Five ‘regional deal’ lifelines may be on offer for cash-strapped councils

Friday, 23 August 2024

Local Government Minister Simeon Brown has cracked open the door to new money for councils, raising the possibility of tourist and mining levies funding local infrastructure.

Brown kept the tough talking tone set by Prime Minister Christopher Luxon at the Local Government New Zealand (LGNZ) conference on Thursday. But Brown’s speech, which came with a heaping of cynicism about council priorities, included a silver lining for local government leaders.

But the silver lining won’t arrive for everyone, immediately at least.

Brown revealed the Government would be inviting only five regions to apply for regional deals. Those regions would not necessarily be within existing council boundaries. That number, five, sparked crystal-ball gazing and gossiping across the conference with councillors, mayors and council officials pondering about which five regions would be offered a lifeline.

After the first round of deals were done in 2025, Brown said the Government would start negotiations with other regions.

In a draft outline of how Brown envisions the “regional deals” to operate, he said the Government was open to giving councils access to new streams of funding. Examples included access to existing levies, such as those paid by international visitors and also royalties that come from mining companies.

The document also suggested that new taxes could be introduced to fund local infrastructure.

These included the congestion charges for traffic, which Brown was keen on for Auckland, but also “value capture” schemes.

Brown rallied against “value capture taxes” while in Opposition and hit out at Labour for suggesting that such a scheme could help fund Auckland Light Rail. But the party then campaigned on using them.

Value capture refers to targeted taxes on the benefits received by private landowners when governments make investments in infrastructure. It could take the form of deferred levies, targeted rates, or a sort of capital gains tax focused on the portion of sale deemed to be as a result of a project.

Each regional deal would include a negotiated 10-year plan.

Those deals would come through negotiation, Brown said. “We're not guaranteeing that we're just going to sign up to what local government wants.”

He said their plans would have to align with central Government priorities to access potential new revenue streams, funding, or to get legislative changes across the line.

Brown said the Government would refuse to enter deals that had been written by consultants or included money for nice-to-haves.

“We don’t want extravagant glossy documents … developed by consultants. We’re looking for simple in-house proposals to finalise the first deal by the end of 2025,” he said.

Regions seeking a deal would have to demonstrate have to show fiscal prudence and the potential to grow.

LGNZ president and Selwyn Mayor Sam Broughton said the regional deal framework was a “great win” for local government. Although he said LGNZ was not consulted before Brown released the policy, he said it incorporated much of what his advocacy organisation had wanted.