Auckland mayoral race: Are John Tamihere's rates freeze calculations out by $72m?

Monday, 26 August 2019

Auckland mayoral challenger John Tamihere appears to have got the numbers wrong in his radical rates freeze policy.

Tamihere said the three-year freeze would forgo rates revenue of $260 million - but a council formula shows the real impact could be up to $80 million less.

The challenger chose the wrong three-year period to make his calculations, and has included revenue growth generated by an increasing number of ratepayers, even if a freeze was in place.

John Tamihere wants to freeze rate rises if he becomes Auckland's mayor in October.

Tamihere responded to the calculations submitted to him by Stuff saying, 'it is better to overstate than understate'.

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Criticism from the incumbent Phil Goff that the policy would deprive the council of $3.8 billion of revenue is based on a calculation using a wider freeze on rates than Tamihere proposed on Monday.

Rather than the $260 million figure released by Tamihere, a formula provided by Auckland Council showed the real revenue loss might be $182 million.

The council's rule of thumb based on the starting point for next year's budget, is that each one per cent increase in rates is worth $16.7 million, with small steps up in the subsequent two years.

From July 2020, the council is forecasting increases from 2.5 per cent to 3.5 per cent, which then continues.

In addition to that, the council's coffers are further boosted by growth which means every year there are more ratepayers. Currently, that generates about an extra two per cent in rate revenue.

Under Tamihere's policy, those new ratepayers would still contribute to rising revenue but he counted that money as forgone.

Tamihere told Stuff he was aware of that when he did the numbers.

'I knew the 2 per cent gave us space - I personally rounded it off to more than cover the probity of the freeze,' Tamihere said in a statement.

'Notwithstanding, it is all affordable and doable.'

The $260 million figure was also based on a three-year period starting a year early and ending in 2022, rather than 2023.

Tamihere's policy applies only to general rates, and not to the targeted rates earmarked for special initiatives such as accelerating infrastructure to clean up beaches and waterways, and to tackle environmental pests.

However, when Goff priced it at $3.8 billion, he included all rates, general and targeted, over the eight years remaining in the council's 10 year budget.