Local government funding and financing

Local government funding and financing
01 Nov 2019
Issues Paper - Local government funding and financ…
01 Nov 2018


The Government has asked the Commission to undertake an inquiry into local government funding and financing. It wants to know what is driving the cost of local-government services and whether the current funding and financing arrangements are adequate and efficient. If neither adequate nor efficient, the Government wants to know what options and approaches will improve these arrangements.


The Commission’s findings and recommendations have been informed by a comprehensive engagement with interested and expert parties. The inquiry received 271 submissions from a diverse range of sector participants; including from councils, business groups, property developers, infrastructure providers, academics and researchers, farming bodies, ratepayer groups, individual ratepayers and government agencies.

The inquiry team met with a wide variety of interested parties across New Zealand. These included several “cluster meetings” of councils (where a council hosted neighbouring councils) in Dunedin, Christchurch, Palmerston North, Tasman, Porirua, Auckland and Hamilton. The Commission has appreciated the large turn-outs at these cluster meetings. The Commission also met with provincial chambers of commerce members, Federated Farmers members, and property developers.

The Commission undertook five in-depth case studies. Four of these were with a cross-section of individual councils, including one regional council. The fifth case study was a thematic study focused on climate change adaptation. It involved visits to the three councils involved in the Clifton to Tangoio Coastal Hazard Strategy process in the Hawke’s Bay.

The case studies involved a comprehensive document review and face-to-face interviews with elected members and key staff. These “deep-dive” case studies have allowed the Commission to “get below the averages”. They have provided it with a detailed understanding of the diversity of issues facing different councils.

Key Results

Radical reform is not required. The current rates-based system remains appropriate for New Zealand. International experience offers no clearly superior alternative.

But there are areas of significant funding pressure. These pressures are highly uneven across councils with small, rural councils serving low-income communities under particular pressure.

Targeted solutions are needed to tackle these pressures. Key recommendations include new tools to help councils fund and manage growth, and additional support from central government to help councils adapt to major pressures, such as climate change.

Councils need to lift their performance to help manage funding pressures. This includes making better use of all existing funding tools. Transparency is key, and a number of recommendations are aimed at improving the transparency of local government funding decisions and performance.

A better relationship between central and local government is essential. An agreed protocol would help end the practice of central government imposing responsibilities on local government, without appropriate funding. The Crown should also be paying for council services it receives on its properties and developments.

Regional spatial planning will better prepare councils for the future. It's a key tool for achieving more efficient use of resources, and better coordination between councils, and local and central government.

Page last modified: 22 Mar 2024