The Government likes to talk of cutting back “nice to haves” but the big cost areas in local government are in fact in sustaining and building essential infrastructure. By capping rates, projects in areas like transport and water vital to public wellbeing will be deferred and the problems will get worse. We cannot keep kicking the can down the road.
If the Government wants councils to hold down rates while still providing the services we rely on, there is a quick and more effective way to do that. Each year, central government adds 15% to rates through its imposition of GST. In the case of Auckland, that adds nearly $400 million a year to rates, which the Government keeps and doesn’t return to the council to be spent locally.
Returning GST to councils would allow them to considerably reduce rate rises. Auckland Council loses another $38m in rates because central government doesn’t pay rates on its properties. In refusing to allow the council to apply a bed tax, central government is also blocking an alternative way Auckland can ease its rates burden.
Former Auckland mayor Phil Goff. Photo / Michael Craig
A bed tax is common overseas and is levied on accommodation providers, who in turn pass it on to visitors. It’s a way that would help Auckland Council deal with the demand on infrastructure used by tourists and the cost of organising and marketing events that attract domestic and international tourists to our city.
The central government is also passing on new responsibilities to the council that it has to fund. The City Rail Link (CRL) is one example. Across New Zealand, providing rail services is a central government responsibility. However, under the Key National Government, there was a reluctance to fund the vital infrastructure that the CRL will provide.
The link will double rail capacity in Auckland and help ensure Aucklanders have alternative ways of travelling across the city to reduce congestion. The Government declined to come to the party and would only do so when Auckland Council agreed to pick up half of its costs. That amounts to billions of dollars in costs being met by Auckland ratepayers that no other New Zealand ratepayers have to face. No doubt the Government and others who opposed the CRL will be at the opening next year to cut the ribbon and claim credit for it.
As mayor, I kept overall rate rises low at 2.5% for the first term and 3.5% for the second up to when Covid happened. We consulted Aucklanders on targeted rates for the things they wanted done, such as stopping sewer overflows into the harbour every time it rains and contributing to action against carbon emissions and climate change.
With public support, we then implemented targeted rates ring-fenced to address those problems. The central government’s rates cap will prevent Auckland Council doing things the public and its ratepayers need and want.
These are decisions for Aucklanders to take, not for central government to dictate. National at the last election promised more localism in place of central government control. They are now doing the opposite.
If central government makes all the important decisions, local government quickly becomes irrelevant. Why bother voting for your local representatives if they don’t have the power to make the decisions that count. Already 93% of all public revenue goes to central government and now they want to control the remaining 7% that goes to local government.
In arguing against the rates cap, I believe it is also important for councils to show fiscal responsibility. As mayor and working with councillors of all political colours, I implemented value-for-money scrutiny of every aspect of council spending. We saved hundreds of millions of dollars.
We had the responsibility to do that and we took it seriously. That was our decision and something for us to be accountable to our electors for. Central government should put its own house in order regarding its poor spending decisions and allow the council to be accountable to its ratepayers and voters.
The rates cap also will not work because one size does not fit all. Auckland is growing rapidly and needs to build infrastructure to create services for a population that over the last decade, grew on average by 30,000 people a year. Our problems and spending needs differ from those of a town or city with a stable population size.
Aucklanders want good transport and water services. We value our libraries, museums, art galleries, city and regional parks. We want our rubbish collected on time, our parks and streets maintained, our bus and train services improved. We want action to sustain our environment and lower carbon emissions.
These are critical services that have to be paid for. Covid and natural disasters like floods have challenged the council to do as much as it wants in these areas. A rates cap imposed by a government that is more distant from the problems and wanting to impose ever increasing central control is neither helpful nor needed.
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