Call to streamline Auckland's local government

Alasdair Thompson

Rapidly rising local government rates and charges supports the case for a return to a single city in Auckland, with just the one main council.

That's the view of EMA (Northern) chief executive Alasdair Thompson who is concerned at the impact on business of escalating charges and infrastructural issues.

EMA analysis shows local government rates hikes are running up to three times faster than inflation - well ahead of population growth - and are projected to keep up the pace for the next 10 years, despite the slowing economy.

"Local government is expanding rapidly as the rest of us tighten our belts," said Thompson. "There needs to be an end to finger pointing and to Auckland dysfunction."

He cites the failures in Auckland's infrastructure - transport, electricity supply and storm water - that are causing investors to delay new projects or business expansion.

"The same bottlenecks are threatening our quality of life overall."

The Mood of the Boardroom shows chief executives from both big companies and smaller enterprises rate local government policies and rates as having a negative impact on productivity and growth.

Some 62.5 per cent of SMEs from Business NZ's membership rated the factor as a negative - a third were neutral. At the "big end of town", 74 percent of corporate leaders rated local government polices and rates as a negative for productivity and growth; 23 per cent said they had a neutral impact. Just three percent gave a positive rating.

Federated Farmers' analysis of 83 local body plans shows rates are forecast to rise an average of 7-8 per cent each year for the next three years. The Auckland situation is much worse: In the next decade Auckland Regional Council is planning to increase its rates by 77 per cent.

"These figures underscore the need for urgent reform to restrain council spending, as well as to sort out a standardized, more equitable basis for funding local councils," said Thompson.

"While business supports new council projects funded in part by borrowing, the EMA wants to go beyond tinkering. We want to see Auckland reunited again under a single city council and governance structure."

That would mean the eight councils that currently oversee cross-boundary developments would reduce to one council with the ability to address and overcome the infrastructure obstacles that hold back the Auckland region's business and economic growth.

"Aucklanders see themselves as one entity already but we pay property taxes to eight different councils. You have to ask why?

"A city our size with just over 1.2 million people, does not need four city councils, three district councils and a regional council with 290 elected persons to represent us.

"Brisbane with much the same population has one council with 40 elected councillor. What's so special about Auckland that we need seven times more elected representatives than Brisbane?"

Barfoot & Thompson director Peter Thompson is confident about the long-term future of the Auckland property market where prices have continued to rise in defiance of the doom-sayers.

Thompson says real estate agents are having to work harder to "make the sale" in the tighter economic conditions. Properties are taking around 30-35 days to sell - instead of the 20-25 days average of a year ago - but prices are firm.

Thompson believes New Zealand is under-appreciated as a property investment destination by some local investors. But the country's reputation as a "safe haven" - in a world increasingly troubled by terrorism - and the return to a positive immigration scenario will underpin the market for years to come.

The NZ dollar's drop has also provided an incentive for offshore investors to come into the NZ market again.

Auckland's growth is having an impact on regional infrastructure which has not kept pace with growing population numbers.

But conversely that growth rate supported the property market.

"New Zealand's a great place to live ... you may have to go overseas and come back to appreciate it."

But he underscores it is now more difficult for young people to save enough to make their first home purchase. He is also concerned that some buying houses or apartments on mortgages at 95-100 per cent of the property's value could get caught as interest rates rise in the tightening economy.

Thompson notes the effect of rising petrol costs is pushing more of his agents into up-skilling to use mobile and internet technologies to reduce their costs.

"This was happening anyway, but the fuel price rise has pushed it faster."

Even the Auckland apartment market - where prices have dropped at the bottom end due to an oversupply of cheap small stock - has not turned into an outright crash of that particular market segment along the scale of the Sydney apartment market collapse.

Investors are staying in for the long-haul betting on a price recovery as Auckland population numbers swell.

Thompson said while there will inevitably be some casualties in the short-term, many long-term investors were prepared to take a rental drop in the meantime.

Many, he said, are betting that their overall equity position would be protected when prices eventually recovered as more Aucklanders became residents of the CBD, or, high-density projects in inner Auckland suburbs.

The trend for younger people to buy units or small apartments as their "first-home buy" would likely continue he said.