Local Council funding review will encourage more debt
Local Council funding review will encourage more spending and more debt.
Seven years after the Independent Rates Inquiry warned that the rating system was unsustainable Local Government New Zealand has come to the same conclusion.
During that same period local Councils have made no real effort to curb their spending.
In fact many councils have increased the pressure on rates by building up substantial debt, with the interest costs being met from rates income.
The Government has made some effort to put provisions in place for greater accountability by Councils, and introducing preventative intervention if Councils were seen to be heading into financial problems.
The threat now is that Local Government New Zealand’s funding review is about finding complementary funding sources – in other words, new finding sources in addition to rates.
Council funding problems always go back to the need for funding – and who should pay.
What services do Council need to fund from rates? And which group of ratepayers pay for which service?
Should residential and rural ratepayers be funding economic development, or youth employment initiatives?
Should residential and rural ratepayers be funding commercial sporting activities and facilities?
And why are only 40% of residents paying rates directly to their council?
Before looking for more taxes, local government needs to re-assess what services ratepayers should be paying for, and what services are optional and who should pay for them.
Simply looking for more income sources will only encourage more spending.
As the Independent Rates Inquiry recommended seven years ago, what is needed are alternatives to rates – not additions.