Revenue and Financing Policy update 2026

The Policy provides the foundation for Council’s rates setting and determines how each Council activity is to be funded.

Through the RFP, Council determines:

• The valuation basis for rating: land value or capital value
• The mix of funding for each council activity, including the mix of general and targeted rates, fees and charges as well as capital revenues and borrowing
• How general rates are allocated across different property categories, including through the setting of general rates differentials.

Requirements for the RFP are set out in the Act, in particular sections 101 (3), 102 and 103. Importantly, the Act requires Council to follow a two-step process when setting its RFP.

Step one involves Council determining the best way to fund each activity.

This involves undertaking a funding needs analysis to assess:

• Community outcomes that each activity supports
• Who benefits from the activity or who causes the need for the activity
• How long the benefits last, for example, short-term or over many years
• The most appropriate funding sources, including the benefits of funding the activity separately through fees and charges or targeted rates, or through general rates.

Step two is where the Council applies its judgement about the overall effect of how costs are shared on the current and future wellbeing of the community.

This includes considering, for example, how rates affect affordability and business competitiveness, whether rates are shared fairly across different categories of ratepayer, and whether the rating system is too complicated and could be made simpler and more efficient to administer.

Our review of the policy found that:

1. The existing rating framework remains fit for purpose.
2. No fundamental change to the rating base or structure is recommended at this time.

Technical amendments to reflect the transfer of water services to Tiaki Wai, and other minor editorial changes have been made to improve transparency and clarity and are reflected in the draft Policy.

A key change is the proposed creation of a new Water Utilities rating category. This would involve shifting five water utility properties from the current Utilities rating category into this new Water Utilities category, and fixing the share of general rates contributed by these water and non-water utilities at their 2025/26 levels.

This proposed change is driven by the general revaluation 2025 which resulted in significant valuation changes within the Utilities category, with flow on rating impacts. If Council makes no change to the Policy, then:

• Water utilities rates in 2026/27 would increase by around 37% on average
• Non-water utilities rates would decrease by around 57% on average

If the proposed change to the policy is made, then both water and non-water utilities properties would face rates increases broadly in line with the city-wide rates increase. This would avoid the large redistribution of rates liability within the Utilities category that would occur if the Policy remained unchanged.

The Council believes this change will result in a fairer allocation of rates because both categories of utility property receive similar levels of service and because a significant component of the valuation changes is attributable to one-off methodological changes and improved information quality rather than market movements.

Background

The Utilities property category comprises 17 properties with an average capital value of around $140 million. Due to the small number of properties, relative valuation changes can have large impacts on the rates assessment for individual properties in this category.

The general revaluation 2025 resulted in significant valuation changes to the group of water network utility properties.

The capital value of water utility properties increased by 234% on average, while non-water utility properties increased by 6% on average.

The change in water utility property valuations was driven by a combination of factors including a change in valuer and valuation approach, changes in information quality, and changes in unit costs.

A significant component of the valuation changes is attributable to one-off methodological changes and changes in information quality that are unrelated to market price movements.

Council considered a broad range of alternative options including retaining the current policy (Status Quo), merging utilities and commercial property categories, and creating a new water utilities property category.

After applying its judgment about the overall effect of how costs are shared on the current and future wellbeing of the community, the Council is proposing to:

• create a new Water Utilities rating category
• shift five water utility properties from the current Utilities property category to the new Water Utilities category, and
• fix the share of general rates contributed by water and non-water utility properties at their 2025/26 levels.

If the proposed change to the Policy is adopted, then both water and non-water utilities properties would face rates increases in line with the city-wide rates increase, avoiding the large redistribution of rates liability that would otherwise result under the current policy.

The Council believes this change would result in a fairer allocation of rates because water and non-water utilities properties receive similar levels of service and because a significant component of the valuation changes is attributable to one-off methodological changes and improved information quality rather than market movements.

Option 1 - Status quo

Under the current policy:

• The Utilities sector will continue to contribute 5.6% of general rates because of the “fixed percentage allocation” method in the current RFP.
• There would be a significant redistribution of rates liability within the utilities category:

1. Water utilities would face an increase in general rates of 37% on average between 2025-26 and 2026-27
2. Non-water utilities would see their general rates reduce by 57% on average over the same period.

The Council considers this outcome would not result in a fair allocation of rates because both categories of utility property receive similar levels of service and because a significant component of the valuation changes is attributable to one-off methodological and data quality changes rather than market price movements.

Option 2 – Preferred- Create a Separate Water Utilities Category

Creation of a separate “Water Utilities” category while fixing the relative contribution of water and non-water utilities properties to general rates at 2025/26 levels.

Impacts

• Moderates rating impacts within Utilities property category.
• Avoids large redistribution of rates liability resulting from one-off changes to valuation methodology and information quality.
• Keeps water vs non-water contributions to general rates at 2025/26 levels.
• Rating category remains exposed to valuation changes over time due to the small number of properties.

Why this option is recommended

• It addresses the distortion created by 'one off' aspects of the 2025 revaluation.
• It maintains the integrity of the capital value system.
• It avoids significant cross-sector redistribution.
• It provides a balanced and fair response.
  
  

Average rates impacts across rating categories of options:

We encourage you to read the draft policy to see the proposed changes in context.

Take the survey: Revenue and Financing Policy Update 2026