REVIEW OF RATING POWERS ACT -- MAJOR INITIATIVE IN LOCAL GOVERNMENT

  • Tony Ryall
Local Government

Minister of Local Government Tony Ryall released today terms of reference for the review of the Rating Powers Act as part of the Government's ongoing plan to reduce costs for businesses and households.

"Yesterday in Parliament the Government introduced ACC legislation to reduce the cost of injuries to the community. Today we are announcing another step in the Government's plan of action: the rating powers review. Both of these initiatives will contribute to improving the country's economic fortunes and demonstrate that the Shipley Government has a firm programme which will deliver benefits for New Zealanders," Mr Ryall said at the Local Government New Zealand Zone 1 meeting in Papakura this afternoon.

"Further announcements will be made in the next few weeks ? some of these will be in the local government area.

"We are seeking a renewed focus on infrastructure and driving the rate-payers' dollar further. The local government sector accounts for 3.5% of GDP and well over $30 billion of assets which include essential community infrastructure.

"We are working with local government to ensure quality infrastructure and efficient services. There is room for improvement. Good infrastructure is vital to the community and to the economic prospects of our exporters. And that's what this Government is focussing on.

"The review was signaled in the Prime Minister's address to Parliament in February and will be completed in time to have legislation in effect by July 2000.

"The review seeks to overhaul the funding powers of local government. Our plan is to bring them into line with the greater transparency and fairer targeting of costs that is now required of local government financial management. The review will also cover Crown rating exemptions and Maori land rating issues.

"Our presumption is that property rates will continue as the main source of local authority income. We do not see a local income tax or GST as viable options.

"Consultation will be extensive. The Government will encourage, listen, and no doubt debate the views of local government and the wider community.

"The review has support from the local government sector and both the Society of Local Government Managers and Local Government New Zealand will be involved in the review process."

ENDS

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TERMS OF REFERENCE FOR A REVIEW OF LOCAL GOVERNMENT FUNDING POWERS
Objective
To develop a comprehensive, coherent and flexible legislative framework of funding powers for local authorities, which will help ensure that the objectives and principles of the financial management provisions in Part VIIA of the Local Government Act 1974 can be attained and are complied with.

Problem
The existing funding powers of local authorities are inconsistent, and are not flexible enough nor wide enough to enable local authorities to allocate costs in the manner required by Part VIIA of the Local Government Act 1974.

Solution
To undertake a review of the current local government legislative funding regime and develop a framework and principles to govern local authorities' funding powers so as to achieve accurate and efficient expenditure decisions reflecting community needs and priorities.

Scope of Review
The review will be undertaken by a dedicated task group led by the Department of Internal Affairs, and involving the Treasury and local government sector officials, and legislation will be enacted to take effect for the 2000/2001 financial year.

The review will be based on the assumption that charges on property will remain the principal taxation base for local authorities, although local authorities will also need to have other funding powers designed to target beneficiaries of particular local government services. The review will include current rating exemptions for Crown land, the basis of rating of M aori land and the appropriateness and most efficient and effective form of rating relief for individual ratepayers facing hardship, including the Rates Rebate Scheme.

Approach of Review
The approach will be to develop principles in respect of issues encapsulated by the following questions, and to identify the form of legislation which will best achieve the policy decisions:

Should all property be rated or charged in the same way, or are there grounds for rating/ charging Maori land or Crown land, for example, on a different basis to other land? If so, how should this be given effect? What would the fiscal impact be to the Crown of particular options, and how could this best be managed?

What kind of rating and charging tools should be available to local authorities?

What, if any, other funding powers should be available to local authorities?
Should income from other sources, such as investments, be able to be used to off-set rates or charges?

What level of discretion should local authorities have to decide the incidence of their rates and charges (including rates relief and exemptions)including between generations?

How can local authorities be best held accountable for their rating/charging decisions?

How should rates and charges be levied and be made enforceable?

Basis of Analysis
The funding powers policy options will be assessed against the following criteria:

- the purposes of local government, as set out in s.37K of the Local Government Act 1974;
- the financial management provisions applying to local authorities (as set out in Part VIIA of the Local Government Act 1974);
- generally accepted taxation principles (e.g. transparency, neutrality, - accountability, enforceability and fairness);
- allocative, productive and dynamic efficiency;
- in considering the appropriateness of Crown rating exemptions, due regard will be given to the fiscal implications of amending or abolishing these, and assessing the priorities of any proposed changes in terms of their impact on economic efficiency and effective local government.

Consideration of Other Reviews
Consideration will be given to other reviews being conducted simultaneously which will affect the local government sector, including reviews of Te Ture Whenua Maori Act 1993, roading, water and wastewater, and the existing statutory requirement for local authorities to keep capital value information.

Consultation
The views of Local Government New Zealand, the Society of Local Government Managers and the Local Government Forum have already been received. Further consultation with the sector will be undertaken through a public consultation process and during the drafting of a Bill. Consultation with other Government departments and agencies will be necessary as particular matters arise and prior to seeking Cabinet decisions.