Our system of local government rates sharing that is based so heavily on property values is broken, Federated Farmers says.

The government has announced the Productivity Commission will investigate how councils can fund their activities most effectively and fairly, with its report due mid-2019.

"It gives farmers hope that a well-resourced organisation will be able to focus on the issues objectively, cut through the politics, and give us a fair assessment," Feds national president Katie Milne says.

Many councils are now reliant on property based rates for upwards of 60 percent of their revenue. A bigger and bigger share of this burden is coming out of rural communities - not because rural folk are using more facilities, or because council services have in some way got better - but merely because of the investment in valuable land required to operate a farm, and council rating policies.

"There are plenty of farmers - and remember these are most often family businesses - who are paying $30,000-plus in general rates. But they don’t benefit any more than town residents, or don’t benefit at all, from facilities such as stormwater infrastructure, art galleries, recreation and events, tourism promotion, footpaths, community development and libraries, etc," Katie says.

"Council people wave their hands in the air about expenditure pressures but our argument is that we don’t have the right funding model to meet those pressures. Even the councils themselves are starting to acknowledge this."

One change Federated Farmers would like to see is lifting of the current 30 percent cap on council revenue that is permitted to come from uniform charges, including charges that are targeted at those who use particular services.

"The Shand report of nearly a decade ago said the reliance on property value-based rates was unsustainable, and that targeted uniform charges should be allowed to be up to 50 percent of total council revenue."

ENDS

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