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Financial crisis to hit council ratepayers


Media release
2nd february 2009

The current financial crisis is about to hit council ratepayers pockets.

The news that the Auckland Regional Council’s investment returns are significantly below budget will mean that any shortfall in funding for interest on, and repayment of, loans for infrastructure projects will need to be found from other sources – most obviously regional rates.

And the ARC will not be alone in their problem –other councils which rely on investment income to relieve the rates burden will almost certainly find themselves in the same boat.

Councils throughout the country receive, on average, 60% of their funds from rates.

If investment income is down then rates must go up.

But, as the Rates Inquiry of 2006/7 reported, the present rating system will be unsustainable within a few years – extra pressure for higher rates increases will shorten that time-frame considerably.

Finance Minister Bill English seems to have indicated some government support for local councils but such support may well depend on councils pruning all unnecessary expenditure – a task many councils find difficult to undertake.

ENDS

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