Council financial profligacy must be addressed

Nigel Billings

Federated Farmers has called for reform to the system of local taxation for a long time. We mean serious reform - particularly an end to the traditional reliance on land and capital value rates.

This system hasn't worked for farming, it can't. All of the evidence is in your August quarterly rate demand. It will involve a lot of money but isn't based on income or services, rather on a property valuation done when the going was better for many farm businesses.

Local government funding has been reviewed several times since the counties and boroughs were amalgamated in 1989. That's when policy-makers began to wonder whether landowners could alone carry the cost of a growing local government. It is also when farm rates really took off as urban and rural jurisdictions combined.

The latest effort on reform has come from local government, with a discussion paper released in July that focuses on new sources of revenue: local expenditure taxes and removal of the exemption on Crown-owned land paying rates.

While it doesn't address the huge equity problems with land and capital value rates, there is the argument that additional revenue will take the weight off.

Rather than stimulating debate on local financial and infrastructure challenges, the paper drew the ire of media commentators, ratepayers and the Local Government Minister - who indicated wasteful spending was a barrier to any serious consideration of additional funding tools.

The irony of that for farmers cannot be underestimated. Hope for an easing of the land and capital value rates is stymied by the perception the revenue isn't efficiently spent.

Federated Farmers encourages a deeper perspective - wasteful spending is one thing and should be addressed, but reliance on an archaic, inadequate and inequitable rating system lies at the heart of local government's dysfunction. The capacity to set aside the painful stories of financial profligacy, many of which come out of the larger city councils, must be found.

-Nigel Billings is a Federated Farmers senior policy adviser