Council debt has gone up $6 billion since 2002 - $5000 for every Kiwi household, writes Hamilton Mayor Julie Hardaker.
Local government has certainly had its fair share of knocks and knockers lately. We've had criticism about everything from the general performance of councils and councillors to rising debt, unaffordable rates and excessive chief executive remuneration.
Perhaps it's not surprising. In 2002 council debt was $2 billion. Today it is around $8 billion and rising. Rates in New Zealand have increased an average of 6.8 per cent annually since 2002 compared with an average 3 per cent CPI increase over the same period.
And with the increase in debt, the total interest bill for local authorities has also gone up from $227 million in 2008 to around $400 million last year. That's about $5000 for every household in the country. While the average cost of servicing council debt is around 5.5 per cent of income, which is similar to the Government's cost of debt servicing, some councils spend up to 13 per cent of revenue in debt servicing.
There's no doubt some of the public criticism is valid. Many councils have been slow to constrain spending since 2008. While the 2009 long-term plans talked about reining in budgets to meet the slowing economic conditions, projects remained on the list and debt and rates continued to increase.
But don't just blame the councils. There are some pretty extravagant public expectations of their councils to deliver highly desirable places to live, work and play without the commensurate price tag.
Cities that experienced significant growth in recent years, like my own city of Hamilton, faced the financial burden to fund the infrastructure for this growth. This is almost impossible without existing ratepayers having to dig deep.
The things that make cities good places to live such as parks and gardens, swimming pools and museums are always going to require a significant portion of rates revenue and it is naive to suggest that these could ever be cost-neutral.
Residents would be banging down the doors of city hall if the true cost of operating and managing assets such as these were passed on to the ratepayer on a user-pays basis.
Everyone has their own view about what local government should or shouldn't do. Having been in the local government environment for only 16 months, my observation is local government reform is well and truly overdue. So here is my prescription for the changes that need to be made.
Clearly defined responsibilities
Under the current Local Government Act, councils are responsible for promoting the social, economic, environmental and cultural wellbeing of communities, in the present and for the future. This very broad purpose can be (and is) used as a justification, and community expectation, for almost anything.
Without this clarity councils often stray into activities which could be considered the role of the Government or the private sector such as subsidised housing or car races.
The Government must give more clarity about what local government should do and, more importantly, should not do. Councils need to be able to explain their decisions for focusing more on the delivery of traditional services and push back on the numerous requests for funding marginal activities.
That's not to say councils don't have a role beyond roads and water. Clearly they do because creating a liveable city is far more than infrastructure. Great cities around the world invest in creating an environment where people want to live. But it is time councils and the public both have a much clearer understanding about just who is responsible for what.
More innovative funding
There has been talk about imposing limits on rate increases and debt ratios. This will have a lot of public support and it does have some merit. Councils need to be more prudent and far more fiscally focused.
Learning to say no is a good place to start. But it is not the complete answer. An innovative approach to funding worthwhile community projects can be achieved through different types of funding partnerships with, say, the private sector, or through the philanthropic sector and community-driven funding and ownership models.
The majority of council debt, and more than 50 per cent of spending, is for roads and water. Suggestions of higher petrol prices, road tolls or airport departure taxes to pay for these projects are not supported by the Government. But if local authorities are expected to be more fiscally responsible and keep rates low, any reform of local government will need to consider other revenue sources such as a regional or city tax as well as the funding relationship councils have with the Government.
Simplify planning processes
Another area that needs to change is the obligation on councils to produce forests of planning documents. These put an enormous strain on our resources where we have to produce screeds of detailed information which very few people, if any, would actually read. That is followed by a drawn-out consultation process which very few people participate in.
I'm not against planning and I'm not against transparency. How councils propose to spend ratepayers' money is very important. But it really needs to be simplified. The public want to know, in simple language, what their council is planning to do, how much it will cost and how it will be paid for. Simplifying the process will make it easier for councils to be held accountable and lead to greater transparency.
More regional-level planning
Land use, transport and water issues do not fit comfortably within council boundaries. They cut across territorial boundaries. More regional planning will not only create efficiencies but will unify planning rules and regional approaches to government funding.
There's an even split between those for and those against council amalgamations. Those for amalgamation say it will deliver greater efficiency and remove duplication of costs and services. Those against are concerned that local community democracy would be lost.
In my view local boards with local people listening to and responding to the needs of their neighbourhoods could well enhance local democratic representation and reinvigorate what is currently poor community engagement with local government.
With 61 territorial authorities, six unitary authorities and 11 regional councils in New Zealand, we need to ask the question as to whether or not it is too many.
What I am certain of is the role of local government must be made clear to everyone.
There are lots of misconceptions about the functions of local government but local government itself should be leading the movement for change and not sit back and wait for the Government to impose it.
Julie Hardaker is Mayor of Hamilton. Before her election, in October 2010, she was a partner in local law firm McCaw Lewis Chapman.