Sharechat Logo

Productivity Commission to investigate local government funding

Friday 11th May 2018

Text too small?

The government wants a better understanding of how local bodies are funding their increasing cost base and infrastructure needs without simply relying on higher rates, and has asked the Productivity Commission to investigate. 

Local Government Minister Nanaia Mauhta today announced the commission will hold an inquiry into local government funding starting in August, with a view to presenting a final report in the middle of next year, she said in a statement. The commission investigated local government regulation in 2013, finding there was a justification for central government funding to meet nationally standardised goals, and the government of the day agreed there was value in better collaboration for relevant regulations. 

"Local government is facing increasing costs for things like three waters, roading, housing, and tourism infrastructure as well as adapting to climate change. And some of the councils facing the biggest cost increases also have shrinking rating bases," Mahuta said. "Rates are rising faster than incomes so simply raising rates is not the solution."

The Labour-led government has also begun the repeal of limitations the previous administration placed on local governments' ability to fund 'well-being' services and facilities it regarded as non-essential.

Statistics New Zealand figures show local authorities' annual income from rates climbed 48 percent to $5.32 billion over the eight years between June 2008 year and June 2016, equating to an average annual increase of 6 percent.  Total operating income rose 43 percent to $8.87 billion. That matches the 48 percent increase in total operating costs to $9.28 billion over that period, although lagged behind the 52 percent increase in depreciation and amortisation at $1.94 billion, which captures capital spending on infrastructure.


The value of councils' infrastructure assets rose 32 percent to $85.39 billion and land and buildings rose the same amount, to $23 billion. Local authorities' term debt soared 278 percent to $11.76 billion, with current debt jumping 119 percent to $2.13 billion. Annual interest costs more than doubled to $693.4 million. 

Local Government NZ, the umbrella organisation for the country's councils, was optimistic the new Labour-led administration had a stronger grasp on local authorities' funding needs, having banged the drum for a wider set of tools for several years. 

Mahuta today said the terms of reference for the inquiry are still being finalised and will be released once they're agreed with the commission. 



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

MARKET CLOSE: NZ shares gain; a2 jumps to 12-month high as earnings outperform
NZ dollar drifts lower following early boost from rising dairy prices
Meridian positions for next generation development
Kiwibank lifts first-half net profit 47.6% amid rekindled growth
John Fellet: Came to Sky TV for 18 months, stayed 28 years
Marsden Maritime net profit down on lower cargo through Northport
Countdown supermarkets 1H earnings dip as digital investment continues
Fletcher open to re-entering high rise construction market
Power price spike put margin squeeze on NZ producers in Dec quarter, stats show
Tilt Renewables to raise A$260m of new equity

IRG See IRG research reports