Local government reform: Rates-capping and the councils’ pushback– Editorial
This week, amid the whirlpool of local government reform our councils are currently navigating, came another factor for them to consider.
Local Government Minister Simon Watts announced council rates increases would be capped at 4%, putting, in his words, “a brake on excessive increases and giving ratepayers greater certainty”.
Watts says that for too long, ratepayers have been hit with steep and unexpected rates increases, adding pressure to household budgets at a time many New Zealanders are already feeling the squeeze.
He says ratepayers have been hit with median increases of 14.2% and 9.2% over the past two years respectively.
Councils will be required to keep annual rates increases to within an initial target range of 2-4%.
“It will also sharpen the focus on delivering the services communities expect councils to get right, like fixing the potholes, collecting rubbish and running our pools and parks,” Watts said.
Focusing on the basics and core services has long been the catchcry of ratepayer groups the length of the country.
Now the Government is looking to force councils’ hands – and many ratepayers will thank them for it.
But at what cost would rates relief come?
The group representing local authorities, Local Government New Zealand (LGNZ), says councils can’t be expected to deliver more infrastructure, support growth and meet communities’ expectations with “fewer levers”.
“The maths just doesn’t add up and something will have to give,” LGNZ president Rehette Stoltz said.
Stoltz says capping rates is a “blunt tool” and that introducing a 4% cap when councils’ costs are increasing at a much higher rate will hamstring already-constrained councils’ ability to maintain investment in the services and infrastructure that people rely on them to provide.
She points to Australian examples where rates-capping has failed: in New South Wales, rates caps resulted in a $201 million maintenance funding shortfall across 62 councils in a single year, she says. Just 46% of councils had sufficient funds to maintain acceptable building and infrastructure renewal levels. In Victoria, rates caps caused a reduction in gross domestic product (GDP) of up to $890 million.
Stoltz says councils frequently end up applying for large “catch-up” rates increases after years of constrained revenue.
She suggests councils are keen to work with central government to tackle the drivers of costs and find efficiencies.
What’s clear is that this co-operation will be crucial if ratepayers want to continue enjoying anything near their current level of services and amenities.
Local councils aren’t in a strong position to control major drivers of costs. They’re often at the mercy of forces beyond their control.
As for efficiencies, it could be argued that some will be found as councils move into the new era of reform.
The Government this year invited councils to voluntarily redesign their boundaries and structures through the Head Start process, including potential amalgamations and the creation of unitary authorities. If regions do not develop acceptable proposals, the Government has signalled wider reform after the 2028 elections.
Councils’ proposals for new unitary authorities were due this month.
Could one dare to hope that reduced duplication, combined back-office functions and increased purchasing power would lead to lower costs?
Maybe ask an Auckland Super City ratepayer – they may well have an opinion on that.
Councils are, and have long been, more than just parks, potholes, pools and picking up your rubbish. They perform complex functions that keep regions, cities and towns running. We expect them to maintain and invest in infrastructure, to hire capable, competent people, to represent residents and champion local causes, and to keep us and our properties safe. In day-to-day operations and planning, they need to constantly consider the past, the present and the future.
We can’t afford to face the same issues LGNZ says rates-capping has caused across the Ditch.
Multiple councils have this week spoken out against the plan. Watts needs to listen to the people on the ground and either reassess the plan’s scope or find a way to reassure councils and residents that there’s a practical path forward.