Local government funding

Local authorities are public corporations with the power to levy a variety of property taxes, charges and user fees.  Most powers to impose taxes and charges are prescribed in the Local Government (Rating) Act 2002) and other forms of specific legislation with their own charging regime (such as the RMA, 1991, the Dog Control Act 1996, and the Sale of Liquor Act 1989).

Councils can use a range of property taxes, namely taxes on the value of land, on improvements or on rental value.  In addition property taxes (rates) can be in the form of:

• general rates - where the community as a whole meets costs of a particular function or functions.  These taxes are rated on property value according to a ‘cents in-the-dollar' formula, set annually by the council.  The amount rate-payers pay varies according to their property value.
• targeted rates - these are designed to fund a function or group of functions.  A range of factors which can be used for calculating targeted rates, such as land value, improvement value, total land area, or area of land paved.
• differential rates - general rates can be set on a differential basis, where the council can take into account a range of factors, such as property value, location, area and use.
• uniform annual general charges - these are fixed charges applied to every rating unit, no matter the value of the property.

Sources of income (2009)

On average approximately 60 per cent of local government's income is derived from property taxes.  Grants from central government, primarily in the form of road and transport subsidies, account for around 11 per cent of council income, a relatively low share by international standards. 

Compared to most other countries local government in New Zealand has a high degree of financial autonomy; as councils raise most of their own income they are also responsible for determining how it is allocated, in accordance with the principles laid out in legislation.

The LGA 2002 requires that councils manage their revenues, expenses, assets, liabilities, investments and general financial dealings prudently and in a way that promotes the current and future interests of the community.

For more information go to http://www.localcouncils.govt.nz/

Accountability

Local authorities receive their powers from parliament, but the mandate to exercise their powers comes from citizens who, as electors, choose their councils every three years. 

As democratic organisations responsible for making decisions about the public good councils operate within a framework designed to enhance transparency and promote public confidence.

Two principles underpin the framework - freedom of information and open decision-making. 

All information in a local authority is deemed accessible to the public unless there are reasons for confidentially, such as issues of privacy or commercial sensitivity.  Similarly all decisions are deemed to be made in a public forum unless reasons for excluding the public exist, such as commercial sensitivity. 

In addition to the principles of open government councils must comply with a range of measures designed to strengthen accountability to their citizens, such as:

• Annual plans - every year councils must publish an annual plan and budget outlining what they plan to do and how it will be paid for.  Draft plans must be published and citizens given the right to make submissions on those plans.
• Long term plans - every three years the annual plan becomes a long term plan which outlines councils' work programmes and budgets for the coming ten years.  The long term plan is a critical mechanism to ensure that councils exercise prudent stewardship of the community's assets.  Draft plans are made available for consultation and are also subject to an audit opinion.
• Annual reports - published every year annual reports contain information on the council's financial and operational performance for the previous three years.
• Pre-election report: the requirement to publish pre-election reports was introduced in 2010. These reports are to be compiled and published approximately three months before a local authority election and are to contain financial information for the three preceding years as well as prospective financial information for the next three years.

Other measures that have been designed to enhance accountability and transparency include the adoption of Codes of Conduct by elected members; registers of members' interests (optional), and the Elected Members Interests Act 1968 that sets rules regarding pecuniary interests and the perception of bias.

In addition councils operate under a general obligation to consult with their communities when making decisions, although the degree of consultation depends on the significance of the issue under consideration.