The Kākā by Bernard Hickey

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Dawn chorus: Council funding review eyed
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Dawn chorus: Council funding review eyed

LGNZ Chair Stuart Crosby lets slip Govt to announce review of councils' guiding legislation and provision of "sustainable funding streams"; Councils face rates revolts next year without reform

Bernard Hickey
Mar 29, 2021
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Dawn chorus: Council funding review eyed
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TLDR: The Government looks set to announce a major review of councils’ guiding legislation and funding streams as it grapples with a fundamental mismatch between its aims for new housing and the intransigence of voting ratepayers wanting low rates and low debt.

Essentially, it can’t solve the housing supply crisis without the approval of council election voters, who currently don’t see ‘growth paying for growth’ and keep vetoing by stealth the high population growth model of central government.

The Government is finally getting its head around the need to invest in infrastructure to cope with growth (or at least catch up with the last decade of population growth), but it needs the cooperation of councils, who have plenty of mechanisms in planning departments, the RMA, urban limits and zoning rules to frustrate that. The risk is that the rash of big council rates and debt increases to pay for catch-up infrastructure currently going through in long term plan reviews will spark revolts at next year’s council elections. (See below on Porirua’s 8% rates increase and tripling of debt)

A new social and financial contract needed

The Government and councils need to come to some sort of truce that rewrites the funding rules and incentives so councillors and mayors feel they can ‘go for growth’ without getting dumped every three years by angry ratepayers. Councils want a share of the revenue benefits of population growth, which are currently all hoovered up by the Government through GST, PAYE and corporate profits. For example, ACT wants to see a share of GST go back to councils, while others, such as Shamubeel Eaqub, want the Government to stop charging GST on rates.

Suggestions include a share of GST receipts broadly linked to construction spending or population growth, or GST rebates on rates and the Government starting to pay rates on Crown land. The problem with suggestions such as these are essentially cultural.

Firstly, Treasury and the apparatus of Government doesn’t really trust councillors to manage that extra revenue well. General election voters, especially the ones who don’t vote in council elections, are also sceptical, given the regular publicity around infighting councils. Unlike the central Government, where the PM is paramount, cabinet is confidential and there is strict party discipline enforced in Parliament, councillors often don’t vote along party lines, have to hold cabinet-like meetings in public, and the mayor is often just a figurehead without the power to pursue a coherent set of policies.

Secondly, neither sets of voters or the Government or councils have had a proper debate about very fast population growth via migration (1-2% per annum) that would involve voters generally giving a social license to that growth and the inevitable increase in taxes, public debt and rates to fund the infrastructure needed for that growth. By the way, Treasury and councils need to stop kidding themselves they can find some sort of PPP or hybrid funding solution to pay for the infrastructure without having to put it on the Crown’s or councils’ balance sheet. It won’t happen in New Zealand because we don’t have the depth or sophistication in ‘muni’ or local debt markets and the implied cost increase is substantial. Just use public debt because there is no shortage of demand, but a shortage of supply. This ‘social license’ really has to come via both main parties and the various planning arms of Government agreeing on an appropriate level, and being to fund it and enforce. Currently, it’s very haphazard and backward looking.

Thirdly, there is a big democratic deficit at council voting level, which means the central Government and the public generally can’t really trust or feel ownership over council policies. Turnout rates in council elections of around 42% nationwide (and 38.2% in big cities) in the 2019 elections were about half the 82.2% turnout seen in last year’s general election. The dominant voters in council elections are older, property-owning suburbanites who have not given permission for lots more people living near them and forcing them to pay more rates. Rates revolts are actually a code for a revolt against population growth. Young, Maori, Pacifica tenants just aren’t in the picture.

Review in April on ‘funding streams’

Why am I writing about this? LGNZ Chair Stuart Crosby let slip deep in the bowels of this Felix Desmarais piece on council workshops that the Government is planning an announcement next month of a review of councils, including “sustainable funding streams.” This is code for changing the underlying revenue incentives of councils to enable growth of housing. This Government and the last one tried to change the equation with capital loans and grants schemes (last week’s $3.8b grant scheme is the biggest yet), but councils still argue these grants don’t pay for ongoing operational spending and maintenance, which have to come out of rates.

Currently, councils frustrate plans for growth because older, suburban ratepayers who vote in council elections dominate, and they don’t want growth near them they don’t want to pay for. They haven’t given their social license for 1-2% population growth. They might be more amenable if there’s share of GST or some other mechanism that changes their belief that ‘growth doesn’t pay for growth.’


In our local political economy

Twitter avatar for @bernardchickey2bernardchickeysubscribers @bernardchickey2
Good piece on use of 'workshops' by councils to avoid publicity. LGNZ Chair Stuart Crosby lets slip this: 'In April there will be an announcement about a review into local govt's guiding legislation and the provision of "sustainable funding streams".
The ‘black hole’ of transparency: Secret council workshops under the microscope - NZ HeraldOver three years, 31 councils held 737 informal meetings in secret.nzherald.co.nz

March 29th 2021

Twitter avatar for @bernardchickey2bernardchickeysubscribers @bernardchickey2
@toddniall rightly asks why @WakaKotahiWgtn is forcing @AklCouncil to drop its 'quality compact urban form' objective from its $31b ATAP plan as part of a greenfields housing push via Mill Rd. Climate emergency? Yeah, Nah.
Who is running Auckland and what are they up to?OPINION: Critical transport and climate issues are being left to Auckland bureaucrats.stuff.co.nz

March 29th 2021

Twitter avatar for @bernardchickey2bernardchickeysubscribers @bernardchickey2
Councils face rates revolts at next year's election unless the Govt and councils rebalance the revenue benefits of growth (ie sharing GST). Eg. Porirua 8% rates hike, tripling debt, cutting services, water metreing, not paying living wage etc
Porirua City Council wants water meters, big rates increases to fund pipes investmentPorirua ratepayers facing a big increase in rates and water meters to pay for infrastructurestuff.co.nz

March 29th 2021

Twitter avatar for @NZStuffPoliticsStuff.co.nz Politics @NZStuffPolitics
Ministry of Health launches sweeping review of Covid-19 vaccine booking systems
Ministry of Health launches sweeping review of Covid-19 vaccine booking systemsWhistle-blower who uncovered privacy breach within the Canterbury DHB Covid-19 booking system says, “It’s not a coding error. It’s incompetence.”dlvr.it

March 29th 2021

2 Likes
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Pokie machines continue to blight south Auckland
Pokie machines continue to blight South AucklandFigures from the Department of Internal Affairs show pokie venues in South Auckland made more than $26 million in profits in the final quarter of 2020.dlvr.it

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1 Like

In the global political economy

Twitter avatar for @bernardchickey2bernardchickeysubscribers @bernardchickey2
FYI in US: “I’m going to lose the script and I’m going to reflect on the recurring feeling I have of impending doom,” Walensky told a briefing with reporters. “Right now I’m scared.”
‘Impending doom’: CDC, White House warn of new surge as U.S. COVID-19 cases riseBiden administration officials pleaded with Americans on Monday to continue to take precautions to prevent the spread of COVID-19 amid an increase in cases across the country.reuters.com

March 29th 2021

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Australia sees record $104 billion of iron ore exports this financial year
reut.rs/3w9FEc0
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#ICYMI the PM today moved Christian Porter, Linda Reynolds + Peter Dutton in a cabinet reshuffle. We have analysis to come, including the latest from @michellegrattan. Sign up to our daily newsletter to read what Australia's experts think of the moves:
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China warns companies against politicising actions regarding Xinjiang
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Investors BlackRock, Vanguard join net zero effort
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More than a fifth of small UK exporters have temporarily halted EU sales
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Twitter avatar for @bernardchickey2bernardchickeysubscribers @bernardchickey2
Keep an eye on this. Could be something. Or nothing. 'The warnings on big losses triggered a sell-off in banking stocks, with Morgan Stanley falling nearly 4%, Goldman sliding 1.5%, Nomura down 16.3% and Credit Suisse down 14%.'
Nomura, Credit Suisse warn of big losses after Archegos share dumpNomura and Credit Suisse are facing billions of dollars in losses after a U.S. hedge fund, named by sources as Archegos Capital, defaulted on margin calls, putting investors on edge about who else might have been caught out.reuters.com

March 29th 2021

Chart of the day

Twitter avatar for @bernardchickey2bernardchickeysubscribers @bernardchickey2
Many think our Government is too big and has too much of a share of GDP/income via taxes. Actually, the Crown's share is much smaller than many other advanced economies and much lower than it was in the late 1980s, especially as our councils are much smaller vs GDP than elsewhere
Image

March 29th 2021

Useful backgrounders

Twitter avatar for @lauramoatesLaura Murphy-Oates @lauramoates
Today on Full Story @BenDohertyCorro on why Australia is deporting so many people to New Zealand, and how a series of recent controversies over deportations (e.g. the deportation of 15 yr old boy) have pushed tensions to an all-time high
Why is Australia deporting so many people to New Zealand?Reporter Ben Doherty explains why deportations are skyrocketing, and how recent controversies have pushed tensions between the two countries to an all-time hightheguardian.com

March 28th 2021

17 Retweets26 Likes
Twitter avatar for @NewsroomNZNewsroom @NewsroomNZ
“I’ve been here 20 years, paying tax and contributing, never taking social welfare. It isn’t fair.”
Loved ones separated by border closures demand answersThousands separated from their loved ones by border restrictions say the hardest thing is having no concrete answers, and not knowing when things will change.newsroom.co.nz

March 29th 2021

Some fun things

Twitter avatar for @evanchillEvan Hill @evanchill
🚨The Ever Given is floating🚨
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March 29th 2021

1,789 Retweets4,498 Likes

Ka kite anō

Dawn tomorrow is at 7.36am. Today was 7.34 am.

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Dawn chorus: Council funding review eyed
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iconoclast
Mar 30, 2021Liked by Bernard Hickey

There are 120 politicians in the Parliament. There are 73 policticians in the Government. Do you accept that out of all those there is not one able to articulate the reasoning behind successive governnments obsession with mass-immigration. There must be concrete reasons that the star-chambered can't share with the populace

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