Media Release
17 September 2009

Council Spending Out Of Control

A 9.3% annual increase in local authority spending shows that the sector is in denial over the economic situation, said Charles Finny, Chair of the Local Government Forum.

Mr Finny was commenting on yesterday’s release of Statistics NZ’s Local Authority Statistics (June 2009 Quarter).

“Council spending seems to be showing no sign of slowing down despite the recession, with the year to June 2009’s 9.3% increase comparable to previous years which were consistently in the 8-10% range” said Mr Finny.

“The increase in spending on employee costs of similar magnitude (also 9.3%) indicates that unlike central government, the local government sector doesn’t seem to have caught on for the need to limit the growth in the bureaucracy.

“A 5.5% increase in rates revenue will still be objectionable to many ratepayers but it is better than previous years which saw rates revenue increases consistently in the 8-10% range.

“I suspect this slowdown in rates is partly because some councils are trying to put voluntary caps on their rates increases. It is good that councils are thinking a bit more about affordability for ratepayers but as a sector they must also do better at controlling their spending if we are to avoid the inevitable catch-up in rates increases.

“The effect of continuing rapid growth in spending and reduced growth in revenue is that councils are increasingly running deficits and they are borrowing more.

“As a recent survey by Federated Farmers has revealed, the capacity for ratepayers to continue to be squeezed is surely limited and sooner or later councils are going to have to cut their cloth. We acknowledge that some are making progress, but it’s high time that prudence and restraint catches on more widely.

“More fundamentally, these figures highlight the need for Rodney Hide’s reforms to get councils focused on the basics and to improve their transparency, accountability and financial management. These reforms are crucial”, concluded Mr Finny.

Highlights of Statistics New Zealand’s Local Authority Statistics (June 2009 Quarter)
• Operating expenditure up 9.3% for the year ended June 2009 to $6.79 billion.
• Employee costs up 9.3% for the year ended June 2009 to $1.56 billion.
• Operating revenue up 6.5% for the year ended June 2009 to $6.55 billion.
• Rates revenue up 5.5% for the year ended June 2009 to $3.79 billion.
• Operating deficit of $238.7 million for the year ended June 2009, up from $56.3 million for the year ended June 2008 (with surpluses prior to that).

About the Local Government Forum
The Local Government Forum comprises organisations that have a vital interest in the activities of local government. Its members include Business New Zealand, the Electricity Networks Association, Federated Farmers of New Zealand, New Zealand Business Roundtable, New Zealand Chambers of Commerce, and New Zealand Retailers’ Association. The Forum was established in 1994 to promote greater efficiency in local government and to contribute to debate on policy issues affecting it.

Members of the Local Government Forum are each significant representatives of ratepayers in their own right but the Forum’s perspective is to advance community welfare through the advocacy of sound public policy. Its members believe that local government can best serve the interests of the community and ratepayers by focusing on the efficient provision of public goods at a local level.

ENDS

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