Herald on powers of Councils
July 19th, 2012 at 12:00 pm by David FarrarThe Herald editorial:
Elected members of local bodies around the country spent two days this week at a conference in Queenstown where they agreed – unanimously – that they do not need their wings clipped by a bill the Government is putting through Parliament.
How unsurprising.
Neither is inclined to leave it entirely to local voters to decide what their councils can do.
Why not? Councils in this country have a source of revenue independent of the central Government. If they exceed the wishes of their ratepayers those who receive their bill have a vote every three years. Do they need the Government to require their elected council to do more (Labour) or less (National) than they might want?
Their source of revenue is Government granted, not independent. But putting that aside, the trouble with the Herald’s argument is that rates increases are not transparent.
The central Government has to live within its means. To increase tax rates needs a special law of Parliament, and everyone sees that the Government is increasing tax rates. Generally also, any increases in taxes are flagged well before the election so voters can vote on them.
In local Government, they work out all the things they want to spend money on, and then strike the level of rates to match. And while media may report the average increase, the actual amount each property owner pays varies depending on the movement in their house value compared to the average. Plus you have the problem that a minority of voters actually pay rates. In total, there is little incentive for Councils to be fiscally restrained – hence why the average increase has been 7% annually – well beyond the ability of the economy to sustain.
What I would do is change the funding of local government from rates to taxes. Each Council can levy an income tax, which means almost all residents will pay it and hence take an interest in its level. It also means that a Council wanting to spend more money than previously, would need to openly propose that (for example) the local income tax increase from say 2.6% to 2.8%. People would be able to compare the level of local income tax between councils.
Now isn’t increasing income tax a bad thing, as the more you tax income, the less incentive people have to work. Yes. So I would balance this by reducing central income taxes significantly, and bringing in a national land tax in a fiscally neutral tax switch.
Related posts:
- Herald against rates cap
- Councils reject Government housing affordability bill
- Dom Post on Local Govt Reform
- Dom Post on Wellington Councils
July 19th, 2012 at 12:25 pm
AND – a local income tax would create less upward pressure on rents, which is also a ‘hidden’ result of rate increases.
Vote:July 19th, 2012 at 12:32 pm
The people in the IRD and employers may not like it.
Suddenly you have a multitude of taxes along with serious disputes over where somebody lives. Would you as an employer working near a district boundary want to have to deal with a multitude of tax rates?.
Then you have all the rich people moving to low tax areas.
And how about the batch – we have to pay for services to the batch such as roads and water even when nobody lives there most of the year should they have to pay as well.
Then how do you deal with corporate property owners? If we own a tiny bit of land somewhere but make our profit elsewhere are we suddenly liable for a local income tax on our whole income?
That said your case has some merit as it makes everyone responsible for council services. And it also avoids the phrase Poll tax. Perhaps a local sales taxes and local petrol taxes would have more merit?
Vote:July 19th, 2012 at 12:33 pm
Two issues.
The funding formula is based on some perceived value attributed to a piece of land and in no way reflects the number of people that inhabit that piece of land nor who use the services attributed to that piece of land.
Clearly a nonsense formula.
There are not voting restraints on “the people” i.e./ the ratepayer is overwhelmed by the facilities users. Only Ratepayers actually should be allowed to vote. If you pay rent you should not get a vote unless you take responsibility for paying the rates.
Vote:Obviously Children are not expected to pay rates.
More user pays of facilities.
July 19th, 2012 at 12:35 pm
Cato (66) Says:
July 19th, 2012 at 12:25 pm
AND – a local income tax would create less upward pressure on rents, which is also a ‘hidden’ result of rate increases.
Incorrect. No person who pays rent pays rates. Illegal by statute so therefore they are simply paying more for their accommodation.
Go read the Residential Tenancies Act available on line. Section on what can be charged to tenants.
Vote:July 19th, 2012 at 12:51 pm
Viking2
Agreed – only listed ratepayers should be allowed to vote in Local Government as how their money is to be spent.
As a Tauranga Ratepayer I note that Len Brown’s former “partner” Leigh Auton, ex Manukau City, has just been appointed CEO, following the untimely death of the incumbant CEO (a Scottish Gentlemen). Understand that senior staff are pleased with the appointment, as Auton would be supportive of what he did in Manukau, spend ratepayers money lavishly. Tauranga is one of the most indebted Councils in the country. Cannot see this changing.
Vote:Talk about the Fox in the Henhouse.
July 19th, 2012 at 1:10 pm
This scam called local body rates which is unevenly paid by the few is part of the reason a new political party is in the pipeline. Two Northland farmers, Joe Carr and Ken Rintoul are doing the ground work to get the “NZ Rural Party” off the ground. Perfect timing as by the time they are well over the 5% the next election will be due. The Reform party back 100 years ago I think did get a couple of seats in Parliament, so will history repeat? Farmers are constantly treated like pieces of sh*t, so I can see this gaining traction. Considering they pay 60% of the bills, about time they had some say, compared to now of having no say.
Vote:email address:nzrural@nzrural.org.nz
July 19th, 2012 at 1:11 pm
Viking2
Yes – as I said it is a ‘hidden’ result of rates. It would be naive in extremis not to think that landlords factor in rates (as a cost of running their businss) in setting rents.
Vote:July 19th, 2012 at 1:17 pm
People renting property are effectively paying rates through the weekly / fortnightly / monthly rental they pay. A (prudent) landlord factors rates into the rental they charge. Same as insurance. It is of course ultimately a tax deduction, but the rates are still paid to local government. It is absurd to suggest that only property owners should have the right to vote in a local body election.
Vote:July 19th, 2012 at 1:26 pm
I agree with Cato. When my current landlord put up the rent last year she said it was due to increased costs, including the increased water rates. I pay the water bill, so any increase in water I pay for anyway. However, rents had increased in my area so they were justified in increasing the rent, but their “excuse” was not “justified”. I think I’m paying below market rent anyway, but I have been here 7 years and I think landlords are wise to encourage good long term tenants to stay!
My previous landlord told me an increase in ARC rates was the reason for my rent increase. Again, the amount was reasonable for the area at the time.
The point is, the weekly rent has increased, the landlord hasn’t handed over their rates bill and told me to pay it.
It’s also worth bearing in mind that generally all rates in an area will rise at the same time, therefore all landlords in an area will want to increase their rents at about the same time, so tenants are (as Viking2 says) “simply paying more for their accommodation” which is due to rate rises. And if all rents go up, tenants have no choice but to pay more.
Vote:July 19th, 2012 at 2:32 pm
The only effective brake on council spending is competition and the ability of people to move away.
Before the Supacity it was possible to move from an overcharging Auckland to a lower cost Waitakere or Manukau or Franklin. Thanks to Rodney Hide & John Key that is no longer possible and Auckland does overcharge everybody within 100 kms.
Vote:July 19th, 2012 at 2:35 pm
My wife and I purchased our house on Aucklands North Shore in 1979. The rates were $238 pa. The rates in 2012 are $2532.
The NZ Statistics Dept advise that the rate of inflation (CPI) for this period is 410%.
My rates have increase 1063%.
This is 2.59 times the CPI increase.
And little Lenny has just informed me I can expect a further 7.5% increase in the 2012/2013 rates.
The CPI for the past year is 1%.
Little Lenny has increased my rates by 7.5 times that.
This folks is the problem. For the past 33 years I have been raped burnt and pillaged first by the East Coast Bays Borough Council from 1979 to 1989 then by North Shore City Council from 1989 to 2011 And now little Lenny aka Auckland Council is set to repeat the rape burning and pillaging.
Have I gotten good value for my rates. NO. I along with all other rate payers have been subject to poor governance poor management and a bunch of crooks who see me as an ATM machine.
Vote:July 19th, 2012 at 2:37 pm
Much of the problem of rising rates stems from the planning process. The councils are supposed to prepare a 10 year budget, which is really a 3 year budget, which is then relitigated every year. It means that the good work done around planning and rating for a 10 year timeframe gets chucked out the window every year on topical projects
Vote:July 19th, 2012 at 2:41 pm
lol
The central Government is borrowing $300million a week and wilfully ignoring an impending superannuation megabubble.
Living within your means = having a printing press in the basement.
Vote:July 19th, 2012 at 4:11 pm
Yes the current rating system is a load of old rubbish and is not representative of the services provided.
Vote:So the most fair and reasonable solution would be a poll tax per person. Politically unpopular and hard to administer a large percentage of the population would probably not disclose there residential address.
The next option would be a central Government tax paid by taxpayers through PAYE. This would be a lot easier to administer as the systems are already in place through IRD the rates would be collected by IRD as part of PAYE and paid out to councils based on the TAX paid per person or actual tax collected per person.
Councils would not be in a position to draw up a wish list without support from central Government and should be 1. Limited to essential services and 2. Limited in there ability to borrow. In other words live within there means because any increase above the rate of inflation long term is not sustainable.
Not at all surprised that they voted unanimously to remain unaccountable. Did anybody point out the conflict of interest. Probably not.
July 19th, 2012 at 4:14 pm
The rates per person should be uniform throughout the country. Not regionalized as this would cause the population to move to low tax regimes.
Vote:July 19th, 2012 at 4:23 pm
The Herald is deluding itself that councils are accountable to ratepayers. First, most voters know next to nothing about the candidates they are voting for and nothing at all about council finances. Second, all the councils have to do is to placate the majority of ratepayers by borrowing and screwing minorities like businesses and farmers and they are entirely unaccountable.
Vote:July 19th, 2012 at 5:12 pm
Rather than mess about with taxes etc why not return what actually worked quite well in the past, i.e. up until 1986 (Labour changed):
- Only rate payers had the franchise (which is entirely fair since they are the only taxpayers, no representation without taxation).
Up up until 1989 (Labour changed):
- Local Authorities had to fund large capex via dedicated internal sinking funds – not external borrowing.
- Any spending commitments over medium size limits could be challenged via binding referenda.
- Break up the authorities amalgamated in the last Local Government Commission in 1989 back into Borough and County councils – it’s an absolute fact the new larger authorities performed worse on financial measures, core work responsibilities and democratic input after amalgamation. The Government knows this full well which why they deliberately blocked any review of pre- and post- merger Auckland megacity.
Up until 2002 (Labour changed):
- Local Authorities had their powers/competencies strictly enumerated – not general competency open slather as it now.
- Requiring Local Authorities to also “be responsible for promoting the social, economic, environmental and cultural wellbeing of communities, in the present and for the future” + General competency without limit + Unlimited property taxation power = total madness – this NZ not effin Sparta!
- Remove the requirement for glorious 10-year plans, before they required long term plans but it was at discretion – i.e. you could have a 3-year plan for rates and a 33-year plan for the main sewer trunklines.
In fact I would get rid of the RMA (a National Party total clusterf..k) as well and return to the TCPA, it worked far better.
Vote:July 19th, 2012 at 6:29 pm
Great comment, Joseph. 100% on the button.
Vote:July 19th, 2012 at 6:49 pm
lastmanstanding says…The rates in 2012 are $2532.
You lucky bastard, mine are the same except, I have no footpath, no stormwater, no street lighting, no rubbish collection no public transport and expected to register my dogs as well seperately plus a levy included for the BOPRC where my money can get spent in Tauranga or Waihi beach
I have to pay for my water through a co-op, meaning we have to buy our pumps $ 25000 each , maintain the same pay a one off joining fee of $3000, non refundable and an annual levy of $200 plus the water ( which is cheap $120 per annum.)
I have to drive my rubbish to town, 30 kms round trip and pay even for re-cyclables. If I want to burn I have to get a permit. When I pointed out that I recieve no services I was told you live in a nice area and have acces to the library, awesome.
To cap it off we have a megalamaniac council CEO who went and spent $600000 on an unnescessary bridge for the Motu cycle way.
So excuse moi when I laugh at you for your rates and services available on the Shore
Vote:July 19th, 2012 at 6:58 pm
Pauleastbay
Same position as you but more expense for less service…..last time I moaned it was pointed out that I received “regulatory services”, (& a library card).
Thank you, not!
Vote:July 19th, 2012 at 8:09 pm
Cato (67) Says:
July 19th, 2012 at 1:11 pm
Viking2
Yes – as I said it is a ‘hidden’ result of rates. It would be naive in extremis not to think that landlords factor in rates (as a cost of running their businss) in setting rents.
sthn.jeff (86) Says:
July 19th, 2012 at 1:17 pm
People renting property are effectively paying rates through the weekly / fortnightly / monthly rental they pay. A (prudent) landlord factors rates into the rental they charge. Same as insurance. It is of course ultimately a tax deduction, but the rates are still paid to local government. It is absurd to suggest that only property owners should have the right to vote in a local body election.
WHAT BULLSHIT.
A Landlords ability to charge a price for their rentals is determined not by the rates or insurance nor any other item.
It is established by the MARKET PRICE that can be achieved.
How come you people cannot understand basic supply and demand issues.
It is of course ultimately a tax deduction,
NO, NO, NO. GO AWAY AND LEARN BASIC BUSINESS ACCOUNTING.
All these items are a business expense.
Tax deductions in NZ are few and far between. A tax deduction would be an expense that could be taken from the tax to pay that an individual might have.
Again basic accounting would stop you making these dumb and foolish claims.
Hollyfield (64) Says:
July 19th, 2012 at 1:26 pm
It’s also worth bearing in mind that generally all rates in an area will rise at the same time, therefore all landlords in an area will want to increase their rents at about the same time, so tenants are (as Viking2 says) “simply paying more for their accommodation” which is due to rate rises. And if all rents go up, tenants have no choice but to pay more.
Rates don’t drive rent increases/decreases. the Market does both up and of course down. Its clear that if one looks at the past few years plenty of rents have fallen as rates have risen. How do you dipwits explain that?
No wonder NZ is fucking broke.
Vote:July 19th, 2012 at 8:12 pm
Paulus (1,044) Says:
July 19th, 2012 at 12:51 pm
Viking2
Agreed – only listed ratepayers should be allowed to vote in Local Government as how their money is to be spent.
As a Tauranga Ratepayer I note that Len Brown’s former “partner” Leigh Auton, ex Manukau City, has just been appointed CEO, following the untimely death of the incumbant CEO (a Scottish Gentlemen). Understand that senior staff are pleased with the appointment, as Auton would be supportive of what he did in Manukau, spend ratepayers money lavishly. Tauranga is one of the most indebted Councils in the country. Cannot see this changing.
Talk about the Fox in the Henhouse.
Yep saw that and for a couple of days couldn’t think who he was. But the penny dropped and I thought “well I wonder if any of the apointers bothered to google his name?”
I even thought I should post the question on Sunlive or send the message to brian@thesun.co.nz
Vote:July 19th, 2012 at 8:16 pm
Have sent the message.
Vote:July 19th, 2012 at 11:21 pm
“Their source of revenue is government granted, not independent”. I don’t quite agree, Councils have several revenue sources. Most revenue comes from rates, which is not government granted, but uses a complex framework under legislation including the Local Government Act and the Local Government Rating Act. The only source of revenue that is granted from government comes from subsidies, which the Government changes from time to time. If the Government reduces subsidies, such as for roading maintenance, this places further pressure on the other revenue sources controlled by a Council. Other independent revenue sources include fees and charges for Council services and income from Council owned investments.
Vote:It is worth noting that Councils are required to have a balanced budget, so when developing their long term plans and their annual plans, Councils look at the mix of revenue streams to arrive at their rates’ requirements.
Many people (and some councils) fail to understand how a council’s funding policy for each activity impacts on the rates’ requirement for that activity. For this reason I do not agree that rates increases are not transparent. On the contrary I would argue the rates setting process is very transparent, however it is also so complex, the confusion experienced by most people could give rise to complaints that the council(s) is/are not transparent.
It is unhelpful to compare a land / property based taxation system with income tax. As the economy grows, the Government is able to enjoy an increased tax take without increasing personal tax rates. The same doesn’t apply to property based tax system. The only way a Council can obtain more rates, is by increasing the rating base, or increasing rates on each property. Councils have to use the funding tools available to them to provide new services / increases in service levels AND cope with inflationary pressures on the cost of delivering existing services. Capex projects also involve the need to borrow funds for the new asset and increase the operating funding requirements to fund the operating cost of the new asset, plus interest and capital repayments over, say 20 years. Therefore, simply looking at CPI changes and comparing this with rates changes since 1979, as lastmanstanding did is simplistic. Perhaps he should also reveal how much the property value has changed over that same period.
My main gripe with local government is that it isn’t particularly responsive. There is disengagement from declining voter participation, and I’m disappointed that my council hasn’t made any changes to its LTP after hundreds of submissions. But I think that’s because it doesn’t know how to make changes in response to submissions within the time available in order to finalise its LTP by the end of June. I think this problem actually gets worse as the Council gets bigger, which might explain why some people suggest breaking up Councils into smaller entities would be a good thing.
July 20th, 2012 at 9:27 am
Viking2 (7,167) Says:
July 19th, 2012 at 8:09 pm
All these items are a business expense.
Tax deductions in NZ are few and far between. A tax deduction would be an expense that could be taken from the tax to pay that an individual might have.
Again basic accounting would stop you making these dumb and foolish claims.
You are talking Symantics. Yes it is an expense, but it is a claimable expense which effects the amount of tax an individual will have to pay. And yes the “market” sets the rate for rental in a particular area, but of course the price of rates makes up what “the market” charges as rental, as does the value of the property. They are all linked. If the rental that can be achieved from a rental property has fallen, it will ultimately follow that its value as a rental will also drop. Any Landlord buying a property as a rental knows that. What part of that do you not get?????
Vote:July 20th, 2012 at 10:58 am
Viking2 (7,167) Says:
July 19th, 2012 at 12:33 pm
Try to run a business. Try owning a dog.
As long as people are subject to the regulatory power of the council they deserve representation.
Vote:July 20th, 2012 at 1:36 pm
Councillors are irrelevant – it is the faction groups in the Executive (Employees) who decide everything behind their doors, and obfuscate to the Councillors, who would not know s..t from clay.
Vote:Its a power game and the Executive always win, and get more staff, salaries, and perks.
Why would they work for Local Councils otherwise.