New Zealand’s fastest-growing council has agreed this week to dramatically increase its debt cap to 220 percent of revenue, as it struggles to pay for transport and water infrastructure.
“We’re borrowing for things that last a long time,” says Selwyn mayor Sam Broughton. “We’re not borrowing operational expenses to run the Council this year. It’s to build infrastructure and roads, bridges, wastewater, drinking water, community facilities. To build the Lincoln town centre that’s been on the plans for 10 years, but we haven’t been able to afford.”
Selwyn District is not alone. Nationwide, councils are upping their borrowing and their rates. The Far North has pencilled in a 33 percent rates rise; Hamilton ratepayers face a 25.5 percent increase; Buller is looking at 31.8 percent.
Westland mayor Helen Lash says her sparsely populated district will need to raise rates by about 28 percent to pay for Three Waters services like a new Hokitika wastewater plant, after the new Government confirmed it’s repealing the Three Waters reforms and returning responsibility for the infrastructure to councils.
She wholeheartedly supports the repeal – but that doesn’t make it any easier to pay for water pipes to stretch the 400km length of the district.
And this week, Lash has been watching worriedly as the Waiho River at Franz Josef shifts its path, threatening more than 50 homes. Councils will bear much of the cost of managed retreat for communities like Franz Josef, Westport and Esk Valley.
Councillors and their staff around New Zealand tell of the increasing stress they’re under to deliver on their communities’ needs – and of their frustration that successive governments don’t seem to get it. Unlike central government, most councils can’t borrow more, so they’re being forced to raise rates on this generation to pay for infrastructure to serve the next generation.
So mayors like Broughton and Lash welcome the unexpectedly candid language of Internal Affairs officials, in their briefing to incoming Local Government Minister Simeon Brown. The officials have acknowledged the significant magnitude of the financial stress on councils.
“The current structure and system are aging, not performing well, and no longer meet the needs of the sector,” the briefing says.
Quarterly change in key local government prices
“The sector is buffeted by three overlapping trends: historical under-investment, a short-term reactionary focus driven by crises and compliance, and the need to do things differently to meet emerging future challenges, including technology.”
Talking to Newsroom, Simeon Brown is well-briefed on the problems. And he acknowledges officials’ advice that he should act “urgently” to support councils. “I’m not trying to diminish the significant challenges that they’re facing,” he says.
“Just as central government has to find savings, in sometimes challenging places, local government has to have similar conversations to ensure they’re focused on efficiently delivering local services and infrastructure for their residents and ratepayers.”
Both Internal Affairs and the Infrastructure Commission, in their briefings, say a big part of the solution is moving more rapidly to user pays – whether that be congestion charges on the roads, or volumetric charging for water and sewage.
Brown replies: “Ultimately that’s a decision for councils as they work through setting up financially independent or financially sustainable models for their regions.”
That may well be so but, to be blunt, there’s only one right answer. Using pricing to manage demand is critical in responding to population growth, protecting the environment and paying for infrastructure, whether it’s cars on roads or rubbish in wheelie bins or water in pipes.
Increasing numbers of communities have water metering, from small districts like Kāpiti and Carterton and Tasman, to bigger cities like Tauranga and Auckland. Ministry for the Environment research found that once meters are introduced, communities embraced them.
It’s cities like Wellington, mostly unmetered, where there’s still resistance. Wellingtonians saw water as a ‘free’ resource and a public good, that would be subject to privatisation if metering was introduced.
User pays can cover more of councils’ operating costs; private finance and the government’s much-vaunted “city deals” can cover more of the capital expenditure.
A new survey of 3000 people, published yesterday by the Infrastructure Commission, says there is strong public support for more funding tools to deliver better services and infrastructure.
The highest support is for charging according to usage: there’s 74 percent support for electricity, 72 percent for water, and 34 percent for roads. For all three infrastructures, paying by usage was the most favoured funding solution, rather than paying according to how much it cost to provide, or household income.
Selwyn’s Sam Broughton, whose other hat is president of Local Government NZ, says additional funding tools might also include the Government paying rates on all Crown land, congestion charges, bed taxes and tourist levies.
Many councils are hitting their debt ceilings, and can’t keep raising rates. “A couple of years ago, rates rise of six or seven percent seemed like a large increase. Now, there’s lots of conversations about 16 or 17 percent. The norm has changed because of the costs required to maintain and look after key community infrastructure and councils being constrained to only rates and debt.”
It’s not going to be easy to close an infrastructure deficit that’s built up over generations – in part because of elected officials’ “short-term reactionary focus” described in the Internal Affairs briefing.
This week, Helen Lash is feeling bruised. Seeking solutions for threatened households in Franz Josef, trying to draft a longterm plan that will increase rates by 28% this year – and then reading the Internal Affairs briefing.
“Today, for the chief executive and myself, we felt like we’d been backed over by a bus. All this stuff, it’s hard going. I went into it with my eyes wide open, but shit, it is tough.”
Trying to balance the books and deliver basic infrastructure is a thankless task, she says, but it’s important. Because if central and local government can’t find solutions, “it’s the people in your community that bear the brunt”.
Need to be clear whether this ‘price signals’ approach for the provision of public infrastructure is on a cost recovery basis (including depreciation) or on a for profit basis.
The right question, Andrew. The push for water meters has, since the neo-liberal was brought in by Labour in ’84, always been for privatizing profits as a priority.
I think water meters are a very logical and appropriate way to make people aware of how much they use and entice them to use it more sensible and economically .
That would make sense for Councils to work cost-covering rather than profit-generating, which would be more the aim of privately owned systems. Let’s keep it in Council-ownership at reduced cost!