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Govt's local council shake-up looms; Less likely to be rates caps, but will look at ways to encourage councils to keep hikes down, Key says

Govt's local council shake-up looms; Less likely to be rates caps, but will look at ways to encourage councils to keep hikes down, Key says

The government's plans to reform local councils will be discussed in Cabinet today, as it looks for ways to try and keep rates rises down, and force councils to better control their debt levels, Prime Minister John Key says.

Speaking on TVOne's Breakfast programme this morning, Key said outcomes being considered were less likely to involve caps on rates increases, but would focus on ways to encourage councils to keep rates hikes and debt down.

Rates across the country had on average risen about 7% every year since 2003, Key said. While there were some good reasons for why rates had been raised that much, "every year, 7% on average seems like an awful lot." 

See previous article, Local Govt Minister Nick Smith warns councils on increasing debt levels, hits back at figures from Local Government NZ on costs faced by councils.

Changes being considered would also make it easier for councils to amalgamate, although the government would not be forcing more amalgamations like it did with the Auckland Super City, Key said.

At the moment it was very difficult for councils to amalgamate.

“In New Zealand there have been very few [council] amalgamations. There’s been eight attempts by communities, only one of those has succeeded, and ironically only when Banks Peninsula made themselves defunct," Key said.

“We’re not going to force amalgamations as we did in the case of Auckland, but we are going to make it possible, and arguably easier, for councils to amalgamate,” he said.

The government would also likely express a view on what councils’ core responsibilities were, but only within broad parameters.

“The reason we would care about the role of councils, is we would care about their rate increases, or their debt levels. Debt has quadrupled in the last six years,” Key said.

“What we’d say is, if a council starts wandering off into activities which arguably aren’t necessarily their domain, and which cost money, then they’ve got to pay for that in two ways: Either rate increases, or borrowing. And the problem with borrowing is, yes, it’s good to spread [costs] – there’s an argument about inter-generational dependency there – but you can only pay for...debt through rates increases, outside of selling any assets [councils] might own," he said.

Asked what place central government had telling local government what to do, when councils would be held to account by ratepayers, Key replied:

“Because councils can’t go bankrupt. If you go back to the leaky homes argument, one of the reasons we wandered in with a bailout package was (a) because we thought that was the right thing to do – try to help those homeowners – but secondly, without it, there would have been massive compound rate increases every year for about four big councils across New Zealand.”

“They can’t go bankrupt, so in the end what would happen is, they legally have to meet their debts," Key said.

Unlike a business, which could file for bankruptcy, councils cannot go broke, he said.

"So the government is passionately interested in the activities of councils, what’s driving their rates, how much debt they have on board. Obviously within that, they have broad flexibility, and there will continue to be broad flexibility. But there has to be some constraint on exactly where the demarcation line is," Key said.

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Wow...that was some puff of hot air...the councils will be frightened into action...not.
Humbug for peasants....feel better do we....looking forward to 'super councils' are we....expecting rates to stop increasing beyond the debasement speed.....wanna place a bet that nothing happens.... in the next two years!
What we will see is......"The Council Working Group" popping up from beneath a rock...yet more makework handouts of taxpayer dosh to National Party flunkies.

Once again Wolly you have highlighted the farce that is presented as our government - both local and central.
I find it harder and harder to respond to such ineptitude.
It is so glaring and continuously in our face - you'd think Key etc would recognise their blathering incompetence and give us a rest.
Not a single coherent growth policy from the Nats since they came to power - acting just like  rabbits in the headlights.

It doesn't matter what flavour government we have. What's been originally designed as 'from the people for the people' has been usurped by a brigade of USELESS know-it-all sociopaths who need a job and who think the community needs them and their ‘management’. These parasites help themselves to precious rate/tax monies and if they fail (many of them have failed before in private enterprise -if they ever held a real job-), hey, they extort the ratepayer to bail them out. As long as the average peasant hasn't got a clue about the abomination called politics nothing will change. And THAT is the only reason CWG is active to keep the peasants quiet

This is the same John Key seeded the Dunedin Stadium with $15 million of taxpayers money?
Spare me.

Porirua Mayor Nick Leggett has hit out at Government suggestions that councils should stick to core services such as sewage, roads and libraries.
Porirua City Council's long-term plan, which outlines spending for the next 10 years, includes a vision of a poverty-free city, and Mr Leggett insists it has a "moral obligation" to stamp out child poverty.
Such social crusading goes against Local Government Minister Nick Smith's plans to pare back the scope of councils' functions so they have control only of essential local services – waste, water, roads, libraries and consents. Sweeping reforms to narrow local councils' responsibilities and reduce soaring debt levels were on the horizon, Dr Smith said this week.
But Mr Leggett said councils did not have to throw ratepayers' money at social problems. Instead, they could advocate to governments and work with social, heath and education services to "look for solutions".

It appears Mr Leggatts Council is cutting "core" services to help fund its "social crusade".
It seems to me that Councils across the land have lost sight of what they are actually there for and its well past time they were hauled into line...but I suspect for all the bluster the Govt wont go far enough, and we'll all continue to be bled dry.

Kermie - big-picture, Councils are picking up the social fallout. Volunteers are not as numerous, and the demand is inevitably going up exponentially.
If they don't, you don't have a society. Trying to run a society which solely focuses on the dollar, is a doomed approach.
What this is signalling, more that anything else, is that inflating-away debt via growth, has had it's day. Don't say you weren't warned!
Rates will outpace incomes, from here on, as will costs of just about everything. Get used to a resource-starved, overcrowded planet. It's something you can't buy yourway out of.

PDK it is Central Govts job to deal with social fallout, not local Govt. Otherwise you end up with an expensive, inconsistent, half baked approach which varies by Council.
For example part of Akl Citys long term plan is to see x % of kids achieve NCEA passes. Its simply not their job.
Between them Mike and Sandra Lee have done a massive amount of damage to the wallets of hard working NZers, and Aucklanders in particular.

If Mr Legget is so concerned about child poverty then facilitate affordable housing the cost of housing is a primary cause of povertry. A starting point is to read the productivity commissions report on land availablity.

If Mr Legget is so concerned about child poverty then facilitate affordable housing the cost of housing is a primary cause of povertry. A starting point is to read the productivity commissions report on land availablity.

Unlike a business, which could file for bankruptcy, councils cannot go broke, he said.
Sounds to me like moral hazard writ large.

Colin, sounds more like a gun to our heads - no doubt the LGFA will be forced through the good offices of the NZDMO and hence the government to bail out the debts owed to the banks. Much the same as Greece.
And silly me, I previously thought sovereigns couldn't go broke as they can print forever. Not any more, apparently. The citizens fail on the sovereign's bankers behalf.  Much the same will happen with our councils I guess. 
Was it ever different?

Stephen, if your gun analogy is correct, then for the last ten years the weapon has been government supplied and came with instructions to use regularly - as part of spending our way to prosperity (you've gotta love neo-classical economics and Treasury). 
What we are seeing now is a massive U turn by central government. No wonder LG is confused.
Has Bill seen the light post election? Possibly, but I suspect it is more to do with some very clear messages coming from rating agencies, the IMF and others.

Does this mean that inflation is really 7% per annum? Does the cpi, despite great efforts to be accurate, actually end up measuring something not very useful?
I've been trying to figure out why my rates have gone up 11.5% per annum here in sunny Nelson since 2004. Is the council even more incompetent and spend thrift than it's predecessor? Possibly, possibly not. Has central government transferred or created work for local councils? Possibly. Or does the increase in council costs just reflect the general rate of inflation? Which is scarier?

Go and have a look at the Nelson City Council 's annual report. A fancy 200+ page glossy. Annual wages and salaries for the council rose by 10.9% for the year. Also, there is a massive item of expenditure called "democracy and administration". Interesting terminology. Whatever that is, it's expensive, and that's what you are getting for your rates increases.

AKL Council also have a department called "Democracy Services"

Just listening to Nine-to-noon, re salmon farming in the Sounds.  There in a nutshell goes the theft of the commons. Sideline the Councils (people's representatives) and put in a tame EPA, and you can raid public land, water, space, at will.
Watch the anger. This is a dead-in-two-years Govt. Even without a credible opposition. Probably they know it, which is why the rape is happening now.
Every man, woman and child in Dunedin will owe $2732 when Dunedin City Council debt peaks at a gross figure of $344 million.
If council company debt is added, the figure rises to $602 million, and the figure per capita to $4778.
Figures in this year's annual plan and six-month company reports, both of which have reached the council table recently, show a level of debt that has been widely forecast.
The issue has hit national headlines over the past few weeks, after slowly building as a concern in the past few years.

Add the liabilities of the government and private encumbrances and it becomes impossible to repay on a per capita basis - what next - IMF type policies for Dunedin? - But who will to buy the local assets at a price to clear the debts? - no one - the likes of Macquarie Capital and their local cohorts will want more than a pound of flesh.
Just depends if it is a national or local pound. I favour the former. Collective bankruptcy anyone?  

They need a good accountant on staff or for advice, if you take council, DCCH and no holding entities 600 million debt appears well understated.
Mind you 150$ for a plat. pass to the super season rugby looks a steal of a deal thou.
A big thankyou, rate payers of Dunedin, on behalf of the many out of towners who are enjoying the FB statium.
ps Left Dunedin after University twenty years ago and noticed all the old boys who run town  in the corporate boxes for the games, aged somewhat... however some things never change in Dunedin.

Judging by the Minister's comments in the House, I would suspect the Local Government Act 2002 and the way the act broadly empowers councils will be a key focus... better role definition rather than a cap on rates or restructuring.

Chaps and chapesses, instead of doing the sack-cloth and ashes thing about the Weevils of Government, there's a DIY approach possible to LG fiscal madness.
No, not the DIY approach which just flat-out doesn't tell the Council about a spot of construction here and there, thereby avoiding LBP's, mucho cost, and getting a much higher build quality to boot.  That's a given.  (And will also explain why consents will fall rather dramatically, Alex, so don't read too much into That statistic.)
No, the DIY approach is simply to take an interest in the Long Term PLan of yer fave local Council.  It's yer money they're spending, and they are obliged to Consult aboot it all.
Ask some pointed question:  like:

  • I see you have budgetted for X million pesos revenue, from Development Contributions.  Please set out the average revenue per section expected, segmented into residential, commercial, industrial and Gummint.
  • Please provide some economic commentary about these figures, given that they are significant inputs into section prices, and coming as they do early in the development cycle, attract significant developer financing cost additions prior to section sale, and are ultimately paid for by the incurrence of household, public and business debt.
  • Please provide commentary about the revenue risk implicit in these averages, focussing on the most likely such risks:  development flight to cheaper jurisdictions, housing inflation, buyer resistance, disadvantagement of low-income new-house purchasers.
  • Please provide a table showing comparative Development  Contributions for adjacent jurisdictions, for equivalently sized Councils across New Zealand, and against a New Zealnd average.

Y'see?  A statement (on public record, no less), an education for Councillors who are often shocked!  Shocked! to understand just what their faceless bureaucrats are inflicting on anyone enmeshed in their processes, and (best of all) a chance to stand up in front of the Council and tell these hapless fools just exactly what a dire effect they are having.
DIY is such fun...and the Open Season for the LTP's is upon us.  Happy Hunting!

Waymad - having done that for several years, don't hold your breath.
Most Councils are hand-in-glove with 'development', it makes both the staff and the elected folk feel 'more important'.
Pointing out that this way is invalid, even with quite a lot of supporting info, largely falls on deaf ears. Ironically, the Govt is bypassing them as 'too slow allowing development'.
Thus exponential growth meets linear minds. Overwhelmingly fast.

Just received from Auckland Council two thick books on their Long Term planning (LTCCP) all the way from Auckland to Australia on Airmail Express, at a cost of $25.  I never ask for them, they just tirned up in my mailbox..
Now I know how they spent my rates..

CHAIRMAN MAO, you should have been asking for them. All learned folk should have been requesting a copy especially since the implementation of the LG Act 2002.

If Auckland has sent a copy to all ratepayers that is another complete waste of limited resources.

Days to the General Election: 29
See Party Policies here. Party Lists here.