Adding to this, soaring costs are often paired with mounting council debt, which must be serviced and inevitably narrows choices.
In response, the government is weighing the introduction of rate caps - proposals that Local Government New Zealand opposes.
In June, the New Zealand Taxpayers Union urged Local Government Minister Simon Watts to "cap rates now".
It argues the cap should align with inflation, adjusted for population growth. The group cites average rate hikes of 34% since 2022, far higher than the United Kingdom’s 14% and Australia’s 8%, despite New Zealand’s three-year inflation figure sitting at 13.7%.
Should councils wish to exceed the cap, they would need to seek public approval via a referendum, the union says. That, in turn, would compel councils to shed "nice-to-haves" and scrutinise staffing costs.
Councillors, especially in larger councils, can often find it easy to spend other people’s money on various worthy matters. Unlike businesses, they operate largely insulated from market competition and the risk of insolvency.
Frequently, it is more progressive councillors who champion public spending and service expansion, even though rising rates disproportionately affect those on tighter budgets. Their generosity comes at a cost.
With local elections approaching, many candidates will pledge to rein in rates. They may promise thorough cost reviews or vow to focus spending on core priorities.
The difficulty lies in making cost reviews genuinely effective; they must be tough-minded and even ruthless. Candidates will also have differing views on what is essential and on the priorities.
Candidates vowing to contain rate rises must be clear-headed about trade-offs. They must be specific about what would be cut and what would not proceed. When push comes to shove, for example, could Dunedin afford the capital and ongoing costs of a South Dunedin library? What traditional sacrosanct services can be trimmed or eliminated? Should rubbish bins be cleared and grass cut less often? What responsibility should councils bear in addressing homelessness?
Under financial strain, even well-intentioned policies - such as guaranteeing a "living wage" for council staff and contractors - become hard to sustain.
Yet, there is also the legitimate view that cities and districts become less attractive places to live when they allow themselves to civically stagnate and severely restrict services and maintenance. Striking the right balance is always demanding.
Many councils already spend more than 80% of their budgets on infrastructure and basics, depending on how basics are defined. Persistent underinvestment in water, stormwater and sewerage systems is a massive drain. Increases in such spending might have to be excluded from any rating cap.
A counterpoint is that such spending necessitates even more rigour elsewhere to free up resources.
Implementing rate caps may be more feasible for councils that have historically overspent or are further along in Three Waters reform.
Clutha District Mayor Bryan Cadogan once supported rate caps, noting years of modest increases. But his district’s mounting infrastructure demands and debt have made such limits "inconceivable". He described the cap proposals a one-dimensional answer to a complex question.
Christchurch Mayor Phil Mauger, on the other hand, favours a cap but perhaps at 5% rather than the CPI level. Whanganui Mayor Andrew Tripe said in 2022 the council "started early and went hard", and the rate rise this year was 2.2%. Some debt had also been paid off.
Although applying rate caps across diverse local contexts will be difficult, the government is likely to keep the idea on the table. Councillors, in turn, must act as firm, fiscally responsible guardians of public funds.
