A draft report by New Zealand’s Productivity Commission on Local Government financing and funding has recommended the NZ government offer councils more support for climate change adaptation measures, and also help with legal guidance and consistent science, standards and data.
New Zealand has two levels of government: the federal or central government, and local government. Regional, district and city councils operate in both North Island and South Island.
The Commission said New Zealand councils owned NZ$112 billion (A$106 billion) worth of fixed assets as of June 2016, employed more than 25,000 full-time equivalent staff, and had annual operating expenditure of NZ$9.3 billion and operating income of NZ$8.9 billion.
The study was commissioned by the New Zealand Government to determine if local councils can meet existing and future needs using funding and financial arrangements, or if other financing tools are needed.
New Zealand’s government must show leadership because local councils are “the body closest to exposed communities and will be expected to engage with them on an adaptation strategy,” the Commission’s draft report said.
“They must manage both pressures from property owners to invest in defences against sea-level-rise and flooding, and retreats from at-risk locations.
“To help local governments prepare for climate change, central government should take the lead on providing high-quality and consistent science and data, standard setting and legal and decision-making guidance.
“Having councils spend resources on these individually would be costly and risks inconsistency.”
The report also says New Zealand’s institutional and legislative schemes need to move from their current focus on recovery after an event towards reducing risk before one happens.
“Such schemes need to resist the tendency to continue along current pathways that rely on hard structures to protect new and existing land use, encourage the use of anticipatory and flexible decision tools, and incentivise actions that reduce costs over the long term,” the report said.
The inquiry is also investigating cost pressures, funding and financing models such as rates affordability, and constitutional and regulatory issues that may underpin new financing entities.
Its original remit was later expanded to assess if a tax on vacant land would be a useful mechanism to improve the supply of housing for New Zealanders. New Zealand, like Australia, is dealing with housing affordability challenges.
Local Government New Zealand (LGNZ) President, Dave Cull, said councils were pleased the Commission was calling out issues that LGNZ had been raising for some time.
“They have identified four key areas where the existing funding model for councils is insufficient to address cost pressures, including the demand for infrastructure in high-growth areas, tourism hotspots, unfunded mandates and climate change adaptation,” he said.
He said local councils agreed with the commission’s focus on the “benefit principle, meaning people who benefit from or cause the need for extra services or infrastructure should fund it.
“Unfunded mandates, where central government invisibly shifts costs onto ratepayers, are a huge burden and make it impossible for taxpayers and ratepayers to hold both tiers of government to account,” Mr Cull added.
“Full disclosure of the costs that central government impose on councils is needed to improve the quality of the decision-making at both levels.”
Image: A street in Wellington, New Zealand, after a storm. Dave Allen/Wikipedia