[As published in September/October BayBuzz.]

Not one of the candidates standing for Hawke’s Bay local body election in 2022 foresaw that, if elected, within four months they would be coping as public officials with the aftermath of a devastating cyclone.

The jobs they were standing for looked routine. Make sure the rubbish got picked up, potholes got fixed, water was safe to drink, CBDs were looked after, reserves were tidy, biodiversity projects were blooming, rivers were clean.

The newbies weren’t thinking at all about ‘asset depreciation’ or ‘infrastructure maintenance’, which the incumbents regarded as the most deadly dull part of their oversight responsibilities … but a nagging pressure on rates. 

A couple of days of downpour upset all that!

So, first of all it should be said that our elected officialdom and council staffs rose to the immediate recovery challenge commendably, including securing over $2 billion in government recovery funding. Yes, a slew of reviews identified plenty of deficiencies in planning, procedures and execution exposed by the disaster, and sadly lives were lost. However those reviews also emphasised the overwhelming scale of the event. 

Our councils have been progressing all of the recommendations presented in these reviews. They’ve also been advancing the daunting projects needed to address the region’s future resilience – some of this quite tangible (bridge opening by bridge opening, stopbank repair by stopbank repair) and some of it still requiring heaps of planning and ultimately community buy-in as future risks are weighed.

All this carries a stupendous price tag in local government terms. One that will still grow as we ‘build back better’ and will need to be paid for in large part by the voters of Hawke’s Bay, whether as ratepayers or taxpayers … same pockets.

Meantime, our region sits on a low-income economy, dependent on overseas markets, a Lilliputian in a challenging global economy. 

So most of us are feeling stretched and nervous about money. And we complain bitterly … about the closest target, councils’ rates, ‘obviously’ fueled by mindless waste and idiocy, if not outright corruption. You should read my email!

What a miserable time to be a candidate for council.

Rates and ‘core’ services

Political pundits agree that, even in the best of times, the primary driver of voter behaviour is one’s sense of personal economic well-being … hence the famous, ‘It’s the economy stupid!”

Bringing that to our local level, council rates are an easy target when our bank accounts are suffering. After all, here in HB we don’t have a regional reserve bank to blame. We don’t have immigrants stealing our jobs. The Government assures us it’s not their fault (yet how many hundreds of millions are we paying for a failed Cook Strait ferry deal?). 

Indeed, this Government is doing its best to convince us that it’s our rapacious local councils that are the villains, engaged in gluttonous spending on vanity projects instead of ‘core’ needs.

What are the facts on that? When BayBuzz asked our councils to calculate what proportion of their spend was on core activities (using the Government’s official definition of ‘core’), the result was as follows: 

Keep in mind HBRC is the ‘odd duck’ here, with a significantly different set of responsibilities than the territorial authorities. 

Despite the Government definition, one might dispute as not ‘core’ the monies spent on ‘libraries, museums, reserves & other recreational facilities’, as some candidates do. 

Yet it should be noted that often such expenditures have the strongest community support. Witness the panicked backflips Napier City Council did after it tried to reduce library services! When councils do spend more on ‘amenities’, it happens in response to public demand. 

There’s another argument at work regarding amenities. Writing online for BayBuzz recently, Bruce Bisset described as essential: 

“Playgrounds, parks, libraries, CBD streets that have a bit of snap. You know, those things that give a place, and the people who live in and visit it, something to be cheerful about. The bits that make a community livable, in short. And attract newcomers to dwell there too. 

“Aren’t those essential? Absolutely. No-one wants to live in an industrial wasteland. So which bits are you going to cut to save a few pennies? 

Before you dismiss ‘From the Left’ Bisset, I can assure readers I’ve heard the same argument made persistently by hardened Hawke’s Bay business people who need to attract staff. 

Do councils waste money? 

Sure they do. But this is not the driver of recent rate levels. Those levels are driven by ‘macro’ factors outside council control – rising insurance rates, interest on debt required (yes, required) for infrastructure repair and upgrading, and construction costs. 

The ‘waste’ that is visible and annoying to the ratepayer is at the ‘micro’ level – bureaucratic processes and lapses in common sense. It’s easy to get an audience response when telling such a waste anecdote … some of our current candidates excel at it. How many cones, etc. 

This isn’t to forgive such waste, it should be called out whenever spotted. But wave a magic wand over all of it in any council and you might get a percentage point of rate saving. And sure, every point matters, but this is not why we face 10% to 20% rate increases, anecdotes notwithstanding. 

As both a councillor and media observer, I have watched councils deliberate on their budgets. Software allows the impact of each expenditure on overall rates to be instantly calculated. The rates impact of cutting the spend on any activity is immediately seen and potential cuts (or additions) can be readily compared across spending categories – e.g. more on civil defence paid for by less on tourism promotion. Similarly clarity with stretching a spend over a longer time frame. 

Staff and councillors (at least most of them) are not working with pencils here, the process is transparent, and the elected participants are especially mindful of what their constituents have said about big ticket items. I’ve yet to see a single councillor yearning to add a few points to the rates. 

Another type of citizen complaint involves supposedly nefarious ‘deals’ – most often between crafty developers and colluding (or inept) councils. By word of mouth or Facebook posts, these can become urban myths, defamatory at their worst. 

I’m not shy about digging into councils, and I recently investigated two of these, involving major land sales and construction, pressing the parties involved. In each case what I found was public tendering and associated processes fully utilised, appropriate planning assumptions made, and multiple legitimate objectives served (economic, social, environmental). 

I was informed of one of these ‘bad deals’ because a mayoral candidate was ‘telling a story’ in his door knocking. Damning by association candidates serving in such a stupid or corrupt council. 

These types of claims further erode trust in local government in general. In our July/August magazine I reported on BayBuzz’s reader survey on attitudes about our councils. Amidst other bad news, we found that when asked about this statement – “I generally trust our councils to do the right thing” – only 27% agreed. 

That finding prompted us to ask all current election candidates: “Would you support Councils appointing an independent ‘Hawke’s Bay Auditor General’ to monitor councils’ spending and programme performance?” 

Among candidates, there wasn’t much enthusiasm for such a position. Incumbents, especially, pointed to the existing external auditing councils undergo. You can see how candidates responded in Election Central.

But the point being raised wasn’t really about ensuring uniform and accurate bookkeeping. It was about having in place – accessible and responsible to members of the public with concerns about council spending, processes or performance – an independent authority empowered to scrutinise council behaviour, with full access to council documentation. ‘Ombudsman’ might have better conveyed the intent.

Councils are genetically defensive. An occasional gadfly (whose most complex business transaction might have been buying a car or a house) waving an Official Information Act request is no match for councils spending hundreds of millions of dollars on complex deals and programmes. [Treasury recently urged that even central government should have an independent fiscal oversight institution.]

The enquiries of such an ’Ombudsman’ would focus on situations where serious systemic performance failures or financial mismanagement might have occurred.

OK, hopefully we’re all agreed lower rates would be welcome, but that no criminal behaviour on the part of councils is involved.

How do we constrain rates?

First, note that there are two sides to constraining rates – lowering council costs and adding non-rates sources of revenue.

Let’s continue first with lowering costs.

We’ve already noted ‘uncontrollables’ are the primary cost drivers. And picking around the edges will produce worthy but marginal results. And ‘picking around the edges’ unfortunately is how I would characterise most candidates’ responses to BayBuzz’s question asking them for specific examples of where/how they would reduce rates. 

The default position of most candidates is that councils are operating inefficiently and if better management were applied, rates would reduce. But again, marginal savings. The real conversation needs to be about level of services – councils do stuff that ratepayers want, like extend library hours. Few candidates actually identify services they would reduce or eliminate. Read the responses yourself in Election Central if this sounds unfair.

A more significant path to savings would be consolidating certain functions or services – from procurement to parks and reserves management to animal control – across our multiple councils. Our councils have paid lip service to ‘shared services’ over the years, but implementation hasn’t been high on the priority list.

Of course the grandaddy of shared services would be shared water services, and that will indeed occur in Hawke’s Bay at the prodding of the Government, with CHB, HDC and NCC agreeing to set up a regional water services entity. Whatever water charges ratepayers in these jurisdictions now bear will be shifted to the new entity (and reset to meet freshly projected needs), and ‘rates’ should be reduced. Presumably, water asset managers and their overhead would be moved off council payrolls. But you will still be paying.

The Government recently opened another significant opportunity for functional consolidation, authorising councils to merge their building consent operations into one Building Consent Authority. Hastings and Napier Councils’ CEOs tell BayBuzz they welcome this proposition.

Taking ‘consolidation’ and ‘collaboration’ to its logical conclusion would suggest amalgamation of our councils in some form … a historically touchy subject. 

BayBuzz asked all candidates about amalgamation. The ‘safe’ response given by many candidates was to endorse ‘more collaboration’ first, but a majority candidates are surprisingly open to the possibility of amalgamation (with NCC/HDC and HDC/CHB mergers suggested), saying the issue should be on the table. Very few were dug in on five councils.

If there’s a topic befitting examination by a Citizens’ Assembly, this would be it!

For its part, the current Government has been pressing toward ‘regionalism’, with measures like those just cited above on water services and consenting, but also initiatives requiring regional spatial plans and proposals for ‘regional deals’ to address local economic development (Hawke’s Bay has submitted one, as we reported online).

And obviously our councils have their own assortment of ongoing initiatives that are predicated on regional planning and implementation – e.g. flood protection, coastal hazard mitigation, other climate adaptation, civil defence, a re-organised Regional Economic Development Agency (including tourism promotion). These are not in the first instance aimed at cost reduction, but they certainly underscore that HB’s big challenges are regional in scope and require regional solutions.

Capping rates

The Government’s other ‘contribution’ to curbing rates is its determination to legislatively cap rates in some manner linked to inflation rates. Announcing his Local Government (System Improvements) Amendment Bill to Parliament, Minister Simon Watts commented: “I have made it clear that the Government will not support new taxes and revenue tools for local authorities at a time when we believe there is scope for improvement in the value for money New Zealanders receive in return for their rates. To that end, we are working at pace on a rates cap model.”

As this is written, details are yet to emerge. Would it apply to both operating and capital costs? Would it be set using the consumer inflation rate or the faster rising costs that councils actually bear in areas like construction and insurance? Would it be a ‘hard’ cap or one that offered some avenue for councils to seek exemptions or overrides?

It was recently disclosed that Treasury has given Minister Watts advice opposing rates caps. Its concern is that formal limits on councils’ revenue raising capability will undermine the credit worthiness of NZ’s entire local government sector. Credit authorities like S&P have already issued such downgrade warnings. 

Treasury goes further, saying rates were “significantly below” what they needed to be. “Given that providing essential infrastructure dominates both capital and operating spending by local government, and infrastructure delivery underpins a significant number of the Government’s objectives and targets, central government policies should focus on how to allow rates to rise to sustainable levels.”

Bottomline: rates capping is simply National (note: not ACT or NZ First) beating up on local government to score some cheap points. And the handful of our local candidates endorsing rates caps are either just doing the same or are woefully ignorant fiscally. Read their responses in Election Central.

So, what about ‘new’ revenue?

Experts looking at NZ’s local government financing have consistently said the current rates-driven model is unsustainable. They have noted that local government’s share of the ‘tax take’ has in fact flatlined for decades, and they have repeatedly recommended the same kinds of ‘new’ revenue for councils.

More use of ‘user pay’ approaches has been recommended (and certainly the Government has adopted this mantra). Volumetric charging for water is a prime example and one heading HB’s way (predicated on universal water metering). Accelerating ‘development contributions’ made when private developers open new areas requiring public infrastructure (roads, water services) would ease financial exposure of councils.

More funding from central government is the obvious main option. However, neither Local Water Done Well nor the ‘Regional Deals’ initiative offer government funding. The statement of Minister Watts quoted above makes the Government’s position clear.

Still, the experts and local government, with allies like Federated Farmers, are pressing some interesting alternatives.

One, supported by ACT’s David Seymour, would return a share of GST to local councils. One version of this would be sharing the GST on new-build housing. 

BayBuzz asked the Hastings and Napier Councils just how valuable the GST on new-builds might be for each council. 

For HDC the answer, for the last fiscal year — about $20 million, given $152 million in new-builds, GST included. For NCC, given $97 million in new builds, GST would be about $15 million. Even a half share of that wouldn’t be chump change! And as HDC pointed out, the last year wasn’t exactly boom times for housing new-builds. Local Government NZ says sharing 50% of the GST from this activity would generate $1.3 billion for NZ’s city and district councils.

Another option proposal advocated by LGNZ is for central government to pay rates on local property owned by government agencies.

Presently the Government posture is all stick and no carrot. So councils will be paying for our local future.

This article – in the present election climate – is intended to suggest that curbing rates is a complex task with no easy fixes. And to caution voters to be wary of candidates who claim otherwise.

As the saying goes, we get the government we deserve! 

All of our campaign coverage and issues analysis is live on our website’s Election Central 2025 domain: baybuzz.co.nz/2025-hb-local-council-elections