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Linking rates rises to inflation is a mistake


LGNZ says linking rates rises to inflation is a mistake

For immediate release on 13 June 2006

Local Government New Zealand’s President Basil Morrison has responded to today’s statement by Business NZ which links rates rises to inflation, saying the analogy is a mistake, particularly when most of councils’ cost drivers are moving ahead of inflation.

“Mr O’Reilly was commenting on information prepared by Federated Farmers on Draft Long Term Council Community Plans. An important thing to note is that many councils are still consulting on these plans with their communities and are yet to set their rates. The plans won’t be adopted until 1 July 2006,” said Mr Morrison.

“The LTCCP consultation process lets communities have input into council spending and this includes input into rates increases. Rates increases are necessary if New Zealand is to make the improvements to infrastructure necessary to achieve a rise in its standard of living. Without good quality infrastructure, business growth is one of a number of things that could be seriously threatened.

“The breakdown of councils’ expenditure shows that in most cases the majority of council funding is spent on the traditional areas of upgrading and maintaining local government infrastructure such as stormwater, water supplies, transport and roading.

“It is true that the Local Government Act 2002 gave councils extra responsibilities in areas such as cultural and social wellbeing but councils are also still very much focused on delivering these traditional “core” services to their communities. Councils are required to take community expectations and wishes into account when they make key decisions relating to the future of their regions. In turn, citizens have the opportunity to provide input into key council proposals whether they are for stormwater upgrades or a new museum.”

Central government and local government are currently engaged in a review of local government funding. The review will examine affordability issues for both councils and ratepayers on the range of tasks requested by communities and those imposed by Government.

There are also a number of new compliance costs that councils must meet arising from new or heightened council roles, such as changes to the Building Act and LTCCP Audits. These have created additional costs for all councils and in a number of cases have not been matched by corresponding increases in resources available to councils to fund the activities. These issues are currently being discussed in the funding review.

Local Government New Zealand is questioning the approach of Business NZ which suggests "restraining" local government activities. The major elements in rates rises are usually historical, such as increased operating and capital expenditure on local government infrastructure, and most new activities are primarily in response to heightened community expectations.

Mr Morrison invites Business NZ to work constructively with local government to help build an environment more conducive to economic transformation.


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