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News & Media » Frontpage News - June 2018

Frontpage News - June 2018

Published: 7 May 2018

News type: National news   

In Frontpage News this month, there is an update on the latest report due out of LGNZ's Water 2050 project, which focuses on the cost and funding of water infrastructure.

We are delighted to announce the finalists of the 2018 LGNZ EXCELLENCE Awards, and we take a look at LGNZ’s perspective on the challenges involved in a transition to a low-emissions economy.

You'll also find updates on current workstreams, local council wins and local government media stories.

 

Proposed international visitor conservation and tourism levy a step forward

LGNZ welcomes the Government’s acknowledgement, in its announcement on 15 June, of a proposed International Visitor Conservation and Tourism Levy, that visitors who use community facilities should contribute to the cost of those facilities.

This is a significant and principled step forward from the present position where ratepayers solely fund both the capital and operational costs of tourism mixed-use infrastructure and facilities.

“The debate now needs to move to how that money should be collected and allocated.”

“LGNZ has for many years been advocating for a greater contribution from tourists to the ongoing costs of mixed-use infrastructure, particularly in areas such as Queenstown, Central Otago and the West Coast where there are very high number of visitors compared to the number of ratepayers,” says LGNZ Chief Executive Malcolm Alexander.

LGNZ says that, for several reasons, the Government’s visitor levy proposal is not the favoured approach.

“The preference is for a local tourist accommodation levy, commonly used around the world.  Such an approach would allow councils to decide whether they wished to continue subsidising tourist infrastructure or meet part of the costs through a levy.”

“This would introduce a competitive aspect to location taxation that would drive performance improvements and incentivise a community to enhance the local value offering for tourists to tempt them to stay in a region.  This approach would break the cycle of benefits being captured entirely by central government but local communities bearing the costs.”

LGNZ says that a levy collected at the border is another central government revenue mechanism that may only partially go to local government.  LGNZ questions whether the levy will meet the infrastructure gap.

“With a limited pool of money, it is likely that a grant approach will fall well short of meeting the needs of local communities on the ground, particularly for ongoing operational expenditure to maintain and operate assets.”

 “The Government’s visitor levy proposal is estimated to collect $57-80 million annually.  Assuming a share of this will go to conversation activity this leaves local government well short of funding the infrastructure deficit of $1.38 billion, as identified by the April 2017 report by Deloitte New Zealand commissioned by Tourism Industry Aotearoa and supported by LGNZ.”

A recent MBIE report Financial Costs and Benefits of International Tourism shows the tourism industry has been enjoying substantial growth and in the year ended March 2017, tourists generated $3.3 billion in GST revenue.  This tax revenue is collected at the central government level but the costs of provision fall on local government, or more specifically their ratepayers.

Mr Alexander says, “With forecasts for the 2018-2024 period showing visitor arrivals to grow 4.6 per cent a year the assumption that ratepayers are going to continue to afford to, or want to, subsidise the provision of mixed use infrastructure is wrong.”

“New Zealand ratepayers have been subsidising the tourism sector in the form of mixed-use infrastructure provision (infrastructure used by local citizens and tourists such as local roads, other transport, drinking water supply, wastewater services and solid waste refuse, car parking, freedom camping sites and public toilets) funded mostly through property taxes (rates) during a period of strong growth.”

LGNZ says any funding mechanism must cover both capital and operational costs.

“Local councils will not build infrastructure if the ongoing costs cannot be met without raising rate levels for locals.  Operational and maintenance costs require both certain and ongoing revenue streams which grant schemes are not well-suited to fund.”

LGNZ looks forward to working with the Government to explore a full range of policy options and will be submitting later in the month on the Government’s proposal and on the Productivity Commission’s upcoming review of local government funding.

“It is time to ease the financial burden on ratepayers,” says Mr Alexander.

 

Release of third report under LGNZ's Water 2050 project

Today, LGNZ has released its third paper in its Waters 2050 work programme Water 2050: Cost and funding – Meeting the costs of water infrastructure; a stocktake and analysis of actual and potential funding options for local authorities.  This discussion paper considers funding – that is, who ultimately pays for the infrastructure, and it outlines and analyses a range of existing funding options and comments on attributes that future funding options will need to consider.

There are five key workstreams to the Water 2050 project: allocation, water quality, infrastructure, cost and funding, and governance.  To date, LGNZ has released the following papers:

These reports and our future work have been undertaken in order to inform discussion between LGNZ members and with central government on water and, in particular, to feed into the Government’s current review of the delivery of three waters services.  Funding is one of the four workstreams in the Government’s work.

LGNZ’s work has highlighted that a range of alternative funding options will be required to fund infrastructure to meet rising standards, climate change impacts and population changes, as well as essential maintenance and renewal.  This report identifies several important considerations:

  1. Cost.  For many districts and cities, the cost of investing in three waters infrastructure, including any additional costs resulting from higher standards and new regulation, will be significant. Central and local government policy development must consider both existing and new funding options to ensure every community can successfully balance its investment principles to achieve outcomes that benefit their communities and the country. 
  2. Economic equity.  If economic equity is considered – where charges reflect the costs of providing services – as a high priority, then those options where users pay based on the extent to which they benefit, and where charges reflect the cost of provision, will be preferred.
  3. Social equity.  Social equity addresses affordability to residents and is based on the premise that no one is priced out of the market. Importantly, improving social equity is not only a local issue, but a national one. In the context of water use, local government should not be expected to carry the full cost of contribution for national benefit, particularly where there may be measurable improvements. Central government should work closely with local governments to determine the fair and appropriate sharing of costs for improvement and expansion, and to also share in better outcomes.
  4. Simplicity and implementability.  For a successful funding programme to be supported, it must be easily explained and understood by all levels of governance, management, stakeholders and the public.
  5. Conditions and context.  While user-charging and local targeted rates are often considered suitable for urban areas, in rural areas these approaches can result in per-person funding requirements that are considered unaffordable. There may be merit, for example,  from a wider public good perspective, in spreading the costs of rural infrastructure beyond the relevant local council, while at the same time applying more economically efficient approaches in urban centres.
  6. Time.  Infrastructure costs can be recovered over different periods, depending on the funding option adopted. Recovering costs over relatively short time periods reduces funding risk and minimises overall debt requirements, but it pushes greater funding requirements onto the early users of long-lived infrastructure.

This report will be followed next month by a report that quantifies water infrastructure costs, including an estimation of the costs to upgrade and renew infrastructure across New Zealand’s councils under various scenarios, allowing for increased capacity for resilience.

Presentations from our recent Water Summit are available here.

 

Transitioning to a low-emissions economy

LGNZ’s perspective on a transition to a low emissions economy.

The Productivity Commission is now close to finalising its report of findings and recommendations on how New Zealand can transition to a low-emissions economy, which recognises that land use will need to change substantially. LGNZ too acknowledges that significant and bold change will be needed if real progress is to be made, and if New Zealand is to fulfil the commitments it has made under the Paris Agreement.

Notwithstanding the significant change required, LGNZ views the transition as an opportunity for investment, job creation, skills development, innovation and the development of new technology.  It’s an opportunity to do things differently and to do them better.  

The transition has the potential to deliver not only emissions reductions but other benefits as well, such as reduced congestion on roads, quality healthy homes, improved environmental outcomes, better urban design and reductions in waste to landfill, among other things.  A recent report commissioned by Westpac Bank has found that the economy would benefit by $30 billion by 2050 if government and business take early action on climate change.

LGNZ agrees with the Productivity Commission’s recommendation that the transition to a low-emissions economy must be a priority area of focus for innovation, research and development in New Zealand.  It presents opportunities for New Zealand to develop cutting-edge emissions reduction technologies, and to demonstrate leadership to the rest of the world, particularly in areas such as agriculture and transport.

Significant changes in the way we use land have to be part of the solution, and that it is likely that agriculture will, at some stage, need to be incorporated into the Emissions Trading Scheme (ETS) if emissions are to reduce substantially.

However, LGNZ has expressed a number of cautions to the Productivity Commission and the Government about how it brings agriculture into the ETS.  Agriculture is after all the backbone of the New Zealand economy, and many of our communities are reliant on agriculture for their ongoing prosperity and sustainability.  Including agriculture in the ETS will have impacts on regional economic development, population levels and patterns of settlement, with flow on impacts for councils’ rating bases.

LGNZ has made clear that there is a need for:

  • The communities that will be impacted to be involved in the decision-making process;
  • Careful planning for and management of the impacts of a decision to include agriculture into the ETS, including through appropriate mitigations that will support rural communities through the transition;
  • Consideration of viable transition paths to alternative industries; and
  • Any decision to include agriculture in the ETS to be underpinned by a strong evidential basis and careful analysis.

As well as the need for land use change, LGNZ believes that the Productivity Commission’s report needs to identify the potential of efficient land use planning as a means of delivering emissions reductions.  In its submission, LGNZ has encouraged the Productivity Commission to promote compact urban form and to recommend that legislative provision be made for regional spatial planning.  Both are tools that would support councils to contribute to emissions reductions, as well as delivering other co-benefits.   

Communities need to be ready for and embrace the challenges and opportunities that the transition presents.

LGNZ's full submission can be read here.

 

Government's changes to rates rebate a big help for retirees

LGNZ welcomes the implementation of new legislation from 1 July 2018 that allows eligible retirement village residents to apply to their local council for a rates rebate.

“Retirement village residents across the country who are living on low or limited incomes will now be able to apply to their local council for a rates rebate under the Government’s rates rebate scheme for low-income ratepayers,” says LGNZ President Dave Cull.

“Basing rates on the value of property means that, for some individuals with reasonably valuable property but limited income, paying rates can cause financial strain.”

The Act addresses an anomaly in the Rates Rebate Act 1973, and ensures that eligible retirement village residents are recognised as paying rates.

“LGNZ has been highlighting the need for this change for some time so it is pleasing that the Government has addressed this anomaly.”

“The changes mean that retirement village residents who do not own their unit, but pay fees to live there, are recognised as rate payers,” says Mr Cull.

LGNZ had highlighted this anomaly in its 2015 discussion paper Local Government Funding Review where it addresses the affordability for individual ratepayers facing hardship, and calls for additional funding mechanisms for councils.

 

LGNZ EXCELLENCE Awards

We are delighted to highlight the finalists in this year’s LGNZ EXCELLENCE Awards.

In its fifth year, the awards programme continues to go from strength to strength.  In 2018 there were 75 high-calibre projects and programmes entered across six categories.  From those entries judges selected 22 finalists with the winners to be announced at the LGNZ Conference and EXCELLENCE Awards dinner next month.

LGNZ President Dave Cull says local government plays an essential role in driving residential, community and economic activity throughout New Zealand and the finalists in the EXCELLENCE Awards showcased the outstanding leadership being provided by councils throughout the country.

“Local councils provide the essential infrastructure and other services which all New Zealanders use on a weekly, daily and hourly basis,” said Mr Cull, “But they also lead and implement the vision, direction and place-making of the towns, cities, districts and regions of New Zealand.”

The awards recognise the best examples of this.

“The EXCELLENCE Awards finalists all demonstrate the innovation, excellence in communication and consultative work undertaken to involve communities in the decisions and planning which frame their future and link closely to LGNZ’s CouncilMARK programme.”

Local authorities were invited to submit award applications in the six categories outlined below. One finalist is also selected as the winner of the MartinJenkins Judges' Choice Award for Performance Excellence and Community Outcomes.

Fulton Hogan EXCELLENCE Award for Community Engagement

Finalists have undertaken a project or programme that has made a positive impact on the community in their town, city, district or region and encouraged effective engagement and participation.

EXCELLENCE Award for Best Practice in Governance, Leadership and Strategy

Finalists have made significant contributions towards innovative and successful local governance, leadership and strategy arrangements that have significantly affected a council’s culture, strategic direction or outcomes.

EXCELLENCE Award for Best Practice Contribution to Local Economic Development 

Finalists have led, or are leading, a strategy or programme, delivering measurable actions and outcomes contributing to the economic advancement of their town, city, district or region.

EXCELLENCE Award for Best Practice in Service Delivery and Asset Management

Finalists have managed service delivery and core infrastructure in a manner that meets best practice and has resulted in better economic, social and/or environmental outcomes for their town, city, district or region.

Air New Zealand EXCELLENCE Award for Environmental Impact 

Finalists have developed a significant strategy, project or programme that has made a positive and measurable contribution to the quality of the environment in their city, town, district or region.

Creative New Zealand EXCELLENCE Award for Best Creative Place

Finalists have contributed to a more prosperous and vibrant town, city, district or region by incorporating arts and culture in local services, amenities and infrastructure.

 

Coming up

LGNZ Housing Symposium: 28 June

The LGNZ Housing 2030 symposium is an important step in establishing a collaborative discussion across central and local government and about local government's role in supporting the delivery of housing.  The symposium will be opened by the Minister of Housing Hon Phil Twyford and have two parts: land supply and infrastructure, and social and community housing.

For more information, click here.

LGNZ Conference 2018: 15-17 July

With less than 25 days to go, the 2018 LGNZ Conference is gearing up to be a great success with over 580 delegates from around New Zealand anticipated to attend.

Click here to register. Click here to read what’s in store.

Festival for the Future: 27-29 July

After four years in Auckland, what has been coined New Zealand’s most inspiring event - Festival for the Future, is returning to Wellington. From 27-29 July 2018, over a thousand young leaders, students and professionals will flood the geographic and political heart of our nation.

For more information, click here.

 

Workstreams

Water 2050 

LGNZ’s Water 2050 project is well underway. A key aspect of Water 2050 is to bring greater coherence to the policy debate, from standards setting through to the financing and community affordability of infrastructure, to deliver required standards, and the project will provide input into the Government's Three Waters Review.

Climate Change

The current priority under LGNZ's Climate Change project is working with central government on climate change adaptation following the release of the Climate Change Adaptation Technical Working Group's report of options for adaptation. LGNZ is also closely involved in the Government's consultation on its proposed Zero Carbon Bill, which will set the framework for New Zealand's transition to a low-emissions economy.

 

Local wins

 

Local Government in the media

 

Other frontpage news