Productivity Commission correct on funding fairness

28 Aug 2019

BusinessNZ says the Productivity Commission brings a common-sense approach to the funding of local government.

Local Government faces a number of funding issues surrounding the provision of new infrastructure growth, dealing with upgrades in rural communities and coping with the demands of increased tourism growth.

BusinessNZ today lodged its submission on the draft report Local Government Funding and Financing, and Chief Executive Kirk Hope said the Productivity Commission had identified key fairness issues in funding local government.

“Business would agree with the Commission’s views that rates should be allocated according to benefits received, and that business differentials (higher rates for business) should be abolished.

For example, the business differential set by the Wellington City Council is currently 2.8:1, meaning that for an equivalent level of capital value, businesses pay almost 3 times more in rates than households.

BusinessNZ also agrees with the Commission’s concerns about the quality and transparency of councils’ Long-Term Plans, saying they are hard for ratepayers to understand or be involved in.

“Long-Term Plans should be easier to understand, and should contain information on how the proposed Plan would affect rates and services in the future.  We should be seeing robust public debate over the appropriateness of council plans every time Long-Term Plans are proposed.”

BusinessNZ was disappointed in the terms of reference for the Commission’s inquiry, which prevented the Commission from looking into privatisation as a funding mechanism.

“In many cases, councils own assets that could be partially sold to build much-needed new infrastructure.  Shares in council-owned assets could be sold to pay for more important assets – the recent listing of Napier Port Holdings is a good example of a council using the stock exchange to partially realise its assets and fund its future growth in a more effective way.”

BusinessNZ looks forward to the Commission’s final report which will be presented to Government later this year.