Editorial: Shake up of council funding overdue for Whanganui

What's the best way of paying for council infrastructure?

It was quite startling to hear Whanganui's average rates rise of 4.6 per cent this year was apparently not out of the norm.

It was a statement by Whanganui District Council's money man Mike Fermor designed to show ratepayers they weren't the bad guys.

But he was right; it is not excessive by national standards and that's the startling bit.

Even though we're assured that will be the highest rise in Whanganui for a decade, an average 2.5 per cent rise each year over the next nine years is a lot - and that's without any unexpected shocks.

Councils around the country face an infrastructure deficit and surely climate and disaster related expenses are on the way for many so we can't expect that level to remain.

It's certainly not going to start getting cheaper and someone has to pay.

Currently the rates bill is determined largely based on assets.

But for farms or commercial properties capital or land value doesn't reflect income or ability to pay.

And for those with residential properties, assets can often peak as income starts to decline in retirement.

The cash rich and asset poor are the only winners.

It's a broken model coming under more pressure every year.

Councillors know it. Ratepayers certainly know it. And deep down central government knows it.

So it's good news the Government has asked the Productivity Commission to review funding of councils.

Its terms of reference are yet to be announced but one idea worth exploring is shifting the rates burden on to income tax.

Central government could then dish out an allowance to councils from the taxpayer pool for essential infrastructure or anything that all councils have.

It would spread costs across the country and push it more fairly on to the people who can pay.

The question is will voters let government get away with an income tax rise in return for a dramatic rates reduction?

Or is there another way? And will politicians take the political risk?

Someone has to because the current model can't be the norm for much longer.