Government announces inquiry into ways for councils to raise money

Auckland Mayor Phil Goff. Photo / Greg Bowker

Finance Minister Grant Robertson has told councils he will consider new ways to raise funds including the possibility of targeted rates and special taxes to pay for local projects.

Speaking at the Local Government NZ conference, Robertson announced the Productivity Commission would undertake an inquiry into cost pressures on local councils and ways to fund and finance them.

It comes after Auckland Mayor Phil Goff and others' calls for councils to be given more mechanisms for raising funds other than through rates and borrowing.

Robertson said Auckland Council was already right up against the maximum debt level it could have but had major infrastructure issues ahead.

"We've had the example in Auckland of a regional fuel tax but we are also investigating other financing mechanisms such as special purpose vehicles, using targeted rates, other initiatives that would allow councils to raise money alongside the government and private sector."

In his speech, Robertson said the Government was already trying to take some pressure off through measures such as the fuel tax, tourism levy and the use of new targeted rates in the Land Transport statement.

Earlier, Auckland Mayor Phil Goff had told Q+A that the rating system was "antiquated" and needed changing.

"I don't think it's great that local government has to go cap in hand to the Government on a case-by-case basis for funding. We are elected at a local level. We are accountable at a local level."

He still believed that councils should at least receive the GST from rates, but the Government was not enthusiastic about that.

Robertson said the review of local government funding was part of the Labour Government's agreement with NZ First.

It would investigate options for new funding and financing tools, regulatory changes, the reasons for increasing costs, the ways decisions on capital investment were made, the affordability of rates, and whether regulatory changes were needed.

Robertson said it would also look at what central government could do by way of cutting red tape to take pressure off local councils.

He said the pressures faced by local councils varied significantly, whether it was the need for infrastructure for growing populations or tourism in regions with smaller populations.

Many councils faced ageing infrastructure and climate change effects were also increasingly an issue.

"We don't want the ratepayers to be the only people carrying that burden."

David Cull, the president of Local Government NZ, said the inquiry was welcome after LGNZ had called for the issue to be looked into.

"Our regions, cities and districts shouldn't be entirely dependent on central government to resolve the complex issues we are now facing. It is essential that we empower local authorities with access to funding and financing tools to make a difference."

LGNZ research had showed that high reliance on rates to fund local services and infrastructure did not allow councils to invest in long-term growth projects, such as infrastructure to contend with extreme weather and earthquakes.