Storm and weather-related repairs are expected to qualify as rate cap exemptions under the government's "extreme circumstances" provision. Photo: Supplied
The government's new rates cap will hit the most vulnerable, infrastructure-stressed councils hardest, a rural mayor says.
Ruapehu mayor Weston Kirton said the cap lands hardest on districts like his that have ageing bridges, heavy tourism loads, and major capital needs, but no alternative funding tools.
He warned the district faces a widening funding gulf for essential upgrades just as several longtime sources of government support disappear.
"For Ruapehu, the main infrastructure pressure outside of water is land transport - particularly the replacement of ageing bridges - and maintaining the infrastructure needed to support high visitor numbers.
"Council would like to accelerate its bridge renewal programme, but we cannot do this without strong co-investment from NZTA Waka Kotahi.
"A strict 2-4 percent rates cap makes this more difficult, as it limits our ability to fund our local share or major capital upgrades on our own."
Tourism infrastructure presented a similar challenge. Ruapehu's small population but heavy visitor load required investment well beyond what local ratepayers alone could sustain, he said.
"We've had to invest in facilities that serve far more people than our resident population - water treatment upgrades, the Park and Ride. These projects have only been possible because government has previously co-funded them," he told Local Democracy Reporting.
"With many of those funding streams now switched off, council will not be able to take on new large capital works without renewed government partnership."
Debt management under a capped model would add another layer of strain, he said.
Ruapehu's small population but heavy visitor load required investment beyond what local ratepayers could afford, the mayor warned. Photo: RNZ
Ruapehu's current Long-Term Plan includes an average rates increase of 9 percent over the first three years (2024-2027), followed by around 5 percent annually for the remaining seven years.
The council had raised its self-imposed increase limit from the Local Government Cost Index (LGCI) +2 percent to LGCI +3 percent to begin gradually reducing debt.
"How this will now look with rates capping and water debt transferring to the new entity is still to be determined," Kirton said.
"Although water debt will not be on council's book, it will be ring-fenced to Ruapehu water users who are facing significant affordability issues."
Although storm and weather-related repairs are expected to qualify as exemptions under the government's "extreme circumstances" clause, Kirton said councils need the same type of support for other damaged assets as is available under NZTA Waka Kotahi's emergency funding rules.
Under normal funding arrangements, Ruapehu has a Funding Assistance Rate (FAR) of 75 percent, meaning the local share of any road works is 25 percent.
In an emergency event, once spending reaches a specified limit, the FAR increases to 95 percent, meaning local share is only 5 percent.
"Unless government supports councils with a similar arrangement for non-roading infrastructure, the affordability issues will severely limit any recovery."
Kirton said Ruapehu has already begun modelling scenarios for the 2026-27 transition to the rates cap regime, but without service cuts, staff reductions, deferred projects or under-depreciation, achieving the rates cap target was "not possible".
The council is now weighing which trade-offs ratepayers face.
"While I fully support any initiative to minimise rates increases, without addressing the linked issues of council funding and ratepayer affordability issues, our ability to fund essential upgrades and long-term resilience planning is limited," Kirton said.
When announcing the policy, Local Government Minister Simon Watts said ratepayers deserve councils that live within their means, focus on the basics and are accountable to their community.
The cap excludes water charges and other non-rates revenue like fees and charges.
In extreme circumstances, councils will be able to apply to a government-appointed regulator for permission to exceed the maximum cap.
Councils can also seek the regulator's permission if they need to pay for things outside of extreme circumstances, such as catching up on past underinvestment in infrastructure.
LDR is local body journalism co-funded by RNZ and NZ On Air
