Libraries, swimming pools and essential community services could face closures, privatisation or higher user charges under the Government’s proposed rates caps, with new economic modelling warning councils could lose as much as $5.2 billion in revenue by 2034.
The Public Service Association Te Pūkenga Here Tikanga Mahi has released a report in Christchurch warning that the Government’s plans to limit council rates increases could create significant financial pressure for local authorities and shift costs onto households, businesses and future generations.
The report, Who Pays for Rates Caps? Shifting Costs to Communities and Future Generations, estimates councils could lose between $1.8 billion and $5.2 billion over the current Long-Term Plan period ending in 2034, depending on how quickly councils are required to comply with the proposed rules.
PSA National Secretary Fleur Fitzsimons says the policy risks undermining essential public services while creating the appearance of savings for ratepayers.
Libraries, Pools and Community Facilities at Risk
The PSA is calling on Local Government Minister Simon Watts to guarantee that no libraries, swimming pools or other community facilities will close as a consequence of rates capping.
The union argues that restricting council revenue without addressing the rising costs of infrastructure, service delivery and maintenance will force local authorities to make difficult financial decisions.
Those decisions could include reducing services, increasing user charges, deferring infrastructure investment or transferring publicly owned facilities and services into private hands.
Fitzsimons says the Government should explain how councils are expected to maintain existing services while operating under tighter revenue constraints.
The PSA warns that community facilities, particularly those relied upon by lower-income households, could become increasingly vulnerable as councils seek alternative ways to balance their budgets.
Councils Could Lose Billions by 2034
The report uses economic modelling and international evidence to examine the potential consequences of imposing limits on rates revenue.
Its central finding is that councils could face a cumulative revenue shortfall of between $1.8 billion and $5.2 billion by 2034.
The PSA says international experience suggests rates caps can lead councils to increase borrowing, introduce additional service charges and postpone essential maintenance.
The union argues that smaller and rural councils could be particularly exposed because they often have limited revenue sources, smaller rating bases and substantial infrastructure responsibilities.
It warns that deferred investment could eventually leave communities facing more expensive repairs, deteriorating facilities and greater financial liabilities.
Cost-of-Living Relief or Costs Shifted Elsewhere?
The Government’s rates capping proposals are intended to constrain increases in council rates, an issue of growing concern for households facing rising living costs.
However, the PSA disputes whether the policy would deliver meaningful long-term financial relief.
Fitzsimons argues that any immediate savings on rates could be offset by higher charges for council services, reduced access to public facilities and increased borrowing costs.
The union says the policy risks shifting costs rather than eliminating them.
Under that scenario, ratepayers could pay less through rates but more through individual fees and charges, while future generations inherit infrastructure maintenance backlogs and additional debt.
The PSA also warns that council employees could face wage restraint, restructuring and job insecurity as local authorities attempt to reduce operating costs.
Māori Communities and Te Tiriti Obligations
The report raises concerns about the implications of rates capping for local democracy and councils’ responsibilities under Te Tiriti o Waitangi.
The PSA argues that restricting councils’ revenue-raising options could limit their ability to respond to the priorities of local communities, including Māori.
For whānau Māori, particularly those living in smaller towns, rural districts and communities already experiencing infrastructure pressures, reduced council investment could have significant consequences.
Libraries, recreation centres, public swimming pools and other council facilities often provide important spaces for tamariki, rangatahi, kaumātua and whānau.
The union also warns that financial constraints could affect councils’ ability to invest in climate resilience, maintain essential infrastructure and meet their responsibilities to communities.
Its concern is that nationally imposed financial limits could reduce the discretion of elected councils to make decisions based on local needs.
Call for Royal Commission Into Local Government Funding
Rather than proceeding with rates caps, the PSA is calling for a fundamental review of how local government is funded.
The union wants the next Government to abandon the proposed restrictions and establish a Royal Commission to examine the role, functions and funding arrangements of local authorities.
It argues that a comprehensive review is needed to develop sustainable funding models capable of supporting infrastructure investment, essential services and the long-term needs of communities.
The proposal would also provide an opportunity to examine the responsibilities placed on councils and whether their existing revenue sources are sufficient to meet those obligations.
A Major Election Issue for Local Communities
With the November 7 general election approaching, the debate over council funding is likely to raise wider questions about affordability, public infrastructure and the future of locally delivered services.
The PSA maintains that the proposed rates caps could leave communities paying more in the long term, despite the promise of greater control over rates increases.
The Government’s response to the report, including whether it accepts the modelling or would provide safeguards for essential services, remains an important part of the debate.
The central question is whether limiting rates increases will genuinely ease pressure on households or simply transfer billions of dollars in costs to future ratepayers through higher fees, reduced services, infrastructure deterioration and additional council debt.
For the PSA, the warning is that decisions made today could determine whether communities across Aotearoa retain affordable access to the public facilities and services they rely on for decades to come.
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