Rates

The Herald reports on how water bills are going up 9.1% in Auckland, along with rates up 33% under Dick Hubbard. City Vision promised at the last election increases of no more than 2% above inflation.

The article is quite timely as Local Government NZ made its submission yesterday to the Rates Inquiry. LGNZ invited a few media people along to a briefing afterwards, but for some reason I was the only one interested enough to turn up. What it meant though is I got to spend an hour exclusively quizzing the President, Vice-President and senior staff of Local Government NZ. Was a great opportunity.

LGNZ made the case quite strongly that communities are wanting better infrastructure, better facilities, more events, and that these cost money. We talked about alternatives to rates such as income or sales taxes, and also about the tension between keeping rates down and spending demands. They acknowledged that Local Govt is different to most organisations who know their income, and then spend within it. Local Govt works out its spending, and then sets rates to fund it.

A very valid point, covered in their submission, is that central Govt gets lots more money every year from bracket creep on taxes. Local Govt does not. Also found out there were around 19 classes of land exempted from paying rates, ranging from Crown land to some Maori land to church owned land.

Considering the wealth of many churches, I’m not thrilled by their exemption. Why exempt churches but not other charities?

The Auckland situation was discussed, and how some of their problem came from the three way combination of an increase in spending, a one off change to the commercial:residential differential and a five yearly revaluation. Hence some massive increases for some people.

Wellington has avoided many of these problems by shifting the commercial:residential differential over a ten year period, and doing annual revaluations so the big swings are avoided.

Also talked on public good vs private good. The town belt in Wellington is what I would call 100% public good. Swimming pools though vary from Council to Council – many are 50/50 funded from rates and user charges but one Council has free admission. Personally I view Libraries as close to 100% public good but they have reasonably significant user charges in many places.

LGNZ said many people are unaware of the extent of the services they get from their Councils, and don’t value them enough, which led to the above conversation that making people pay directly for them can help make people value them.

Also good discussions over how transparent funding should be. Central Govt funding is almost invisible to the average person as GST and PAYE are all done by businesses for you. However one gets regular rates bills which means they get scrutinised more than central Govt does. Personally I reckon a bold National Party should abolish PAYE and make the IRD invoice people monthly to pay their income tax. You’d have a huge and permanent lower tax constituency if people were actually writing out $1,000+ cheques every month to the IRD.

It will be interesting to see what the Inquiry team recommends to Govt. None of the 30 LGNZ recommendations are fundamental changes to how local govt is funded, and I doubt the Govt is interested in fundamental reform.

The one prediction I will make is that the Government will not agree to remove the rating exemption for crown land!