Rates capping explained
At the end of December, the Government announced a series of proposed changes that could significantly reshape local government. One of those proposals is rates capping, which would set a limit on how much councils can increase rates each year.
The Government is proposing a rule that would limit annual rates increases to between 2% and 4%. This cap would apply to all general and targeted rates. It will exclude water charges and non-rates revenues like fees and charges.
At this stage, this is only a proposal. The Government is currently seeking feedback and decisions are expected later this year. Starting 1 January 2027, councils will be required to consider the target while setting rates. This will be monitored by the Department of Internal Affairs. The law is expected to fully take effect by mid‑2029.
Council acknowledges the cost-of-living pressures faced by our residents and ratepayers. While the Government blames rates for these pressures, that is an oversimplified view. Rates do not increase in isolation; they reflect the increasing cost of delivering essential services. It is now 38% more expensive to build bridges and 27.3% more expensive to construct or upgrade water and wastewater systems compared with just three years ago.
On top of this, the Government has reduced several funding streams, including subsidies for local roads.
We are not afraid to enter the debate on keeping rates as low as possible. However, the proposed cap is detached from reality. It relies on the Consumer Price Index (CPI) which measures inflation for household goods and services. But councils are not households. They pay for things like pipes, roads, wastewater plants, bridges and parks; costs that are not reflected in the CPI.
Instead, these costs are better tracked through the Local Government Cost Index (LGCI), which more accurately measures the inflation councils face. Council has made a submission recommending that the Government use LGCI rather than CPI when setting any rates cap.
As these reforms take shape, Council remains committed to transparency and open communication. We will continue advocating for a fair funding framework that reflects the real cost of delivering essential services, while keeping our community at the heart of every decision.
You can read Council’s submission and find more information about rates capping at waimatedc.govt.nz/reforms
