central government governance legislation and processes. We have also both undertaken these professional activities internationally, advising other governments. So we have a lot of experience to draw from about what types of budget-setting systems will control costs, and which budgeting systems won’t.

INTRODUCTION

Imagine a situation where, at the beginning of the year, you went to your employer and said:

“Boss, my power bill’s gone up, my insurance bill has gone up, and my rates have gone through the roof.  I’ve worked it out and I need an 8.4% pay rise to just cover all those increased costs.  Can I have an 8.4% pay rise?”

Do you think you would get it?  Yeah, right.

But that’s what’s happening right now at the Kapiti Coast District Council (KCDC).  The Council staff have worked out that the cost of doing everything the Council is currently doing in the way they are currently doing it has increased, and the cost of paying themselves (via salary levels) to do it has also increased, so they are requesting an 8.4% pay rise. The Councillors are the employer, but unlike YOUR employer, they don’t pay these costs and any increases out of their own funds, so they have to work out how much more they can charge their customers (i.e. you – ratepayers and residents), so they (you) can pay it.

That’s how budgeting and rates setting at the Kapiti Coast District Council works.  But the employer – the Councillors – then realise that 8.4% more money is a bit higher than they can make their customers pay for.   And so – to take the analogy about your pay just a little bit further – they are trying to claw back some of the pay and allowances of the people that you work with, so that the net increase is between 5.7% to 6.4% extra.

This is a series of three articles outlining how rates setting at KCDC actually works – but it’s pretty close to the scenario we’ve painted above.  Understanding this goes a long way to explain why your rates bill keeps increasing so much – and why rates increases have been the second largest contributor to the rate of general inflation in New Zealand in the past year. Our first article outlines how the rates increase for next financial year is being calculated, right now.  The second article is what the defenders of this bonkers system would say in its defence, and why we think those arguments are bonkers too.  And the third article sets out what Councillors can do to fix it.  Because unless KCDC fixes the way it sets its budgets, you will get high rates increases next year, and the year after, and the year after, no matter how hard some Councillors try to stop it.  But they CAN fix it …. if enough Councillors want to. They just have to change the Council’s approach.

Article One: How Rates Increases are Calculated in KCDC – available now by clicking HERE

Article Two: The Defence of the System (and why it fails) – available now by clicking HERE

Article Three: How it can be fixed – available now by clicking HERE