Central government used the 2025 LGNZ conference to give local government another telling-off.
(My comments on the 2024 LGNZ conference are available on this link "Prime Minister gives councils a boot")
Let’s focus on the most controversial of announcements; rates capping.
As expected, alarmist responses have come from both sides on this proposal. Here are my comments as someone with practical experience.
I worked within a voluntary rates cap policy at HCC for 20 years. Exceptions were made on two occasions; an extra 6% increase spread over 4yrs to cover funding and operating costs to commence treating wastewater, and another 4% to cover community facility earthquake strengthening and upgrades.
Claims that this led to less-than-optimal maintenance and renewals are correct in some respect (e.g. parks and reserve assets). However, leaks and potholes were mainly under control and many major infrastructure upgrades were funded. Importantly, the backlog of pipe replacements in 2019 was only about $100m and easily affordable within available debt capacity. In contrast, the backlog since removing the rates cap policy has increased rapidly to about $400m.
It is possible to operate effectively within a rates cap environment providing exceptions can be made when truly needed. It brings risk of deferring maintenance and renewals, although this can be mitigated through asset management planning and audits.
The main benefit is driving efficiency and value for money across Council operations. While that should exist without capping, there is clear evidence that this isn't the case at some councils such as HCC. I’ve commented previously on big overhead increases and overcharging for water infrastructure projects.
While I'm not inherently in favour of an imposed rates cap, I understand why central government is resorting to this measure. Councils have failed to demonstrate sufficient control over spending during a rates affordability crisis.
