Luxon tells mayors the ‘party’s over’, as councils call for funding change

Wednesday, 21 August 2024

Prime Minister Christopher Luxon has told mayors seeking new funding tools from Government that “the days of handouts” are over, as ratepayers get “sick of white elephants”.

“The central government focuses on must-haves, not nice-to-haves, and we expect local government to do the same,” he said.

Mayors and local government leaders are meeting in Wellington this week, urging “systemic change” to allow them to raise more money, at Local Government New Zealand’s (LGNZ) annual conference being held at the Tākina event centre in Wellington.

Luxon, speaking at the opening of the conference, said councils that thought the coming city and regional deals would deliver a suite of funding tools needed to return to “reality”.

“Shifting your costs onto taxpayers doesn’t save anyone any money. It means ratepayers pay more tax, and are left with less of their own money, to meet the cost of a slightly smaller rates bill.”

While there would be some funding tools ‒ where it made sense ‒ the Government was also working on “benchmarks”, or performance measures, for councils, as well as options to cap their expenditure on “nice-to-haves”.

Wellington mayor Tory Whanau hit back on a LinkedIn post shortly after the announcement, saying there was no more fat to trim.

“Barking at us that we need to be better is tired and unhelpful and doesn’t solve our shared problems. I urge the PM to instead take a proper look at the long impending challenges being faced by councils, that have been foreshadowed and highlighted strenuously by LGNZ as our representative entity.”

Whanau said many councils were doing what was necessary to fix an issue that was now pressing and urgent.

The speech missed the opportunity to talk about how to solve the shared problems and instead punched down, she said.

Speaking to reporters afterwards, Luxon said the Government remained committed to localism and devolution ‒ being policies that empower councils to make decisions closer to communities ‒ but councils also has a “responsibility not to do dumb stuff”.

“We are big fans of localism and devolution, but with that doesn't mean we just send cash to the local communities and we get nothing for it in return. We expect a return on that investment.

“To be honest, we've seen councils get distracted.”

In the speech, Luxon said the “party is over” and there would be no “cold, hard cash” which many councils wanted from Government, as a “laundry list of distractions and experiments” plagued council balance sheets.

The Tākina convention centre was a “classic example” of this, he said.

“With pipes bursting and other infrastructure under pressure, Wellington City Council decided to spend $180 million of ratepayers’ money on a convention centre, which, according to public reporting, is now losing money,” he said, to murmurs in the audience.

“It looks very nice, and it’s very nice that politicians like us have another expensive room to deliver speeches in, but can anyone seriously say it was the right financial decision or the highest priority for Wellington given all of its challenges?”

Upper Hutt mayor Wayne Guppy, the region’s longest serving, supported accountability and performance measures being put in place.

It was clear the Government meant business and the heat would not go off local councils.

“It is surprising if they think that councils haven’t gone line by line. Before we put anything up to be done, we do that. It’s part and parcel of what we do.”

Porirua mayor Anita Baker said hers was a council that “sticks to its knitting” and the Luxon’s announcement encouraged them to do that.

“I think our water troubles and the state of our harbour have focused our attention for several years. I don’t see it as a big change for us.

“I would have also liked to see some positive comment on future amalgamation options for councils. We really need to rethink the way we’re organised particularly in this region. We need to do better for our communities.”

Kāpiti Coast mayor Janet Holborow needed to be efficient, needed to deliver roads and pipes, but did that. “But that's not enough. It won't help our communities thrive, it won't help us have a prosperous future if we think the basics are all that people and our country needs.

“It seems to me that looking after the wellbeing of our communities is an important thing to be doing. If local government isn't allowed to do it, then who will?”

Greater Wellington Regional councillor Thomas Nash tweeted: “I try to be constructive and measured in my criticism of Ministers so it truly pains me to say this, but the Prime Minister’s speech to local government just now was one of the most mana diminishing, paternalistic and visionless speeches to a group of people I have ever heard.”

LGNZ president Sam Broughton followed Luxon’s speech, saying “criticism and antagonism” would not move New Zealand forward, and true localism was needed ‒ a message more warmly received by the audience.

“We need a new way of funding local government … we’re not just looking for hand outs, we actually want to think about how we increase growth.”

Speaking before Luxon’s speech, Wellington mayor Tory Whanau made a point of welcoming the conference to Tākina, a convention centre built to host major events and boost the local economy ‒ in the case of this event to the tune of $1 million.

She also said localism meant councils should be able to choose whether they had Māori wards. The National-coalition Government is legislating to insist that public referendums be held even for existing Māori wards, to the protest of many of the country’s mayors.

Whanau said it was a difficult time for Māori ward councillors, and she agree with protesters outside the event, who has chalked on the pavement that the Government was “racist”.

“I agree with those outside Te Papa right now, that having more places for Māori in local government strengthens our democracy, rather than weaken it,” she said, to applause from the crowd.

“Successive central governments have overstepped when it comes to local council decision-making processes … that’s an approach that must change.”

Broughton, who is also the Selwyn mayor, said councils were well aware of the Government’s message and had been going “line-by-line” through their budgets.

“The numbers that were originally proposed in councils’ draft budgets back in December-January this year, have been pulled back a lot in response to thinking about the cost concerns within communities.

“So yeah, local government is doing that work.”

He said there had been great “rhetoric” from the Government about empowering local decision-making, and now action was needed.

The Government has been exploring funding tools for local government.

Broughton said LGNZ wanted the Government to provide it new funding streams including returning GST earned on new buildings to local government ‒ so the benefits of housing growth are distributed.

“It's a systemic change that's needed, and we've got to move away from rates being the tool that we use to fund local government infrastructure.”