Marlborough District Council’s Finance Committee has endorsed a submission made to the Government’s proposed Rates Target Model.
Committee Chair and Deputy Mayor, David Croad said Council welcomed the opportunity to make a submission, but had significant concerns with rates capping in principle.
He said Council supported the submissions made by Local Government NZ, Taituarā and Te Uru Kahika.
“Although there is very little detail in the Government’s proposal, we have made three suggestions that we believe are practical, if this legislation does indeed go ahead,” said Cr Croad.
“Firstly, councils should be able to continue funding recovery after a natural disaster. In our case Marlborough has recently suffered three major weather events resulting in hundreds of millions of dollars’ worth of damage to our roading network.
“While the Council received support for the repairs from the Government through NZTA there was still a shortfall, which has meant a rates increase of between 0.5% and 1% for each of the next five years.”
It is the Council’s view that rates increases for disaster recovery that are already underway should be excluded from the proposed rates cap, said Cr Croad.
“Secondly, the costs of government-mandated legislative changes for councils can be onerous. Two recent examples include the imposition of charges by the Water Services Authority – Taumata Arowai and the Commerce Commission, amounting to $270K annually, equivalent to 0.25% of rates.”
“There is a long history of unfunded mandates by governments of all stripes. They come up with reforms in Wellington and then tell local government to deliver on them with little or no funding provided, passing the cost on to ratepayers.”
Council’s submission says government-mandated changes, if they result in additional costs, should be allowed for in the rates target model.
“Finally, funding for roads, drainage and flood protection infrastructure should be excluded from the model, in the same way that three waters-related infrastructure already is under the proposal. In addition, an allowance in the rates target model should also be made for the proactive funding of financial reserves to support emergency event recovery,” said Cr Croad.
“We have been through one of the most extraordinary periods economically since the Covid pandemic in 2020. New Zealand has seen almost ten years’ worth of inflation in just three years.
“While the Government is suggesting a target range of 2% to 4% rates cap aligned to the Consumer Price Index, that index is completely unrelated to councils’ main expenditure items, which are materials and services for building roads, sewerage and water supply systems. Those items have experienced accumulative cost escalation of between 27% and 38% over three years with some categories peaking at 19% a year.”
He said Council’s rates increases in recent years have been driven by factors outside of its control, mostly related to inflation, Government reform and three major storm events.
“If rates capping is introduced, it is likely that council services will have to be cut or reduced and Marlborough will start going backwards instead of forwards. Any individual or organisation coming to us to ask for funding for their community project through our annual planning process is going to be sorely disappointed as we will not be able to support all current initiatives let alone consider new ones.”
“Even S&P Global, Council’s credit rating agency, has noted the negative consequences of rate capping. They said that if councils are inhibited in their ability to lift future rates, they could further struggle to balance the books or lean more heavily on debt to finance capital expenditure.”
The Government has indicated legislation will be enacted this year and be operational by 1 July 2029.
