Local Government funding

Local Govt. NZ has released a ten point plan on how to fund local government and incentivise economic growth. Most people would be against an increase in the overall funding for local government, however the current rates based system is inadequate, and it is good that Local Govt. NZ is looking at other complementary methods.
One problem with having local government funded by rates, is that local councils do not benefit from local economic growth, and hence are often not incentivised to support economic growth. Central Government does benefit from economic growth – an increase in the economy leads to more income tax and GST revenue.

Their 10 points are:
• An agreed priority and action plan to advance “special zones” for growth to test new ideas and drive economic prosperity
• When new centrally imposed costs are considered (and particularly where national benefit applies) a cost benefit analysis and agreed cost sharing with central government should be mandatory
• Mandatory rating exemptions should be removed
• The application and administration process of the rates rebate scheme should be simplified to increase uptake
• Better guidance is needed to assist councils make decisions on trade-offs about whether to fund services from prices (user charges) or taxes
• Road user charges, targeted levies and fuel taxes should be allowed where it is economically efficient
• Councils should be able to retain a share of any value uplift arising from additional economic activity related to local intervention and investment
• Local authorities should receive a proportion of any mineral royalties attributed to local activities
• Allow councils to levy specific charges and taxes on visitors where economically efficient
• Reconsider the decision to limit the range of community amenities funded through development contributions.

This a useful document and the LGNZ review group is to be congratulated for their work on it.. However these should be seen as alternate way to fund activities, not additional ways on top of rates – I.E. any new income sources should be compensated for by reductions in rates.