This information is to provide people with a better understanding of rates, rates charges and their rates bill.
Further information on the aspects surrounding rates can be found in the following pages on our website.
How we fund council and the purpose of rates
Local councils have the responsibility of looking after a range of infrastructure/services and have the ability to charge fees, collect rates and borrow to pay for it.
When it comes to funding Council's day-to-day running (operating expenditure) and the new builds/upgrades (capital expenditure) judgement is applied in assessing the options to determine the appropriate source of funding.
A number of funding sources are available and are generally used in the following order:
- Fees/User charges - user charges are preferred when a private benefit can be identified and it is efficient to collect the revenue from those receiving the benefit
- Subsidies, grants, sponsorship - capital costs to upgrade or build new assets is funded firstly from these sources
- Borrowing - each generation of ratepayers should pay for the services they receive and borrowing can assist to achieve this outcome (often called Intergenerational equity). Growth-related capital costs and new builds/upgrades are funded by borrowing (after using subsidies/grants)
- Rates - having exhausted all other funding sources, the remaining revenue requirements come from rates
When charging rates Council tries to apply the following principles: tax, equity, fairness, affordability, is it understandable, simple & effective to administer.
Rates are essentially a tax on properties in the district to cover the funding required not funded from other sources. Hence rates, in general, are not a charge for the use of a service; they are a tax to fund the provision/delivery of the service.
Rates are a combination of charges for general and specific services/facilities provided by the Rotorua Lakes Council.
- Water supply
- Parks & Reserves
- Animal control
- Our environment
- Recreational facilities
- Household waste
- Community events
Council sets a long term budget through the development of its Long-term Plan; this is done every three years. In the intervening years the budget is reassessed. This process of linking the annual setting of rates to the LTP is called the Annual Plan process. The annual plan sets the total amount of rates to be collected from property owners, the level of fees and charges for users of services, and an estimate of other revenue (e.g. grants, subsidies etc).
How rates are charged
Rates are a combination of charges for general and specific services/facilities provided by the Rotorua Lakes Council. The charges are a blend of "tax" and targeted charges. In Rotorua these are mostly charged by a general rate and a targeted rates.
General rates fund a 'basket of services' that are available to everybody and no one has exclusive access to these. The amount of general rate a property is to be charged is partly determined by a property's capital value. Capital Value = Land Value + Improvements (e.g. buildings etc).
There are two parts to the General Rate in Rotorua:
- Variable portion - Based off the capital value of the property on a per dollar of rating unit value. This is the main part of your rates bill that is affected by the capital value of a property.
- Fixed portion - Uniform Annual General Charge (UAGC) - $500 (GST exclusive)
The Fixed portion of the general rate (UAGC) is applied to ensure every ratepayer pays a minimum contribution for council services. With services funded by the general rate, there isn't always a direct link between who pays and who receives services as it is to fund a 'basket of services'.
These are applied where this is a strong/direct link between the ratepayer and the service provided. In most cases, the property charged with a targeted rate has exclusive access to the service.
Examples of targeted rates in Rotorua:
- Water Supply
- Wastewater sewage
- Household waste disposal
- Business economic development
With services funded by a targeted rate, there generally is a direct link between who pays and who receives services. While we target rate, the cost of providing the service is generally equalised across the district.
Rating categories basically describe the general activity undertaken on a property for rating purposes. Our district is grouped into three rating categories;
- Farming (e.g. Forestry, Sheep/beef, Dairy etc)
- Business (e.g. Commercial, retail, industrial, Accommodation)
Residential is any property less than 5 hectares (anywhere in the district) - these properties pay the general rate plus individual target rates for any individual services received. Residential investment properties are NOT rated as 'business' as long as they are long term tenancies.
Farming is any property greater than 5 hectares - these properties pay the general rate plus individual target rates for any individual services received. Farms also pay a portion of the Economic & Development Levy. Farms are NOT rated as a 'Business'
Business is any property, where the primary purpose/activity at that property, is a business activity. Business properties pay a higher variable portion of the general rate. This is called a business differential and is charged at 1.72 on the variable portion. Businesses also pay a portion of the Economic & Development Levy. Residential properties that are rented on a short term basis (more than 100 days) are rated as a business.
Understanding your rates bill
This section is intended as a detailed explanation of a rates bill, the various lines of charges and what these pay for.
A rates account is made up of:
- General rate - variable portion: based on capital value
- General rate - fixed portion: Uniform Annual General Charge (UAGC)
- Targeted rates: for individual services received
To view your own rates bill online you can use the Rates Information Database (RID). The database allows you to view rating and valuation information about any property in the Rotorua District, using either the property's physical address or valuation roll number.
An example of residential rates bill (Costs include GST):
(Note: Example is based off 2019/20 charges)
To elaborate on how properties are rated (using above example):
General Rate - fund a 'basket of services' available to everyone is in two parts:
- Variable portion - This rate is based off the properties Capital Value ($377,000). The capital value of this property is multiplied by 0.00285545. Hence, the variable portion for this property is $1076.50
- Fixed portion - Universal Annual General Charge (UAGC) $575 includes GST (or $500 + GST). The uniform annual general charge (UAGC) is the fixed portion of rates that every ratepayer pays regardless of property value.
Targeted Rates - These are a fixed charge for service (Costs below include GST)
This example property receives the following targeted charges:
- Lakes Enhancement Rate - Fund to support wastewater developments around lakes areas ($20.22)
- Urban sewerage development rate - Funds existing sewage network capital works ($3.32)
- Sewage disposal charge - Sometimes referred to as a 'pan charge', pays for the operations and maintenance of wastewater services to the property ($539.63)
- Waste Collection Services - Curb/roadside rubbish & recycling collection service for the property ($205.06)
- Urban Water - For water supply connected to the property ($284.51)
All properties that receive these services in general pay the same charge for these services. Hence, targeted rate charges are equalised for all receiving the service (or a multiple of these charges).
For the full range of rate charges in the Rotorua District please refer to the Rates funding impact statement section of the Annual Plan 2019-20