Two South Island mayors say the Government's 4% cap on rates increases could affect public services as councils face additional costs from new reforms.
Under the proposed system, first proposed late last year, annual rates increases would remain within an initial target range of 2% to 4%.
Local Government Minister Simon Watts said the cap was a response to "steep and unexpected" rates increases.
On Breakfast this morning, Waitaki Mayor Mel Tavendale acknowledged that the economic climate was tough, "and councils certainly aren't exempt to that".
She said, however, that new reforms – such as the Resource Management Act reform and the Emergency Management Bill – would add to council bills.
"There's going to be millions in that for councils, and that's not part of the status quo we're looking at right now," she said.
"So there is a real concern that yes, we can do it if we're doing what we need to carry out and services for our community, but if we keep getting thrown a whole lot of other things to do with no money, that's just going to be something that eats into our community and what they can actually afford to do on that."
Gore Mayor Ben Bell said his council was in a similar situation, saying the new RMA system will cost $860 million to stand up across the country, while the emergency management changes will cost $83 million.
"You've got to add all of that, plus the increases in roads, which we can't skimp on, and rubbish as well.
"Four per cent might be fine now, but with all these extra additions, it'll make it really tough."
He said community access to things like pools, parks, and gardens will be affected.
"It's all those things that our communities enjoy that they'll have to sacrifice to be able to pay for the things that are capped."
Bell said these things will likely have to be funded through fees and user charges – with debt another option.
"Those families on lower incomes are going to not be able to go to the pool anymore.
"We've worked really hard to balance the budgets. But you would have to just start taking on debt to keep the lights on."
Tavendale said there was a "real disconnect" between where costs are and how much funding councils received.
"We've got about 30% of the nation's infrastructure, and we get about 10% of the funding coming through for it.
"This conversation, I guess, shouldn't start with the government handing us down a rates cap. It needs to start with us actually talking with central government around how we fix a much wider infrastructure issue."
Bell said the cost of water infrastructure would "massively" increase bills in the coming years.
While water services were excluded from the scheme, "all of this capping of rates is going to disappear when everyone starts to get their water bills".
Tavendale said water was a "massive driver" for increases.
Minister Watts said yesterday the cap's target range will be reviewed every six years and updated "where necessary to reflect costs outside councils' control". Exemptions would be available in exceptional circumstances, such as natural disasters, or when councils can "demonstrate prudent financial management and a justified need to operate above or below the target range".
Councils will need to consider the target range from July 1, 2027, with the caps expected to take full effect from July 1, 2029.
“Ratepayers nationwide have been hit with median increases of 14.2% and 9.2% over the past two years, respectively," Watts said about the new scheme.
“This rates cap is about driving greater fiscal discipline, keeping rates affordable, and ensuring councils are focused on delivering the services ratepayers rely on.”
“It will also sharpen the focus on delivering the services communities expect councils to get right, like fixing the potholes, collecting rubbish and running our pools and parks."
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