How will local body taxes solve council spending escalation?

Local body rates have already been climbing well ahead of inflation. They are predicted to rise another 50% over the next ten years in the major cities.

So local bodies are looking at other ways of getting revenue. That doesn’t solve the escalation in spending, but I guess it makes it easier for mayors and councillors to divert from broken rates rise promises.

In the weekend Local Government New Zealand

Substantial review of local government funding welcome and needed

Local Government New Zealand is pleased with the terms of reference for the Productivity Commissions’ forthcoming inquiry into local government funding and finance which were launched by Minister of Finance Hon Grant Robertson at its annual conference in Christchurch this afternoon.

LGNZ President Dave Cull says that the current way of funding local government doesn’t provide the means to invest for growth and development, particularly given the diverse challenges facing communities.

“Our regions, cities and districts shouldn’t be entirely dependent on central government to resolve the complex issues that we are now facing – it is essential that we empower local authorities with access to funding and financing tools to make a difference,“ says Mr Cull.

Local government has been calling for a significant review of local government funding since 2015 when LGNZ first released its Local Government Funding Review and 10-Point plan: Incentivising economic growth and strong local communities.  The review found that the heavy reliance on property rates to fund local services and infrastructure failed to incentivise councils to invest for growth, which is necessary to provide the additional income to deal with issues such as infrastructure improvements and the pressures from climate change, extreme weather events and the impact of tourists on infrastructure.

“Local government is critical to the overall wellbeing of New Zealand’s communities and the way in which councils are funded influences their approach to new investment.  If the only funding sources are property based taxes then the ability and incentive to fund long term growth investment is limited.”

So local bodies want more alternatives to property based rates. Auckland City Council has already got approval for a fuel surtax, and other local bodies are considering having one too. How long will it be before just about everyone pays a local body fuel tax?

Mayors and councils are struggling to keep rates rises below eye watering levels.

LGNZ President Dave Cull’s own Dunedin council has big plans – rates wise. See 7.84% rates rise “a normal part of the cycle and 60% rates rise proposed.

And this is level of planned rates rise is common.

Stuff – Rate rises continually outstrip incomes and inflation – do they need an overhaul?

Analysis by Stuff found that over the coming decade ratepayer bills in five main cities will, on average, increase by 50 per cent.

As well as everyday council expenses, these increases will contribute to major projects – for example, $253 million for a new stadium in Christchurch and $311m for pest and disease control in Auckland.

Exact comparisons are difficult because of variations in the way rates are calculated, what they include and when rating valuations of properties are carried out. But indicative figures provided by the councils for average house prices suggest Hamilton and Christchurch ratepayers will see bills surge by around 53 per cent by 2028, and those in Wellington by 48 per cent.

Auckland rates will rise 38 per cent, and Dunedin by 59 per cent.

Rates for 2018/19 rose across the board on July 1, from 2.5 per cent in Auckland to 5.5 per cent in Christchurch and 9.7 per cent in Hamilton, against a backdrop of 1.1 per cent inflation.

But it is likely to be worse.

TEN-YEAR RATING FORECASTS ARE ‘BEST CASE SCENARIO’

Gough has an ominous warning, at least for Christchurch – that the annual increases outlined in the long-term plans are far from fixed in stone.

“Every year we do an annual plan, and I have never seen one where the rating increase is less than what’s projected.

What seems to happen is councils warning of a large rates rise, finalising a slightly less large rise and claiming that is a reduction.

Cull believes there is an over-reliance on property rates to fill the coffers, the 60 per cent of council income they provide far exceeding that of other developed countries, and that putting them up year after year in the face of sluggish wage rises is not sustainable.

He is a proponent of local taxes as an alternative funding tool – sales taxes, GST, a local income tax or the like.

That makes taxes even more complicated, and will presumably end up with variations between different councils and regions.

But all this focus on alternatives for raising local body revenue misses a fairly large point – why is expenditure going up so much?

It sounds like 50% rates increases are inevitable and mayors just want to disguise where their revenue comes from.

Broken rates rises promises make for embarrassing election campaign fodder.

Alternatives to rates should certainly be considered, but I wish as much effort was put into containing expenditure.

A plethora of regional taxes may help mayors and councillors, but it will still cost us all one way or another – probably more given the costs of administering a complexity of taxes.

Back to the Stuff headline: Rate rises continually outstrip incomes and inflation – do they need an overhaul?

What about ‘Spending rises continually outstrip incomes and inflation’?

27 Comments

  1. Alan Wilkinson

     /  July 19, 2018

    With the decline in retail viability extortionate business rates will expire as the golden egg for many councils. It is already not a tax on property but a tax on business.

  2. Callum

     /  July 19, 2018

    The Auckland numbers are a lie, they have whacked increases in elsewhere such as the fuel tax, water and sewerage charges. My local area for example is inclusive of all council costs, Auckland stings you with separate water and waste charges through Watercare which put a fair chunk extra on the actual Council charges per household.

    • Our council now has user pays for water.

      Before this, I was paying as much as the people next door who have a very large two storey house with a huge swimming pool and who have several cars that they wash with the hose.

      We also pay for each rubbish bag; $1.50. The council took the cost of two bags a week off the rates, so people like me who put out very little (two black bags this year, so far) are actually saving (about $150 a year in my case) It also means that people can put out as many bags as they like instead ot the limit of two that there was before.

      I was unimpressed with the idea of water meters until I realised that I would no longer be paying the same as a house with many more people in it and that people like me would not be subsidising people with in-ground swimming poots who water their lawns all the time in summer.

  3. PDB

     /  July 19, 2018

    Nobody takes an interest in local body elections hence a bunch of halfwits you wouldn’t let anywhere near the loose change tin in your kitchen are in charge of millions $ of public money…………what could go wrong?

    • NOEL

       /  July 19, 2018

      And who is responsible for that PDB?

      When the call from central government came for councils to change to CV rating well patronised “consultation” meetings were held in the Franklin District.
      Overwhelmingly the call was for no change to CV rating.
      That’s only one example of “consultation” by council where the outcome was not wanted by the majority of ratepayers.
      And the players wonder why ratepayers don’t get involved.

      Past experience has shown yah don’t have any real voice.

      As rates keep rising CV causes inequities as asset rich cash poor ratepayers get squeezed by property values created from the flow on of the Auckland obscene property market.

      • PDB

         /  July 19, 2018

        Two different things – once they get in they don’t listen as the decision has already been made upstairs in most instances. I’m talking about getting into the job in the first place.

        The problems I see are these;

        *Generally poor candidates without the skills for the job.
        *Generally poor information/media available to the voters on all the candidates.
        *Poor voter turnout.
        *Poor Council/Mayor elected by the few people that bothered to vote (35% & 38% of enrolled people the last two Auckland elections as examples).

        Rinse and repeat.

        I also think it may be time to put a timeframe on length of time a Councillor can be in the role – ship them out after 9 years unless they become Mayor.

        • Alan Wilkinson

           /  July 19, 2018

          The problem is not how few people vote but how little information they have to base their vote on. This is the entirely predictable consequence of local government amalgamation into large areas. Previously in small districts everyone knew at least one councillor and met them frequently. Now, most people know almost nothing about the people they are voting for.

          • High Flying Duck

             /  July 19, 2018

            You get a booklet with mindless platitudes written by the candidate that reflect nothing of their actual mindset on major decision making.
            This is the advantage of party politics – you vote knowing the general leanings of the candidate (with some exceptions).
            For some reason political parties have resisted becoming overtly active in council elections – probably because councils are a no-win proposition and could hurt the Governmental party brand.

            • Blazer

               /  July 19, 2018

              thats why they are usually disguised with names like the Citizens and Ratepayers and the like.

            • High Flying Duck

               /  July 19, 2018

              C&R were the right wing weren’t they? They were bloody hopeless at getting elected…

            • Blazer

               /  July 19, 2018

              Wiki-
              Auckland Communities and Residents Incorporated, known as Communities and Residents (C&R), is a right-leaning local body ticket in Auckland, New Zealand. It formed in 1938 as Citizens & Ratepayers, with a view to control the Auckland City Council and prevent left-leaning Labour Party control. It controlled the council most of the time from World War II until the council was merged into the Auckland Council in 2010. It changed its name from “Citizens & Ratepayers” to “Communities and Residents” in 2012.

            • If people don’t take an interest and don’t attend council meetings ,they can’t complain.

              There is nothing to stop anyone standing.

              I agree about the number of terms. Even if they were able to stand again, it would possibly prevent people becoming seatwarmers if they had to stand down after so many terms. One of ours was there before I was old enough to vote. This was a few years ago, but he had been there far too long even then- decades ! To him and his wife, it was a nice little earner. He had become a real seatwarmer who was most annoyed if anyone had the gall to ring him up at home and expect him to DO something. He was a fool as people realised that he had done nothing for ages but collect his money, and he lost his seat.

          • Gezza

             /  July 19, 2018

            I think there’s a lot of truth in that Alan. When I first moved to Tawa it had its own Borough Council. The Mayor was a long-serving, well-known & respected public servant & saw himself as one, & the same was true of the councillors. They all had either local business and/or volunteer community organisation experience. They didn’t borrow excessively & they simple things like buy land for a park or playground & only develop it when they had saved up the cash. We had the lowest rates in the country, from memory.

            • Gezza

               /  July 19, 2018

              *did simple things…

            • Gezza

               /  July 19, 2018

              Because local councils operated more directly on behalf of their own resident community of ratepayers, our energy supplier was the Hutt Valley Electric Power & Gas Board. Energy prices were cheap in comparison to the extortionate charges of today. This (according to the abominable privatising crusaders) supposed monolithic bureacracy was so well-managed when it was wound up & flogged off by the execrable liar Max Bradford it first returned, in accordance with its charter, a dividend of I think it was around $1,000 to each homeowner from the funds invested for maintenance capital.

        • PartisanZ

           /  July 19, 2018

          Increasing the tax base of local government to include a portion of income tax and GST might “up the ante” and improve voter participation? This in turn might improve quality of candidates?

          Devolve power along with it, as Zedd says below.

          Let districts compete to attract rate-and-tax payers …

          A legalised cannabis Far North District with massive opportunities in cannabis and hemp growing, added value and sales would absolutely fucking CREAM IT!

          • PartisanZ

             /  July 19, 2018

            The climate, beaches and fabulous people are already here …

            If we can just prevent any more fucking pine trees being planted!

  4. Zedd

     /  July 19, 2018

    I think it would be better to devolve more power to provincial governance.. inc. local politics (eg Drug reform) as in states/provinces overseas 🙂

    I heard calls for GST to go to councils.. not central Govt.

    • Alan Wilkinson

       /  July 19, 2018

      With your Labour govt spending hand over fist and already running out of other people’s money, how is that going to work?

      • Zedd

         /  July 19, 2018

        oh ye of little faith..
        I said ‘devolve more power’ (& functions) we should not be totally reliant on central Govt. for all the services, they currently provide.. without just ‘flogging it all off to the highest private bidder’

        btw; ‘With your Labour govt’
        they are all of NZs ‘Labour-led Govt.’.. just as I beratedly accepted ‘Team Key & co.’ as the Govt. for 9 loooooooooong years

      • Blazer

         /  July 19, 2018

        bit of Q.E wouldn’t go amiss Al.

        • Zedd, I think that we are too small a country for that. Keep local government for local things.

  1. How will local body taxes solve council spending escalation? — Your NZ – NZ Conservative Coalition