Do you wonder why rates keep increasing — year after year — no matter who is elected? Although these increases have been relentless for a long time, in the last four years, rates in Kapiti have surged.
Since June 2022: +43%
This year: tracking at 5.7%–6.4%.
Here’s the hard truth– KCDC uses a “cost-plus” budgeting system.
That means:
• Start with last year’s budget ($116.3 million)
• Automatically add “cost pressures”
• Lock them in
• Then argue about cutting small community grants
The core budget is never fundamentally challenged.
This isn’t accidental.
It’s how the system is designed.
Here is presented a three-part analysis of the budget system driving Kāpiti’s rates increases
EVEN IF COUNCILLORS WANTED TO REDUCE THE LEVEL OF RATES INCREASES IN KAPITI, THE WAY THE COUNCIL DOES ITS BUDGETS MAKES IT ALMOST IMPOSSIBLE FOR THEM TO DO SO
By: Michael Papesch and Kathryn Ennis-Carter, members of the Concerned Ratepayers Kapiti Committee
We have spent our professional lives working on central and local governments’ budget processes, co-ordinating planning and budget bids, and leading reviews to reduce spending. We have also worked on local and central government governance legislation and processes. We have also both undertaken these professional activities internationally, advising other governments. So we have a lot of experience to draw from about what types of budget-setting systems will control costs, and which budgeting systems won’t.
INTRODUCTION
Imagine a situation where, at the beginning of the year, you went to your employer and said:
“Boss, my power bill’s gone up, my insurance bill has gone up, and my rates have gone through the roof. I’ve worked it out and I need an 8.4% pay rise to just cover all those increased costs. Can I have an 8.4% pay rise?”
Do you think you would get it? Yeah, nah.
But that’s what’s happening right now at the Kapiti Coast District Council (KCDC). The Council staff have worked out that the cost of doing everything the Council is currently doing in the way they are currently doing it has increased, and the cost of paying themselves (via salary levels) to do it has also increased, so they are requesting an 8.4% pay rise. The Councillors are the employer, but unlike YOUR employer, they don’t pay these costs and any increases out of their own funds, so they have to work out how much more they can charge their customers (i.e. you – ratepayers and residents), so they (you) can pay it.
That’s how budgeting and rates setting at the Kapiti Coast District Council works. But the employer – the Councillors – then realise that 8.4% more money is a bit higher than they can make their customers pay for. And so – to take the analogy about your pay just a little bit further – they are trying to claw back some of the pay and allowances of the people that you work with, so that the net increase is between 5.7% to 6.4% extra.
This is a series of three articles outlining how rates setting at KCDC actually works – but it’s pretty close to the scenario we’ve painted above. Understanding this goes a long way to explain why your rates bill keeps increasing so much – and why rates increases have been the second largest contributor to the rate of general inflation in New Zealand in the past year. Our first article outlines how the rates increase for next financial year is being calculated, right now. The second article is what the defenders of this bonkers system would say in its defence, and why we think those arguments are bonkers too. And the third article sets out what Councillors can do to fix it. Because unless KCDC fixes the way it sets its budgets, you will get high rates increases next year, and the year after, and the year after, no matter how hard some Councillors try to stop it. But they CAN fix it …. if enough Councillors want to. They just have to change the Council’s approach.
Article One: How Rates Increases are Calculated in KCDC
On 5 February 2026, members of Concerned Ratepayers Kapiti attended the Council’s briefing #3 on next year’s Annual Plan. (The public were excluded from Council briefings #1 and #2, where initial decisions were made behind closed doors). Although this sounds like a very dry topic, it’s actually the process by which KCDC sets its budget for the coming year, which in turn determines what the rates are going to be for next year. At the moment, it looks like next year’s rates increase will be between 5.7% and 6.4%, even though general inflation is just over 3%.
What we saw was that the way KCDC sets its budgets is the primary reason for why your rates have risen astronomically in the last 4 years – by 43% on average since June 2022. There were several Councillors who were trying to stem the tide, but the way KCDC currently sets its budgets pretty much stops them in their tracks.
The key is in this Council diagram below:
This diagram shows how the Budget for next financial year – 2026/27 – is constructed.
It starts off on the blue bar on the left-hand side of the diagram, which is the Council’s budget for this current financial year (2025/26) – $116.3 million.
In the diagram, the starting budget is then increased by a succession of red bars – so-called “cost pressures” – that are simply added onto the starting budget. These “cost pressures” are things like increases in salaries and “inflation,” as well as some very specific items. These bits in red are simply added onto the opening budget of $116.3 million. They are taken as a given. At Council briefing #3, there was no discussion about whether these were reasonable, or should be treated in some other way. They are simply just added onto the bill.
This is cost-plus pricing in action. And you, the ratepayer, are paying for it.
Some of these “cost pressures” seem high to us. One that stood out was “personnel costs” which are slated to increase by $1.8 million. That’s on top of a budgeted personnel cost of $39.7 million this financial year (Source: OIR 2425/1353, question 4) – or in other words a 4.5% increase. That’s much faster than the 2% growth in wages and salaries across New Zealand in 2025. Somehow, KCDC’s system of cost control results in staff salaries increasing at more than twice the rate of the economy as a whole.
Because of all of these “cost pressures,” the budget for 2026/27 jumps to just over $126 million. Suddenly the Councillors are facing an 8.4% rates hike if they do nothing. Even for Councillors who are comfortable with imposing high rates – yes, there are some – this is too much. So they have to scramble around to see whatever they can find as “savings.”
Anticipating this problem, Council staff put together a random list of expenditure cuts that they describe as “low hanging fruit.” There is no logic or principle behind these savings options other than staff regard them as “low hanging’ – which usually means easy to identify. Importantly, all the identified ‘savings’ are cuts to grants and subsidies to business groups, community groups, and non-Council entities. None of the savings are within Council staffed functions, except for a couple of items that are coming to the end of their natural life anyway.
Wanting to avoid a rates increase of 8.4%, Councillors are left debating the list of “low hanging fruit.” What they are scrambling over are options that involve terminating or reducing payments to business and community groups by small amounts – $40,000 here, and maybe $50,000 there. But what is not being discussed at all are the underlying drivers of why the budget has blown out in the first place.
To their credit, at Briefing #3, some Councillors did try to ask about the value and efficiency of the core Council budget (the starting $116.3 million), and whether there are savings to be had there. But they are quickly and firmly batted away and directed back to the list of “low hanging fruit.”
At the time of writing, Councillors haven’t made final decisions on all of the list of “low hanging fruit.” Depending on what they decide, the rates increase next year will be between 5.7% and 6.4%.
Don’t get us wrong – we agree that most of the “low hanging fruit” should indeed be picked. But this cost-plus way to set the budget is completely the wrong way around. Based on our professional experience, if we were going to design a budgeting process that maximises Council spending, completely protects the budgets of Council staff, and limits the ability of Councillors to ask questions about the value and efficiency of Council spending, we would design the system KCDC has.
In our next article we explore what some of the defenders of KCDC’s process might say, and why those arguments are weak. And in our third article, we will set out how this system can be changed so that rates increases can be lower and Councillors can have much more of a say in how the budget is set. In the meantime, please send or give this article to any of your friends, neighbours or family who are concerned about how they are going to pay their rates. Because they deserve to know what’s going on … because they are the ones footing the bill!
Stay informed, spread the word, and join us at our next public meeting on 1 March–
