Reforming the way councils are funded.
Margaret Thatcher was probably right. Ideally, the cleanest, most efficient and equitable way to fund core council services is through a poll tax – a fixed charge per adult resident. But Local Government New Zealand ( LGNZ) is playing it safe, by ensuring that perceived stick of political gelignite is firmly off the table, as it embarks on a welcome investigation into how councils can be funded, beyond the reliance on property-based rates. The latest residential property revaluations in Christchurch illustrate the perversities of this archaic funding mechanism . A friend of mine is facing a $550 rates increase, purely because her property’s RV has jumped by 37%. This impending money-grab bears absolutely no relationship with her ability to pay or what council services she uses. LGNZ has launched the review increasingly concerned that with an aging population, it’s unsustainable to expect asset-rich, cash poor ratepayers to cover the likes of hefty infrastructure costs, by basing rates on property values. So a range of complementary funding options are being considered, including local sales taxes, visitor taxes and vehicle congestion charges. Christchurch has 165,000 ratepayers. Yet, tens of thousands of residents who rent a property are insulated from the full financial brutality of council rates demands. Sure, most landlords pass on rates as a built-in component of the weekly rental, but there’s no substitute for the chilling effect of thumping rates bill for $2000, eye-balling you from under the fridge magnet. Perhaps if all residents were directly billed for council services, it would trigger far greater public engagement and scrutiny of council affairs, not to mention a vastly higher voter turn-out in council elections. There is no greater motivator than the backpocket. In the spirit of fairness, I believe there are various ways, the wild variability in rates bills should be addressed. Councils should radically recalibrate the make-up of rates bills, to minimise the importance of a property’s value and instead place the focus on increasing the uniform annual general charge. ( Currently this flat-fee only constitutes about 6% of the average rates bill.) Similarly, I think average annual rates increases should be inflation-capped, with any further funding needs derived through user-pay increases. I canvassed a sample of city councillors for their perpsectives, which duly underscored the appetite for change. Jamie Gough and Ali Jones both want a more equitable rating system, with Gough highlighting the uniform annual general charge. The council’s finance committee chairman, Raf Manji, the new High Priest of Fiscal Discipline, wants a sweeping overhaul. Coupled with reining in council expenditure, Manji strongly backs shifting to a user charges funding model.
Mike Yardley’s current affairs column in The Press. First published on April 15.
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