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Business endorses Productivity Commission call

The failure of high-growth councils to supply enough infrastructure to support housing development has led to some serious social and economic problems, the NZ Productivity Commission states in a local government funding and financing report released today.

The Government should give councils the power to levy wastewater and road-congestion charges, and Special Purpose Vehicles (SPVs) could help councils nearing their debt levels, are two good Commission recommendations long-supported by the Auckland Business Chamber.

These tools would help councils efficiently fund the costs of growth, said Michael Barnett, head of the Auckland Business Chamber.

In another area supported by the Chamber, the Commission questioned the merits of council imposing an accommodation allowance for funding services for tourists. Instead, councils should make better use of available tools, including more user charging, greater use of debt, raising more in rates, and strategies to plan for tourism and manage peak demand.

Other good recommendations were that:

• A fundamental, first principles review of council’s performance reporting be undertaken, including to simplify Long-Term Plans to make them more accessible and ease compliance costs and to make more transparent the cost of essential infrastructure services (roading, water supply, wastewater, stormwater and solid waste).

• In choosing a funding tool, councils should give explicit consideration to promoting economic efficiency, fairness in who pays, and keeping compliance/ administration costs low.

• Councils should consider the partial or full sale of commercial assets as an alternative to borrowing to finance needed new investment; and do so in each case based on maximizing net current and future benefit for the district or region.

We strongly support a recommendation that “councils should assess rates for business properties in proportion to the cost of the council services that benefit those properties”.

This in effect recommends abolishing the business differential rate. The Chamber agrees with the Commission that if business rates are set simply to raise revenue without reflecting benefits, “they are likely to cause productive inefficiency that is avoidable.”

The Government asked for the report. The Commission has made its call. It’s time for delivery.

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