Finance Minister Grant Robertson said yesterday the Productivity Commission would hold an inquiry into local government funding & financing.
The inquiry will investigate the drivers of local authority cost pressures and provide recommendations for how councils can maintain & deliver services & infrastructure in cost-effective ways.
Addressing the Local Government NZ annual conference in Christchurch, Mr Robertson said: “The Coalition Government has highlighted right from the outset our determination to help local government address the varied increasing cost pressures they have faced in recent years.
“The Coalition Agreement between Labour & NZ First stated that we will hold a public inquiry ‘a decade after Shand’ to investigate the drivers of local government costs & its revenue base.
“Cabinet has agreed the terms of reference for the Productivity Commission inquiry. The commission will be able to build on its previous inquiries into urban planning, housing affordability & local government regulation.”
Mr Robertson said the terms of reference would be released shortly. They require the commission to investigate cost pressures, funding & financing models & the regulatory system for local government.
These include investigation into:
- Cost & price escalation for services & investment, including whether this is a result of policy &/or regulatory settings
- Current frameworks for capital expenditure decisionmaking, including cost:benefit analysis, incentives & oversight of decisionmaking
- The ability of the current funding & financing model to deliver on community expectations & local authority obligations, now & into the future
- Rates affordability now & into the future
- Options for new funding & financing tools to serve demand for investment & services. This will appraise current & new or improved approaches for considering efficiency, equity, affordability & effectiveness, and how the transition to any new funding & financing models could be managed, and
- Constitutional and regulatory issues that may underpin new project financing entities with broader funding powers, and
- Whether changes are needed to the regulatory arrangements overseeing local authority funding & financing.
Mr Robertson said: “Since the Shand report into local government rates in 2007, local government cost pressures have grown significantly and by more than other costs faced by ratepayers.
“The pressures faced by local councils vary significantly, whether it’s the provision of infrastructure due to growing resident populations, or provision of tourism infrastructure against decreasing rating bases.
“The scale of this issue means an in-depth look is needed into whether our current structures are fit for purpose, and to identify how central government can help by cutting red tape, improving regulation and taking pressure off local government.”
The Shand Report
The Funding local government report resulted from the local government rates inquiry conducted by chair David Shand, Ernst & Young national real estate group head Graeme Horsley & Massey University associate professor Christine Cheyne. They made 96 recommendations in their 2007 report.
2007 Shand Report – local government rates inquiry documents
Department of Internal Affairs: Local government funding project
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Attribution: Ministerial release.