Council funding recommendations deserve action, Feds says

 12 December, 2019

Some worthwhile recommendations but ultimately underwhelming is Federated Farmers’ summary of the Productivity Commission’s final report on local government funding and financing.

“On the whole, the inquiry and the final report don’t move the dial much on local government funding issues and will provide little comfort for long-suffering ratepayers, especially farmers who pay a disproportionate share of the burden,” Feds President and local government spokesperson Katie Milne says.

“It looks like we’ll be sticking with over-reliance on a property-value based rating system that for farmers in particular can have no correlation to services used or cost-sharing fairness.  And of course the Commission was never going to find an answer to councils that don’t exercise financial discipline and hike rates well ahead of inflation.”

Nevertheless, the Commission has made a number of recommendations that are in line with the Federated Farmers’ submission (in summary) and deserve to be picked up:

  • Remove the statutory cap on uniform charges.The Commission emphasised the benefit principle, which says that those who benefit from, or cause the need for, a service should pay its costs.This implies that user charges or targeted rates should be used wherever it is possible and efficient to do so.


  • The Government should find an efficient and effective means to fund councils for the cost of damage to local roads caused by heavy vehicles such as logging and flooding/coastal protection rock trucks. While the vehicles pay for their damage through Road User Charges, no effective mechanism currently exists to channel these funds to councils to cover the cost of the damage that councils bear.


  • The Government should pay more than it currently pays (because of the Crown rating exemption) for the services that councils provide to Crown properties.


  • Councils should consider the partial or full sale of commercial assets as an alternative to borrowing so they can finance needed new investment.


  • Co-funding from central government to assist small, rural and low-income councils make the required upgrades to their three-waters infrastructure, and that central government funding for tourism facilities be distributed more efficiently and fairly to councils.


“Federated Farmers opposed the idea of a tax on vacant land and we’re pleased the Commission rejected it because of definitional problems, high administration costs and ineffectiveness,” Katie  said.

“But it’s a shame it has also walked away from ideas floated in the draft report, such as accommodation levies, and payment from central government to councils for new houses consented, which Feds had supported.”

Feds backs the call from the Commission that councils generally need to improve their performance, productivity and decision making to help relieve funding pressures.

“In particular, we like the suggestions that the sector should work to improve elected members’ governance and financial skills and, for transparency and accountability’s sake, that councils be required to provide indicative itemised rates assessments that show ratepayers the dollar amounts they are contributing to each activity funded from each rate,” Katie said.

“The ball is now in central and local government’s courts to respond to the recommendations made in the final report.  Federated Farmers will of course be keen to engage in whatever work programme is put together.”