Time for new thinking in local government funding

Improvements in long-term planning and council management are required to support local government funding models so regions can take best advantage of tourism growth opportunities, says Tourism Industry Aotearoa.

The Productivity Commission’s Local Government Funding and Financing Issues Paper has identified eight pressure points driving local government costs, including tourism. TIA has responded to the Commission’s call for submissions with a recommendation that any proposed system changes to funding and financing take a long-term approach.

The tourism industry makes a significant contribution to regional economic development, and many councils already have a strong and positive focus on expanding the contribution to their region.

“On any day of the year, local communities are hosting visitors, domestic and international, who are helping support local jobs and businesses,” says Chief Executive Chris Roberts.

“However, there is no doubt that some councils have struggled to respond quickly enough to tourism growth over the past five years. The costs and benefits of increased tourism do not always fall evenly and the impacts of the growth have been felt more acutely in some regions than others.”

Out of the six main funding tools available to local authorities, the Commission’s Issues Paper identifies rates as the biggest potential contributor.

“Tourism business operators contribute to local government funding primarily through the mix of rates paid, which includes general rates, targeted rates and user charges. The business sector pays about half the country’s total rate bill but this is often disproportionate to the level of service received. It’s crucial that rates are applied fairly and equitably.”

TIA’s submission notes that sectors of the diverse tourism industry have been at the wrong end of local government decisions, such as Auckland Council’s accommodation targeted rate (APTR), which have a significant impact on business productivity and future planning.

“At the same time, local government has struggled to take advantage of untapped revenue streams, such as collecting contributions from online short-term accommodation providers like Airbnb, and this has resulted in unfair and inequitable rating systems.”

TIA’s submission says that improved use of council balance sheets is part of the solution – some councils hold significant equity in assets but struggle to provide sufficient infrastructure for locals and visitors.

Driven by concerns that many debates on funding tourism at a regional level default to a bed-tax, TIA is undertaking a project to identify a tourism regional funding model that is fair, widely applicable and is acceptable to business and local government.

“Industry has a role to play in identifying new solutions to funding shortfalls,” says Mr Roberts.

“We are grateful to the Productivity Commission for agreeing to receive our report by mid-April 2019 so that the Commission can consider it fully ahead of the release of their draft report in June 2019.”

TIA says new thinking has to be used alongside the existing mechanisms available to councils.

“Through a combination of better long-term planning and a regional vision for tourism, improved planning and regulatory systems, better management of council balance sheets, thoughtful use of current funding mechanisms, and more user-pays - regions can continue to benefit from tourism in a sustainable way.”

TIA is also encouraging those working in the tourism industry to take an active interest in this year’s local body elections.

“Make sure your local candidates understand tourism and its potential to deliver real benefits to local communities – even better, consider putting your name forward for elected office and having a direct involvement in the decisions determining the future of your place.”

Read TIA’s submission to the Productivity Commission here.

ENDS

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