Local Government (Rating) Act 2002

The Act states that all land, unless otherwise excepted, is rateable.

In Schedule 1 to the Act it defines 25 categories of land that are non-rateable and also three categories of land which are rateable at no more than 50% of the regular rate. Non-rateable land is primarily land that is owned by the national or local government, or owned by a charity and available to the public, and some categories of Maori land.

Land that is at least 50% non-rateable is land owned or used by Agricultural and Pastoral Societies as showgrounds, sportgrounds (but not horse or greyhound racetracks) and/or land owned or used by any group for any branch of the arts.

Non-rateable land is still liable to pay rates related to water supply, sewage disposal, and/or refuse collection.

Understanding what comprises a single rating unit is important when rates such as a Uniform Annual General Rate (see below) is imposed on each rating unit. The concept of rating unit is defined in the Rating Valuations Act 1998.

Generally, each separate certificate of title is considered to be its own rating unit. But if multiple certificates of title are owned by the same person or persons, are used jointly as a single unit, and are either contiguous (i.e. next to each other) or separated only by a road or rail line or body of water, then they can be deemed a single rating unit. So, for example, a farmer with land on four different titles, on both sides of a road that goes through the middle of his property, would most likely have his four titles deemed to be a single rating unit.

A second related concept is that of determining a count of Separately Used or Inhabited Parts of a Rating Unit (SUIP). It is possible that one rating unit might have multiple SUIPs on it—for example, a piece of land with three condo/apartments on it. This becomes relevant when general rates such as Uniform Annual General Charges are imposed, not per rating unit, but per SUIP.

The Act defines two main categories of rates: general rates and targeted rates.

A general type of rate is usually adopted when the local authority believes the community as a whole should pay for a service, or where there is no good reason or reason to separate the cost out and fund it specifically. General rates apply to all ratepayers within the local authority's jurisdiction.

A general rate can be either a Uniform Annual General Charge which applies equally to all ratepayers, or a 'value based' rate which is based on some element of the property's value (either its unimproved (land) value, its combined value of land and improvements, or its annual value).

Value based rates can be calculated either on a standard rate per dollar of rateable value, or at different rates for different categories of rating units. The different categories that could be considered are listed in Schedule 2 to the Act.

More than one general rate can be imposed. For example, a ratepayer may be levied a UAGC of $200 plus a differential rate of 0.25% of the total property value.

Targeted rates are sometimes used where a specific service or benefit is being provided unevenly to some ratepayers but not to others. Targeted rates can also be imposed on all ratepayers, with the monies received being earmarked to fund a specific purpose.

An example of a targeted rate might be a 'Central Business District' rate imposed on property in a town's central business district and used to fund specific services in that area.

Another example might be a water rate—possibly a flat fee per rating unit that is connected to a central water service, and/or possibly a fee per cubic metre of water provided. A related rate would be a sewage disposal rate, often calculated on the basis of the number of toilet bowls or urinals present in each rating unit.

Water and sewage rates can have three 'states' associated with them. If a rating unit does not have that service available, then the first state (i.e. no charge) would apply. If a rating unit has the service available, but the service is not being used, then one level of rate might be imposed, and if the service is available and being used, then a second higher level of rate might be imposed.

The Act employs confusing terminology when describing the process for setting targeted rates. It helps to see it as a two step process.

In Schedule 2, it lists a set of matters—these are considerations that determine which rating units will be liable for, and which rating units will not be liable for a particular rate.

In Schedule 3, it lists a set of factors—these are considerations that determine how and what amounts will be payable.

There are nine matters that can be considered, for example, where the land is located, or the use to which the land is put. There are twelve factors that can be used in calculating rates, for example, the area of floor space within any buildings on the land or the value of improvements to the rating unit.

Because they are felt to be regressive in nature, there is a 30% cap on how much of the total rates revenue can be collected from Uniform Annual General Charges and from targeted rates that are set on a uniform basis, except for uniformly targeted rates that apply for water supply or sewage disposal.

The Act requires properties to be valued at least once every three years. The Rating Valuations Act (1998) covers much of this process, and Part 2 of this Act sets out the record keeping requirements of each local government body. Most local bodies have their rating database available online, and are required to have it available for free public inspection at their principal public office or an alternate appropriate location during regular business hours.

Ratepayers can challenge the accuracy of their property valuation or the information held about their property.

The process of setting rates seems deceptively simply in the Act (section 23)—i.e., being set by a resolution of the local authority.

This apparent simplicity is because most of the process is prescribed in section 103 of the Local Government Act 2002. It requires rates to be congruent with the Revenue and Financing Policy in the Long Term Plan, and for each year's rate-setting to be based on the annual plan for the year and its associated Funding Impact Statement. Rate models must be included in the FIS, and if the rate setting process isn't strictly followed, the rates thereby levied may be uncollectable.

The Act allows local authorities to remit all or part of the rates on a rating unit if the local authority has established a formal policy allowing itself to do so.

The act allows local authorities to postpone all or part of the rates on a rating unit, again if there is an existing formal policy allowing such postponement. The policy may set a fee that applies in such cases, but if a fee is applied, it can not exceed the actual administrative and financial costs involved.

These types of waivers need to be formally reviewed at least once every six years by the local authority[4]

There are also income-tested provisions under the Rates Rebate Act (1973)[5] that provides a subsidy to low income homeowners to help them meet the cost of their rates.