Editorial: Council tax plea hard to stomach

Councils that are prone to bleating about their need of new forms of taxation are usually the last to take a hard look at their property holdings and ask whether they could make better use of the public capital. Photo / Doug Sherring

Councils have been pleading for a new source of money for as long as ratepayers can remember. And governments have been deaf to the plea for just as long. Nothing looks likely to change as a result of a paper put out by Local Government New Zealand this week arguing that rates and other revenue sources are inadequate for councils with low populations or, like Auckland, high capital needs. The Prime Minister was unmoved. Councils were not carrying excessive debt, he noted, "and they do have assets they own".

Fair point. Councils that are prone to bleating about their need of new forms of taxation are usually the last to take a hard look at their property holdings and ask whether they could make better use of the public capital. Does Christchurch need to own its airport, or Auckland its sea ports? Would Auckland be better off if shares were issued in the port and the proceeds put into unprofitable assets such as a central rail link?

Of course the Government would demand the final say in an investment of that scale even if the council could fund it all. Parliament controls what councils can do, the level of debt they can raise and the rates they can charge. It is a pity the same control can not be exerted on councils' internal costs.

If they are looking for public support in their bid for new or additional revenue sources, they will need to show they are making the most efficient use of the revenue they already collect. Property rating might not be popular or perfectly equitable - what taxation is? - but it has the virtue of high visibility. Home owners see a bill, which is not the case for employees paying income tax or consumers paying a petrol tax or GST.

It is perhaps for this reason the councils would like an alternative to rates - something less visible such as a local tax on incomes or petrol or all retail sales. Those are painless for everyone except the employers and retailers who must collect the revenue. They are too painless for public accountability and cannot be trusted to any tier of government unless other forces can keep its costs down.

Parliament and party politics is reasonably effective at keeping the spending of governments under scrutiny. Political oversight is much weaker in local government. Party affiliations are not in play, elected members form weak and shifting associations, consensus decision-making is more common. Most disturbing, the role of elected members is strictly removed from the administrative machinery of councils where the costs of generous staffing and work practices are legendary.

The only leverage that mayors and elected members may have over the administration comes from the fact that mayors and members must answer to ratepayers. If rates were replaced or augmented with more grants from general taxation, the mayors and members would face less pressure from voters and the council apparatus would feel less pressure from elected representatives. No wonder governments are reluctant to go there.