Tauranga City Council has been asked to take a more lenient approach to people who fail to pay their rates on time.
Councillor Murray Guy said the 10 per cent penalty was too high when interest rates were so low. He said that it should be reduced to a figure closer to the interest rates paid by the council for its money.
He was responding to information provided to a recent council meeting which showed that $500,000 of last year's $3.7 million rates surplus came from penalties.
Cr Guy told the Bay of Plenty Times that 10 per cent was at the legal maximum and was almost twice the council's finance costs.
"Why should we be at the maximum, especially with interest rates being significantly less?"
He suggested the penalty should be a floating rate linked to actual interest costs. Guy guessed that financial pressure was why the majority missed a rates payment and 10 per cent was excessive in today's economic environment.
Although the council allowed rates remissions, applications had to be accompanied by letters of explanation and Cr Guy felt that many people would be too proud to ask. "The Kiwi way is not to cry."
He suggested that a penalty of around 7.5 per cent would be more appropriate which would still be a sufficient deterrent for ratepayers.
The council's rating and land information team leader Jim Taylor said 3627 customers incurred penalties of $322,000 for this year's first rating instalment - an average of nearly $89.
"Not all of them have the full amount owing."
Ratepayers liable for penalties totalled 7 per cent of Tauranga's 52,000 rateable properties. Penalties incurred on last year's two rating instalments were $311,000 (3613 customers) and $309,000 (3502 customers)
Mr Taylor said some of these penalties were reversed if the ratepayers were eligible for a remission.
Remissions were allowed if full payment was made or if ratepayers entered into an acceptable payment arrangement. The overdue penalty was also remitted if the ratepayer signed up for the monthly direct crediting of rates.
Mayor Stuart Crosby said Cr Guy was free to put his suggestion forward for debate as part of the council's 2013-14 annual plan process.
"That is the legal place to make the change." Mr Crosby said. "It is not a drama - just follow the process."
If the council agreed to change the rate, it would go out for community discussion and apply from July 1.