Rates Target Model – Risk of Further Shifting the Burden onto Auckland Business Ratepayers

Mark Pervan
330 Dominion Road
Mt Eden, Auckland
founder@citybuildersassociation.org
021 737 826
www.thecitybuilder.com

20 August 2026

Hon Simon Watts
Minister of Local Government
Parliament Buildings
Wellington 6160

Dear Minister Watts

Rates Target Model – Risk of further shifting the burden onto Auckland business ratepayers

I write regarding the Government's proposed rates target model (the 2–4 per cent range intended to apply from 1 July 2029, with a transition period from 2027).

While the objective of constraining overall rates growth is understandable, there is a material and foreseeable risk that the model will be implemented in a way that further increases the relative burden on Auckland's business sector in order to keep residential rates increases within any capped or targeted band.

The existing Auckland setting already demonstrates the mechanism

Auckland Council's Revenue and Financing Policy currently requires the business sector to contribute approximately 31 per cent of general rates and of the major region-wide targeted rates (Water Quality, Natural Environment, and Climate Action Transport). This share was locked in May 2024 when the Council discontinued the Long-term Differential Strategy.

Business properties represent only about 16.5 per cent of capital value and 9.3 per cent of separately used or inhabited parts. The 31 per cent rates share is therefore a deliberate structural over-contribution. Absolute general rates revenue extracted from business has already risen approximately 70 per cent between 2016/17 and 2025/26.

Because the share is the controlling policy variable, any overall constraint on total rates growth that is expressed primarily by reference to the residential or average ratepayer creates a strong incentive for the Council to maintain or increase the business differential. Residential increases can then be held lower while the total revenue requirement is still met by extracting a larger absolute (or higher relative) contribution from business.

The rates target model does not currently prevent this outcome

From the publicly available material, the proposed target range applies to the overall price component of rates. It does not appear to constrain the internal allocation of that total between residential and business categories, nor does it limit the use of differential rating to shift the burden.

In an environment where Auckland Council has already chosen to freeze the business share at a high level, and where residential growth continues to expand the rating base, a headline rates target framed around residential affordability risks simply transferring further pressure onto commercial and industrial ratepayers.

Request

I ask that, in the design of the legislation and associated guidance, the Government explicitly address the risk of differential-driven burden-shifting. Specifically:

1. Require that any rates target or cap apply in a manner that prevents councils from increasing the relative contribution required of business categories solely to keep residential increases within the target band.
2. Require transparent reporting of the share of rates revenue collected from business versus residential categories, and of any changes to differential factors, as part of the monitoring regime.
3. Ensure that any exemption or variation process cannot be used to embed higher business differentials as the default response to overall revenue constraints.

Without such safeguards, the rates target model risks compounding an already significant and permanent over-contribution by Auckland's business sector.

I would welcome the opportunity to provide further detail drawn from Auckland Council's own published data and the 2024 policy decisions.

Yours sincerely

Mark Pervan
Auckland business ratepayer / City Builders Association
www.thecitybuilder.com