MEDIA RELEASE

Councils accountable to their communities, not Dr Bollard

For immediate release on 11 December 2008

“Councils are well aware of the need to be fiscally prudent and they are fully accountable to their communities for their spending decisions”, President of Local Government New Zealand  Lawrence Yule said today, after comments by Dr Bollard, Governor of the Reserve Bank.

“Councillors agree to rates increases only after thorough consideration of what is needed to maintain the quality of life of their communities. Even if they do raise rates, it only has a small national impact on the CPI.

“The economy has changed significantly since this year’s rates were set. Councils are now preparing for their next Long Term Council Community

Plan and are looking at their budgets carefully in order to manage expenditure.”

While some councils will be able to achieve rates increases to no more than the rate of CPI inflation, others will not be able to for two reasons.

“Firstly, all communities require investment in infrastructure to ensure essential services continue to operate, today and in the future.  Many are

facing expensive renewals as their infrastructure is reaching the end of its useful life and others are dealing with increased demand caused by population growth. Councils use rates to pay for new and enhanced infrastructure, as well as to pay for the interest on loans raised for this purpose.

“Secondly, the cost drivers for local government expenditure are typically higher than the consumer rate of inflation. Roading and construction

costs have tended to increase more than the CPI measured rate of inflation. Rates cover both present and future funding needs, and in some cases are also catching up on past under-investment. 

“For these reasons it is neither practical, nor beneficial to communities, to manage rates within nationally-imposed constraints which cannot capture or respond to the range of councils' needs and resources.  These decisions must be left up to local councils to decide after proper consultation with their citizens.

“Councils are not like a private sector monopoly.  Councillors are elected by citizens to represent their interests on behalf of the community

as a whole and we exercise this responsibility seriously.  Ultimately the consequences of councillors failing to take note of their community’s

views will be felt at the elections.  This is what democracy is about and it works well.

“If people are concerned about their council’s level of rates, now is the time to get involved. Councils are considering their spending decisions as

they draft their 2009 – 2019 Long Term Council Community Plans (LTCCPs) and will be consulting on these early next year. 

“Unlike private sector companies, councils are significantly influenced by the needs and priorities set by their local communities and remain first and foremost accountable to them,” said Mr Yule.

ENDS

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