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Infrastructure Commission chairman Alan Bollard says councils need to borrow more to invest in infrastructure, saying limited revenue sources isn't an excuse

Infrastructure Commission chairman Alan Bollard says councils need to borrow more to invest in infrastructure, saying limited revenue sources isn't an excuse
Alan Bollard

Infrastructure Commission chairman Alan Bollard says local councils are largely to blame for New Zealand’s infrastructure deficit.

Speaking to at an economics forum at Waikato University, Bollard called out councils for not borrowing more to invest in infrastructure.

They aren’t using their balance sheets, he said, refuting the argument they’re constrained by having limited revenue sources.

“I think the tools [to generate revenue] and scope are there currently,” he said.

Bollard is a former Reserve Bank governor and Secretary to the Treasury. The Infrastructure Commission, which he now chairs, is a Crown entity tasked with establishing a 30-year infrastructure plan to be tabled in Parliament by late this year.

Bollard recognised if councils take out more debt, it’s essential they’re well governed.

“There could be real misuse of councils pushing up debt for short-term projects. But if you got confidence in that, they should be taking on more debt,” he said.

“Local authorities have got more powers currently than they seem to be prepare to use.”

Debt cap lifted

The Local Government Funding Agency (LGFA), which raises debt on behalf of 71 of the country’s 78 local authorities, in June last year lifted the debt cap it imposes on councils. Note, the LGFA accounts for most (82% in the 2020 calendar year), but not all, of all council borrowing.

In the years to June 2021 and 2022, authorities with credit ratings of ‘A’ or higher will be able to take out debt three times (300%) the value of their revenue. Previously this net debt to revenue ratio sat at 250%.

From 2023, the cap will taper back to 280% by 2026.

As at June 2020, Auckland Council had the highest net debt to revenue ratio of 196%. Wellington City Council sat at 128%, Christchurch City Council 121%, Hamilton City Council 137% and Tauranga City Council 203%.

Yet the average net debt to revenue ratio across the 30 councils with credit ratings above A was only 80%.

In the financial year to June 2020, LGFA issued $2.91 billion of bonds - an increase from $2.46 billion the previous year.

In the year to June 2021, it expects to issue $3 billion of bonds, with this falling to $2.40 billion in 2022 and $2.15 billion in 2023.

Rates rises problematic

The LGFA explained the issues facing councils in its latest half year report to December 2020: “The local government sector has felt the impact from COVID-19, albeit there has been a divergence of the severity of impact amongst councils.

“Councils have in general experienced a reduction in revenue from fees and charges and reduced income from their investment portfolios.

“It has also been difficult for many councils to implement planned rate increases given the financial impact from COVID-19 on some ratepayers within the community.

“Meanwhile there has been a need to continue, if not increase, capital expenditure on infrastructure.”

Revenue sources unlikely to be broadened in the short-term

Asked whether he saw scope for central government to help local government by sharing some of its GST tax revenue for example, Bollard said that would get “really complex”.

“I don’t think that’s going to change in the short-term, but there are discussions going on between local and central government,” Bollard said.

“I wouldn’t expect to see big changes around that.”

Bollard said councils could however make use of the Infrastructure Funding and Financing Act 2020. This enables them to use a somewhat complex process to levy property owners to cover infrastructure costs.

A similar model has been piloted at the Milldale development in northern Auckland, but a project is yet to use the powers outlined in the Act.  

“You have to say; what is it about local politics that’s not delivering?” Bollard questioned.

Asked whether ideology around debt was also holding councils back, he said, “I’m not seeing an ideological gap in central government, but there is in some cases in local government.”

Bollard said addressing the issue involved a lot of communication with ratepayers.

Credit rating agency happy

On the flipside, S&P Global Ratings is pleased with LGFA, upgrading its foreign currency rating to AA+ a fortnight ago, on the back of an upgrade to the New Zealand sovereign rating.

S&P Global Ratings noted there was an “extremely high likelihood” the New Zealand government would bail LGFA out if it ran into trouble.

While it noted New Zealand councils are relatively leveraged compared to their international peers, it said their credit quality was strong.  

S&P credited LGFA for addressing risks associated with its loan book being concentrated by restricting Auckland Council from taking up more than 40% of the book.

LGFA is of the view it’s important its credit rating is on par with the New Zealand sovereign rating. This is the norm among the equivalent agencies it compares itself to overseas.

Yet as at February 22 at least, these countries hadn't had their credit ratings upgraded, as New Zealand had, making it the first developed country with investment-grade debt to receive an upgrade since COVID-19 hit.

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Its going to be interesting to see what Milldale will be like in future. It could go one of 2 ways: a haven for the very rich (who have enough income to be able to pay the higher rates bills than any other area around there). ie Exclusive. Or it could go on a long downward spiral where people face hard times and it becomes a rental area only where people do not do house maintenance or mow lawns....

I'd bet on the former.
How much are the rates?

The Milldale model is a dog and is just a general revenue grab under the guise of charging for local infrastructure.


To encourage Councils to take on more debt right now is not at all prudent with the way interest/bond rates are going now.
This just shows how stuffed the Ak Council is!

In most cases homeowners have seen the value of their dwellings appreciate substantially so their collateral position should be sufficient to absorb infrastructure development costs passed straight back to ratepayers. Why should local councils accrue more debt?


It's the old "taxing unearned and unrealised wealth" dilemma.

I don't really have a problem with taxing wealth, realised or unrealised.

Ah the classic spiteful Kiwi who's earned none. What a wonderful way to live.


Life's too short, be bitter all you want but hopefully it's not too late in life before you realize how short sighted it is to be so.

I don't want to spend my life being negative and shaking my fist at the way the world works, or seeing others do well, whatever their occupation. Who am I to say it's wrong! Markets have a tendency to be right, commentators on forums in a tiny dot in the world tend not to be.

Pretty sure squishy was on here the other day talking about how many properties they own and their elevating "value" which was more than a couple of million?

If squishy is OK with taxing themselves on some of that unearned wealth, that's the sort of person I take my hat off to. Taking personal hit to ensure the future wellbeing of society.


Sure but a homeowner in a house for say twenty years or so, with no intention of shifting, may well have a property that has doubled in value but that does not give them actual extra cash on hand to fund a city council. As well most of the councils levy rates as a wealth tax, ie the more the value of your property the more rates you pay pro rata. That has now compounded into quite some distortions. For example in our family we have elderly relations paying rates $8,100 pa as opposed to immediate neighbours paying $4,300. Same sized section, same sized structure, same street frontage, but the former is a new house arising from the EQs. Supposedly the rates are a “goods and services charge” but each property receives exactly the same services so the only explanation is the extra “wealth” of the new house is being levied, taxed in other words. And of course central government collects 15% GST over the top of all of that, thus compounding the distortion even further.

That's why a tax based on the land value rather than the land and improved value should be charged.

Sounds like a massive incentive to further restrict land supply to me. I'd be extremely reluctant to go down this route until we have the type of planning regime that sees inner city suburbs intensifying instead of new ones added on the exurbs with the lifestyle compromises such as mega-commutes that come with them.

1. There is no such thing as 'land supply'. We need to be past that in the discussion; this is a finite country.

2. Compacting humans into a smaller space may reduce infrastructure requirements, but not supply/servicing ones. Cities are just giant heat-engines.

3. Commuting presupposes BAU. BAU is unsustainable.


“if they take on more debt, it is essential they are well governed.” So far that is the understatement of the year. The obsession with non essential projects, vainglorious and zealous enterprises foisted on rate payers, and other squandering of the public purse, has been all at the expense of basic infrastructure services and is exactly why there are enormous deficiencies in basic services from Northland to Southland.

When representatives seek election, it's all a bidding war. Who promises to erect the biggest, shiniest monument to human extravagance. For some reason electors aren't sophisticated enough to understand council money comes out of their pocket? National politics? Worse!

Of course councils are more leveraged compared to international peers, because they have much more restricted sources of income than international peers who are allowed to set municipal taxes and fees of various sorts.

Blood and stones
Anyone care to put some numbers on how much would be required to be extracted from local spending capacity to service all this local body infrastructure debt?
The TA model is bust, much like the rest of the mess.

Too many demands on too few resources....catabolic collapse.


When revenue is restricted, taking on more debt is daft. Essentially he is advocating they spend more that they earn. Mr Bollard - that never ends well.
There is no magic solution. Abraca dabra does not work. It still has to be paid for sometime.

What is daft is the false economy of not maintaining and investing in infrastructure because of some ideological aversion to debt. If you’re worried about the debt (I’m not) you should be focused on the ability to service it not the notional total and with interest rates at record lows the servicing costs are trivial.

Btw local government is basically a branch of central government, and you’re mistaken if you think governments have to pay back debt, in fact the economy would collapse if they ever tried.

The problem Calaverite is indeed the inability to service it, which includes reducing debt until the next infrastructure cost comes along. Which for councils can be weekly. So if they can't service it for sure now, and they can't in the future, debt ain't the answer.
All those drains in ground, etc etc are real things that take real imputs of labour and material resource to provide. They cost and no amount of financial magic and fantasy are going to change that.
We want the infrastructure, we gotta pay for it.

Exactly. The majority revenue stream is from rates, but incomes are stagnant so how can an increase in rates be achieved? What really grinds my gears though is loading up on debt to borrow from future generations. Those future generations will have the next round of infrastructure to pay for, and what do they do then? The borrowing (through debt) is stealing under the guise of intergenerational equity, made by elected representatives with only a token consideration of future generations.

I don’t know why property owners are complaining about a few hundred dollars in rates rises when their properties have increased by hundreds of thousands of dollars, after all Carterton has higher rates than all of the major centres. As for debt “borrowing from future generations” this completely ignores the fact future generations receive the benefit from current investments. The only way you “steal” from future generations is by transferring wealth to the current older generation to consume now e.g. cash transfers (or via inflated asset prices)


It's all about debt and growth and passing that debt forward to be able to live the dream now .
It's people like Bollard saying things like this that have me shaking my head and stepping over to PDKs side of thinking.


First valid reason for capital gains tax I've ever heard. It'd be a source of capital funds generated from the increase in property values, reinvested back into the infrastructure that supports them. Similar to what development contributions are. Whereas rates are an operational revenue stream related to property values that enables councils to spend on the day to day services like water, drains, sewerage, road maintenance, rubbish collection etc.

Back in the years of 2012-2014 there was an active contributor called "Kumbel" who worked at Valuation NZ. He knew "because he was at Valuation NZ and it was their job to analyse what was happening and revalue the city.

If you have a spare hour or so, search on for "kumbel revaluation" and have a read

After many years of re-valuing upwards, how much of those balance sheets are comprised of revaluations

I live in a 50 year-old, 1 bedroom corrugated iron shack on a ¼ acre section
Got out the tape measure and a calculator and revalued my shack at $6 million
Went to the bank to get a $4 million mortgage on the property
The bank manager laughed at me

Irony in that in that it was bogus valuations of that nature that contributed significantly to the downfall of RSL in the late 80s. The same underhanded scenario with vehicles collapsed Provincial Finance 2008, many other finances companies soon followed.




And yes, it needed to be shouted. From the rooftops. Bollard - and a generation of like-educated types - is preaching in the manner of pre-Darwin pulpit-thumpers. Essentially, we have problems all to do with growth, and all he can do is preach growth. Does this not strike anyone else as grotesque?

One does not question the High Priests...all you need to do is 'believe' and paradise will be yours.

The Myths of Green Energy

All debt is borrowed against future supplies of affordable hydrocarbons (oil, coal and natural gas).

Line of the day..."Central banks cant print energy"

"Bollard is a former Reserve Bank governor..." really, we weren't going to get anything else from him...

How about immigration????


If we'd charged every new migrant an infrastructure levy of 100K, we'd be in a lot better position.

Vague memory that the total value of NZ infrastructure divided by the population is about $250k per capita. That is physical infrastructure but there is also the past cost of training for our teachers, doctors, nurses, librarians and any other jobs providing a service to the public without charging the user.
It baffles me that our fairly low paid immigrants have paid many tens of thousands to agents in their own country and to our PTE's but not compensated NZ taxpayers for the infratructure they benefit from. Incidentally I'm an immigrant myself and receiving NZ Super.

Why can’t councils access RB funding at OCR like the banks can?

FLP transforms outstanding bank short term debt into cheaper longer term debt financing investment securities such as NZGBs and RMBS. Hardly any useful infrastructure collateral involved in this repurchase agreement transaction.

Fun fact about Alan Bollard. Around 2000, when he was boss of Big T, he happened to come in and sit next to me while we were waiting for an internal presentation to start. He leaned over and asked the time. Looking at my (perpetually fast and hard to adjust) watch I mumbled, "Lemme see, that's 20 past, so quarter past". He said "So, your watch is fast, and you know it." "Ya", I said, cheerily. His response; "Uch".
He moved on to RBNZ after that - probably disillusionment.

I once contacted Jenny Morel - who I consider an I/Q click above Bollard - about energy and Limits.

No reply.

When you've invested a goodly portion of your life in some pointy-ended echelon, it's very hard to acknowledge you were barking up a wrong tree. You can see this with Grimes throwing Nordhaus into a Biophysical Limits to Growth webinar, with Karacaoglu in 'Love you', even Boston advocating 'putting aside funds for future generations' (collections of computer-held digits? What will that do?). When a false narrative - and growth forever on a finite planet was always a false narrative - turns out to be what you based your life on, you find you don't have enough time to redress, and that your own echelon don't want to let you do so. Bollard sounds like Bishop Wilberforce, in relative terms. Pity he's still being given oxygen.

How incestuous ... In the year 2014 ... Jenny Morel

Last year when her husband, former Reserve Bank Governor Alan Bollard, began a three-year stint with APEC in Singapore, Investment Banker Jenny Morel moved with him, closing the office of her Wellington-based company No 8 Ventures

Thanks - interesting read

All the money the council needs for the infrastructure is right there, staring them in the face, but they allow the land bankers to walk of with it due to council policies that allow the price to be artificially increased 20x above its next best economic value, to the total benefit of the land bankers wallet.

This just shows the incompetence of council policy, and you wouldn't/couldn't trust them to handle money if they are this remiss in allowing others to take it in the first place.

But the land banker doesn't have the money. And if the land isn't economic to develop, then it's just going to sit there until it is. I'm starting to agree with capital gains tax. Its an easy to capture source of capital funds that could be reinvested into infrastructure.

Both are artificial constructs. Both the money, and the value. And 'reinvest' is therefore invalid.

Our whole problem was/is seeing things through money eyes.

Infrastructure requires energy and resources. Money is no guarantee of the supply of either. Been the problem increasingly since 2005/8.


Money is indeed an artificial construct, but it is not logical to conclude from that, that reinvestment is invalid.

I agree that money is no guarantee of the supply of energy or resources, but money can be used to lessen our dependence on certain resources. Of course oil and gas will run out at some point, but when. By the end of this century? Quite possibly. The pessimist will argue that we will never be able to come close to the energy density/efficiency of oil and that this together with climate change and over-population will see societal collapse. The optimist will argue that the efficiency of alternative sources of energy will keep improving and that by then, global popuation will be falling quickly. Me? i am somewhere in the middle. i think that well within the lifetimes of my grandchildren we will see considerable disruption to our globalised world,but not on the cataclysmic scale that you forsee.
I very recently quizzed a friend in the US about their growing debt/GDP ratio-he is an academic and a consutant to the Fed and he tells me that absolutely nobody is talking about it. America he says, does not need to play by any rulebook and can just keep printing money. I think he is wrong and that there will be a day of reckoning, but not anytime soon.

In the 1960s working in a trading bank as they were then, we were lectured by Rufus Dawe concerning the perils of countries printing money. the standard examples Germany post WW1, Argentina & Brazil, Italy too. Recently we have seen the like of Zimbabwe & Venezuela stricken similarly. But somehow now, it doesn’t pose such devastating risk? I am not an economist, but the logic of it all certainly escapes me, hand over fist.


Google World3. Have a look at the graph, and the updates. Remember that they ran it with 'double resources' - as in: with another planet. The problem (and it's the flaw in your optimistic timeline) is exponential growth, acceleration thereof.

Their extra planet only bought 30 more years. That's what exponential growth does - it catches linear thinkers (the majority) by surprise. That 30 years ends before 2060, given where the cusp of those trends in World3 seem to peak.

I reckon the day of reckoning was about 2005. The day of first repercussions was 2007/8. The thing's been on life-support ever since. Could it be that you just need to avoid knowing that you've been sucking on an IV drip this last decade or so?

"oil and gas will run out at some point, but when. By the end of this century?" Run out? Oil and gas will never run out, they'll just become uneconomic both financially and energetically, to extract, (Ignoring for a moment the environmental cliff burning fossil carbon is driving us off). Have you not heard of peak oil theory? It's the peak of production that is the problem, not the long tail of declining supply. Without growth in cheap energy inputs, economic growth is finished. The global economy is no longer resilient enough to tolerate high oil prices, but the price of oil is too low to facilitate new production from inevitably higher cost new sources.

The land bankers will receive a non-valued added increase of 20x plus above what they paid for it. It's always economic to develop, but by doing nothing then can force the price up as causes a shortage of supply.

The point is if the land was prevented from being gamed in the first place and landbanking was not allowed, then the input cost of the land would be a lot less. This would result in two things. 1) Council could charge a larger infrastructure levy, and 2) the developed section would still be cheaper for the end-user.

However given that landbanking is the status quo, Since this has forced up the price of new builds, it also raises the prices on existing, which get a free capital increase. Taxes like stamp duty are used to tax the 'churn' of property, but then there is a perverse incentive for councils to promote the turnover of property.

Rates can only be used for operating costs which can include short and long-term maintenance funds but any Capex should be via deprecation funds for Upgrades or if for new growth then development levies on new developments. Councils have not put aside their depreciation and have not charged enough for rates, so naturally, they are short. It's catch up time.


I recommend watching "Princes of the Yen" on YouTube. It is about the events leading up to the bursting of the Japanese property and sharemarket bubble. Alan Bollards recommendation is a repeat of the Japanese experience of piling on increasing debt until the inevitable crisis arrives. Then in will come the foreign owned vultures picking up council assets for cents on the dollar.

No government has been given a mandate to keep increasing our population, so we should stop borrowing from the future to fund it.


Well put.
Significantly reducing immigration is key to addressing most of our biggest issues.
Will that happen? No, because both of our major parties believe in the benefits of ultra high immigration levels.
And even the Greens welcome relatively high levels of immigration....

I wonder if the party members actually do want high immigration....but I bet the major party donors do. And so the members just follow along because they want to win more than to do what is best for the country.

Beanie - look at the treasury forecasts. We need high immigration otherwise the boomer superannuation bill is going to cripple the countries finances. So without being a complete DGM (although I fear it’s already too late), but with immigration were #^*%{] (house price demand), and without immigration were %^*{ (budget deficits due lack of tax take)

I have always thought that when the crunch really comes on the affordability of universal super, it will be means tested. Kiwisaver will be made compulsory, you will be forced to buy an annuity with it, and that annuity will form part of the means test.

Well benefits for the elderly are semi means test already. Because I live with a working wife and we cohabit our own home I recieve far less from the govt that if she threw me out. Then I'd get more Super and accommodation allowance. Time I made her a cup of tea.

If Super is means tested then the thrifty elderly will be up in arms and they are far more dangerous and politically powerful than students. NZ will have to bite the bullet and up the qualification age; that would put us back in line with other developed countries. Do it now with all parties agreeing or wait until the govt's next financial crisis and bring it in hard, sharp and unfairly.

NZ did have its opportunity to address much of the current problems with both housing and pensions. That was when the greatly undervalued Labour government under Norman Kirk was in office. That government introduced ACC, compulsory super-annuation, and a property speculation tax, and on another arm, had the guts and conscience to cancel a Springboks tour and send a navy vessel to protest the French nuclear testing in the Pacific. That government was much maligned and once Norman Kirk had died, could not withstand the savage and destructivepersonality politics of Robert Muldoon who proceeded to unravel most of it on assuming power. I am ashamed to admit my vote was part of that.

What the heck - Superannuation?
Superannuation is controlled by Central Government
Any cost reduction will simply flow into the CG coffers
And you know that Central Government doesn't share its loot with Local Goverment
Got any other ideas?

No IO. The increased number of oldies won't strain the budget as much as you think.

Well you can take that argument up with Treasury and convince them to tell the government to lower immigration in that case given you’re so certain - I’ll see if I can find their latest forecast.

I think that's right.
Big Money talking.

Yeah I’ve watched that a few times over the last few years and I think that what we’re seeing in the economies of the anglosphere is very similar to Japan late 1980’s.

Deep down most people know this isn’t sustainable but they can’t look past their own self interest in order to see just how broken the current economy is. It surprises me how uncomfortable people get when you hit them up about the problems that the status who is creating - but they brush them aside like it’s somebody else’s issue. I.e. ‘I no longer have any social responsibility, as long as much rental property keeps going up in value I don’t give a shit about the quality of my community or the wellbeing of its people’

More debt! Haha were in trouble because we already have too much debt!

You can’t solve your dilemmas by doubling down on the core issue - that would be the definition of insanity.

Not debt, "Balance Sheet usage"


I second that lol.

Ah yes the ever thankful ratepayers will love this idea...

Any discussion on what the new rates will be very very soon ? The whole of Tauranga has the new RV's out in July this year, its just a few months away now. The recent huge house price increases across the whole of New Zealand has been perfect timing for the councils to really start cranking the rates up. From memory they have already been going up at like 3.5% per annum anyway without the sort of recent gains. Wouldn't surprise me to see 7 to 10% increases coming.

That's not how rates work. Man everytime....

It shouldn't be an issue for councils to borrow cheap from the banks. Currently our banks are awash with customer deposits ready to lend..

Kind of makes you think tho doesn't it ? We are at an all time high debt level but yet there are still billions in deposits. Society continues to swing to the top 1% owning everything.

Deposits (bank liabilities) are already funding borrower's liabilities (bank assets) on bank balance sheets. New loans beget new deposits. Both remain in place until the loan liability is extinguished by payments made by the borrower.


All money is existing and banks only lend out money mums and dads deposit. And the economy is booming because banks are awash with customer deposits..

Currency in circulation amounts to $8.21 billion according to the RBNZ's liability ledger.
Banks claim to be in possession of $1.055 billion vault cash.

Then people are hoarding physical cash. As banks are awash with customer deposits...

"This article explains how the majority of money in the modern economy is created by commercial banks making loans. Money creation in practice differs from some popular misconceptions — banks do not act simply as intermediaries, lending out deposits that savers place with them, and nor do they ‘multiply up’ central bank money to create new loans and deposits. The amount of money created in the economy ultimately depends on the monetary policy of the central bank. In normal times, this is carried out by setting interest rates"

Everyone who owns a house in NZ is in the top 1% of the world...

Facepalm. Not this again...

Tauranga: the only council with net debt/revenue of over 200%, while the average is just under 80%.

It will be 'interesting' to see how the Commissioners deal with this.With Anne Tolley leading them-the minister who put the boot into night classes- i am not optimistic. No doubt she will see our libraries as a cost rather than a benefit.

Obvious answer = Ship in another 100,000 rate payers.

(NB: Or was that the root of the problem in the first place?!
And an incisive comment from above; one that sums up pretty much every problem we face today = "(It's) Not Debt, (It's) Balance Sheet Usage")

Well Tauranga has been one of the fastest growing cities so yes that is probably the cause. But it isn’t necessarily a bad thing, infrastructure is an investment after all.

Wellington needs to borrow up and fix the water issues. What a joke.

That city has become a joke. A great example of poor leadership and mismanagement.

But but, rainbow crossings and cycleways!

Yeah cities that just build 20 lane highways are much nicer places.

Similarly we had in Christchurch the identity assumedly in charge of roading proclaiming, oh we have been listening and we understand you want your roads fixed, so we we will have to work out how much your rates will need to go up to pay for it. Well if they had been listening they must have had the hearing aids turned off. Then believe or not, the council then went on to say could you just let us know what roads are of concern. Management of the worst type possible by those working in rooms without windows, behind locked doors.

If I had a Deutschemark for everytime I heard a banker peddling debt as an answer to all life's problems

"Germany 100 Trillion Mark Banknote. "

That can not happen again ...can it?!

'Debt' is so passe, try Balance Sheet Usage

Yea, where I come from 'plus size' is still referred to as 'fat'. Or 'fatty' if you like. Call me Old fashioned.

"Lazy Balance Sheet". Fuuny term. Makes it sound bad, but I was always happy to have one.

So now we have a tidal wave of infrastructure deficit from one end of the country to the other heading our way. Can't see that this is going to be cheapest price when councils are bidding against each other for limited resource on the ground to get through the backlog of works.

Immigration you say?

An ex RBNZ banker promoting debt who would have thought that. Someone needs to tell them the problem is the Government’s lack of a population vision based on the optimum number needed to convert the sustainable resources of NZ for the benefit of all.

I have no problem Councils lifting debt if:

1) Central government pays rates on Crown land (the Crown is currently heavily subsidised. This distortion needs to go)

2) Council's are required by legislation to fund maintenance & renewals on existing infrastructure first

3) Council's are required by legislation to undertake proportionate benefit cost assessment of its proposed projects. Anything with a b/c < 1 has to go to the ratepayers for approval.

We need productivity from Council's to ensure rates are spent efficiently (i.e. increase total welfare from a social cost benefit perspective). Companies have to operate within financial constraints. Councils should be required to operate within benefit/cost constraints.

Good ideas - only they're likely to simply fudge the cost/benefit exercises - hence to avoid that pitfall, the legislation could require that all non-core capital expenditure (all but capex for water, wastewater, waste) would be subject to referendum.


Best practice is for BC assessments to be:
1) peer reviewed
2) made available to the public.

This reduces the fudging.

The benefits are always crap anyway and the costs are not the full costs of the project. A road widening that costs millions and only saves everyone a whole 30s until the road is clogged again 2 years later normally ends up with a good b/c, but means that the local community is screwed: noisy, can no longer cross the road or ride a bike, polluted, etc, but none of that is considered a cost. it’s this crap that got us to be the car dependent country that we are. Turning your local park into a nuclear reactor probably has a good b/c

No, what made us into a car dependent country is the significant over subsidisation of private travel:
a) under priced car parking
b) no congestion tolls
c) under priced road user payments (ratepayers pay too much)
d) zoning laws that effectively force low density car dependent suburbs
e) government not increasing the fuel excise tax for inflation - this happened in the last few years

Benefit/cost assessments can only work within the existing framework, its up to the government to get rid of the distortionary subsidies.

Transport B/C's aren't perfect and can be much improved. They typically dont properly evaluate effects on access & safety of non motorised modes as well as community severance and traffic noise issues.

Also we dont have a nationwide NZ transport infrastructure standard that sets the minimum accessibility and safe standards for all modes, especially non-motorised modes.

Yeah but if you doing benefit cost you either have to go tangible in which case a nuclear reactor is much better than a kids playground or you go intangible in which case it is so woolly that it is meaningless.

One of the best things the councils could do is change to a monthly bill. The council takes our rubbish, builds roads / cycle ways / footpaths, maintains parks, builds other infrastructure, promotes events, storm water, and lots more, and for us it’s about the same price as our power bill which was just some rain falling down a hill and turning a turbine built 50 years ago. But the rates bill feels worse because it’s every 3 months.

Ask your council if they will take monthly payments (or even fortnightly). We have, and the Council allows it. It's just a bit disconcerting to see at times we're in arrears odd amounts when the 3 monthly statements come, even though it comes out in the wash at the end of the year.

Talking of Balance Sheet Usage (BSU): Curses! I missed US Debt Clock ( ticking over US National Debt to 28T. Really wanted to watch that live.

BSU also stands for Bull Sh*t U (you).

A bit off topic, but was reading Croaking Cassandra's latest blog summing up that Nana Ganesh (chair to Productivity Commission) speech at Waikato Uni's Economics Forum was a great big nothing burger. Several things I find interesting. Waikato University is where JA learned her double-speak and made connections, now the university is hosting this new Economic Forum.. Also found surprising the lack of business acumen of speakers which is pretty much all bankers and economists

Productivity is merely energy efficiencies (Adam Smith is irrelevant when 99% of work-done is fossil-fuelled)

It is amazing that many people are angry at high level of immigration, debt etc, yet very few are fuming about the performance of Councils in relation to their core responsibilities (e.g. maintaining infrastructure). No one questions the governance model, the engagement from the public, the fact that most people never even read the Council's financial statements and understand nothing (and do not care).
In Wellington they do not even have a complete map of their water piping network. In Christchurch a ridiculous amount of water is wasted through leaking pipes every second. Generation after generation of councilors have failed with absolutely no repercussion for either themselves or their institution.

Councils don't use their balance sheets properly currently. E.g. spending depreciation for 3 waters infrastructure on feelgood projects so they don't have to put rates up to pay for the extra interest payments. We need some serious upskilling in LG.

Finger pointing (again...)
There has still been no coordination of what the infrastructure demand projections are relative to immigration

So how are you supposed to plan for something that takes 5-10years to build when governments flood the system to capacity? then start bleating about you not foreseeing their policy changes fast enough??

Governments flooded NZ and this is the consequences... how about building a roadmap going forward that is actually sustainable and doesn't increase costs to existing rate payers simply to cover up ineptitude?

O No this guy is giving permission for councils to take on more debt that they cannot already service. F Sake Bollard councils cannot borrow 300% more than their revenue that is just stupid and not good financial Advice. Your were a Reserve Bank Governor I thought you would have a better idea of economics. Looks like the good ole ratepayer will be getting shafted for years to come.

So borrowing 3x income is stupid? Yikes, better tell everyone trying to enter the housing market...