LGNZ president Sam Broughton says rates capping may mask the real impact of reduced revenue to fund infrastructure. Photo: RNZ / Angus Dreaver
Mayors and councillors from across the country have met in Wellington to hear discussions about alternatives to rate capping.
It comes as the government indicated it would explore this option to balance the long-term interests of ratepayers and the budgets of councils.
Local Government New Zealand president Sam Broughton said they had been keen to hear about other councils' experience with it.
"Rate capping is an artificial way of trying to limit costs for communities without having the true conversation about what is the real impact of that over the medium and long term.
"Underfunding infrastructure hasn't resulted in good outcomes for New Zealand and so we want to be careful before we think about rates capping.
"But artificially lowering those costs just because of affordability can't be the only tool that we look at so we need to explore other ways of doing things."
Broughton said 25 new tools launched at the LGNZ conference on Thursday would help councils with funding and financing, including the sharing of GST on new builds, sharing mineral royalties back to communities, congestion charging and tolling roads.
Local Government New South Wales councillor Darriea Turley spoke at the conference, and urged councils to be cautious around introducing a rates cap.
New South Wales and Victoria were the only two states in Australia to have rate capping, which had led to a backlog in projects needing to be done, she said.
"We've had 50 years of rate capping, 50 years of lack of funding for infrastructure builds and 50 years of the community wondering why they're not having services delivered."
Turley told the conference between 1989 and 2019, the states' rates per capita grew by $139 to $591 - an average increase of 1 percent per annum and the lowest in Australia.
"This has left New South Wales' rates per capita about 29 percent lower than the Australian average of $835 dollars per capita and it means councils are not able to provide the services, the infrastructure renewals, maintenance and investment their communities need."
But Domenic Isola from the Municipal Association of Victoria said rate capping did have benefits for councils.
"Rates bills, probably not increasing as much as they had previously. [And it has] made councils work with their communities more about what's important and what a community is willing to provide or support and pay for. I think that's important because sometimes we can go along and do all these things, but are they actually adding values to community?"
Victoria had had capped rates for only eight years.
If rate caps were to be introduced in New Zealand, they would need to be phased in, he said.
He agreed with Turley that capping rates could result in a lack of revenue to fund important infrastructure.
"In many ways ... some councils would say their ability to fund a whole series of other types of services and infrastructure has been reduced because there's a rate cap involved and you've got to meet the rate unless you apply for a variation," Isola said.
Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.