MEDIA RELEASE

Rates report highlights need for more funding

12 March 2008

Implementing the six recommendations from the Report of the Local Government Rates Inquiry relating to the use of rating tools will not achieve significant benefits for ratepayers without additional funding from outside the rating system.

This is the conclusion from No Magic Answers, a report released today by Local Government New Zealand and the Society of Local Government Managers (SOLGM).

No Magic Answers presents the results of modelling undertaken by 20 councils to determine the impact of the Rating Inquiry’s six recommendations on the use of rating tools.

“The results don’t offer any significant benefits for residential ratepayers in our cities, although some provincial and rural residential ratepayers may gain. The results show the commercial sector would be clear ‘winners’ from these recommendations and rural ratepayers would be clear ‘losers’,” said Basil Morrison, President of Local Government New Zealand.

“In cities rates are likely to shift from the commercial sector to the residential sector, with one case showing a shift of as much as $38 million. In provincial and rural areas, rates are likely to shift from the town (both the residential and commercial ratepayers) to the rural ratepayer,” said Mr Morrison.

The shift in median residential rates could range from a $650 annual decrease per ratepayer in a provincial council to a $600 annual increase per ratepayer in a city council. These figures represent only the impact of redistributing rates as the Inquiry recommended, and do not include future allowances for cost increases, changes in services or the effect of future changes in the level of funding from Government. Some local authorities may be able to reduce some of the extremes created by the shifts through the use of targeted rates.

“Without additional funding from sources other than rates, all these recommendations achieve is to move rates from one sector of the community to another - rearranging the problem rather than actually solving it.

“It’s ironic that one of the key results shows many urban residential ratepayers are likely to face higher rates than they would have before the Inquiry started, unless there is more funding from outside the rating system.

“We continue to push the case for additional funding for long-term investment in network infrastructure, and will not be limiting our advocacy to the recommendations in the Rating Inquiry report.

“The 2006-16 LTCCPs highlighted that development of our infrastructural networks is at a cross-roads. Underinvestment now will have consequences within the life of the current LTCCPs, not in 20 – 50 years down the track.

“The 2008 budget represents an opportunity for the Government to walk the talk on sustainability and make an investment in the long-term economic future of this country”, said Mr Morrison.

Mr Morrison emphasized the Local Government Rates Inquiry was independent advice commissioned by the Government. The Government is still considering these recommendations as part of its evaluation of the Rating Inquiry. No Magic Answers models what could happen under certain scenarios but does not indicate any intention of these councils to change their current rating tools.

Copies of the report can be found on the ‘what’s new’ section of www.solgm.org.nz and www.lgnz.co.nz .

Note for editors:

The following were the recommendations from the Report of the Local Government Rates Inquiry report which were modelled in No Magic Answers:

- promotion of the capital value system as the basis for setting the general rate (in effect, recommending that local authorities adopt capital value as the basis of the general rate, but not making it mandatory)
- phasing out of differentials on the general rate by 2012
- abolition of powers to set a Uniform Annual General Charge (UAGC) – fixed targeted rates would remain
- removal of the so-called 30 percent cap on fixed charging (although in at least one place the document calls for an increase in the cap to 50 percent)
- retention of targeted rates in their present form
- promotion of full cost recovery (including environmental costs) for water, and metering for water and wastewater disposal (with government assistance to meet the cost of installing the meters)
- the retention of GST on rates (although recommendations elsewhere in the report would see a substantial part of the revenue that this raises given over to fund so-called “three waters” infrastructure).

Local Government New Zealand is the national voice of all 85 councils of New Zealand.

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