Local infrastructure funding model ‘unsustainable’


Almost all councils have now seen the initial level of investment required over the next 10 years as part of long-term planning, with many considering double-digit rates rises

Providing for community needs from infrastructure is a massive challenge that is not being met and without a longer-term and committed plan of investment in old and new infrastructure, our assets will continue to decline, says Gary Porteous, Āpōpō.

The association for infrastructure asset management has just released the findings of its first Member Sentiment survey, highlighting that New Zealand’s infrastructure has not improved in the past year. The majority of respondents also believed the country doesn’t have sufficient capability to manage infrastructure assets.

“We need a step change to the way we fund, develop, manage, and maintain our country’s infrastructure; a dramatic increase in potholes is a great representation of what happens when we haven’t invested well enough in our assets,” Porteous says.

“Our survey also shows that we need to find new ways to steer ourselves away from an infrastructure tragedy.

“This is why Āpōpō supports Local Government New Zealand’s (LGNZ) calls for a more sustainable funding structure that gives greater clarity around the future pipeline of infrastructure work.”

LGNZ President Sam Broughton says at a time when central government is talking about tax cuts, local leaders know rate increases are necessary to provide for communities’ futures. Councils will consult their communities on their draft long-term plans (LTPs) in the new year. The draft LTPs will outline the priorities for the community, how much it will all cost, and where the money might come from.

“Councils’ share of overall tax revenue has remained at 2% of GDP for the last 50 years, despite our ever-increasing responsibilities. That’s not sustainable.

“The rates proposed in the LTPs are necessary to fund existing services and essential infrastructure, and while councils are always acutely aware of the need to balance the level of investment needed with affordable increases, the pressure on councils has reached the tipping point.”

Recent commentary from the Office of the Auditor General said they remained concerned following the analysis of the 202/21 results that councils might not be reinvesting enough in critical assets. They mentioned if councils underinvest in their assets, there is a bigger risk of asset failure and ultimately reduce the amount of services delivered to their communities.

“We cannot keep patching up worn out assets. Local councils are very aware of increases in the cost of living and how difficult this conversation is for communities.

“Many households pay $2-3,000 per year just for one service such as power. Rates account for a huge range of infrastructure and services communities rely on, and are councils’ key tool to raise revenue.

“Continuing to rely so heavily on household and business rates is not a sustainable funding approach for local government. LGNZ will be working with the Government on a toolbox approach to addressing funding and financing challenges.

“Not every tool works well for each council so we need to take a locally-led approach to finding the right levers for individual communities. Options for new funding mechanisms include revenue sharing between central and local government, which could form part of new city and regional deals. Our members have also strongly supported that the Government pay rates on all Crown land, as well as introducing new tools like congestion charging, bed taxes and tourist levies.

“A 4-year term of local government would also make a dramatic improvement in productivity across councils and provide certainty. This would in turn create a longer-term pipeline of work for the private sector to partner with councils and deliver for Aotearoa New Zealand,” Broughton says.