There’s been considerable commentary on rates and the current round of increases. I’m unaware of any rural rates increases in single figures and some are well into double.
There are two issues, as I see it. The first is the increase in the rates to fund councils and that’s the original problem.
That is exacerbated by the increase in valuations. For example, in Masterton the rates rise from the council is 16.1% but there are many local farmers paying in excess of 30% courtesy of the increase in RVs from Land Information NZ.
Land Information NZ’s website tells me that they average recent sales, which on the surface of it is fine.
The problem is that recent sales have been to take land out of food production for forestry, where purchasers are prepared to pay a premium. That premium has then been translated to RVs, putting their subsequent rates in the fairy-tale category.
Richard Moore is a highly experienced local rural valuer, farmer and director of Wairarapa Property Consultants.
“It all depends on the land status under the [Emissions Trading Scheme],” he told me. “Land under forestry that was planted pre-1990 is significantly cheaper, between $2000 and $4000 a hectare. That’s because there is no involvement in the ETS.
“Pastural country capable of planting and registration into the ETS was up to $15,000 per hectare but it has since come back to $10,000 … and we anticipate further softening.
“We have seen very few pastural sales for animal production recently,” Moore said.
The issue is that one local farmer has a land RV of $10,500 per hectare to farm sheep and beef, which I find ridiculous and far removed from reality. Doing a budget, I wouldn’t want to pay more than $7000 in the current market so an RV of $10,500 is wildly out of touch – 50% out of touch.
I am aware you can appeal against your RV but that requires time and effort. In the current market farmers don’t have much of either.
My suggestion to Land Information NZ would be to do it once and do it right.
The issue isn’t just the valuations but the fact they provide the basis for rates. The higher your value the more rates you pay. When values get into the absurd so do rates. They are, effectively, a tax on production – I’d humbly suggest an unreal tax on production.
This isn’t just a Wairarapa problem but one for the eastern North Island and I can see it spreading further.
Anthea Yule is the meat and wool chair of Hawke’s Bay Federated Farmers and provincial vice-president. She isn’t happy.
“The rateable value of our farm lifted 54% between August 2019 and August 2022 driven by the carbon frenzy and strong commodity prices,” she told me.
“Hastings District Council has announced a 25% increase from July to cover cyclone costs. They are already $400 million in debt, likely rising to $700m by 2030.
“The rural sector is paying more for less. It is paying more with less,” she said. Hawke’s Bay rural landowners have an additional problem as the regional council has increased rates by 19%. That’s just an average and according to Hawke’s Bay Feds chair Jim Galloway, a farmer in Hastings will suffer an increase of 27% with a Central Hawke’s Bay farmer facing a 24% increase.
Feds policy staff have worked out that since 2015 rates have increased 165% in Hastings, 186% in Central Hawke’s Bay and 197% in Wairoa.
That is unsustainable.
Sheep and beef profits are down 54% this year or 67% since the 2020/21 year. Interest rates are high and input costs through the roof.
Now farmers are hit with a considerable tax increase as I believe that district and regional council rates are as much of a tax as income tax or GST.
Providing a reduction in income tax while having farmers hit by a massive rates increase doesn’t achieve much. At the end of the day a farmer is worse off.
So at this point farmers are facing a triple whammy. Basic district council rates are up, in some cases heading towards 30%. That is exacerbated by the increase in RV, meaning a total farm rates bill to the district council can head towards 50%.
Then we have the regional council rates increases, which has me stuffed. The government has indicated infinitely less work for those councils meaning rates should reduce, not increase. I can see absolutely no reason for regional council rates to go up.
So we have a system that is broken and needs fixing and now, because if costs keep increasing as they are and incomes keep declining as they have, there can only be one result.
