Productivity Commission to investigate Local Government funding and financing

The Productivity Commission will hold an inquiry into Local Government funding and financing, Finance Minister Grant Robertson announced today.

The inquiry will investigate the drivers of local authority cost pressures and provide recommendations for how councils can maintain and deliver services and infrastructure in cost-effective ways into the future.

“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,” Grant Robertson said.

“The Coalition Agreement between Labour and New Zealand First stated that we will hold a public inquiry “a decade after Shand” to investigate the drivers of local government costs and 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 and local government regulation.”

The terms of reference, to be released shortly, detail that the inquiry will investigate cost pressures, funding and financing models and the regulatory system for Local Government.

These include investigation into:

· Cost and price escalation for services and investment, including whether this is a result of policy and/or regulatory settings

· Current frameworks for capital expenditure decision making, including cost-benefit analysis, incentives and oversight of decision making

· The ability of the current funding and financing model to deliver on community expectations and local authority obligations, now and into the future

· Rates affordability now and into the future

· Options for new funding and financing tools to serve demand for investment and services. This will appraise current and new or improved approaches for considering efficiency, equity, affordability and effectiveness, and how the transition to any new funding and financing models could be managed

· 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 and financing.

“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,” Grant Robertson said.

“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.

“We look forward to working with Local Government and communities throughout the inquiry,” Grant Robertson said.

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