GST on rates under scrutiny as council costs soar
By Lois Williams, Local Democracy Reporter
West Coasters will be topping up government coffers by at least $10 million this year, when they pay their council rates.
The GST component of rate bills nationally soared to $1.1 billion in the last analysis of data from councils around the country in 2022, by the economics consultancy firm Infometrics.
And principal economist Brad Olsen (pictured) says that figure will only increase this year as councils sign off on annual plans tackling pricey infrastructure deficits.
“We feel charging GST on rates is still appropriate because councils do supply goods and services. But we come back to the fact that a lot of councils are struggling to provide those services because their only significant source of income is rates.”
In 2022, the government clipped the rates ticket to the tune of nearly $9 million on the West Coast.
Grey District Council paid $3million in GST; Westland $2.3m; Buller $2.4m and the West Coast Regional Council, $1.2 million.
This year the Regional Council figure will be more than $1.8m – a sum that could have filled some gnarly financial potholes, chairperson Peter Haddock said.
“We had emergency flood protection work in Westport that we had to raid our catastrophe fund for and we’re still short of a million for that.
"We’ve got ratepayers struggling to come up with their share for stop banks in Franz Josef; if even part of the GST could come back to us it would help, but we could do a lot with $1.8 million.”
Westland mayor Helen Lash says her council will be handing the government $3.3 million this year, in GST.
Getting the money back would be a game changer for the district’s ratepayers, she says.
“We would use it for core services – the ones we can’t afford to fund now, like footpaths and roading, and we could put it towards capital upgrades of wastewater treatment.
"It would make a hell of a difference for Westland.”
Instead, councils are being invited to bid for a share of the government’s new $1.2 billion regional infrastructure fund, with just five regions or cities being selected in the first wave of long-term regional deals.
The amount, at least, is in line with the conclusions of the independent ‘Future for Local Government’ review panel, which last year recommended an annual transfer of funds from central to local government, equivalent to the GST paid by councils.
The former chairperson of Local Government NZ, Stuart Crosby, said the history of who pays for what when it comes to infrastructure is instructive - and often forgotten.
Now a Bay of Plenty Regional Councillor, his memories of the changes go back to 1986, when he first stood for election.
“We’ve submitted remit after remit on the return of GST on rates over the years from Local Government conferences, that this tax-on-a tax is unfair."
Before the 1989 local government reforms, the Government made large capital grants to councils for water works, roading and other activities and Catchment Boards, responsible for flood protection, were subsidised by up to 70 percent.
“It was critical funding. But all that went after 1989, except for Transport and it’s taken more than 30 years to catch up.”
The quid pro quo for funding infrastructure was that government entities did not pay rates, Crosby said.
But as the subsidies disappeared the government retained its rate-free status.
“The tradeoff back in the day, was that Government departments didn’t pay rates or development fees on new schools and hospitals and very low service rates on existing buildings.
“That was in recognition of the infrastructure subsidies but that all stopped and now we have these problems we see with water and so on and they still don’t pay rates.”
Crosby said the rebate of GST would be a first step in resolving the yawning gap that has developed between what councils must fund, often by Government decree, and what their ratepayers can afford.
But the question of whether government departments should now be paying rates should also be revisited, he says.
On the West Coast, where the Conservation Department owns nearly 90 percent of the land and there are only 20,000 rateable properties, the ability to rate the Crown would transform council finances overnight, the regions’ councils say.
The counter-argument has been that the Coast’s vast areas of mountain and native forest receive no council services and cost councils nothing.
But that does not bear scrutiny, Crosby said.
“Water comes off that land into rivers the councils have to manage, so whether its DOC or developed land. Those lands have an impact and they should be rated to make a contribution to the protection that’s needed downstream for homes and businesses.”
The chances of persuading the Government to become a ratepayer is not overly high he concedes.
“But the stress councils are under has been building for decades and every government needs functional local government to carry out national strategies.
“If it’s fragile that becomes a problem – not just for councils but for the Government itself.”
The Government has previously signalled it would consider sharing a portion of GST collected on new residential builds with councils, but not the sharing GST on rates.
Local Government Minister Simeon Brown has been approached for comment.
In August, Brown said councils must focus on the must-haves, not the nice-to-haves, to reduce costs.
Poll: Should drivers retake the theory test every 10 years?
Drivers get where they need to go, but sometimes it seems that we are all abiding by different road rules (for example, the varying ways drivers indicate around a roundabout).
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48.9% No
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1.9% Other - I'll share below
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Coastal plan goes back to drawing board
By local democracy reporter Lois Williams:
The West Coast Regional Council (WCRC) is going back to the drawing board to come up with a new Coastal Plan, controlling what can and can’t be done or built on the foreshore.
Regional Coastal Plans are a requirement under the RMA for all regional authorities, to manage the coastal marine area - stretching for mean highwater springs to 12 nautical miles offshore.
They regulate the activities the council will allow in that area; they must give effect to the New Zealand Coastal Policy statement, and they must be reviewed every 10 years.
But the WCRC’s last attempt to update its Coastal Plan was never completed, mainly because of staff shortages, and parts of it are now well out of date.
Chief executive Darryl Lew asked councillors this month for approval to withdraw the old plan and start again.
“A lot of the resources of this council have been going into the Tai o Poutini (district) Plan, which we run but don’t govern and we’ve not been able to pursue our own regional plans, which are actually our work,” he said.
In the past few weeks, Regional Council staff had begun focusing on that work including the Coastal and Air Quality plans.
A staff report outlining the issues and options in a new coastal plan said the main activities needing regulation in the CMA were temporary whitebait stands, hard protection structures (seawalls), gravel and sand removal, and small-scale beach mining.
The council grants an average six or seven resource consents for activities a year and has dealt with 29 incidents involving those consents in the past four years.
Most commonly, they involved the removal of beach material within Coastal Hazards Areas, and flood protection structures.
The main concerns for iwi, consulted under the council’s Mana Whakahono agreement, were offshore seabed mining and the discharge of untreated sewage into the ocean, staff reported.
That was culturally offensive to Poutini Ngai Tahu, but the coast’s three main centres all pumped treated wastewater out to sea, and there were limited options for land-based disposal, the report noted.
The regulatory options were to require the urban sewage to be treated to a high standard, consult with iwi over resource consents, and proactively monitor those consents.
Buller councillor Frank Dooley had concerns about possible restrictions on seawalls, discouraged as ’hard protection structures’ which could cause erosion, in the national policy directive.
“We have to recognise that at times they are the only option,” he said.
Councillor Brett Cummings agreed.
“Down at Haast at the moment they’re putting in rock (defences) to protect the power poles – we don’t want to get in the way of that.”
Dooley also challenged a staff suggestion that seawalls could be treated as restricted discretionary activities in the new plan.
But the word “restricted” referred to council’s powers to regulate and was in fact favourable to the applicant, the chief executive explained.
“With these plans, you are the governors, and you have a chance to say what you want in them. I would urge you to get involved in the workshops and you will end up with the plans you want,” Lew said.
Councillors voted unanimously to withdraw the old unfinished Coastal Plan and start work on the new one.
The council is aiming to begin consultation with stakeholders next month, and have the plan notified and out for public submissions in early 2026.
*LDR is local body journalism co-funded by RNZ and NZ On Air.
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