Councils can’t go cut-rate

Come rates-setting time, local government tends to hear a lot from the disgruntled twin of the famous Nike slogan. It’s a loud and pained message: Just Don’t Do It. Don’t shove yet another rates increase on us. For a while there, Invercargill ratepayers were given tantalising intimations of a potential zero increase, what with times being so tough.

Since then times have grown tougher as the Covid-19 lockdown has clawed into jobs, household and business incomes, and our sense of security.

Has this simply made the zero increase case more straightforward? Evidently not.

Invercargill rates are rising 2 per cent, Southland District rates 2.65 per cent and Gore District ratepayers . . . well, let’s just say it’s hard to cross your fingers and clench your fists at the same time.

The online public reaction has been, for the most part, dismay and reproach. Some criticisms are valid to a point. Resentment of the extent to which more than a few of the council higher-ups have been preserving their own incomes while cutting jobs and wages of the lowerpaid will stay radioactive for years.

But it is too cynical to contemptuously toss aside the fundamental justifications presented for the increases. In large part, they do stack up.

The Invercargill and Southland councils face major capital expenditure needs that cannot airily be dismissed as unaffordable now.

It’s a horribly false economy to disregard essential infrastructure work. Things fall apart and the costs become ever more brutal.

It makes sense to borrow for this work so the cost is paid over the life of the asset. Interest rates have been good and low, but loan availability in the future, worldwide, is looking far more perilous.

And there are rules about council borrowing. As the city council’s finance manager points out, the council can borrow at 2.5 times its rates revenue. So a zero increase would potentially lose $16 million the council had planned to raise for its 10-year $100m capital works programme.

In these parlous times there’s significant help available for some favoured infrastructure work through the Crown Infrastructure Partners scheme for shovel-ready projects.

But there’s a pretty stern parallel message coming from Economic Development Minister Phil Twyford warning local councils not to cut rates to an extent that means they’re not ‘‘investing alongside’’ the Government.

(Granted, this draws an artificial distinction between you the ratepayer and you the taxpayer, but good luck pursuing that argument when it comes down to specifics like this.)

Local Government Minister Nanaia Mahuta says rates freezes or reductions would probably be ineffective, failing to target those with the greatest need. This is arguable, but the more closely you target assistance the more people you exclude. Being too tightly focused about where assistance goes can end up offending the principle of achieving the greatest good for the greatest number.

Even so, it’s entirely appropriate for councils to be setting up provisions for deferred payments for those ratepayers who are doing it toughest, though as things stand there are some interesting variations in detail. The city council proposes deferrals where someone can prove a 20 per cent loss of income due to Covid-19. Gore has been less specific, requiring applicants to sign a declaration that they’re facing financial hardship.

The bottom line for now is that the extremities of the present cannot blind us to prepare for no less implacable long-term needs. As you must have noticed, the south is right now paying a price for having erred in that direction far too often.

It’s a horribly false economy to disregard essential infrastructure work.