It is not a ‘Trojan horse’ for more funding, but a genuine attempt to look at the long term funding options for Councils. The study was governed by a committee made up of local government, financial experts, private sector members, and national organisations including Federated Farmers and the New Zealand Initiative. Objectivity was the reason for allowing some of our biggest critics into the process.
Importantly, this is the first strategic piece of work commissioned from within the sector to look at the long term picture. The work was driven by fundamental changes that are occurring to our population. The advent of urbanisation, ageing of population and need for significant investments in long term infrastructure require a long term view. As was recently announced in the Government Infrastructure Plan, data and knowledge form the basis of long term thinking.
The study found that half of the councils in New Zealand would lose population in the next 30 years. And most of New Zealand’s future population growth will occur from Taupo north. We see this in our own region where Wairoa is predicted to lose 2,000 people in the next 30 years and Central Hawke’s Bay 1,200 in the same period. The larger centres of Napier and Hastings will gain 2,900 and 6,400 respectively. Even though these cities are projected to grow, they are still way below the national average.
At the same time as our population shifts geographically, so too does the average age … upward. This is especially true in Hawke’s Bay. The ageing of the population means that more people are on fixed incomes as a percentage of the total ratepayer base. We all know of people on fixed incomes who struggle to meet increasing council and other costs.
The combination of these two factors mean that in the decades ahead the current reliance on property-based rating will not be sustainable. Our five councils in Hawke’s Bay have just completed their Long Term Plans for 2015-2025. Here are their projected rate increases over that period:
• Wairoa District 53%
• Napier City 49%
• HB Regional 46%
• Hastings District 30%
• CHB District 27%
With adverse trends affecting our region’s rating base, how will our local government(s) meet these expectations … without reducing service levels?
While the Government is naturally cautious about the LGNZ review, they have not dismissed the findings. The Crown has a natural interest in looking for maximum efficiency from councils before they consider new funding options.
The key themes of the review were the following:
1. An effective partnership between local and central government around shared goals and strategies, pragmatic testing of new ideas, and strong incentives for both arms of government to perform.
2. Recognition of the value of the private sector and community by recalibrating relationships with those sectors to incentivise partnerships and the achievement of shared goals.
3. A local government structure which is open to innovation in service delivery, funding and financing (within an environment of strong fiscal discipline).
4. To provide a diverse set of funding tools for New Zealand communities to respond to the different challenges they face, with property rates as a cornerstone supplemented by revenue sources to equip local communities to meet current and future opportunities.
Out of these themes came 10 key actions:
1. An agreed priority and action plan to advance ‘special zones’ for growth to test new ideas and drive economic prosperity.
2. When new centrally imposed costs are considered (and particularly where national benefit applies) a cost benefit analysis and agreed cost sharing with central government should be mandatory.
3. Mandatory rating exemptions should be removed.
4. The application and administration process of the rates rebate scheme should be simplified to increase uptake.
5. Better guidance is needed to assist councils in making decisions on tradeoffs about whether to fund services from prices (user charges) or taxes.
6. Road user charges, targeted levies and fuel taxes should be allowed where it is economically efficient.
7. Councils should be able to retain a share of any value uplift arising from additional economic activity related to local intervention and investment.
8. Local authorities should receive a proportion of any mineral royalties attributed to local activities.
9. Allow councils to levy specific charges and taxes on visitors where economically efficient.
10. Reconsider the decision to limit the range of community amenities funded through development contributions.
These key actions will form the basis of LGNZ’s advocacy over the next five years. In summary they are represented as improved relationships, improved efficiency and a culture of innovation. Within this mix nothing is off the table. A powerful but new concept has also emerged around incentivisation.
While the options may appear clinical, they are completely new and could radically change the incentives for efficiency and structure. Yes, there will be some concern from the tourism sector and road users about increased costs; but equally you could argue they are currently not paying enough. Secondly, concepts such as ‘special zones’ which foster economic growth by removing planning and bureaucratic compliance are new concepts for New Zealand.
In summary, the conclusion of this review shows what local government must adapt if it is to keep up with fundamental macro changes. Doing what has always been done will not work, nor will it be supported by the ever tightening wallet of the ratepayer.
While big projects like wastewater and water plants were heavily subsidised by the Crown when they were built in the 1960’s, the Crown is not likely to re-enter this space unless the reason is compelling and communities are supportive.
A recent reputation survey showed that there was lots of work to do in terms of the public’s confidence around efficiency and spending. It is clear to LGNZ that change is needed, and we are pulling out all stops to make this happen. Ratepayers will benefit from a wider use of funding tools, a sustainable urban and rural New Zealand and a culture of innovation. It may not mean rates will go down but they will go further!!