What if Christchurch was $102m richer?
Wednesday, 1 May 2024
Some $102 million of Christchurch’s rates will be taken by central government as GST this financial year - money the mayor says is better spent locally.
The figure, released by the Christchurch City Council, follows an analysis by economics consultancy firm Infometrics, which found over $1.1 billion of rates revenue nation-wide was collected by central government in 2022 as GST.
Some $88.5m of that came from Christchurch city ratepayers: enough to save the Christ Church Cathedral from ruin; build a potentially lifesaving bridge on Pages Rd; or restore the Dux de Lux seven times over.
It would also pay for 26 years worth of annual funding for the Art Centre and Orana Wildlife Park, as they’ve recently requested.
Mayor Phil Mauger said the money could be used to lower rates rises. In a letter to Finance Minister Nicola Willis, sent in March, Mauger said $102m was the equivalent of a 15% reduction in proposed rates rises (currently 13.24% on average).
He called on the Government to consider policies pitched by both Auckland mayor Wayne Brown and Local Government New Zealand (LGNZ): to give the GST collected on rates back to councils, and to share the GST collected on new builds.
Sam Broughton, LGNZ president and Selwyn mayor, said LGNZ had offered the Government several more solutions to the “broken” funding system, including mineral royalties, an accommodation levy and congestion charging.
He said it was unsustainable for councils to rely so heavily on rates.
The Infometrics analysis found the Selwyn and Waimakariri district councils would each be more than $11m richer, and Environment Canterbury would be left with $19.7m more in its coffers, if it had kept the 2022 GST take.
In total, more than $130m was taken out of Greater Christchurch’s rates revenue. If $130m was saved each year, in 2054 it would cover the estimated $4b cost of building light rail in Ōtautahi - about the same time the area’s population is expected to reach 1 million.
Auckland Council lost the most revenue to GST overall, with $317m collected by central government in 2022. However, when Infometrics compared the estimated amount taken to the overall percentage of a council’s estimated operating income, the Rotorua District Council had the most to lose, at 12.2%.
In the South Island, the highest percentage of operational income lost to GST was 10.8% (Waimakariri, Waimate and Waitaki district councils) followed by 10.7% (Christchurch City Council, Gore District Council).
How much a council’s operating revenue is affected in this way depends on how much it relies on ratepayers to fund its costs. The Chatham Islands was affected the least (1.2%) because of how it is funded, followed by the Hurunui and Buller district councils (6.3%).
Brad Olsen, Infometrics chief executive and principal economist, said it made sense for rates to be charged GST because councils provided goods and services.
“But given constant discussion about the need to fund local government differently, perhaps GST on rates should be collected and then returned to local councils.”.
He said although 29 of the 78 councils would receive more than $10m if GST was returned - which could be invested in local services - central government’s finances were also under pressure.
The GST it took on rates revenue was worth 0.9% of total government revenue in 2022, he said.
The Government has already agreed to consider sharing a portion of GST collected on new residential builds with councils, as per the National and ACT Party coalition agreement.
This was repeated by Local Government Minister Simeon Brown on Tuesday, who told The Post the Government was looking at a range of funding and financing tools for local government, but did not confirm if returning GST on rates revenue was one of them.