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Low-geared local authorities mull new ways to raise funds in addition to property taxes

New Zealand's local authorities are to review the options they have to raise funds, saying their reliance on property tax as their main tool is becoming less sustainable as populations grow and change.

Local Government New Zealand announced today it will establish a working party this month to conduct a funding review, saying the high reliance of its members on property tax is unusual compared to counterparts overseas, which often have "a multiple taxing power."

Complementary alternatives could include local taxes or levies on residents other than property owners, LGNZ president Lawrence Yule said in a statement from the body's quarterly media briefing.

"Our focus is on developing a strategy and model that is sustainable for New Zealand communities in the long term," Yule said. "Examples of funding tools that may be reviewed for appropriateness in a New Zealand context include local income taxes, local consumption taxes, congestion charges, visitor charges and payroll taxes."

Yule said some regions have static, declining or ageing populations that had less ability to cope with higher rates to fund maintenance on public infrastructure. Others regions were growing, putting them under pressure to fund large-scale infrastructure investments, which would "place severe pressure on a pure property tax model."

LGNZ released data today showing the balance sheets of local authorities are stronger than central government or the private sector. With a combined $121 billion of infrastructure, investment and other assets and $11 billion debt as at June 30, 2012, their combined gearing was just 9 percent on a debt to assets basis.

By contrast, central government debt amounted to 75 percent of its $241 billion of assets and for businesses in the private sector debt was about 65 percent of assets, LGNZ said.

In February 2012, local authorities established the Local Government Funding Agency, creating a borrowing entity with sufficient size to bring down the credit costs of individual councils. LGFA Chairman Craig Stobo told the briefing that the cost of debt to council borrowers had been trimmed by at least 30 basis points since then.

(BusinessDesk)

Comments and questions
17

Isn't an obvious solution to spend less rather then to tax more?

Any problem always has a "solution" that even a fool can understand

Here is an idea. Local Government could spend less.

Local authorities should not be permitted to finance borrowing costs directly from their population base.

Good lord. Wildly out of touch with what's happening with ratepayers, combined with a massive sense of entitlement mentality.

"How can we tax more?" is madness. How about, "how can we be operate more cost-effectively? or "how can we focus on outcomes that matter?"

And if more money really is needed, "how can we offer something new that people will WANT to pay for?"

hmmmm, like everyone else in society has to do in the real world when they want to earn money. Maybe that's the thing, it should be "how can we EARN more" not "how can we TAKE more". Ditto, respect...

Start with sacking all the drones on council staff who add no value and to whom the word 'innovation' means looking for new justifications for saying "No, Mr Ratepayer, of course you can't do that".

Trimming their unbelievable bureaucracies would be a good start!
Councils are permanently locked into a non-accountable cost + mentality.

About time. Congratulations - it is unquestionably overdue that other than property owners should be paying the taxes necessary to run towns and cities which might also make non-property owners join the queue asking whether the huge cost of the likes of libraries is still something local bodies can justify - if people still want such archaic facilities it should definitely be on a user-pays basis.

In most cases the so called assets are reported at some ridiculously inflated figure - often glossing over the fact that the land was originally expropriated/gifted or purchased at a tiny fraction of its current "value" a value that could never be realised and should therefore never qualify as security for debt.
Live within your means!

I disagree with the Anon comment that local bodies should not be able to fund themselves from their population base. Of course they should - it is not just property owners who benefit from Council services - every resident - and visitor - benefits - and it might just make everybody a lot more conscious and start asking whether we need reserves manicured within an inch of their lives and hugely expensive libraries that virtually nobody except the homeless seeking shelter use these days!

LGNZ are slow on the uptake. Many lobbys have promoted different funding models through at least 3 Govt reviews but LGNZ was always tardy. Funding reform was needed last century! In the interim LG expansion has been almost 3 times that of CPI.

I agree, Auckland Council is involved in property development, Marina ownership, Port operations, Airport ownership, plus, plus. What would be the downside of supplying the essential services efficiently, concentrating on protecting the tax money collected than continually asking for more because of mistakes due to poor decisions by key staff. Example - Leaky homes, Hair brained projects like multi million dollar foot bridge over the Wairau Creek.

Re the LGFA, they did this with insurance, Self insuring in the end, do you recall, that bit the Councils in backside big time .

how about a tax on flying pigs?

That wont happen as it means the council taxing itself.

Council expense went out of control when it became a salaried lifestyle option to be a Councillor. the Socialists loved it, and once elected promptly employed all their mates in un-necessary departments. Councils were much more efficient when they were made up of business people who had to get back to their 'day job' to make a living, and keep their company in business.
Auckland, Manukau and Waitakere/Waitemeta were three good examples of ineptitude. Rodney tried to resolve this problem, but was piped at the post, and we now have an even more incompetent bureaucracy.
There is only one fair way to raise Council funds, and that is a 'Citizen Tax, levied similar to Income Tax. One people have to pay a contribution from their pocket, they won't be so keen on the so called 'Freebies' that are touted as election bribes every three years.

Any guesses on what vacillating Lawrence Yule earns a year? There's your answer. Slash it to a third and pro rata that over every TA, which you've already fired half the staff of.

Local Authorities are not asset rich, and those that say so dont understand their balance sheets. Most assets on their balance sheet cant be sold, and represent historical cost.

Central government have (conveniently) been passing alot of their costs onto Local government. Its called big brother, and few local politicians are prepared to stick up for their local areas. Time Shadbolt and Len Brown appear to be exceptions.

More user pay fees provides most of the answer to keeping rates at bay. And target those that are used by the majority of the populace.