More tax not answer

Local Government New Zealand has launched a funding review paper with options on how councils can raise more money:

LGNZ President Lawrence Yule says the findings, along with increasing demands from central government policy-makers, means we must take a fresh look at the way local government is funded for the benefits of communities. There is currently a significant shortfall between revenue and expenditure.

“Councils spend approximately 10.5 per cent of all public expenditure, yet they raise only 8.3 per cent of all public revenue,” says Mr Yule. The World Bank, in its recent report on local government finances, describes this as a vertical fiscal gap caused by a “mismatch between revenue means and expenditure needs.”

“As a result, a growing number of councils face financial challenges at a time when demand for infrastructure and services is greater than ever. Local government is also an important contributor to economic growth but the right incentives and resources must be in place to drive this growth,” Mr Yule says.

As part of the solution, LGNZ proposes a principles-based partnership model with central government. This would include central government fully considering the costs and benefits of decisions for local communities and co-funding costs where policy proposals have significant national and local benefit.

“The goal is not to increase the overall tax burden for New Zealand, but rather to determine whether a different mix of funding options for local government might deliver better outcomes for the country,” Mr Yule says.

“The sustainability of local government funding has become an increasingly important policy issue in the face of demographic and economic change. Some metropolitan councils are having to invest heavily in infrastructure to accommodate growth, while others have to maintain and renew infrastructure in the face of declining populations and funding bases.”

“This is alongside increasing community and central government expectations, and increasing impacts from natural hazards and environmental challenges. Earthquakes and flooding events in recent years have highlighted this.”

It is fair comment that successive central governments have required more and passed on more costs to local government.

The goal to not increase the overall tax burden is welcome, but is threatened by some of the options:

The paper elevates the key issues and identifies how present funding frameworks might be improved, and ways to incentivise local government.

It examines options that could sit alongside a property tax (rates) based funding system. Options suggested for discussion include local income tax, local expenditure tax, selective taxes, regional fuel taxes and transaction taxes.

“However, before pursuing fundamental changes to the funding regime, the local government sector needs to assure communities that it is open to innovation in service delivery, to build confidence in the quality of its spending decisions,” Mr Yule says.

Some councils, such as Rangitikei District Council, have already taken steps to develop innovative approaches to address funding gaps. Rangitikei is considering a number of measures to tackle the issue of population reduction. Likely changes to infrastructure by 2046 include a smaller number of council-managed community facilities, with some transferred to community ownership, and a larger network of roads, some in private ownership; along with modifications to its water and wastewater provision.

Other areas are planning for growth. Tauranga City and Western Bay of Plenty District, for example, are collaborating on a spatial plan, called Smart Growth Bay of Plenty, which is a comprehensive, long term strategy to ensure infrastructure is available for new residents. . .

Some councils face challenges of population decline and some face challenges with growth.

But too many councils have been living beyond their means and increasing rates well beyond the level of inflation for too long.

Whatever the questions asked, new and more taxes, whether they are levied by central or local government should not be the answer.

The discussion paper is here.

6 Responses to More tax not answer

  1. Gravedodger. says:

    What is it with the Letter L.

    Lying, Lacivious, Letcherous Len,
    Lianne Dalziel,
    Laughable Lawrence Yule,
    And This morning lovable rubber lips “I dont care where as long as I am Mayor” Shaddy all looking for more money.

    Just because the law allows the elected to continually seek ways to rort money from a few to build a bigger image for their inflated egos, threr is no reason to continue to raise rates at twice the rate of inflation and in the case of Kaipara District Council an eyewatering multiple of that extravagant usurious level.

    I first met Yule as a callow youth at Rathkeale College in the 1980s and he has been a constant disappointment ever since.
    The dopey muppet even wanted his Hastings District council to finance and build an upmarket Hotel in his home town.
    For what reason Lawrie, The nearby Hastings Racecourse, The Tomoana Show grounds have a handful of events a year and neither of them gets close to precipitating a crisis of accommodation.

    Here is a radical idea Lawrence, get back to the knitting and do what you are elected to do and If you have a brain fart find the freakin money from the world we all inhabit and keep your deluded ideas as just that, unfulfilled dreams.

    Tomorrows Letter of the day is “R”, Roads, Refuse, Rinfrastructure, Responsible Rates Management and restraint.


  2. TraceyS says:

    That would be Refreshing!


  3. Bulaman says:

    The only way forward is to slash public service salaries. Any PS getting more than $100K takes a 20 percent paycut yesterday. Below that it is prorata’ed down to $40K.
    The use of comparative salaries between private and public is the problem. Unfortunately it completely ignores risk. If you work for the guy with the printing press then your equivalent should only be 50 to 60 percent of what a private sector job pays!


  4. farmerbraun says:

    You’re right Gravedodger, Lawrence must really struggle to put his face on straight every morning.
    “when demand for infrastructure and services is greater than ever. ”

    Actually L. dear boy , the demand is that you deliver some core services at cost , or close to it , and very little else.

    I pay >$20,000 /annum in rates , for which I receive no water or sewage connection , no footpaths or lighting (a gravel road in fact) , no rubbish service that I do not have to pay for separately, and I enjoy the benefit of having my farm turned into a ponding area , so as to protect the poor folk enjoying all of the services that I do not receive. Yes I am zoned into a city purely for the purposes of daylight robbery.

    Lawrence , one sincerely hopes that you will pull your deluded head out of your rs in the very near future. We have had enough.
    Your future welfare depends on your seeing daylight . . .quickly.


  5. Paranormal says:

    A very wise lawyer, involved in the sector, pointed out to us the problem with NZ local government is it’s mostly incompetent. Can’t help but agree.

    Yes Minister and Yes Prime Minister are clear role models for the staff managing the winners of the popularity contest who are supposed to act in a governance role for those same staff….it is stunning to behold.


  6. JC says:

    The truly horrifying thought is most people think the central govt could do a better job of running the towns.

    Case in point being the Socialist Republic of Christchurch where by all accounts King Gerry should have been assassinated by now and 90% of citizens voting Left.. hasn’t happened in four years and two elections.

    About all we can do is limit the funding powers of local politicians and let Blenglsh have a bit more oversight.



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