Auckland Council's desperate hunt for new revenue to supplement an ever-growing rates burden may be boosted by a Local Government NZ funding review.
A discussion paper issued yesterday from the review says a "one size fits all" set of funding tools for the country's 78 city, district and regional councils is insufficient for Auckland to address growing pains common to big cities across the globe.
It also warns of a rising inability of many parts of rural New Zealand with declining populations to pay for infrastructure upgrades such as to water supplies required by government legislation.
Although the Government has been dismissive of motorway tolls or a regional fuel tax proposed by an advisory group to Auckland Mayor Len Brown to close a predicted $12 billion funding gap over 30 years, the paper says it is not uncommon for big overseas cities to have extra powers of taxation.
"Toronto [in Canada], for example, has a heavy reliance on property taxes but also has the ability to levy other taxes which smaller local authorities in [its province of] Ontario do not have."
The paper - produced by a working party including representatives of business organisations as well as councils - lists those as including vehicle registration fees, a land transfer tax and even a billboard tax. Yet it says Auckland Council estimates legislation which has narrowed the scope of what can be raised from development levies will result in an extra $160 million burden on ratepayers over 10 years.
Working party chairwoman Penny Webster, an Auckland Council member and former Rodney mayor, said the review differed from others conducted over the years as government initiatives. It was a "ground up" exercise in which the local government sector was keen to hear from communities around the country before the end of next month, to help it formulate recommendations to the Beehive.
"We've put it out for people to feed back to us, whether we go with more user charges or deal more with the tools we've got, we need something new," she said. "We were very careful in the working party not to jump to a solution. We've laid out the issues - we want people to come back with solutions."
Mrs Webster said property rates had been "around forever, and that will probably continue". But research by Local Government NZ into water and wastewater infrastructure indicated a big deficit between community needs and funding. It also found that a greater partnership with Government was needed to match resources with expectations.
The discussion paper notes the Government already shares transport costs with local councils, in recognition of the importance of a functional network to national economic growth, and suggests spreading that practice to other infrastructure.
Grey Power's Auckland regional director, Bill Rayner, said the Government could make a small start towards a more equitable cost-sharing regime by abolishing GST it collects on rates. He lamented "push-back" by land developers and the Government against levies on increasing land value and said compounding annual rates rises were unsustainable for superannuitants and others on limited incomes.
"Most of the cost is basically for growth, for people who are not here yet, and the people here now are getting squeezed," he said. "We've paid our dues. We built the harbour bridge, we built the motorways - they didn't fall out of the sky."
Potential alternative (non-rates) income options suggested for local councils.
1 Local income tax
Common in European countries such as Germany, Norway, Denmark and Belgium where it provides the bulk of funding for councils, which generally provide more services than in New Zealand, such as welfare assistance. An extra payroll levy on wage and salary earners would be less costly and complex to administer than a broader local income tax, but would be subject to avoidance by groups such as self-employed people who may pay themselves dividends from profits.
2 Sharing central government revenue with local councils
Including sharing taxes on profits on sales of rezoned land or royalties from extractive industries such as oil, gas and coal for which local councils provide infrastructure and sometimes bear clean-up costs.
3 Local expenditure tax
Could include regional sales taxes, possibly as a share of GST, or hotel room levies. But even if able to be allocated geographically, could raise disproportionate income in large cities with high consumption at the expense of productive rural areas focused on export markets.
4 Selective taxes
Could include water right charges, visitor levies, road-pricing such as tolls, or property development contributions. Arguably justifiable where there is a reasonably close relationship between money raised and activities to be funded from it.
5 Regional fuel taxes
Involves taxing drivers to pay for regional transport projects, but would require legislative change and could be undermined by oil companies raising national prices to minimise local variations.
6 Transaction taxes
Could include Australian-style stamp duties on property sales but have been removed in this country as a central government income source because of their perceived high economic cost relative to amounts raised.
Bay of Plenty
Tauranga Mayor Stuart Crosby said the LGNZ review was important, particularly for the growth of the city. "We have limited tools for funding: rates, user fees and charges, and development contributions," he said.
"Any opportunity to broaden that is welcomed."
Rotorua Lakes Council chief executive Geoff Williams said it was "a conversation that needs to take place" but the council had not had time to consider the report.
A local ratepayers' association chairman, Jerry Douglas, believed the introduction of additional taxes would meet strong opposition from ratepayers.
"I think any further increases in rates by council would be laughed at ... [and] any other taxes, whatever way they're labelled, would not sit well with residents."
Wairarapa councils unanimously support a review of council funding - but say it won't come without issues.
Carterton District Council chief executive Colin Wright said rates were "pretty narrow" and the council welcomed any discussion around funding.
"Other rates are worth considering but, like anything, the pluses and minuses would have to be weighed up."
Masterton District Council spokesman Sam Rossiter-Stead said it was evident councils required a larger range of funding tools as current legislation was quite restrictive on what they could and couldn't do.
South Wairarapa District Council chief executive Paul Crimp said the review was a really good first step towards getting additional support for local bodies.
A poll of Herald readers has revealed people see regional fuel tax as the best way, other than rate increases, to raise cash to address the rising cost of infrastructure. An online poll showed that 28 per cent of people saw regional fuel tax as the best option for raising cash; 14 per cent thought selective taxes were the best way; 12 per cent wanted a transaction tax; 11 per cent agreed with a local income tax and another 11 per cent with local expenditure tax. A further 24 per cent of the people who were polled had other suggestions.
Solution: a) reduce bureaucracy b) privatise more local government services c) increase road construction and maintenance efficiency - costs per km are far too high in New Zealand.
Cut the bloated payroll. Cut the sky-high salaries of senior executives who think that they should be paid the same as private enterprise. Cut the puff items like Gay Days Out, special events which should be run locally. Cut the overseas travel of the mayors and executives.
Local councils should stick to the jobs that they were originally designed to do i.e. footpaths, roads, water, sewage and infrastructure. Cut out 'culture', sports events, Auckland Symphonic Orchestra and 'social' programmes. Let users of sports and cultural events pay their own way.
Cut the middle/top management bureaucracy, cut extravagant spending, get back to core services for the community and let [the] Government take care of business it's pushed off to the councils. Cut back on government spending by reducing the number of politicians. Cut out the corporate welfare benefits, like $5 million to Americas Cup ... and put it into the basic services.
I feel council funding should be spread across the entire population of Auckland or whichever region you live in. It is just not sustainable to keep hitting ratepayers and penalising people with tolls etc for just trying to get to work. My choice would be a combination of a small local income tax, transaction tax, fuel tax, slightly higher public transport charges etc.