In any event there is the argument that ratepayers who might benefit significantly from council spending in their locality this year will subsidise those in another part of the district next year. That is really the only valid means of viewing council spending, even if the basic principle of raising revenue according to the value of land remains fundamentally unfair.
The problem with augmenting current revenue streams with new taxes is twofold. Firstly, it suggests that councils see increasing revenue as the only solution to whatever financial problems they might be facing, despite general recognition that some people, notably the elderly, are already struggling to pay what is demanded of them. Those people might enjoy some relief if part of their rates demand was replaced with broader-based taxes, but no one seems to be saying that petrol taxes or a local GST would replace land taxes to any degree. The suggestion seems to be that they would be additional to revenue already raised by way of rates, thus allowing councils to continue spending at what are clearly unsustainable levels.
The other problem is that tax revenue is unpredictable. The government knows this. Its promised surplus will take longer to arrive than originally predicted because of a fall in tax revenue, the result of the economy not growing as quickly as anticipated. That's why replacing taxes on land value with any form of spending tax won't work for councils. Revenue would be dependent upon the health of the economy, and no council can afford to see its revenue fluctuating in response to the likes of commodity prices, for example.
That's why new local taxes, if they come to pass, will almost certainly be additional to the rates we already pay. At the end of the day the problem for councils is that ratepayers aren't paying enough, so new ways must be found to extract more. That's not going to help those who are already struggling to make ends meet, and it's not fair on those who could pay more but shouldn't have to.
The obvious solution, which doesn't seem to have occurred to Local Government New Zealand, is for councils to reduce their spending. Given that councils continue to use the unique process of deciding how much they want to spend then charging their customers accordingly, that is probably not surprising. Rates have risen much faster over recent years than can be explained by inflation, but still, it seems, they must rise more. It seems that councils have yet to come to the realisation that ratepayers, however wealthy their particular community might be, are not a limitless source of cash. There must come a point where spending has to be controlled.
What councils need to do is conduct a stocktake of assets and liabilities, perhaps divesting themselves of some of the former to help reduce some of the latter, then establish a means by which they can do what they genuinely need to do at a sustainable level of funding.
Mayor John Carter has undertaken to do just that in the Far North, perhaps prompted by a trio of proposals for the building of public swimming pools. He has said he will tell this district exactly what costs it faces, and invite residents to say how they would like to see their money spent. That might be on new pools, or it might be on restoring basic infrastructure such as sewerage and water reticulation to a less parlous state than they are likely in now.
Last winter's storms did significant damage to Far North roads, as we all know, but the bad news is not expected to end there. We need to know what shape our infrastructure in general is in, and how much we need to spend to restore it to an acceptable standard. The same undoubtedly applies to every council in the country, a process that needs to be completed before we talk about new revenue streams.
Mr Carter spoke last year of a 'gut feeling' that his district might need to find $100 million before contemplating what might be perceived as luxuries like swimming pools. Whether he's right or wrong, we need to know what work needs to be done as a matter of urgency or over a longer term before we start talking about how we're going to fund that work.
Given that the news is unlikely to be good, this will also be a good time for the council to re-focus on its core responsibilities and to cull any expenditure that isn't absolutely necessary. How the Far North District Council might respond to that obligation has yet to be seen, but the signs elsewhere aren't that flash. The Auckland Council was in the news again last week over public art works that reportedly cost its ratepayers $200,000, small beer perhaps in terms of that council's expenditure but symbolic of the way in which some authorities, strapped for cash as they might be, can't seem to help themselves from frittering money away.
The potential for reducing frivolous spending might not be as significant in the Far North as in other districts and cities, but there will be some. And until we've established how spending might be reduced, and how much we need to catch up on maintenance and to develop this district as we wish to see it develop, talk of finding new ways of parting residents from their cash is premature.
