Governance & Administration Select Committee on the Local Government (Community Well-being) Amendment Bill

The Local Government (Community Well-being) Amendment Bill Has Three Objectives:

To restore the purpose of local government to ‘promote the social, economic, environmental and cultural well-being of communities’; To restore territorial authorities’ power to collect development contributions for any public amenities needed as a consequence of development, assisting in the provision of facilities such as sports grounds, swimming pools, and libraries; and; To make a minor modification to the development contributions power so it is clear recoverable advances of financial assistance from the New Zealand Transport Agency do not affect the power of territorial authorities to collect development contributions for projects financed using that mechanism.

Our submission will focus on objectives 1 and 2 (above). Objective 3 appears to be a rather technical amendment and as such is not an objective on which the Chamber wishes to comment.

The Chamber, like other submitters, is particularly concerned about the timing of the Bill in that it prejudges the public inquiry promised in the Labour-NZ First Coalition Agreement - ‘to investigate the drivers of local government costs and its revenue base’.

We would reiterate the concern shared by submitters that it is concerning that there was no consultation on the changes set out in the Bill and indeed the introduction of the Bill came as complete surprise. It is not good enough for the Bill’s Regulatory Impact Statement (RIS) to blandly say that the Bill is consistent with previous representations of Local Government New Zealand and the Society of Local Government Managers. This completely ignores the perspectives of ratepayers, the people who fund local government.

The Chamber has actively supported the concept of an inquiry into local government costs and its revenue base given the pressures the sector is currently experiencing. This is true of both high-growth and low-populated areas, where, in the latter case, infrastructure upgrades are needed but ratepayers’ ability to pay is being squeezed. It is therefore pleasing to learn of the Government’s intention to hold a Productivity Commission inquiry into local government funding.

Notwithstanding the above, the Chamber considers it desirable for local government to focus on the provision of local public goods, since their provision otherwise will likely be inadequate. There is little incentive for the private sector to provide goods and services where the return on investment is probably low or, in the worst case, non-existent.

There is potential for the Bill’s proposed changes to result in significant expenditure creep, much of which will fall on the business sector, principally as a result of the wide-spread use of business differentials. For example, the business differential set by the Wellington City Council is currently 2.8:1, meaning businesses pay almost 3 times more in rates than households for an equivalent level of capital value. Further, the use of differentials in targeted rates mean that downtown Wellington City businesses are looking at an 8:1 differential for the regional public transport rate, it already making up in one rates bill example it is seven times the general rate total, making up $53,000 of a $62,000 regional rates bill...

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