Local Government NZ launches council funding review; says property rates may not be sustainable; Road tolling, sales taxes, income taxes mooted as alternatives

Local Government NZ launches council funding review; says property rates may not be sustainable; Road tolling, sales taxes, income taxes mooted as alternatives

By Bernard Hickey

Local Government New Zealand (LGNZ), which represents all councils, has announced its own review of council funding mechanisms and wants a national debate about alternatives, including suggesting council sales taxes, council payroll taxes, congestion charges, visitor charges and road tolls.

LGNZ President Lawrence Yule said demographic changes and the need to fund big infrastructure projects without increasing property rates faster than inflation meant the current reliance on property rates may not be sustainable.

"New Zealand councils have a high reliance on property taxes, which is unusual by international standards.  The common international approach is for local government systems to have a multiple taxing power, important for both resilience and fairness reasons," LGNZ said.

LGNZ said its Local Government Funding Review would identify new funding options and alternatives that could complement councils’ current funding tools.

Yule referred to the challenges of funding expensive new infrastructure when councils also faced an ageing population where the burden of paying rates fell more on retirees who were asset rich but income poor. He also pointed to council areas south of Auckland who faced stable or falling populations.

"Other councils are facing major growth pressures to fund large-scale infrastructure investments to meet the needs of future generations and sustain economic growth, with limited funding tools at their disposal.  The required growth in funding requirements will place severe pressure on a pure property tax model," Yule said.

“Complementary alternatives are required.  Our focus is on developing a strategy and model that is sustainable for New Zealand communities in the long term,” Yule said.

“Examples of funding tools that may be reviewed for appropriateness in a New Zealand context include local income taxes, local consumption taxes, congestion charges, visitor charges and payroll taxes," he said.

LGNZ planned to set up a cross-sector working party during April.


Auckland Mayor Len Brown welcomed the review.

“I have been advocating for some time for a national discussion on alternatives to rates. I’m delighted that LGNZ is now taking the lead on this issue," Brown said.

"The current model of funding through rates is intrinsically unfair. Now is the right time to look seriously at alternatives that are more equitable and that better reflect the complex funding challenges facing Councils," he said, adding any sensible options should not be ruled out.

The Local Government Forum, a group of business organisations looking at local government, also welcomed the review.

Forum Chair Michael Barnett said businesses were also concerned about an over-reliance on property value rates to fund councils.

“Modern local government is broadly empowered in terms of its role and responsibilities yet it is restricted to a narrow, archaic funding base made up of property value rates and per property charges," Barnett said.

“Property value rates bear no relationship to either a person’s relative ability to pay, or use of a service. Rates prevent communities from truly assessing the costs and benefits of council activities. For many businesses, this means a heavy tax on a key asset to pay for all manner of community services many of which they may rarely, if ever, use and have very little say over," he said.

Barnett said few of the recommendations of the 2007 Shand Inquiry into Local Government Rates had been adopted.

He said the Government's Better Local Government programme of reforms to make local government more efficient and to slow growth in spending, rates and debt had not addressed the funding issue in a meaningful way.

“It is therefore timely to take another look at how best to fund modern local government and we congratulate LGNZ on its initiative.  The business community is very keen to be part of the conversation."

Associate Local Government Minister Peseta Sam Lotu-liga gave the following comment by email: "Local Government New Zealand has said it will look at some options and we need to wait and see what they come up with. The Government will always listen to ideas from councils, but at this stage there are no plans to significantly change the way local government is funded."

(Updated with Government reaction)

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We do need a review of local government but not into how they can become more effective parasites.
Any review should be into how to make individuals working for local government - be they elected, employed or consultants - more accountable for their failures.

The question must have been " how do we get more money, we need more money".  Political suicide for any political party, thats goes near any scheme to allow councils to continue to out grow the communities funding ability.
  The tax system is already at peak, without a lot more production the money doesn't exist and councils have already tried the debt road  with LGFA.  
There are already signs of growing resentment in communities to out of control spending by councils.
 Councils will eventually strangle the very communities they are meant to serve.
  The best solution would be to de centralise and get smaller local government, cut red tape and cut costs.

Councils and other bureaucracies should have to publish monthly cashbooks of all transactions online. How can anyone see where all the leakage and inefficiencies are when this is not a mandatory requirement?
People want accountability and yet no platform to deliver accountability has ever been suggested.

I’m not sure if reform along these lines would be political suicide. There’s a whole generation of 'good kiwi mums and dads' with rentals who might warm to the idea of lower direct property tax. Kind of a ‘let them eat regional sales taxes’ attitude.


Proposing a capital gains tax on property, now that could be political suicide. Proposing to ditch the WFF benefit: definite political suicide. Proposing a sales tax that could ultimately improve rental yields, hmmmm, might bring in some votes from the generation that votes.

I don't get this kiwi anti local government thing. Lot of really successful countries in North America and Europe have local governments which can actually do things because more tax goes to them and less tax goes to there equivalent to Wellington. But here in kiwiland we are happy for all our taxes to go to thoses leeches in the windy city.
On occassion I have driven through small local places like Ashburton that by the look of the number of cows around are doing well. But does any of the tax from that income stay in the district? Not likely, the locals beg for money for things like a new bridge and the leeches in Wellington say 'not this year'. Really those places should stop begging and say, 'we are keeing our taxes down here this year....'

Because a lot of us see a huge amount of waste in local government.  There is no incentive to improve perfomance if every time you hit a wall you just get more imaginative with the way you tax your community.
 I own 250 acres, I pay 5k in local coucil taxes, plus rubbish charges etc top of that. $1200 in regional council Tax plus over $2500 in  user pay fees for bores etc.
 My income this year will be around 40k, its been a good year.
 Either way I look at it taking money form the community ends up with less been spent by people, who spend it better that the council ever could. I think councils should be forced back to basic services only.

200acre here, pay 9k in local taxes. about same income.

Psst...don't say about the huge amount of waste!
They'll hire counsultants to write reprots to look into the problem and give professional presentations.  they'll review all the proceeds and rules.
and if we're lucky they'll run out of budget and stop there...otherwise they'll hire more oversight people to make sure that the wastage is keep with in approved limits.

What choices do we have? Do nothing and continuing whinging? We have inadequate infrastructure for our urban areas. Central government is trying to repair Christchurch and it is a joke. NZTA is a national wide joke. I say we give Councils greater responsibility and hold them accountable by measuring housing affordability and transport mobility figures. As outined by Alain Bertaud.
The twin objectives of maintaining mobility and housing affordability should drive the design, financing, and construction of trunk infrastructure.

Because the building of trunk infrastructure often requires the use of eminent domain, governments have a monopoly on its design and construction. Here is a new simple job description for urban planners: plan the development of trunk infrastructure to maintain a steady supply of developable land for future development, but leave land and floor consumption per dwelling to the market. (Forword to this housing survey -http://www.demographia.com/dhi.pdf)

Brendon - there is not enough financial transparency.  Take Christchurch and the under-insurance issue that has surfaced. This is incompetence.
I disagree with your method of evalutaing accountability.  We have to look at the nuts and bolts mechanism, that is the total income and expenses across all projects and every department. If we had that transparency then I think the Christchurch issue of under-insurance would never have happened.

If you live on a farm or in a greenie survivalist home you are probably ok with inadequate urban infrastructure but the rest of us are hoping for better. If our local councils think they can up there game and do better. I say go for it. I do not mind giving them some extra taxes, paying some tolls. Whatever.
I just want to stop reading about and experiencing the following. 
Don't tell me that Canterbury is unique because we have been told for decades that Auckland roads are a mess and that is why the nations taxpayers have sent billions up there fore special projects.
And then there is Wellington which got doubling tracking and Transmission Gully.
But when smaller places ask to keep some of there taxes to do smaller but just as significant for there area infrastructure upgrades you all sneer and rubbish the idea.
No wonder NZ is heading towards third world status....

.........Providing more income to Councils.......is like..........drinking milk when you're lactose intolerant.......

So are you suggesting Central government take over all local government responsibilities? Everywhere could get state appointed commissioners running their local affairs forever.... 

Absolutely not.......I think Andrewj gave the best option above.......de-centralising....Small Councils are preferrable.....easier to keep an eye on too.
These large Councils have a Narcissistic personality.

Actually I like small councils too, CCC for example has got too big and arrogant. I would have no problem with a return to smaller councils if there was some regional public body (preferably well resourced and democratic) that dealt with transport issues.

I want to stop reading stories like this. I mean this is just ludicrous.
Caught up with some of the neighbours last weekend. We were having a collective moan about the lack of council interest in our small (popn 500 or so) community. Why can't we just get on and do stuff when we want. Get some local community spirit going again. They had a funny story in line with that. A friend of theirs had gotten fed up contacting the council about a broken public bench seat. So one weekend, got some matching timber and fixed it up himself. Called the council to say no need to worry about this seat anymore, I fixed it. Well that got them to battle stations. You can't do that!! What if somebody injures themselves sitting on that seat now?! Um, well how about if anybody had injured themselves sitting on the broken plank beforehand? No matter how inefficient councils are, there is no hard incentive for them to stop the stuff ups. They can't lose, but we can. Which is ironic given the councils are us, and we are them.

These stories are all too common and I like you would also like to stop reading and hearing stories like them.
Your broken seat is pretty typical......I know many stories of a similar tone.
Councils get all the treatment of a protected species.

Brendon - if you wonder why I don't 'engage', that is why.
We are on different planets - but I'm on this one. You will indeed see services descend to third-world levels. And then below. That's what happens when you mine a one-off store of fossil energy, go into overshoot on the use of it, and find it getting scarcer/of lesser quality while you have an unprecedented number of infrastructural balls in the air.
You start from the wrong premise - in that you want to maintain a first-world lifestyle. Try starting with the premise that we need to get onto a physically-sustainable footing. You will find that if you then want your current lifestyle, you may have to convince 6 billion others (more, if you procrastinate) to, um, exit.
Th reason NZ is heading for third-world status, is the same reason every other first-world nation will go there too. Yep, even a dominant empire won't dodge this one. Too many demanding too much from ever-less.

Thank you PDK, you saved me the trouble.
You can bring this back to personality types again. Those that are intuitive thinkers look at what we have got and think "how can we make the most of that". The others just see what is there and take it, a lolly scramble if you like, without thought for tomorrow. Seriously I know quite a few people that only care where the next party is at, some close relatives included. It is the Ant and the Grasshopper mentality. It is the functioning behind the Tragedy of the Commons.

PDK you don't engage when I put up the physics of why your power down thesis for NZ is rubbish because you can't fault the logic that NZ can simply replace oil energy for renewable energy. So instead your shift the argument. Make little attacks elsewhere.
The reason Christchurch and NZ has problems with infrastructure and housing is simply a lack of political will. We all suffer because of it.
This lack of will comes from the hard right who can't stomach that taxes and public goods are needed for the market place to work. And it comes from the hard left who want to crash the market completely. In the end your ideologies and arrogances end up being just as selfish as each other.

"Sanford Bernstein says it may not be long before home energy storage is cheap enough to lure households away from the grid en masse across the world."
So best not buy Genesis shares. The better long term investment is north facing roofs....

ZZ - I would be interested in having a look at this system......would I be able to have any details.......website perhaps? Thanks..

"it may"

Solar isnt transport energy, it doesnt have th elow cost or density to do it.
Ambrose is wrong, not unusual for a financial journalist.
His little bum cheecks must have been flapping...

Im not aware of this thesis, in any event NZ simply cant replace fossil fuels, on 2 grounds a) you cant overall and b) what you can do, you cant afford it. EROEI.

Steven EV exist and manage to mobilise despite the difficulties of energy density and the cars are getting better and bettter all the time.
Wind power exists despite your claims of terrible EROEI and NZ has enough consented but not built to replace the energy used by our car fleet. Do I need to post the physics again? Solar as the AEP article says is now trumping other forms of energy like fossil fuels and wind.
We may face resource constraints in the future, but energy itself is not the problem it seemed a few years ago. It is greatly helpful that populations are stabalising. I think we will get to peak population and peak consumption long before we hit peak energy or peak everything.
Nothing is certain in the world but I think the balance of evidence is NZ and much if not all the rest of world will adapt to 'post oil' without too much difficulty.

Wind power isnt terrible, and I have never claimed it is. Its about the best renewable we have, but it isnt transport energy.
EVs are also 65k for 12 years use v about $6k for 12 years use of a conventional car.  ie buy one about 8 years old and it should last another 12, thats simply affordability for many NZers. Sure EVs are getting better, however its pretty unlikey that they will ever get as cheap as a petrol driven car.
You can keep posting the same thing time and time again but it doesnt change the answer.
AEP doesnt get it either, or he wont admit it.
You are very wrong on peak population, peak fossil energy is about now, yet the UN thinks its going to be 2050, aint going to happen, read limits to growth re-visited.
Its not evidence you are looking at but a prayer book...learn the difference.

Steven I put up what others have called a 'well crafted solution' with physics you cannot deny and you give no evidence supporting your assertion that 'peak fossil energy is about now'. If fossil fuels were past the peak oil, gas and coal prices would be at record highs but they are not. Even oil has retreated from the $140 highs of a few years ago. I think oil is nearing its limits, but not peaked and it is looking like a very flat peak. It is now economic for alternative forms of power generation, storage and engines. This is giving us time to adapt it would be stupid not to take it. This being Jeremy Grantham view. Maybe PDK is taking a extremist polemic stance and exagerating the problem as he sees no other way to get the small movement needed. If so. Fair enough...

Brendon what you wrote is not well crafted, beyond its a prayer. If others think that well they are in the same boat as you, its nothing more than a novel. Just how you think one A4 page is a "solution", is unbelievable.
Peak oil is evidenced by the graphs of output, the peak of crude oil output was about 2006.  That output has never been exceeded despite Trillions spent in exploration and development. Here try this, http://en.wikipedia.org/wiki/Beyond_Oil  
or if you want a graph,
or NZ's version,
Here an interesting presentation,
Huge quantities of work has been done on this.
Sure peak oil has retreated, we work on a rationing system based on price, most ppl and our global economy cant afford oil and hence fuel at $140.  
Adaption? just where is this adaption? its not happening on anything like the scale needed...as someone wrote it needs to be on a par with the run up to WW2...
Jeremy Grantham is limited in what he can say IMHO. I'd love to have an off the record chat with him.
No, PDK is spot on.
This site might help you,

Of course your thesis is faulty...not that its a thesis, its an opinion by a non-technical/academic person.  By all means put up a thesis of thesis quality.
NZ cant simly repalce fossil fuels, the "killer" is EROEI, there is no transport fuel that gets to 8 to 1 or better let alone of we could afford it economically.

"Inadequate" ?  Surely sound business practice is not to over capitalise on assets especially as that hammers the existing rate payers some of whom cant afford it for no gain for them.
Mobility? what about energy cost? in the equation? ie whats the point of building "far" out when ppl wont be able to afford the commuting cost?
On top of this in Auckalnd for instance we dont really now if the demand really is genuine or not, hence it would be crazy to spend millions on infrastructure when th true demand isnt known.

E-fficiency is a dirty word for Local Government.
It is also completely unheard of in Government.
It is also not a common theme in the fourth estate.
When someone else can waste your money faster than you can replace it, then deficits, can, will and have happened.
No matter how you cut it, you cannot spend your way out of a hole, you keep digging deeper and deeper.
Stupidity is imagining that the same inefficient people can still produce a sensible result.
No wonder so many, many bloggers have given up the post.
Waste of time, effort and resource.
But at least, not paper.
Sad, but true.

I agree Alter Ego - many bloggers do give up posting because they know the are not effective in getting the necessary change.
It is very frustrating when efficiency, accountability and transparency have no proper meaning in the Government and bureaucracies...Worse is those in the system who use the words to make themselves look good and then deliver the opposite.

And a word to David Chaston....
And the damn timeouts continue apace.
No wonder I shall leave this stupidity to those with more patience.
Maybe I should have filled in the Interest.co.nz feedback questionaire, but as usual, what the heck would be the point.
Would not make a blind bit of difference. Others have reported the same trend of time-outs.
Who are we to argue.
If you agree with this statement, please give a big tick.....he might take a bit of notice.

I use draftin.com. Works well , I don't get timed out, plus I get spellcheck.

I understand that AndewJ, I try not to get too lengthy these days, so do not use other than that provided, but I do like to follow various threads and replies.
(For that is what it is all about, is it not?) 
However when distracted by the phone or such like, it is annoying to lose the thread and have to start again.
My email does not time out...and millions more use that.
So what is the real problem, pray tell.

feel your pain.
its just wordpress so...
and as for smart phone gr, & where is the responsive?

It's damn frustrating......this time-out BS........
I have too many interruptions so get caught out alot.
It would be best if I keep off interest.co.nz as it is really a waste of my time......

Honest Indian, use draftin.com. You click in the box then open draftin, write you comment and then click post, its drops your comment into the interest.co.nz box. Keeps a record of all your comments its a great site. Its also free for the basic package.
 Its a basic wood processing program, I like it lots.

Thanks AJ - I will have to take a proper look at it.......I usually type flat out and hardly ever edit, no time for spell check.

yes getting timed out is annoying.
How about after you have typed your message, and before you click the save button to post it, COPY what you have written.  Just select it all, and use control+C.  Then if you have been timed out and lost your message, you still have it.  Just paste it, with control+V

9 and counting.
Thank you Ladies and Gentlemen....using the term loosely of course.
At least some agree with me.
I timed myself out the past few days. There is a limit.
Seems the world is getting more voiciferous about "Global Climate Change", than Kiwi houses hereabouts.
They say a change is as good as a rest.
I have been watching the Royals playing cricket in Christchurch.
I see that the Insurance companies are still not playing cricket with the premium properties there. (Three years and counting) ...Must be taking a time-out there...too.
Must put a dampner on the feelgood atmosphere, generated by Will and Kate larking and lurking about and feasting with our 'Dear Leader'.
Not that we have a housing problem, I hasten to add.
Not for some, not at any cost. Free board and lodgings.
Better get with the program...eh.
Maybe there is something to this hide and seek, smile and wave, fiasco.
Hides a multitude of sins, but you would not read about it.
Better go, before I time out again.
Nite nite Will and Kate, hope the bedbugs do not bite. wrap up warm, it gets a bit chilly, when it is cold and damp...kiwi houses are known for it. Especially in Christchurch.
Wellington Mansions, not so much.

Auckland Council can get stuffed , they need to live within its means like the rest of us do .

  • There are a ridiculous number of Auckland Council  staff earning over $100 k per annum.
  • They ( Auckland council and AT ) have the biggest fleet of vehicles of any entity in the city
  • These vehicles are all new or very recent models cars , vans and even luxury  SUV's
  • There are far too many cases of two staff members driving around the North shore in Auckland council cars together . Its Bull$1#
  • What work needs 2  people ( expensive resources) on healthy salaries to be driving around together ?
  • Not even the NZ police waste resources like Auckland Council , you mostly see cops working solo on the motorways

Nationwide protests agains the Councils !!!

Oh c’mon Boatman, Auckland Council got good taste in cars and they are showcasing it to the world.  Len should get himself a shiny black 7 series BMW to complete the set.  They also have great taste in tall expensive building near the water front.. Len will get an amazing view to inspire him to achieve better things for Auckland
Unlike other councils, all they have is a yard full of Hyundai i20s and Kia Rios, some even got Great Wall utes.. terrible taste.

So would you underpay and get the bottom of the barrel for staff?  How efficient will the council be then?
Would you have not enough council vehicles so the staff can't get to meetings/site visits etc?  How efficient will the council be then?
Would you have the vehicles all be old, breaking down, costing us heaps in fuel bills, and staff not turning up?  How efficient will the council be then.
Most of the cars i see are small late model fuel efficient vehicles, Toyota Yaris etc.  Haven't seen them driving in pairs myself but i'll take your word for it.
The council is one of the biggest employers in the city, it's not surprising to me they have a large vehicle fleet, though i which they would give us a world class public transport system that was useful for more than trips into the CBD so they didn't need so many cars.  Of course, that's out of their hands as public transport is run by Auckland Transport which, despite spending auckland ratepayers money, takes its orders from Wellington.

dtcarter....Council staff should always be paid lower than their job equivalents in the Private sector......   Business has to generate all revenue before any redistribution is able to take place......
If the Auckland Council is the biggest employee in the city........then Auckland has problems.....

Hang on, the size of the council relative to the size of the largest private company is a it spurious- a company town with one large company able to throw its weight around will always seem better (because the private company is so much larger than anything else around) than even a small efficient council in a city filled with vibrant SMEs.
The metric for talking about council size is surely size of council per (some combination of people and property).

That makes no sense. a) Council is but one organisation and b) having good, efficient staff means value for money. 
Now paying drongos top dollar like say some of the CEOs they hire, well they shouldnt be paid at all IMHO, just sacked.

How to fix the Council rates problem.  New rule.  5% off the rates every year for five years.  No more price gouging for council activities.  Reduce their borrowing.
Oh and I forgot.  Live within their income.

Of course they are not politically biased or motivated.
oh no....

1 - actually, they need to spend more now, before they can't. They're already late in getting infrastructure to a resilient state.
2. Actually, none of pay the correct price for things - if we did, we'd do almost nothing. (if you are going to leave future generations the same chance that you had, not only do you have to leave population at where it was, you have to leave exactly the same amount of fossil energy in the ground. Just how many diggers would you be affording, at that point?
3 - agreed. Even though they need to spend more now, the future can't repay. Of course, you could perhaps bargain on the fiscal collapse removing your debt.
4. long-term and physically, yes.

#3, yes indeed.  I'd suggest that ultimately once globalisation goes bye bye there is no real reason to pay the debt back, especially as its 1s and 0s invented by the Fed.  Alternatively just print X billions in NZD and ship it to point of demand, have a nice day.

What hope is there for local government when even their own lobby group so badly misuses its resources?
Why are they putting so much effort into this review when the government will so obviously ignore what they come up with? What do we pay rates for? The three waters are fully linked to properties so rates are fair there. Roading is a bit less obvious but could still be said to service properties so rates are fair there. The rest is parks, libraries etc where there is no massive demand for infrastructure.
I just don't get why LGNZ are trying to fix something that is not obviously broken.

Because - council realises that with the new changes to the LGA that they will be able to be challenged, and will lose, on why they charge the DC they do. Hence their revenue stream from DC's will drop. But to paraphrase, ‘a DC by any other name is still a DC.’ That is they will find other avenues to extract this revenue that are no more legitimate than DC’s.
And of course as you have pointed out, why would you allow them to have more money when they so badly miss manage what they have now. Giving money to council is like giving money to a crack addict expecting they are going to use it on rehab.
Council need to focus on costs out rather than revenue in, because it is council ideology on how they see their legitimacy to charge what they do that also sees them think it is alright to have restrictive urban boundaries that allow land bankers to make massive non-value added profits. It’s the same set of blinkers.  
If they removed all the non-value added costs, they would have less costs, less revenue, but more left at the end, and land and development costs would be lower. Of course that does not mean house prices would be lower as developers could capture that. The solution to the developer problem is another article some other time.
What we have at the moment is a serious game between council and developers to see who can capture whatever money they can get out of the poor new home owner. The council are winning but it is a race to the bottom for all involved.  The system at the moment is no more than a cost plus model.