Council rates

Council rates can change when a council decides to increase its rate revenue. Other factors such as an increase in the number of rateable properties in the council area through development can also affect rates. Council rates do not increase because the valuation of existing properties increase.

All councils are required to adopt an annual business plan, budget and rating policy each year. One of the most important parts of this work is the decision each council makes on the total amount of money it needs to deliver its services and functions to its community—this includes setting council rates.

Rating decisions

Councils must be accountable to their communities for their rating decisions.

Councils are legally required to consult with the community on their draft annual business plan, which includes information on proposed rating decisions.

This helps each council strike an appropriate balance between community demands for services and infrastructure and raising the revenue needed to pay for them.

Councils have a wide range of tools available to determine a rating strategy that, best suits their community. These include:

• differential rating - where a council may apply different rates in the dollar to different land uses or locations
• a minimum rate or fixed charge – this ensures all ratepayers make a certain contribution to the services in the area.

Councils can also choose to moderate the impact of increased valuations of properties, by setting a maximum increase in the general rate to be charged on rateable land.

Property values and council rates

Once a council makes the decision about their required revenue, it then uses property valuations to determine how ratepayers will contribute to this overall amount.

Usually, ratepayers that own a more highly valued property in a council area will contribute more to this total amount than another ratepayer that has a relatively low valued property.

However, some believe that property valuations determine rates—that is, council rates automatically increase or decrease in line with changes to property value. This should not be the case.

Property valuations are used by councils to apply a rate in the dollar to generate the total amount of rate revenue that councils need. If property values increase, councils can decrease this rate in the dollar to ensure that the amount collected is what is needed, rather than using increased values to generate extra for the council.