Grey Power November 2015

NATIONAL GREYPOWER MAGAZINE » NOVEMBER 2015 11
Future of funding local government
How councils fund their activities has
been a source of contention since
local government was established.
In attempts to find more effective and efficient
means to fund community services, local governments
- or central government through third
party execution - have delivered at least one report
a decade since the 1950s.
The most recent effort was created earlier this year
with Local Government New Zealand’s (LGNZ’s) 10
point plan; incentivising economic growth and strong local
communities.
This recent report is premised on economic, demographic
and population profile changes that make the
existing funding regime anachronistic.
An effective and efficient funding structure for local
government requires both improved innovation and efficiency
and likely a modification to the Local Government
Act (LGA) to allow local councils to utilise tools that most
effectively and fairly distribute the cost burden of community
infrastructure and services.
Local government has capital assets valued at around
$120 billion (roughly the same as central government).
This seems like a large amount of infrastructure, but
local government has the responsibility for 16 resource
areas including roading, 3 waters, environmental management,
emergency management and recreation and
sport, among others.
The value of this infrastructure and service is not
small - and based on the kind of local government you
live in - may be skewed toward roading and water.
Local governments in New Zealand manage more
than 80,000 kilometres of roads (88 percent of the New
Zealand’s roads), and 3 waters infrastructure has a value
of more than $35 billion.
As such, roughly 44 percent of all local government
operating expenditure goes toward operating these resources
alone.
However, inquiry is often oriented toward whether
the funding sources are fit for purpose and if execution
is efficient. As community members age, the impact of
a tax based on property value (rather than income) can
be burdensome. Further, with populations in some 30
communities expected to decline over the next 20 years,
are ratepayers getting the most from their
contribution?
These and other questions
are what prompted Local
Government New Zealand
to research the
appropriateness
and effectiveness
of how and
where we collect
our rates.
In analysis,
it was
difficult to
find another
country that
has as few
alternatives
to raise local
revenue.
The LGA
prohibits local
governments
from collecting
sales or income
tax, or to source
other opportunities
including a regional
fuel tax or a visitor levy.
LGNZ’s approach, which
makes its report a bit different
from others, was to premise a discussion
on incentivised economic success.
Incentives that are mutually beneficial for central and
local government, and meet the needs of business and
volunteer interests, are likely to be supported in possible
trial and potential adoption.
LGNZ’s 10 point plan is intended as a conversation
starter.
There may be other options and opportunities that
exist for local government to appropriately support its
citizens. Each community is unique, but the
LGA has a “one size fits all” approach
and local government must work
with every stakeholder and resource
to resolve its uncertain
future.
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