Local Government Act 2002 Amendment Bill Submission

LOCAL GOVERNMENT AND ENVIRONMENT SELECT COMMITTEE SUBMISSION – JULY20123 The IssueLocal Government New Zealand (LGNZ) has commissioned NZIER to provide anindependent review of recent trends in Local Government statistics.Our report provides an independent review of the trends reported and the conclusionsdrawn in three papers: the Better Local Government discussion document (NZ Govt. March 2012)the Cabinet paperthe accompanying Regulatory Impact Statement for Better Local Government(dated 16 March 2012).These three papers conclude that the local government sector has been fiscallyirresponsible since the local government reforms of 2002. This is based on five mainissues:Rates have increased much faster than general inflationLocal government labour costs have risen rapidlyLocal government expenditure has risen as a proportion of the economyLocal government capital expenditure has risen rapidlyLocal government debt has quadrupled over the past decade and is projectedto rise further.We summarise the key issues, the metrics used, the appropriate metrics and theinterpretations in Table 1. We agree with some of the trends identified, but we do not findthese evidence of fiscal irresponsibility.In particular, while rates have risen, they remain contained relative to the rating base –the value of property – and some measures of income. Capital expenditure, debt andinterest cover are all at prudent levels.The Better Local Government reform programme should be based on robust statisticalevidence, using the appropriate metric and in the appropriate context to answer thequestion posed.