User-pays.
Public private partnerships.
Targeted rates.
New revenue streams.
These are all emotive phrases especially when used to describe local government services. They are also phrases we will hear much more often as councils around the country try to find ways to invest in infrastructure with the release of draft long-term plans.
We all know local government budgets are under pressure. Under the draft council plans, ratepayers across the country may see average rises of 15 per cent for next year alone, with Napier Council recommending a 23.7 per cent rates increase this year alone.
For those councils like Auckland, Tauranga or Napier with growing populations, there is a pressing need for new infrastructure. But there is also a desperate need to pay for all the maintenance and replacement of roads, water pipes and public spaces that are nearing the end of their lives.
How can local governments pay for both the replacements and the new projects? And what level of rates will ratepayers put up with before they simply say stop?
A recent report from the Infrastructure Commission, Te Waihanga, finds that between 2009-22 Councils debt increased by 226 per cent while revenue only increased by 42 per cent, leaving today’s Councils with less head room for borrowing. That compares with the period from 1950-70 where revenues grew roughly in line with debt.
What is more interesting however, is that the report argues that Councils can borrow more.
Finance is available for new infrastructure projects, but only if it is matched with a revenue stream, preferably one that is ring-fenced. Think of Wellington’s sludge levy, or the Bay of Plenty’s targeted flood rates.
But before Councils can suddenly start to add new targeted rates or open the door to partnerships with the private sector, they need to talk with their ratepayers about what services are needed, and how much people are willing to pay for them.
Put simply: we need to talk about local government funding.
Community and ratepayer engagement is not easy, and it’s not particularly sexy either, but it is essential.
That means talking with the community about:
- user-pays
- public private partnerships
- targeted rates
- new revenue streams, and why they are necessary.
Failure to prepare the ground before rising prices, or adding new costs, is the opposite of good communication. But engaging ratepayers is a challenging proposition.
The best advice is that councils need to be thinking of how to start telling a story, by using whatever participative tools they have, and engaging ratepayers in the debate.
Tell ratepayers what is being planned. Communicate the need. Explain the tradeoffs. Be up front and honest. Otherwise, more and more Councils are going to be in the firing line with unhappy ratepayers, and deteriorating infrastructure and services.