The quiet suburban pool is a microcosm of everything wrong with New Zealand’s broken rates system.
Windbag is The Spinoff’s Wellington issues column, written by Wellington editor Joel MacManus. Subscribe to the Windbag newsletter to receive columns early.
On Thursday, as the nation’s media were preoccupied with the government’s budget, another budget was passed, less than a kilometre from parliament: Wellington City Council’s Long Term Plan.
One of the most controversial debates in the final weeks was about whether to spend $7.5m repairing Khandallah Pool. The 100-year-old unheated outdoor pool is not particularly well used. It gets about 10,000 users annually (down from 45,000 in its heyday), the lowest of any public pool in Wellington. By some estimates, ratepayers will subsidise swimmers to the tune of $60 to $80 per swim. Khandallah residents campaigned hard to save their pool and the council ultimately agreed to fund the repairs.
The fact that the pool is heavily subsidised isn’t inherently a problem; all council facilities are subsidised. The problem comes from the political processes that decide what the council spends money on. Councillors increasingly see community facilities as “bread and circuses” politics. They’ll spend money on whatever councillors think will make their constituents happy, which biases decision-making towards the loudest voices. That’s a recipe for short-sighted decision-making and white elephant projects.
Every council spending decision is an investment in city land. Land connected to serviced roads and mains water is more valuable than land without those things. That also applies to libraries, pools, parks, community centres and theatres. Land with nearby amenities is more valuable than land in the middle of nowhere.
A 2019 meta-analysis of 33 studies by Texas A&M and Swansea University researchers found there was an 8%-10% premium in house prices when they were located near a public park. For a small public park, the increase in value is quite localised. Once you’re more than 750 metres away, the price premium all but disappears. A destination park, like a botanical garden or a multi-sports field, will spread its benefits across a larger area. Major facilities, like a stadium or art gallery, will add some small value to every property in the city, but will have a greater impact on nearby commercial properties because they attract customers.
Khandallah Pool is a value-add for nearby residents. They get the benefit of a pool without the cost of installing one on their property. To justify the investment, the council must hope that the pool will make Khandallah a more appealing place to live, encouraging higher property values and more development, which means more rates revenue for the council.
The problem is that Khandallah residents don’t seem to want that. The Onslow Residents’ Community Association, which represents Khandallah, has consistently fought against new housing in its area. One of the reasons for the drop in Khandallah Pool users is that the number of school-aged children in the suburb is declining, down 19% since 2015. Young families are being priced out. Khandallah is increasingly a community of elderly people sitting on $2 million properties, watching their grandchildren grow up over Zoom.
Recent zoning changes under the district plan should help to address this, but some suburbs are still highly motivated to fight back. In Mt Victoria, a group of residents led by Dame Gaylene Preston is organising sustained protest action to block a seven-storey apartment development. In financial terms, for the council, this apartment building contains 32 units, which would generate about $250,000 per year in rates. The single-storey building that stood there previously generated about $10,000 annually. Would Mt Victoria residents be willing to accept lower council spending in their community in exchange for cancelling the development? I doubt it.
Wealthy and well-organised communities like Khandallah and Mt Victoria are very effective at demanding investment in their areas while simultaneously opposing the growth that pays for it. That means the younger, poorer, denser neighbourhoods are subsidising the lifestyles of the leafy suburbs. A Greater Wellington Regional Council study last year found councils were spending three to five times more per dwelling to provide infrastructure to lower density suburbs than the higher density inner city.
So what’s the answer? We could go down a convoluted rabbit hole of targeted rates and development levies earmarked for local projects, but that’s probably more effort than it’s worth. There’s a far more elegant solution waiting in the wings: switch from property value rates to land value rates.
Land value rates allow councils to directly recoup their investments. If your land value goes up because the council upgraded the road and built a new pool, it’s fair enough that you should pay more rates. On the other hand, if you increase your property value by renovating your house, the council hasn’t added anything.
The major benefit of land value rates is that they are based on developable capacity, which encourages more efficient land use. People who own large, underdeveloped sections would pay higher rates, which would encourage them to sell up or develop the land into apartments or townhouses. That’s what this is all about, really – allowing more people to enjoy the benefits of council facilities. Now that Wellington City Council has decided to repair Khandallah Pool, we should want more people to live near it and use it.
