Funding discussion needs to take place, says council

A discussion paper has been released by Local Government New Zealand about the way councils are being funded.

A local government leaders' discussion about the way councils are funded is "a conversation that needs to take place", Rotorua Lakes Council says.

A new report has proposed various new taxes at a local level to underwrite councils that are struggling to stretch their budgets.

Local Government New Zealand (LGNZ) released the funding review discussion paper yesterday with options for addressing current and likely future funding shortfalls at local authorities.

The report was the first in a two-stage funding review and considered alternative ways to deal with the increasing demand on services and infrastructure paid by councils.

Suggested options included adding a local income tax, local expenditure tax, selective taxes, regional fuel taxes or transaction taxes.

LGNZ said councils spent about 10.5 per cent of all public expenditure, but raised only 8.3 per cent of all public revenue.

Rotorua Lakes Council chief executive Geoff Williams acknowledged LGNZ's paper was, at this stage, simply intended to stimulate discussion about possible funding opportunities and constraints in New Zealand.

"This is a conversation that needs to take place," he said. "However, our council hasn't yet had the chance to consider the report on the review as it has only just been released."

Hamurana, Kaharoa and Awahou Ratepayer and Residents' 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," he said. "The main promise of this council of elected officials was that they would find ways to reduce costs for ratepayers so any other taxes, whatever way they're labelled, would not sit well with residents."

Mr Douglas said his personal view was the council should keep their election promises by finding additional funding through cost-cutting, rather than asking ratepayers to dive deeper into their pockets.

LGNZ president Lawrence Yule said the findings demanded New Zealanders "take a fresh look at the way local government is funded for the benefits of communities".

Current funding shortfalls meant more and more councils faced financial challenges when demand for infrastructure and services was greater than ever, he said.

LGNZ also proposed a "principles-based partnership model" with central government. This would include central government considering the costs and benefits of decisions for local communities and co-funding costs where policy proposals were of significant national and local benefit.

"It is vital that we raise public and government awareness about the factors contributing to the funding gap," Mr Yule said.

"The goal is not to increase the overall tax burden for New Zealand, but rather to determine whether a different mix of funding options for local government might deliver better outcomes for the country."