Tauranga’s new councillors are backing a new rate that sees industrial businesses pay more than residents.

Under the industrial rate introduced this year, businesses in that category had a median rates increase of 37.7% for 2024/25, which was much larger than the residential rates jump.

The commission, which ran Tauranga City Council from 2021 until July’s election, introduced the industrial rate and increased the commercial rate to reduce the burden on residential ratepayers.

The rates categories meant industrial properties would pay 2.6 times more than residential, while commercial properties paid 2.1 times more.

The median rates rise for residential properties was 7% this year.

For commercial ratepayers, the median increase was 10.7%.

On Tuesday, the accountability, performance and finance committee meeting was presented with a report about the council’s rates policy and rating categories.

The report provided background on the rates policy and made recommendations ahead of the council’s annual plan process next year.

Mayor Mahé Drysdale said the rating categories were never going to be perfect. Photo / Alisha Evans

Mayor Mahé Drysdale asked for the reasons behind the commercial and industrial categories.

Rating policy and revenue manager Jim Taylor said part of it was finding an equitable solution for what each sector should pay.

The industrial category enabled the council to collect revenue from industrial businesses that had a bigger impact on roads and created “environmental issues,” Taylor said.

The council also did not want to increase the commercial differential because the cost-of-living crisis was particularly impacting hospitality businesses, he said.

Chief executive Marty Grenfell said some large industrial organisations that had a significant impact on the community were not necessarily paying their fair share.

But the industrial category was a “reasonably blunt tool” that may have captured some industries and organisations it had not intended to, Grenfell said.

Glen Crowther said the rating categories were a "game-changer". Photo / Alisha Evans

Councillor Glen Crowther thanked the commission and previous councils for introducing the separate rates categories.

“This is a huge shift in Tauranga’s funding scenarios, it’s just an absolute game-changer.”

The council was now in the fine-tuning phase, he said.

Drysdale agreed it was a blunt tool and said it was never going to be perfect.

There had been huge rates increases to get to the differentials but now they were there, the increases would be incremental, he said.

“We’re not going to get as much of a complaint going forward.

“It was a shock and also in a pretty hard financial environment. But going forward [with] just the normal increases maybe some of that noise will go away and they’ll kind of understand.”

Drysdale said he was supportive of where the council had got to with rates and past decisions had got the council in a “pretty good spot”.

“From a residential ratepayer point of view, it’s a much fairer place to be.”

Councillor Rick Curach said compared to other councils the rates increase wasn’t unreasonable. Photo / Alisha Evans

Councillor Rick Curach said the timing for the increase could not have been much worse because of the “very difficult economic situation”.

“A lot of businesses are struggling and even going under, so they certainly feel the additional rates.”

Compared to other councils the rates increase was not unreasonable, he said.

Curach said he looked forward to hearing from submitters about the rates through the annual plan process.

The current rates system could be tweaked and the public would help guide the council with it, he said.

The report recommended the council consider removing smaller operations from the industrial category, reviewing the level of the differential, and the possibility of recombining commercial and industrial rating categories as part of the annual plan process.

LDR is local body journalism co-funded by RNZ and NZ On Air.