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Local Government Faces Serious Spending Issues

Posted on 08 Jun 2009

An analysis of draft 2009 - 2019 long-term council community plans (LTCCPs) shows that local authorities are planning significant rates increases over the next 10 years to fund their extra spending, the Minister of Local Government Rodney Hide said today.

The Department of Internal Affairs report shows councils are planning a 41% increase in total operating expenditure over the next 10 years, despite attempts to cut costs. Planned capital expenditure will total almost $31 billion over the same period. If councils confirm this expenditure in their final LTCCPs, it will mean an overall increase in income from rates of 48% by 2019.

"These are hard economic times and councils need to think about the cost and affordability of services in their areas," Mr Hide said. "They need to think about the broader impact of the decisions they are making over the next decade, not just the impact over the next two to three years.

"We need hard thinking about the costs imposed on ratepayers. There will have to be trade-offs between the services wanted by communities and the services councils can afford to provide in the future. Councils and communities are going to have to work together to provide services that give value for money.

"Cabinet has authorised a review of the Local Government Act 2002 to improve the transparency, accountability and fiscal management of local government. I want the Act reviewed to ensure ratepayers and citizens have better tools for controlling council costs, rates and activities. I will be looking at ways of ensuring local government operates within a defined budget and focuses on core activities."

Mr Hide said that the report shows councils should think hard about the sustainability of funding and be vigilant about cost increases. The review of the Act will ensure their decision making is transparent and accountable.

Councils need to become more

Councils need to become more efficient - like every business! Thefact that they have no incentive to do so is the major problem and one that must be addressed. Relying on voter outrage has proven to be ineffective as it is not the Councillors who run the Councils but the entrenched bureaucrats - who have every incentive to castle build. If normal businesses operated in this way they would be bankrupt very quickly.

In my experience of Councils (over 25 years) there is excessive fat in almost every Council office - especially planning, policy, administration and management - where salaries are much higher than the private sector, and staff ability and productivity is often very low.

However, staff levels in productive sectors (e.g. wastewater treatment plants) is often only just adequate, and often these plants only operate at all due to the ability of these lower paid operators.

We need to find a simple financial way to make the Council Management both accountable (firstly) and productive.

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