Rates cap and the business share: our submission to the Finance and Expenditure Committee (Part 1 of 2)
CBA asked the Finance and Expenditure Committee to amend the Rates Capping Amendment Bill so councils cannot meet the cap by shifting rates to business.
City Builders Association Limited (CBA) has asked Parliament’s Finance and Expenditure Committee to amend the Local Government (Rates Capping) Amendment Bill so that councils cannot stay inside the cap by moving more of the rates burden onto business, with mandatory reporting of the business and residential split and no exemptions that embed higher business differentials. We sent the submission through Parliament’s online form on 18 October 2026.
This is Part 1 of 2. It covers the summary, who we are and the problem with the Bill. Part 2 sets out our recommendations and proposed wording.
Where the submission stands
Parliament was dissolved on 1 October 2026, so there is currently no select committee. Submissions are held by the Office of the Clerk of the House until the new Finance and Expenditure Committee is set up, and that committee will decide when submissions close. No closing date has been set yet; Parliament encourages people to share their views by 1 December 2026. CBA has asked to appear before the committee to speak to its submission. You can follow the Bill’s progress on the Parliament bill page.
The submission follows our 20 August 2026 letter to the Minister of Local Government, which the Minister’s office replied to on 15 October 2026 without addressing our three asks.
The submission
Submission to the Finance and Expenditure Committee: Local Government (Rates Capping) Amendment Bill
Government Bill 340-1 · A cap on the average must not become a shift onto business
- Submitter: City Builders Association Limited (NZBN 9429053649225)
- On behalf of: Mark Pervan, Founder and Director
- Website: https://thecitybuilder.com
- Contact details: Provided separately through Parliament’s online submission form (not for publication)
- Oral submission: CBA wishes to appear before the committee (see section 7)
- Date: October 2026
1. Summary of recommendations
This submission by City Builders Association Limited (CBA) addresses one issue. The Bill caps the average rates price per rating unit (new section 26A of the Local Government (Rating) Act 2002), and says nothing about how that rates take is divided between categories of ratepayer. A council can therefore comply with the target range while moving more of the burden onto business. We recommend that the committee amend the Bill so that:
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R1: Distribution constraint. While the target range applies, a council must not increase the business share of rates to keep residential increases inside the band (new section 26AB; consequential amendments to section 26Z and section 93 of the Local Government Act 2002).
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R2: Mandatory reporting. Every long-term plan and annual plan must publish the business and non-business shares of rates revenue and every differential, with any change and the reasons for it, and the regulator must report on these trends (clauses 13 and 14; sections 26ZA and 26ZB).
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R3: Exemptions and variations. No Type-1, Type-2 or 2029/30 transitional exemption, and no substituted decision, may permit or embed a higher business share or business differential (sections 26G, 26I, 26J, 26L, 26N, 26O; Schedule 1AA clauses 14 and 18).
Exemption applications, regulator advice and decisions should be published (new section 26QA).
Supporting safeguards. The same result can be reached by other routes the cap does not see. These two lighter-touch measures close the main ones without limiting legitimate council choices:
- R4: Incidence integrity. Where a council moves the funding of an activity out of the capped rates (to fees and charges, contributions, or excluded water-services rates), it must identify who bears the cost and justify the change on its merits. The regulator may direct reconsideration (new section 26AC).
- R5: Measurement integrity. Councils must publish the rating-unit projection and the water-services exclusions used in the rates price. Over-projection is corrected the following year (section 26A).
References to sections are to sections inserted into the Local Government (Rating) Act 2002 by clause 8 of the Bill, unless stated otherwise.
2. About City Builders Association
City Builders Association Limited is an Auckland civic think tank (Rōpū Hanganga Tāone). It was incorporated on 6 May 2026 (NZBN 9429053649225) and is funded solely by membership. Its founder and director is Mark Pervan, who makes this submission on its behalf. CBA publishes its research at https://thecitybuilder.com.
3. The problem: the cap measures the average, not who pays
What the Bill does
- Section 26A defines the rates price as the sum of general rates, any uniform annual general charge, targeted rates and penalties (excluding water services rates and section 115 rates), divided by the projected number of rating units. It is a single per-rating-unit average.
- Section 26B and Schedule 1AA, clause 8 set the target range (interim range 2% to 4%). Clause 7 (new section 23(2)(c)) requires rates to comply unless an exemption applies, and clause 13 (new section 93(9A)–(9C) of the Local Government Act 2002) applies the same test to the revenue and financing policy and funding impact statement.
- Nothing in the Bill addresses differential rating. Councils keep their full power to set general rates at different rates in the dollar for different categories of land (sections 13(2)(b) and 14 of the Rating Act) and to set targeted rates differentially (sections 16(4)(b) and 17).
Why that creates an incentive to shift the burden
Because the rates price is an average across all rating units, moving revenue from residential to business properties leaves the rates price unchanged, so the cap cannot detect it. Yet the figure that ratepayers and councillors watch is the average residential increase. A cap framed around the average ratepayer therefore gives councils an incentive to hold residential increases inside the band by raising the business share. The Bill’s new purpose (clause 4) is predictability of costs to ratepayers. That should mean every class of ratepayer, not only the average.
The Auckland evidence
- Auckland Council’s Revenue and Financing Policy fixes business at about 31% of general rates and the major region-wide targeted rates (the Water Quality, Natural Environment and Climate Action Transport targeted rates).¹
- Business holds about 16.5% of capital value and 9.3% of separately used or inhabited parts (SUIPs).²
- Business general rates rose about 70% from 2016/17 to 2025/26.²
Auckland already sets the business share by policy, independent of value. Under a cap that tests only the average, nothing would stop that share being raised further to keep the residential headline figure inside the band.
Other routes to the same result
Differentials are not the only way to comply on paper while changing who pays. On the Bill’s text:
- Reclassifying properties. Councils define their own categories of rateable land (sections 14 and 17; Schedule 2). Redrawing the business/residential boundary moves rating units, and their rates, into business categories.
- Business-weighted targeted rates. All targeted rates count towards the rates price (section 26A). A rate set mainly on business is a distribution choice the cap does not test.
- Moving costs outside the measured rates. Fees and charges, development and financial contributions, and lump sum contributions (Local Government Act 2002, section 103(2); Rating Act Part 4A) are not in the section 26A sum. Any portion of a rate for water services, including stormwater, is excluded (section 26A(2)(a)).
- The divisor. The rates price is divided by the rating units figure “projected by the local authority” in the previous year (section 26A(1)). The Bill has no true-up if the projection is too high.
- Growth and remissions. Because the test is an average across all units, existing properties in one category can face larger increases while the average complies. Rates are counted as set, before remissions and postponements (Rating Act sections 85 and 87).
R1 deals with the first two routes. Our supporting safeguards (R4 and R5) and the expanded reporting in R2 deal with the rest, mainly through transparency and regulator oversight rather than prohibition.
Continue to Part 2: our recommendations and proposed wording
Sources
- Auckland Council, “Changes to your property rates for the 2026/2027 rating year” (aucklandcouncil.govt.nz), citing the Long-term Plan 2024–2034.
- CBA analysis, as set out in CBA’s letter to the Minister of Local Government of 20 August 2026 and published at https://thecitybuilder.com/article/6ad3ebf6483acddec4985c59.
Further reading
Frequently asked questions
Why could a rates cap shift rates onto business?
Because the cap measures the average, not who pays. The Bill caps the average rates price per rating unit (new section 26A) and says nothing about how that rates take is divided between categories of ratepayer. Moving revenue from residential to business properties leaves the rates price unchanged, so the cap cannot detect it, and a council can comply while moving more of the burden onto business.
What share of Auckland rates does business pay?
About 31% of general rates and the major region-wide targeted rates, fixed by Auckland Council’s Revenue and Financing Policy. Business holds about 16.5% of capital value and 9.3% of separately used or inhabited parts (SUIPs), and business general rates rose about 70% from 2016/17 to 2025/26.
Will CBA speak to the committee?
Yes. City Builders Association Limited wishes to appear before the committee to speak to its submission. Mark Pervan, Founder and Director, will appear on its behalf, in person or by video conference.
Join the discussion
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Written by Mark Pervan, Director, City Builders Association Limited
Mark Pervan is the founder and director of City Builders Association Limited, an Auckland civic think tank funded solely by membership. He has run manufacturing plants, with global sourcing and supply chain management in the same role, and has been project manager on multiple commercial and residential building projects. He was also responsible for product design and development across multiple mediums, and served as sales and marketing manager. He is a company director and business owner, including as a director of Idea Foundry. He served three years as an elected member of the Puketāpapa Local Board (2022–2025) and was a council candidate for the Albert-Eden-Puketāpapa ward of Auckland Council.
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