New Zealand Plans Reforms to Focus Local Councils on Core Role

(Bloomberg) -- New Zealand’s government is urging local councils to focus on core tasks and not direct scarce funds to convention centers or projects that central government is responsible for.

“We have to get our councils focused on doing the basics really well and at the moment there’s been massive amounts of distraction with pet projects and vanity projects from time to time in different towns and cities across New Zealand,” Prime Minister Christopher Luxon told reporters Monday in Wellington. “We want them to be very focused on what the ratepayer expects them to do.”

Many councils have raised rates paid by local citizens at double-digit pace to reduce operating deficits after a surge in costs, adding to inflation pressures across the economy. Some of New Zealand’s local councils are saddled with debt levels among the highest of their global peers, which may jeopardize their credit ratings, S&P Global Ratings said earlier this year.

Local Government Minister Simeon Brown today said references in the Local Government Act to “four well-beings” — the promotion of social, economic, environmental and cultural well-being of communities — had led to poor decisions and added an estimated 2 percentage points to annual rates increases. The government will remove those features and ensure the legislation sets out that the purpose of councils is to fix pipes, maintain roads and deliver core services, he said.

Brown said for some councils that may require less investment in new social housing, which is something that is more the responsibility of government working alongside community housing providers.

“If a council is thinking about its capital budget over the next 10 years and deciding should they be focused on building more social housing or actually fixing the roads that rates pay for, I would suggest they should be focused on fixing the roads,” he said.

The government is also planning to produce annual benchmark reports of local councils that will compare rates, debt level, breakdown of capital spending and road conditions. The first release will be mid-2025 ahead of the next local body elections later next year, Brown said.