LGNZ responds to rates capping announcement

LGNZ is warning that, while popular, rates capping will have real impacts on the essential infrastructure and service councils deliver that communities rely on.

LGNZ President Rehette Stoltz says everyone is struggling with the high cost of living and that’s something local government leaders are acutely aware of.

“I know every single mayor, chair and councillor across the country wants to make sure they’re delivering value for money for their communities.

“At the same time, there is a huge demand on councils to deliver infrastructure and services at the level communities expect while these costs are increasing dramatically.

“Councils can’t be expected to deliver more infrastructure, support growth and meet communities’ expectations with fewer levers – the maths just doesn’t add up and something will have to give.

“Capping rates is a blunt tool. Introducing a 4% cap when councils’ costs are increasing at a much higher rate will hamstring already-constrained councils’ ability to maintain investment in the services and infrastructure that people rely on them to provide.

“Local government only gets 10% of the country’s tax take but councils are responsible for about a third of all public infrastructure investment in New Zealand.”

Councils have very few levers to fund and finance investment without rates, Stoltz says.

“The introduction of rates capping legislation comes hot on the heels of the National Party ruling out an accommodation levy, which the Government had agreed to explore in regional deals. It’s an example of a key tool that could have helped take the burden off ratepayers.

"We see the pressure households are under every day.

“That's why we've developed the Ratepayers Assistance Scheme, which would provide meaningful relief. The average household each year could see $1,000 lower power bills and put $4,000 cash in people’s back pockets through rates postponement or lower interest payments by $400–$700 through rates deferral.

“Each of these dwarfs the $34 a year that officials estimate households would save as a result of rates capping.”

Stoltz said rates capping constrains income but the Government is not addressing the drivers of costs.

“In fact it’s making things worse by passing on the costs of government reforms to councils and ratepayers.

“Official estimates show local government is facing around $860 million in implementation costs to get the new resource management system up and running.”

Overseas examples where rates capping is in place show that the policy doesn’t work on the ground.

“In New South Wales, rates caps resulted in a $201 million maintenance funding shortfall across 62 councils in a single year. Just 46% of councils had sufficient funds to maintain acceptable building and infrastructure renewal levels.

“In Victoria, rates caps caused a reduction in GDP of up to $890 million.

“What we see in Australian states with rates capping is councils frequently end up applying for large ‘catch-up’ rate increases after years of constrained revenue.

“That is not sustainable. We are keen to work with central government to tackle the drivers of costs and find efficiencies. A rates cap will not deliver that,” Stoltz said.