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The Productivity Commission’s final report on local government funding and financing, released last week, recommends significant changes to the financial relationship between central and local government.
That included in climate change adaptation, which was now seen as "the most challenging new and growing pressure" facing local government funding.
There was a need for central government leadership, including new forms of financial support, to help councils meet the challenge.
That should include an expansion of the cost-sharing arrangement between councils and the NZ Transport Agency, which already helped pay for local roading projects.
An expanded cost-sharing system could result in the NZTA helping to pay to relocate or realign roads compromised by coastal erosion or flooding linked to climate change.
A climate resilience fund, overseen by a new Crown agency, should also be established to support councils with infrastructure — including water and wastewater pipes — threatened by climate change.
Sea-level rise was expected to result in saltwater infiltration of coastal communities’ wastewater systems, reducing capacity and damaging pipes, components and machinery, while more extreme rainfall would overwhelm wastewater and stormwater systems more often.
Together, the suggestions outlined by the commission would, if adopted, cost the Government an estimated $150million annually for the next 20 years, it said.
However, not acting quickly, or leaving individual councils to respond in an ad hoc manner, would also come at a cost, the report cautioned.
Dunedin Mayor Aaron Hawkins said there was no doubt councils faced "significant" financial challenges from climate change adaptation, and were ill-equipped to handle them alone.
A new fund would be a "positive", as would increased focus on the issue from central government, he said.
"There’s no question in my mind that central government do need to be far more involved in this, in the same way they are dealing with earthquakes," he said.
If the recommendations were adopted, Dunedin — which in South Dunedin had one of the communities "at the pointiest end of a changing climate" — stood to benefit more than many centres, he said.
The commission’s report also outlined other suggestions to improve council finances, including greater use of targeted rates and a suggestion the Government should pay development contributions to councils.
Private sector developers already made the payments to offset the extra loads placed on council infrastructure, but Crown buildings — including Dunedin’s planned new hospital project — were exempt.
The recommendations came months after a Local Government New Zealand report, published in February, warned $5.1billion of council assets across New Zealand — including roads and water infrastructure — were threatened by 1m of sea level rise.
Otago was identified as a "priority region’,’ Dunedin alone having $415million of threatened council-owned assets.
The commission’s report also noted some areas, including South Dunedin, were already experiencing the effects of climate change, and warned that over time "some existing communities will ultimately become unviable".
"When communities become unviable, a managed retreat of people and infrastructure will be necessary."