Millions in extra funding for councils would be welcomed by Western Bay of Plenty leaders, but it wouldn’t be enough to ease the pressures they face.

Local Government New Zealand is calling for the government to return the GST paid on rates to councils, which would result in $1.1b in extra funding across the country.

Tauranga City Council would receive $31m, which is 10 per cent of its operating income of $308 million; $206m of this income is from rates.

Western Bay of Plenty District Council would be in line for $11.5m – 11.6 per cent of its $99m operating income with $77m of this coming from rates.

Economic consulting firm Infometrics crunched the numbers using 2022 data.

Tauranga’s commission chair Anne Tolley told Local Democracy Reporting every little bit of funding helps.

“An annual repayment of GST would certainly be welcome.

“However, it would not address the underlying problem for local government of the increasing costs to ratepayers of providing for essential infrastructure, especially for high growth councils.”

Tauranga City Council has been grappling with how to pay for much needed infrastructure which is exacerbated by the city’s rapid growth.

Western Bay of Plenty mayor James Denyer said he welcomed alternative sources of funding for council.

Local Government New Zealand president Sam Broughton said the funding system for local government is broken. Photo: Supplied.

The analysis comes as councils in Aotearoa are setting rates, with the average rates rise estimated to be 15 per cent.

Tauranga’s median residential rates rise for 2024 is 7 per cent. This has been offset by a new industrial rating category introduced this year which reduced residential rates by around 3 per cent.

The city’s average rates rise, which includes residential, commercial and industrial properties, is 15.9 per cent.

Western Bay of Plenty District Council is yet to set its rates, having pushed out adoption of its long-term plan until September.

Local Government New Zealand president Sam Broughton said despite councils’ ever-increasing responsibilities, local government’s share of overall tax revenue has remained at 2 per cent of GDP for the last 50 years.

“It’s no secret that the funding system for local government is broken. Relying so heavily on rates is unsustainable,” said Broughton.

“We need a range of levers to address the funding and financing challenges in front of us. Returning GST on rates would be an excellent place to start.

“We’ve also put an accommodation levy, GST sharing on new builds, mineral royalties, and congestion charging on the table.”

The suggestion of returning to GST to local authorities was just one way to help address the funding issues councils faced in the Future for Local Government Review.

The independent review also suggested central government paid rates on crown properties, set up an intergenerational fund for climate change and considered the funding impact proposed policy decisions would have on councils.

LDR is local body journalism co-funded by RNZ and NZ On Air.