Bernard Hickey thinks any move by councils to tax incomes, spending, road usage and congestion to lessen the rates burden on ageing property owners is unfair on younger and poorer generations

Bernard Hickey thinks any move by councils to tax incomes, spending, road usage and congestion to lessen the rates burden on ageing property owners is unfair on younger and poorer generations
Who should pay for the local infrastructure investment that needs to be made?

By Bernard Hickey

It always pays to ask a few searching questions whenever one group in the community wants to change the way community-owned assets are paid for.

This week Local Government New Zealand launched a review of the way councils raise money.

It is concerned that councils rely too heavily on property rates and that demographic changes will make it increasingly difficult for councils to build and run the infrastructure their communities need over the next 50 years.

Councils are worried that as populations age and shift that ratepayers won't be able to, or want to, stump up enough to pay for the roads, footpaths, water pipes, sewers, storm water drains, libraries, street lights and sports fields that cities and towns depend on.

Some cities and towns, mostly north of Taupo, are expected to grow substantially and will require big investments, while others will shrink as younger people leave for the bigger cities.

That will create stresses, particularly as home owners age and start retiring in droves.

Many ratepayers will become asset rich and income poor.

That combination becomes politically painful for councils that rely mostly on collecting rates from those home owners and who have in the past simply stung ratepayers with higher rates whenever they needed to spend big lumps of cash on new infrastructure.

Ratepayers are increasingly grumpy at rates increases higher than the rate consumer price inflation.

It is doubly painful for towns and cities with flat to falling populations because their costs are fixed, while their ratepayer base is not. A street with only 10 occupied houses needs just as many pipes and paths and roads and lights as a street that used to have 20 occupied houses.

So what should councils do?

Local Government New Zealand has suggested a whole range of new ways to raise money, including payroll taxes, sales taxes, petrol taxes, congestion charges and visitor charges.

It also suggested that councils use debt more often to pay for infrastructure that has a long life span.

That all sounds sensible enough until to you dig around to find out who is actually paying rates now and who would have to pay these wider range of charges in future.

As home ownership rates have fallen the responsibility of paying rates has fallen on owner-occupiers, landlords, farmers and commercial property owners. They tend to be older and richer in asset terms at least.

Younger and poorer renters, and they are growing in number because house prices have more than doubled over the last decade, are not paying directly for the water, the roads, the lights and the parks, yet they use them just as much.

New ways of funding councils would pull those younger and poorer citizens into the local taxpaying net.

It would make council services much more user-pays than is currently the case, and tax the incomes and spending of poorer and younger renters.

The issue is looming because over the next 15 years the baby boomers will retire and have to start keep paying those rates, often on multiple properties, while living on their pensions and savings alone.

The pressure is already building through the ballot box as these ratepayers, who vote in much greater numbers and intensity than their younger and less politically engaged tenant neighbours, protest ever more loudly about rate increases.

They argue they shouldn't have to pay for parks and footpaths and public transport they don't use so much.

They argue they can't afford it because their incomes have fallen.

But is that really the case?

Those baby boomers may well become income poorer, but they have become fantastically asset rich from the property they own and pay rates on.

The value of New Zealand's houses has risen by NZ$663 billion to NZ$719 billion over the last 30 years. The bulk of that capital gain went to those home owners now aged over 45.

Home ownership rates for those under 45, particularly in the most expensive cities, have slumped in the last 30 years as richer landlords have geared up to buy multiple properties to take advantage of falling interest rates and tax-free capital gains.

The great irony is that over the last 30 years that same generation of rate payers and tax payers also systematically under-invested in public infrastructure.

Now as a catchup surge in infrastructure investment approaches, those home owners and landlords are nearing retirement and face having to pay higher interest rates and higher rates, while also receiving lower incomes.

Many of those home owners do not want to have to move or liquidate their property portfolios to pay those rates. No wonder they want some rates relief at the expense of someone else.

But should they be allowed to get away with another intergenerational wealth transfer?

There is another solution. It is to change nothing about the current over-reliance on property rates.

If anything, that reliance could be deepened by increasing the loading on land values rather than capital improvements.

Baby boomer home owners can afford it.

It may mean councils have to take on bigger debts to pay the upfront costs of the infrastructure spending and then pass on those higher interest costs in higher rates.

It may mean some asset rich property owners have to sell at lower prices to younger first home buyers and downsize into smaller homes.

It may mean others have to take out reverse mortgages. That would be fairer than shifting the costs of new infrastructure spending onto younger and poorer tenants who missed out completely on the windfall gains of the last 30 years.

It also means a social contract that has bound together governments and citizens for more than a century is not broken.

That contract essentially said that the owners of property should effectively pay for the infrastructure of society that supports those property values.

That contract provided public services and opportunities for people who couldn't afford them.

It bound society together, rather than drove people apart into their own gated communities.

The generation of property owners who benefited the most from rising property values have been dodging their fair share of the true costs for the last 30 years.

That same generation should not be allowed to offload even more of the cost to their tenants and the generations to come.

Meanwhile, non-ratepaying voters need to become more politically engaged to protect their interests.

Local Government New Zealand has started the debate. It should be had across the generations.

---------------------------------------------------------------

A version of this article was published in the Herald on Sunday. It is here with permission.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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The intergenerational thing is a red herring Bernard.  The theft is still real.
Councils are coming up with some fatuous reasoning as they try to find more ways to take money off us.  Instead they need to sort out their attitude about how they expect us to pay for their excess. 
it's theft if they overcharge me and they work in offices, better than I can afford, with support staff like HR departments thru to staff kitchens and new vehicles.  In a grand manner I can't afford.
It's theft when they overcharge people who work harder than them and earn less, for similar jobs.

and now we see the libertarian, self-centred view point shining through on two levels in your post.
a) No care about intergenerational theft on a massive scale ie peak oil/minerals just as long as " I am OK" today and for my lifetime.
b) Why should I pay for others needs, tax is theft etc...oh boy.
regards

Pity you did not read my comment before replying Steven.
You know naught on my views re "peak" etc.  But comment anyway.  Iced with abuse
Others needs.  You have no idea of my view.  I didn't mention it.  But more abuse.
Try again please.
 

I did read your comment and others, its dripping "tax is theft"...
regards
 

well answer the valid questions steven, and drop the ad homien.

It's a very legitimate point of view.  Why should the tax collectors and State/bureaucrats get better wages and conditions, all laid out for them, compared to the workers

thank you cowboy.  And well expressed about the state bureaucrats.
Steven makes aware of the needs of others.  And my point was "It's theft when they overcharge people who work harder than them and earn less, for similar jobs."
If council employees are better off than people they tax - who are often poor.  Just who does Steven think is the exploited one of those two.
 

and what about ever increasing debt levels? (and even maxed out debt regarding covenants) isnt that in effect inter-generatioanl theft?
Really I'd like to know wtf is going on, its certainly un-sustainable.
regards
 

Those fools running Auckland need to  live within their means like the rest of us .

  • Infrastructure spend on major  roads needs to come form Central Government
  • There are too many council employees earning over $100k and their income bears no relation to their productivity.
  • Auckland council throws ratepayers money around like drunken sailors in a whorehouse  

Then there is inter-generational theft from climate change,
https://www.facebook.com/photo.php?v=604931046260624&set=vb.168876449866...
regards
 

Then what about peak oil?  we have wasted a limited resource, so much so that I suspect we wont have any at all by 2030.
Great legacy for our kids.
regards

and so? interesting that your abilty or wish to see the bigger picture is zero.  Plus of course your total disregard for the subject on future generations.
The effects of peak oil isnt just cars, its a feed stock into the petro-chemical industry, the airline industry, shipping etc. All these higher costs from energy feed into increased charges for goods and services and we cannot afford to keep buying them all. 
So sure you can afford a 60k car, I couldnt, or not easily.  Take that further, if I and many others are forced to pay 60k for a car to keep a job that lasts 12 years instead of $6k then that impacts our ability to buy housing, ergo that foretells a housing price drop/collapse.
regards

$60k? ONLY?  Gasp!

Are you just rabble rousing there Bernard? I'm not sure you haven't missed the main points and focussed on an important but subsidiary issue.
 
As a ratepayer I find I have no choice to not consume. This is vitally important as it is how I send feedback to providers of overpriced goods and services - I find a way of not consuming their goods and services by working hard to find or create an alternative.
 
As a house renter my incentives are to vote for council that improve amenities the most. As a commercial tenant my incentives are the same. As a commercial property owner my incentives are to encourage the council to spend on tarting up the area.
 
There is thus no choice to not consume and incentive for all concerned to vote in a free spending council.
 
Have you looked at the Swiss system? I believe they have an income tax based system which encourages councils to compete against each other. Thus each council is incentived to do a better job, whereas here each council is incentivised to spend more.
 
Also, what about splitting out or privatising individual council functions? For example, why do councils do building certification?

Spot on Roger.
 

You raise a very good point about the Swiss council system , Rogie , they're competing on services , on giving value for money , and they're competing with each other for residents ...
 
... they're incentivized to get housing developments constructed , and at a cost competitive base ...
 
We have so much to learn from studying them ... if you follow Oliver Hartwich's articles , he argues that councils in NZ have been dis-incentivized to promote subdivisons and developments since the 1970's ..

We should not have to incentivise them to be careful of our resources.  They should be careful of those anyway.
But they aren't careful, which is their bankruptcy of social responsibility.

So true KH.
 
Just below the surface the real issue is about to unfold - globally.
 
http://www.businessinsider.com.au/warren-buffett-warns-of-public-pension-crisis-2014-3

Exactly Rudderless.  And it's not only USA city councils who agreed pensions without funding them, but also like the big car companies.   Truely kicking the can down the road.   Sometimes these concealed liabilities have taken decades to come to light.
Don't let anybody offer you a pension without writing the cheque then and there.
All the pension eggs have been in one basket.  When those companies and councils have gone bust.  It's been the pensioners who have suffered.
Of course our pension scheme is not funded either.   It's a concealed problem, although denied by those nongs that think the money can be just magiced up by government somehow.  And they believe goverment can endlessly give us more money than we give it.

Nah, groups like CALPRO have plenty of funds listed on their books :)

Excellent summary Roger and GBH of the sort of councils we need....   "they're competing on services , on giving value for money , and they're competing with each other for residents ...
 
... they're incentivized to get housing developments constructed , and at a cost competitive base ..."

councils do building certifications to ensure independence.  Very important considering the way building industry (see India) and how most of NZ big business is a cartel style horse race (due to small size of coutnry)

Yes, but you could have a national body, a New Zealand Building Inspectorate which would oversea building certification. Alternately you just allow any suitably qualified Building Engineer to certify the building meets current standards. There is no reason to involve councils.

The building engineers would be exposed to economic/contract pressure from industry.

A NZ BI would duplicate much of the infrastructure already existing for council and a NZ BI would not have native power of enforcement nor would it have intergrated access directly to unlimited town planning expertise.

add to this that each council consists of people and property in a location, and that the primary assets of those people and their council are the very buildings they inhabit.  Thus the primary asset of the council is the land and buildings in their area - this is also, under the current system, the primary income source for councils.
  Building Properties are also inextriably linked to land.  Land issues and concerns fall in the realm of RMA.  Which is controlled and bylawed by the council.  So putting them in the same melting putting allows the integrated direct asset to current RMA thinking.

This, of course, is completely ignored by socialist wouldbe rulers and sycophants.  For them give all power to the empire and ignore anything else.  Strangely enough they also end up creating massive inter-departmental barriers to try and establish their power within the structure.

Councils have simply out grown the communities abilty to support them. Back to core services no social charter would solve alot of problems.
 Our council 20 years ago was a minnow now its a monster employing thousands.

... wasn't that a part of Helen Clark's agenda , to shift some central government " social " functions to local councils , under the theory that locals are better intune with what their residents wish for or need , rather than a big bureucracy some distance away ...
 
Of course , the question goes unasked in Bernard's article , what % of council expenditure is truely on core functions ( roads , rubbish removal contracts , sewerage , etc ) and how much is on fluff ... the " wellness and feel good programmes " ... do we really think that's a core responsibility of council officials , our happiness levels ?

You're both onto it. Part of the problem for many LAs with their tax take is that central government isn't paying its share of rates for land-use in government ownership - yet that land-use (in partcular conservation land makes up a big chunk of many LA regions) brings with it local infrastructure and administrative costs. Below is a list of non-rateable land.  I can see no reason why airport companies and port companies are exempted given they are in private and/or public/private ownership (perhaps this has been changed since I last looked at it?).
 
The other problem for a number of councils are the high number of holiday homes in their districts (i.e. non-resident ratepayers). For example, Thames-Coromandel DC - their reticulation systems have to cope with peak load, making it quite expensive for full time resident ratepayers funding pipes big enough to pay for these transient homeowner-holidaymakers. Whereas a restaurant owner can vary the amount of food they prepare in anticipation of those peak loads - an infrastructure owner cannot.
 
Easy solution is to create a rating differential for central government owned land and for non-resident owner-occupier land.
 

▫Conservation land (National Parks, wildlife reserves etc.)

▫Heritage land (QE2 Trust, Historic Places Trust, health camps etc.)

▫Local authority land

▫Education and District Health Board land

▫Places of religious worship

▫Cemeteries and crematoria

▫Maori customary land

▫Land for roads, railways, airports, wharves

▫Charitable institutions

Go read an Annual Plan. About 70% rates goes on core infrastructure; 20% on social infrastructure and the remaining 10% on 'democracy services' . LGA2002 gave councils an opportunity to branch into social service delivery but I don't know of any that did.

Get real, lets forget whether its left or right, just listening to Key's govn its clear that as much cost and work as possible is being shifted to councils, whether they can do it, or should do it.
So sure central taxes wont rise (maybe) but instaed the Councils take the potitical flak for rates rises they are forced to charge extra for.
regards
 
 

Not only that but councils also haven't had the right (or guts) to protest about the ludicrous levels of unnecessary expense/service they are forced to impliment.    Although it gets hard when councils tend to end up with many "true believers" parasiting on to them (and the more "poor people" created the more likely that is to happen

they are more in tune, and that was a big step forward

however doing so does not make the unaffordable, more affordable.

many of the services can't act as sustainable profitable entities in their own right.  Their users are typically people who can't afford to buy such services...hence the need for council to provide instead of private commercial activity.    But that means such "oppuntunities for use" must be tailored toward that ideal. 
  Again I have to ask ... why should such non-payers get services provided by council/public funds that are nicer, bigger, fancier than is really available to those who are paying for them?

Which social services would you like see cut? They don't really do any but I am curious to know what people think they do and why it impacts rates.

I would list it for you, but as I have not input or influence on such mandates I just haven't bothered penetrating the veil,  (generally relying on discussion with the fringes implimenting the polices)

 

Is Bernard trying to convince us that renters don't pay rates. Maybe not in name, but I doubt there would be a landlord that does not factor them into what they ask for a property

Well, I'm a house renter and I don't pay rates. It is part of what makes renting so affordable relative to house purchasing. House purchasing only makes sense if house prices continue to rise, but at what point is it a ponzi scheme and have we passed that point?

Yes, well see below. Actually my rent goes up because other rents go up, presumably because wages have gone up. My landlord would love to be able to put the rent up just because his rates have gone up.

Before mocking people for being ignorant it would pay to get your economic facts straight. Rents are driven by supply and demand, they actually have nothing to do with rates.  
 
I suppose you think iron ore miners magically pass on their costs to.  They might want to but they don't, the price of iron ore like everything is driven by supply and demand.  When it's in demand they can charge hugely more than their costs and when it's not they may have to shut down or go bankrupt.
 
Bernard's and Roger's arguments are entirely valid.

If you are able to increase your rent in response to rate hikes it's becasue the demand was there to support higher rents.  You could have raised your rents anyway, the rate increase had nothing to do with it.
 
If there is a glut of rentals or a lack of tenants you will have to lower your rent regardless of what happens to rates.

Thanks Julz. There is one situation where zz is correct, and that is on a net commercial lease where the tenant does in fact pay the rates directly, these are quite common for commercial buildings.

Of course you pay rates, they are factored just like insurance. If you seriously believe that just because your name is not on the bill you ain't paying it, then you need your head examined.
 

Yes, well I'm being provocative I suppose, but here is a more expanded view:
My rent includes insurance and rates. The landlord is getting a return of 4% on the value of the property before his costs of rates, insurance, property management, repairs and maintenance, and depreciation of the structure. He also takes on a number of risks, like earthquake, flood , tenant damage. He chooses to do all this, presumably because he gets tax relief on his mortgage interest payments and because he expects to make a capital gain at some point when he sells the property.
As an investment it makes no sense without the expectation of a capital gain.
If, alternatively, I buy a house, I have to pay rates, interest, insurance, repairs and maintenance and suffer the non cash depreciation of the structure (until longer lived items like kitchens, bathrooms, roofs etc need replacing). Hope that helps.

Yes and at the end of it you have a house, you rent and at the end of it, you have a bloody great hole in your bank balance, and a very scrimpy old age

Ah, true enough. The householder does have to pay the rates until the day he dies, and the insurance, repairs, maintenance, structural deterioration, and earthquake, flood and other risk. The carefree renter just moves house.
 
Fundamentally I agree with you that owning property is generally a good thing but having rented the last few years I realise there is another side to it. During this period I have seen what happened to house owners in Christchurch and here in Stoke during the floods and it is not as one sided as it may appear.
 
However, try this, I still don't feel like I pay rates. Whatever the facts may be...

Roger : Save your breath , buddy , no logical argument on the perils of home ownership will work with this bunch , you'd have more success selling bacon rolls in a synagogue ...
 
... fact : From 1890 to 2004 house prices across the entire USA rose an average of just 0.4 % p.a. adjusted for inflation .... then things went mad due to easy credit and slack lending standards ... and government demands that everyone should be allowed to own the their home ...
 
And then we had a GFC .... and those house prices plunged right back into line with their long term averages ...
 
... that doesn't apply to us in NZ  the property devotees and spruikers tell us , we're different , special in some indefineable way , immune to gravity , property can only go up mate , it'll double from here , rents will double too ... we've heard it all here at interst.co.nz , so it must be true .... aha ha ha deeeee haaaaaaaaaaaa !!!!

To be fair, whilst I still feel I don't pay rates, my argument about renting versus home ownership was a bit weak. The key thing home ownership does, when it works, is fix your costs and provide protection against rental inflation. Rents just haven't gone up in Nelson in the last five years, nor have house prices.
 
 

Wasn't Nelson the first place where house prices started sky rocketing? I seem to remember Nelsonians complaining about being priced out of their own homes...

rents are connected to several things:
 
(1) capital value of building (sets baseline)
(2) Cost of maintenance and upgrades
(3) Interest cost
(4) rate and insurance overheads
(5) cost of property management inspection
(6) cost of property management, overheads - labour, margin etc
(7) local disposable income  (capping effect)
(8) local competition on prices
That's the list IIRC, pretty much in order of importance note that option 8 tends to be similar all all properties in a location.

So without increase in (7), you won't see much movement in the others.   You also won't see any pressure for (2) house upgrades/maintenance or (4) push for more social services.

 

And again...
 
Before mocking people for being ignorant it would pay to get your economic facts straight. Rents are driven by supply and demand, they actually have nothing to do with rates.  

I suppose you think iron ore miners magically pass on their costs to.  They might want to but they don't, the price of iron ore like everything is driven by supply and demand.  When it's in demand they can charge hugely more than their costs and when it's not they may have to shut down or go bankrupt.

Bernard's and Roger's arguments are entirely valid.

Sorry doesn't quite work like that Julz.

The elasticity of demand falls inferior to cost of supply.

If your iron ore miners supply at under cost they will and do go broke.  And that lack of economic intelligence upchain frequently causes such problems.

A rates or insurance increase hits all the suppliers in the area, and acts as a price setter process.  the increases individualyl are lukewarm, so aren't usually enough to create migration efforts, especially when everywhere else is experiencing the same lift in prices.

Thus the net result, is extraction of wealth in an area, as rents go up, landlords make nothing extra*, and all residents in the area have less money to service debt, pay principle or spend at businesses.
 
(*or less if they don't pass on the whole cost increase, making it more difficult for them to afford property upgrades)

Are there rates charged on your rental location?

Who pays those them?

where does the money for that come from?

And, to your landlord, rates are tax deductible.  (a dispersement)

I agree.  One landlord of mine put rent up 13% one time and cited a rates increase as part of the reason for doing so.  It's in the expenses column of any landlord.

$2000 per annum for rates is not too bad - for a 1/4 acre with free water, sewer line, footpaths, rubbish pickup, good parks maintained, cycle paths developed, etc.  
Problem is in retirement when you're not earning  -  you really need a discount system as 2 - 4,000 is too much.
 
 

but if you need discounts, when do you stop discounting.

No, what you really need is to revisit the whole structure fro a grassroots level.
Put in the knowns, come up with actual problem solving solutions, not "what is our mandate, lets through a bunch of random ideas on the table and see which ones we can promote."

Putting down the hard parameters first and what desirable targetrs are required is the only successful step.  That is what is done in successful business/engineering - it is the opposite to what is done at council/social/not-for-profits.

Replace Auckland for London:
http://www.alexcartoon.com/index.cfm?cartoons_id=4646
as we posted last week interest incomes have halved.
Its suggested real interest rate is close to zero, therefore folk in the non-productive sector use houses as a currency, as the other stuff not worth holding on to....
 
Off topic, how would Len and co feel about following the British and introduce a bedroom tax?
 

Henry
Your briliant cartoon displays the reality in many Kiwi families.
 
Bernard does his best to ferment a divide between the generations. He would do well to print your cartoon - blow it up to the power of 100 - frame it - and hang it on his office wall.
 
The trickle-down to our kids is huge.

As government has been lowering our income tax and passing the costs, of what originally Government provided, onto either Local Government or private enterprise, the money has to come from somewhere.  So what we once paid in income tax now goes elsewhere AND more importantly, they are costs we can't get out of.  So while I think a bedroom tax is silly idea I can see the worth in a poll tax - for Local Government.  We all use the services Local Government provides - some more than others - so why shouldn't we all contribute to them?  You can't achieve much by forcing that burden just on owners of houses who just get more and more grumpy with each increase.  In my view everybody over the age of eighteen should pay a poll tax.

It's the symptom of a bigger problem.

The poor, new, and elderly are always the first signs of such problems.
What REALLY bugs me, and is what I've been hinting about with all my posts for many months....it doesn't how many different ways they invent to get the money off people, it's still money that many of those people can't afford,  and trying to get around that fact by targetting the few people that might still have a bit of money left is obviously just going to suck out the little marrow left in the economy.
 
Until they can realise the problem, that such activity; that paying the poor to consume to stop them rioting, to giving away services because they're uneconomic, WILL NOT work under a capitalist model of economics.  WILL NOT !!  _CANNOT_ !!!

 

The problem is the intergeneration consensus has already broken down. Benefits existing ratepayers received regarding infrastructure and land prices from previous generations they are unwilling to extent to the next generation. 
 
Rate payers have gone down the compact city route because they have been told that infrastructure and transport costs in particular public transport is cheaper that way. Existing ratepayers like this argument. Currently they will do anything to transfer costs to others and prevent rate rises. They ignore the problem of escalating residential land prices coming from the resulting lack of competition in residential land. I suspect the more pressure we put on Councils to save money the less infrastructure they will provide, the tighter the compact cities will become and the higher residential land prices will go. What would be small widely spread public costs get transferred to large private costs for the next generation.
 
Really the only answer is a new consensus. A complete do over of our local government system.  
 
Something like what Roger was suggesting above.

Are you just rabble rousing there Bernard? I'm not sure you haven't missed the main points and focussed on an important but subsidiary issue.
 

I am sick to death of hearing  this ridiculous notion that tenants don't pay fro council sercies becasue they don't pay rates.  The don't pay them to the councils, but they pay rent, part of which is then paid to the council.  Just because it goes to a landlord first doesn't mean tenants are not paying for council  services.  That is like saying none of the money you pay for goods goes to the manufacturer if you but it from a shop.  This idea is just nonsensical. 
As for the amount of rates, no-one ever seems to justify their asseration they are too high.  If they are going up faster than the rate of inflation it may just be because they were too low before.  The prices  for example, for water supply and waste water seem a much better deal than a telephone line rental or electricity lien cahrges, but it's much cheaper to string a wire from a pole, than to bury pipes.

Sorry Bernard this is a non-story.
 
There is already a taxpayer-funded subsidy to councils on behalf of low-income households. As councils have no mandate to solve social issues they have no business trying to re-invent this wheel.
 
I could probably dream up ten good projects that would actually address rates affordability without even breaking a sweat. But all but one would require a competent Minister of Local Government willing to do some hard work for their salary. Until that person comes along this is all yet more hot air.

BH's article (perhaps unknowingly) advocates a classic conservative approach:  summed up as 'don't just do something - stand there!'.

 

Which I applaud.

 

What we are seeing from LGNZ (thgis time round) but in most Councils, is the belated realisation that they have:

 

- dug themselves a massive expense hole, after a decade plus of spending on the 'four well-beings' - social, cultural, environmental. infrastructural - but with a populist emphasis on the first two.  After all, who Doesn't want their buskers, arts fests, street performers, fireworks displays, community engagement advisors, resilience coordinators, and all the rest of a rilly, rilly long list of salaried, accommodated, and superannuated warm bodies?  Hard to fire, harder to get KPI's for, impossible to campaign against.

 

- rendered themselves quite incapable, as a direct result, of attending to the traditional engineer-driven functions of the 'three waters', roading and basic community infrastructure such as parks and halls.  These, in contrast to the social/cultural crew, are boring, expensive, have to take a decades-long view, and need hard qualifications.

 

- reached the practical political limits of rates increases, and are shortly to see their Development Contributions rort severely truncated, by Central Gubmint fiat

 

- good transparency (DC's apart) on their source and application of funds.  As rates are propoerty-based, impossible to dodge, and property is static, it's very easy to associate the Value of the 'services' with the explicit cost to one's business, home or organisation.  This, of course, will Nevah Do, in the eyes of the LGNZ crew.

 

Hence we see a concerted push for alternative revenue sources, which meet the following criteria:

 

- dissociate source of funding from effective control over the spend thereof.  For a working example, try to get a notion of the actual spend of GST, excise, or tobacco tax.  This dissociation will enable LG to continue the social/cultural spend without challenge.

 

- have a sufficiently robust base as to produce revenues equivalent to rates - no point in faffing around with Pennies when Pounds could be had.

 

- have no natural political constituency which could conceivably organise an opposition to such taxes.  This may rule out regional fuel taxes, for example:  motorists tend to be a well organised and vocal bunch.

 

- are not likely to be subject to the 'sunshine laws' which currently mandate quite explicit transparency about source and application of funds from various sources (e.g. a special rating district)

 

- are sufficiently diffuse to be able to garner the required revenue increment without too many payers actually noticing.  The art of taxation, it has been said, is like plucking a goose:  one wants the most feathers with the least hissing.

 

So let's see what comes of all this.  Because I fear that in the event of a Lab/Green/Interwebs/NZFirst electoral victory/schemozzle, something along the lines of what LGNZ want, could just be waved through in the name of Empowerment, Subsidiarity or some other buzzword-du-jour.

 

In which case we'll find out sooner rather than later....

RE "- rendered themselves quite incapable, as a direct result, of attending to the traditional engineer-driven functions of the 'three waters', roading and basic community infrastructure such as parks and halls.  These, in contrast to the social/cultural crew, are boring, expensive, have to take a decades-long view, and need hard qualifications."
 
I think that infrastructure will never be provided. The councils are going to go on an infrastructure strike. They will use excuses like peak oil, compact cities, earthquakes, insufficient funding, Central government inflicting too many unfunded expenses on them etc.
 
Whatever the real cause I think it is obvious that LG is buggered no longer fit for purpose.
 
Already in Christchurch we have been informed road repairs will not be done to the usual new road surface standard. This is part of the gradual adjustment for the public to get used to lower quality and cheaper public amentities.

Waymad is his usual entertaining and lucid self albeit slightly off-beam today. It is not the case that councils have wandered away from their traditional mission its just that costs have gone up so much that we notice all the little furphies way more than we may once have done.
 
Cancelling the buskers festivals would have the same impact on rates as Muldoon's firing the tea ladies had on the government deficit. Find out why the costs of civil construction have risen 50% faster than CPI over the last ten years even in a supposedly competitive market and you will probably get a better idea about why rates are where they are.
What Waymad is right about is that this is an attempt by the sector to avoid the difficult conversation about levels of service. Inflation has always been local governments best friend. As I repeatedly say raising seed capital is the most difficult thing for a council to do (capital for replacement is a doddle by comparison) and by far the easiest thing politically has been to take on debt. Once rtatepayers got past the initial pineapple, inflation has tended to ease the pain of interest and capital repayments pretty quickly. Now that councils are waking up to the fact that low inflation might be here to stay they are desperately looking for some way to have their cake and eat it too.
 
I love the idea that, if we transfer some more money into councils via new taxes, somehow we residents are not really paying out more; that it is pixie dust free money.

So in summary councils are buggered?

In effect: yes. Councils are largely disconnected from their communities so it really doesn't matter what they do they will always be strongly crticised. They have become deeply entrenched in a defensive regime of compliance and have lost sight of why they exist.

It would help, if council wage bills didn't keep ballooning from no fault of their own (having to met central gov demands).

Also if they were able to make long term infrastructure plans that relied on _necessary_ supply that fitted their population and demand, rather than replace perfectly good stuff before it's even finished paying off it's loan, just to meet some twits sig project.    And that the minefield of rules didn't make every little park and railing and sidewalk and major figgin undertaking !!  
 What we were losing with unionised costs and leakage (but gaining in perks), we are now losing it pointless redtape.

I remember when the computer was going to make paperless offices and easy paperwork... yet look at how that went!