KEY POINTS:
A sweeping review of rates has found councils are taking more from ratepayers than they need to.
The independent inquiry was set up by the Government a year ago after protests about skyrocketing rates bills.
Yesterday, the inquiry team's near-300 page report was made public and it contained several criticisms of the actions of councils - including accusations they had not been exercising enough spending restraint, were not considering affordability issues, and were overly conservative about taking on debt.
"We believe that overall, many councils are following inappropriate funding policies," inquiry head David Shand said. "We believe that rates are higher than they need be in part because of funding decisions made by certain councils."
The Government is remaining tight-lipped about what it thinks of the 96 recommendations the inquiry team has made. Local Government Minister Mark Burton said only that work was going on behind the scenes in response and it could have implications for next year's Budget.
The rates inquiry panel heard submissions nationally and Mr Shand said there was considerable angst expressed by those who fronted up to speak.
Rates have increased, in inflation adjusted terms, by 38 per cent nationally over the past 12 years. The outlook offers no comfort, with rates projected to increase in actual terms by 8 per cent each year for the nextfew years.
The inquiry estimated there were now affordability problems in between 7 per cent and 14 per cent of households and said that they would increase over the next 10 years. Under current practices, rates would not be sustainable in 10 years' time.
While rates should remain the main source of funding for local government, they should be no more than 50 per cent of total revenues, the inquiry recommended.
At the moment rates account for around 56 per cent of operating revenues, and are forecast to rise to 60 per cent by 2016.
Two financial issues were highlighted in the report - that debt levels are very low within councils, and that cash is being used by councils to cover depreciation costs.
Mr Shand said there was scope for greater use of debt to fund long-life assets, and changing council practice around debt and depreciation could lead to a reduction in forecast rates levels of between $300 million and $500 million per year - or the equivalent of 10 per cent of rates.
However, taking on debt is a political hot potato and Mr Shand acknowledged some candidates in this year's local body elections were campaigning on being debt-free.
The inquiry said councils should give "more rigorous consideration" to their spending priorities, and ask if they could defer expenditure to later years.
Among the recommendations made by the inquiry to stem the rise in rates were greater funding from central government, making Crown-owned locations like universities and hospitals pay rates, more user-pays policies on things like water, roading, and building consents, and the abolition of fixed charges currently incorporated in rates bills.
Mr Shand also noted the Resource Management Act and Building Act as factors that had required a rise in council staff levels.
The inquiry findings were broadly welcomed by political parties, with National Party leader John Key saying the report supported what his party had been saying.
He said National would look to offer local government "a broader range of tools", including increased use of partnerships, charging arrangements and longer-term financing.
New Zealand First, which played a pivotal role in setting up the rates inquiry, was absent from yesterday's press conference to mark the report's publication. In a statement, the party's local government spokesman Brian Donnelly said he was pleased the inquiry had identified funding policies that were leading to higher than necessary rates. The Maori Party welcomed a recommendation in the report that changes be made to the ratings valuation of Maori land.
