Local councils need to lift their act and central government needs to put more money in to make rates affordable in future, a new report says.
The Funding Local Government report came out of the Local Government Rates Inquiry conducted by David Shand, Graeme Horsley and Christine Cheyne.
The inquiry was commissioned by Local Government Minister Mark Burton last November to address public concerns over rates rises.
The report made 96 recommendations. Among those were for local authorities to:
Central government should:
The panel said there was no need for major new taxes or a rates cap but said councils needed to take control of hikes.
Rates made up only about 3 percent of average household income but had been increasing at a rate that was becoming unsustainable.
The report said rates increased by 38 percent in the 12 years to this year with forecast increases of 8 percent for the new few years reducing to increases of 4 percent by the end of the 10-year period.
Rates were 56 percent of local authority operating revenues, expected to go up to 60 percent by 2016.
Mr Shand said voters might not like councils taking on more debt but then they needed to accept higher rates.
"There are good reasons in terms of equity to make greater use of debt for funding of long life assets which passes the burden of financing those assets onto future users."
Mr Shand said councils needed to accept they were also responsible for community welfare and increasing use of uniform charges was hitting some groups hard.
"All we are saying is we felt it was a cop-out for local government to say well look we'll design the rating system ... and if there are any hardship problems then it falls to central government to pick it up through rates rebates schemes."
The panel called for rates to be based on capital values and said rating differentials should be dropped -- Business NZ has welcomed this saying businesses carried an unfair burden.
"The practice of councils using local businesses as cash cows does not help businesses and communities to prosper," Business NZ economist John Pask said.
Mr Shand suggested that water be treated in a similar way to roading with local and central government sharing the cost.
He expected some councils would think the report unfair as it criticised them for not considering affordability enough and focusing on forecasts rather than targets.
"I think local government are going to say we're being a bit tough on them here but I don't think we are overall. There's a mixed bag."
Mr Burton, who received the report at the start of the month, said the Government would give the recommendations serious consideration but would give no indication about whether it would agree to them.
He said changes may be considered as part of next year's budget.
"The Government will be and has already commenced a significant work programme looking at these far reaching recommendations. What we won't be doing is making a piecemeal response."
It would talk to local government before acting.
Local Government NZ president Basil Morrison said decisions needed to remain with local government and said some of the recommendations were useful.
"Some of the recommendations appear to suggest a radical change to the rating landscape," he said.
"It is vital that solutions do not compromise local accountability and the autonomy of local government to respond to community preferences in a flexible manner."
NZ First welcomed the report and MP Brian Donnelly called on the Government to ensure recommendations were implemented.
The inquiry helped the Government defeat ACT leader Rodney Hide's bill proposing a cap on rates rises be set.
National Party leader John Key said his party would offer local government "a broader range of tools".
Options included increased use of partnerships, charging arrangements and longer-term financing.
"As today's report confirms it is not sustainable to simply keep on putting rates up year after year."
He said Government laws had imposed increased costs on councils.
The Green Party supported recommendations to protect the environment which included a visitor levy and user charges for waste.
Both the Greens and Maori Party welcomed the report's recommendations on Maori land which said it was rated beyond its value or productivity.
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