Business Groups Call For Binding Referendums On Major Council Spending

The Local Government Business Forum has today released a report calling for binding referendums on major council spending projects, giving ratepayers a way of saying yes to projects that they support. 

“Council rates increased an average of 12% last year and are estimated to rise another 9% this year. It is little wonder there have been loud calls for the government to step in and cap rates increases,” said the Local Government Business Forum’s secretary, and report author, Nick Clark. 

The Forum's report Local Government Spending Referendums recommends requiring councils to hold binding referendums for significant capital projects exceeding $500 per ratepayer or 5% of annual operating expenditure. 

“International experience shows that rates caps can cause problems, including underinvestment in critical infrastructure,” Clark continued. 

"Ratepayers deserve a direct say in major spending decisions on non-essential projects. Our proposal offers a democratic 'third way' between uncontrolled local government spending and centralised rate capping," added Dr Eric Crampton, Local Government Business Forum spokesperson. 

Local government can and occasionally does hold referendums. But they have not made a difference. Results are often ignored, as was the case in the vote on the Tauranga Museum. This is mainly because the Local Electoral Act provides for them to be non-binding. A council must resolve to adopt a referendum result. 

The Forum’s proposal is for binding referendums of ratepayers, who directly pay the bills, with a turnout threshold and potentially a supermajority requirement. The referendum would simultaneously authorise the project and any levies necessary to fund it. 

Importantly, the Forum’s proposal distinguishes between essential network infrastructure and discretionary facilities. Referendums should only apply to non-essentials, preserving councils' ability to invest in water, transport and waste infrastructure. 

Automatic referendum triggers would ensure thresholds reflect the size of councils. 

“The Local Government Business Forum calls on the government to add this idea to the mix as it considers how to keep councils focused on doing the basics brilliantly. Rates need to be kept in check, but ratepayers also need to be able to say yes to projects they support,” concluded Dr Crampton.
 

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