Marlborough Deputy Mayor David Croad said he understands why the Government's proposed rates cap appeals to households facing cost of living pressures, but the policy risks creating significant long-term consequences for communities.
"Everyone understands the financial pressure that families and businesses are currently under, and every mayor and councillor in the country wants to deliver value for money and keep rates as affordable as possible," said Cr Croad.
"Marlborough District Council has worked hard to keep rates increases down in the face of rising costs. In recent years we have had to either absorb or pass on cost increases, most of which came from areas outside of council’s control, such as severe storm damage, contract cost increases, government reforms and the impact of the Covid pandemic."
Deputy Mayor Croad said local government receives only about 10 per cent of New Zealand's total tax revenue, yet is responsible for approximately one third of all public infrastructure investment.
"Our economy relies on the infrastructure councils provide, from local roads to community facilities to growth-enabling infrastructure."
He said that a blanket four per cent cap on rates would be a blunt instrument that could limit councils' ability to maintain critical infrastructure and services over time.
"Councils have very few funding tools available beyond rates. At the same time, we're being asked to support growth, maintain and renew ageing infrastructure, respond to emergency events and meet increasing community expectations."
"Just this week, the Government ruled out a bed tax that would have helped ensure visitors contribute to the infrastructure and services they use. Without alternative funding mechanisms, the burden continues to fall largely on local ratepayers."
Cr Croad said the proposed variation process would be critical to determining how workable the policy is in practice.
"Many councils are facing substantial costs from population growth, emergency management and disaster recovery. These are not expenses that can simply be avoided or deferred. In our case, the Marlborough Sounds roading recovery programme, from multiple severe storms, was budgetted at $234 million, with $106 million funded by Marlborough ratepayers over 25 years.”
"If the variation process is overly restrictive, councils will struggle to meet the costs of growth, address infrastructure deficits and provide the services communities expect."
Deputy Mayor Croad said another significant concern is the impact on councils' ability to borrow for long-term infrastructure investment.
"Councils' ability to access affordable debt is directly linked to our ability to raise rates revenue."
"Ratings agency S&P has already signalled that rates capping could weaken council credit ratings and increase borrowing costs. When councils are downgraded, interest costs rise and those costs ultimately fall back on local ratepayers."
Mr Croad said councils remain committed to delivering value for money but need sustainable and flexible funding tools to continue investing in the infrastructure and services communities rely on.
"The reality is that councils cannot be expected to deliver more infrastructure, support growth and absorb rising costs while being given fewer funding options. Quite simply, the maths does not add up."
