Source: Radio New Zealand
Marlborough mayor Nadine Taylor said that council may struggle to renew key infrastructure such as roading under the Government’s proposed rates cap. LDR / Supplied
The government’s proposed rates cap could put future core infrastructure projects at risk, Marlborough mayor Nadine Taylor says.
The government has proposed capping rates rises at a target range of 2-4 percent a year across all general and targeted rates, excluding water charges and non-rates revenue such as fees and charges.
Local Government Minister Simon Watts said the proposal was “about stopping the runaway rate hikes” that had impacted families and those on fixed incomes.
Councils would have to start factoring the cap into their planning from 2027, with the full cap coming into effect in 2029.
Taylor said no-one, including her, wanted to see rates rises like those of recent years, with Marlborough’s increase this year at 8.61 percent.
“Those rates rises we’ve had have been very much outside of council’s control,” Taylor said
High rates rises had been largely tied to inflation, Taylor said.
“Local government inflation isn’t measured against things like butter or mince, things that households buy. It’s measured against steel and bitumen and the cost of building a bridge.
“Those costs have essentially just gone crazy in the last few years.”
The Spring Creek stopbank on the Wairau River. Taylor says a rates cap may hamper future infrastructure needed to protect towns. LDR / Supplied
Local government inflation was 3.3 percent this year, meaning almost all of a 4 percent rates cap would have been used to cover inflation, Taylor said.
Taylor said that while she understood why water charges were exempted from the rates cap, with $413m of infrastructure investment needed in the next 10 years, she didn’t understand why roading was not also exempt.
“Many councils across the country are looking at a bell wave of renewals in roading,” she said.
“A lot of those renewals are around quite expensive items like bridges … that roading is key infrastructure should be treated the same as water.”
Watts said he did not envisage a situation where councils would let the conditions of their roads deteriorate.
But Taylor said that without exemptions, councils would struggle to fund road renewals under the cap.
Under the proposed cap, councils would need to apply to a regulator to raise rates beyond the cap, which would only be granted under exceptional circumstances such as natural disasters.
The Marlborough Roads Recovery project repairing storm damage from previous years, now in its third and final stage, was partially funded by gradually increasing targeted rates until 2034. Under a rates cap, that funding would be at risk.
“We could be an early example of a council that needs to apply for an exemption,” Taylor said.
The Marlborough Roads Recovery project was funded by targets rates for the next decade, this funding is at risk under the Government’s proposed rates cap. LDR / Supplied
It was important the exemption process be flexible and fast-moving to support communities when responding to natural disasters or infrastructure needed for climate change resilience, Taylor said.
“The central government seems to like the term fast-track, so they’re going to need a fast-track process for exemptions in order to keep the country moving,” she said.
Marlborough would need significant climate resilience infrastructure in the future, including raising stopbanks along the Wairau River to protect towns from the increased risk of flooding, Taylor said.
“We don’t want to be having a conversation with our communities to say to them, ‘we can’t do this work, we can’t protect you, we can’t renew that bridge’.
“But if there is not enough flexibility built into this system of exemptions, then that’s a conversation that we might end up having over the next 10 and 20 years.”
While most infrastructure investment was funded through debt, council had to be cautious as to how much they allow debt to make up funding shortfalls, she said.
On Tuesday, credit rating agency Standard & Poor’s said that a rates cap could lead to a greater debt burden as council’s could be forced to rely more heavily on debt to finance capital expenditure.
Councils that responded to the rates cap by loading up on debt could see their credit ratings downgraded, making it more expensive to borrow.
Uncertainty around funding and exemptions meant councils could be reluctant to take on new projects, Taylor said.
“The one that springs to my mind immediately is the homeless, the issue that we’re seeing rising here in Marlborough.
“We will struggle to consider to take on any more obligations … where the community is very, very keen for us to take a lead, we just won’t be able to.”
LDR is local body journalism co-funded by RNZ and NZ On Air.
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