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Rates and other funding
- User charges
- Fees and licences
- Subsidies and grants
- Petrol taxes
- Development contributions
- Local Government (Rating) Act
Local government funding relies on rates, development contributions, user charges, investments, occasional central government grants and very little else.
Local authorities gather funds to spend on their local communities. They also need the help of other agencies, such as central government, which can raise much more revenue from taxes, to spend in the local area. Central Government’s roading funding package, to help overcome Auckland’s transport challenges, illustrates how crucial it is that local government negotiates funding from other sources.
Public-private partnerships may prove to be another funding
growth option for local government, although only if the private sector and
local political interests, not all of whom like such partnerships, play ball.
A local authority must adopt a policy on:
- revenue and financing
- liability management
- investment
- development contributionspartnerships with the private sector
- the remissions or postponement of rates on Māori land.
As traditionally local authorities have a limited scope for raising money, their funding capacity may not match their longer-term plans and ambitions.
User charges
User charges are direct charges to the users of a particular facility or service. For example, many libraries impose a charge for borrowing books that are in high demand; community groups might be charged a fee for use of a hall; swimming pools might impose an entry charge.While the user charge often does not cover the full cost of the service, it does provide councils with some income to subsidise the service, while also allowing people to express their preferences by choosing which services they will purchase.
Fees and licences
Legislation allows councils to fix reasonable charges for a number of their activities, including issuing licences and permits, undertaking inspections (of construction or plumbing work, for example) and issuing parking infringement notices.
Subsidies and grants
Payments from Transfund (a government transport funding organisation) subsidise approved roading maintenance and urban passenger transport. Councils also receive subsidies and grants for civil defence, job training programmes, cemetery maintenance, and supporting local recreational organisations.
Petrol taxes
City and district councils can levy taxes on petrol and diesel. Councils are grouped into tax areas for this levy, which is collected by the oil companies and returned to the councils.
Development contributions
Councils can charge property developers development contributions to help fund roads, sewers, water pipes and other infrastructure. These development contributions can be added to charges for resource or building consents, or other services, and mean that developers and their clients bear the cost of new infrastructure required to service the development, rather than existing ratepayers.
Under the Local Government Act 2002, there is a limit to how much council may charge for appropriate developments, and council’s funding and financial policies must, of course, be in order.
New subdivisions mean new infrastructure – which must be paid for.
Local Government (Rating) Act
The Local Government (Rating Act) 2002 is intended to ensure that the
community has the opportunity to be well informed about what its money
is being spent on, and to express its views when major decisions are
being made.
The Local Government (Rating) Act replaced the Rating Powers Act 1988 with
updated and streamlined rating powers.
Days of the large section gone
The Rating Powers Act had sections that were virtually unchanged since the 1925 Rating Act. For councils and ratepayers, 1925 was an entirely different world. When proposing the 2001 law change, the then local government minister Sandra Lee said the old Rating Act was made for a time when most home-owners had a large section, with more than enough room for their apple and lemon trees, a vegetable garden and a clothesline.
These days, councils have a wider range of ratepayers. Properties range
from infill housing to high-rise inner city apartments, from corner
dairies to huge
shopping malls.
The 1988 Act predated the introduction of annual plans and annual reports
in 1989, as well as the additional financial management documentation required
since 1996.
Purposes of the Act
The three main purposes of the Act are to:
- provide local authorities with flexible powers to set, assess and collect rates
- ensure that rates reflect decisions made in a transparent and consultative manner
- provide for processes and information to ensure that ratepayers can identify and understand their liability for rates.
Main funding source
General rates on the value of rateable property will continue to be the main way local authorities obtain funding from the community as a whole. Local authorities will retain the power to deal with anomalies arising from valuation-based general rates by differential rating and/or uniform annual general charges.
Councils accountable
Local authorities are required to make their decisions in accordance with the processes set out in the Act. This is not a limit on the extent of their legal power as such, but it is an important constraint on how it is to be exercised. Councils still have to be accountable for the level of the revenues they raise and the manner in which they spend those revenues.
Otorohonga's public toilets reflect a unique New Zealand culture.