Retailers warn rates rises for commercial properties will hurt city

Friday, 30 March 2018

Tonic Health owner Derek Hill at Centre Place says commercial property rates rises will have a huge affect on his bottom line.

Jobs could be on the line as a proposed council rates revamp looms.

Hamilton retailers are up in arms over huge rates increases to commercial properties set out in the Hamilton City Council's 10-year plan.

Paper Plus, Centre Place owner Mick Gower is considering reducing operating costs to keep staff employed.

The preferred option - an average 9.5 per cent increase in the first two years, a move to capital value rating and the introduction of a $500 uniform annual general charge - will see landlords stung with massive hikes.

The average rate for a $12 million property will nearly double in the first year of the plan from $69,361 to a whopping $135,335, increasing again in the following year.

A rapid rates change could have serious consequences for Hamilton businesses.

Rates for a $2 million property will go from $20,991 to $22,108 in the first year while a $500,000 commercial property will see a rates decrease in the first year from $5989 to $5783 but will increase to $6332 the following year.

And it will be passed on to tenants.

Foundation Bar owner Paul Gibson is facing a 100 per cent rates increase at his Te Awa business.

'It's a big whack for us,' said Tonic Health owner Derek Hill, in Centre Place. 'We're a small business, owned and operated locally, and it has a huge affect on our bottom line.

'Everyone has got to make decisions on whether they continue particularly in the CBD, which is our main concern.'

The change is designed to even the playing field between big malls and other operators.

In 2015, council agreed on a commercial rates rise to take place over a 10-year period.

Hill's rates in the first year of the plan will shoot up 50 per cent and more than 70 per cent the following year. Previously, he was looking at a nine per cent rate increase.

'We had accepted it was going to increase but over 10 years were willing to work towards it,' Hill said.

'We are pretty shocked council is proposing this increase all in the next year. It's basically fast-tracked.'

Paper Plus Centre Place owner Mick Gower said the additional cost will inflate his operating costs to a point where he will be forced to look at downsizing the store, moving elsewhere or getting out of the game altogether.

That would hurt Hamilton's aspirations of a revitalised inner city.

'What could happen, in time and not just to our business, is Hamilton could end up having no centre city or malls because of online shopping and because [council] have driven it that way. It won't be viable to have a bricks and mortar outlet,' Gower said.

Gower and his wife Denise Gower have been in business for 18 years. They are an agent for NZ Post serving 400 customers daily but make no income from it.

He said council needs to have a re-think.

'To me, they've got to go back to basics. They've got to go back to a zero budget and work it through and not just keep putting it on, and putting it on the ratepayer.

'It might take two or three years to get back into financial viability but they have to do their share as well and I don't think they do.'

City malls such as Chartwell and The Base currently pay less than the CBD rate, said Hamilton City councillor Geoff Taylor, and they'll be hit harder to level the playing field.

Council borrows $10m each year to cover everyday costs which is where some of the 9.5 per cent will go. Taylor prefers a smaller increase over a longer period of time.

'The mayor wants to recoup the operating deficit in one or two years, basically,' Taylor said. 'A large proportion of the 9.5 per cent is making up that operating deficit.

'We have to make up about $20m in lack of revenue. My contention is we have to make that up but we don't have to be enslaved by it.'

Paul Gibson, owner of Foundation Bar at Te Awa is staring down the throat of a 100 per cent increase for his rates portion.

'I am angry. It just doesn't seem right,' Gibson said.

He's an owner-operator employing 40 staff. He can't absorb the increase like bigger companies and he can't pass the costs on to customers.

'There is a limit on what we can charge people otherwise they just won't turn up,' Gibson said. 'With the increasing costs in everything that's happening out there, it's just one more thing.

'What's the point in being in business if the bottom line is just shrinking.'

Angela O'Leary voted against sending the 10-year plan out for public consultation at Tuesday's meeting.

'As we know, the costs will be passed down. People might lose their jobs over this,' O'Leary said.

'We did commit, back in 2015, to a new direction and we gave some certainty and assurance and a whole bunch of commitment which included that slow move to capital value. Now, the entire plan is pretty much chucked out the window and it's started greenfield again. That's a pretty tough ask.'