Mayoral contender says world-class cities need world-class funding mechanisms, with in-built economic drivers and fiscal accountability

“The Shand Report tinkers round the edges but it concedes defeat on
finding a ‘magic bullet’. They haven’t looked hard enough.” Alex Swney

Auckland Mayoral contender Alex Swney agrees with one prediction in the Shand Report - that rates in their current form will be unsustainable for a significant number of ratepayers within ten years.

In response, he is championing a funding solution that would see 1% of the share of GST which is generated in the Auckland region, re-invested back into Auckland. He says this mechanism was given one page out of 298 pages in the Shand Report, but deserves more attention. The plan would supplement Auckland’s rates income with at least $200million annually. Other regions would benefit also, as they would receive 1% of the share of GST generated locally to re-invest locally.
 

Experts agree it as a more sustainable form of local body funding which would benefit cities throughout New Zealand and grow as local economies grow.
 
“We only need to look overseas for imaginative and effective new ways to fund cities. We have learned that over 100 cities in the United States are now building rail systems because they have a share of sales tax revenues. Across the Tasman, the GST generated in New South Wales returns to New South Wales. Same in the other states. We believe we should adopt a similar system to fund cities here,” says Swney.
 
Swney lists the benefits:

It would incentivise cities and regions to support and drive their economies more vigorously, which in turn would assist the national economy
It would diversify revenues taking the pressure off property rates and keeping them at affordable levels
All residents and visitors who use city amenities would contribute, not just ratepayers   
Funding increases would correlate with population increases
It would share taxes more equitably between central and local government
 

Swney advocates 11.5% of GST going to central government and 1% staying with local and / or regional councils, meaning the total GST burden for the country would remain the same at 12.5%. Using government estimates, 1% of GST would total $680 million in extra funding annually for councils throughout New Zealand, with over $200 million annually for the Auckland region, calculated on a population basis.

Swney emphasises that his recommendation does not represent a tax increase.

Swney supports Shand’s call for a climate of greater fiscal responsibility within councils and applauds the concept of medium-term fiscal targets linked to local body election cycles for added accountability. But he cautions the notion that commercial returns should be achieved on all investments, saying: “If you try to run a balance sheet over a park, you will never build a city”. (Source: Metro, Aug ’07)

“Wasteful spending and mortgaging our grandchildren are a legacy of the Hubbard administration. Dick is shuffling the deckchairs on the Titanic if he thinks taking $20million a year off Auckland schools and hospitals will save Auckland,” he says.

“Councils need a more sustainable source of revenue that grows as the economy grows, and I’ll be calling for the repatriation of a small proportion of GST to become part of a national discussion alongside the Shand report,” says Swney.

Professor Peter Newman, Director of the Institute for Sustainability and Technology Policy, at Murdoch University in Perth says: “I am supportive of this approach. A revenue-sharing exercise from GST, targeted for infrastructure in cities should be seriously considered as a way for fundamental funding problems to be solved. The reason why over 100 cities in the United States are now building rail systems is because they have a share of sales tax revenues.”

Larry Mitchell provides the New Zealand local government sector with financial and policy advice, and currently consults in North America. “We should leave no stone unturned in the search for alternative funding means to relieve the burden from property-based rates. The concept of councils having a share of GST is something I support,” says Mitchell.

Swney says: “The extra $200 million from a 1% share of GST would allow Auckland to develop new economic and environmental infrastructure including stormwater quality improvements to protect our harbours, improved public transport, an international convention centre, proper cruise ship facilities and new tourism initiatives, for example.”           

Read more on rates reform from Alex Swney at www.alexforauckland.co.nz

and  www.metrolive.co.nz

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