Local Government (Rates Capping) Amendment Bill
Local Government (Rates Capping) Amendment Bill
Local Government (Rates Capping) Amendment Bill
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Local Government (Rates Capping) Amendment Bill
Government Bill
340—1
Explanatory note
General policy statement
Overview
This Bill is an omnibus Bill that amends more than 1 Act and is introduced under Standing Order 267(1)(a) because the amendments deal with an interrelated topic that can be regarded as implementing a single broad policy. That single broad policy is to establish a framework to limit annual increases of non-water-related rates in order to promote local authority fiscal responsibility and the predictability of costs to ratepayers.
The Local Government (Rates Capping) Amendment Bill (the Bill) builds upon the direction set in the Local Government (System Improvements) Amendment Bill, particularly the changes to the purpose of local government, the core services that councils should consider in their role, and the focus on these matters in councils’ financial management approach.
The Bill amends the Local Government (Rating) Act 2002, the Local Government Act 2002, and the Legislation Act 2019. The changes relate to both how councils plan rates increases in council planning documents and how rates are set. Compliance will be overseen by a regulator.
Target range
The model applies to all local authorities. It covers general rates, a uniform annual general charge, targeted rates, and penalties on unpaid rates. Rates relating to water services (drinking water, wastewater, and stormwater) are excluded and regulated under separate legislation.
The target range applies to increases to the rates price as a per-rating-unit average calculated by a formula. The range places a cap on the minimum and maximum rates price increases. The lower end of the range is designed to ensure councils can maintain essential services, while the upper end balances the need for sustainable growth with keeping rates increases affordable.
A review process is set out for changes to the target range in future, with new target ranges to be set by Order in Council. The Minister of Local Government (the Minister) must consider local authority costs (including any future costs resulting from government decisions or legislative changes, any costs already incurred resulting from such decisions or changes, and any costs already incurred resulting from unanticipated economic trends or indicators) before recommending that an Order in Council be made.
Exemptions
The Government recognises that there may be times when it is justified for councils to operate outside of the target range. The Bill includes mechanisms that allow councils to operate outside of the target range in specified circumstances where it is justified to do so. These mechanisms include—
exemptions for exceptional circumstances (for example, in response to a major emergency), to be approved by the Minister:
exemptions for future financial planning where the council can demonstrate fiscal prudence, to be approved by the regulator:
bespoke processes for exemptions for the 2029/30 financial year relating to major infrastructure projects and councils in financial hardship.
Regulatory function
The Bill establishes a regulatory function for ensuring council compliance with the target range, with the regulator having responsibility for—
providing advice to the Minister on the target range, exceptional circumstance exemption applications, and a review of the implementation of the target range; and
making decisions on the other types of exemptions; and
directing councils to make replacement decisions in relation to any non-compliant rates-setting decisions; and
reporting on the implementation of the new target range regime.
The regulatory function will be performed by a statutory officer within the Ministry for Cities, Environment, Regions, and Transport, but must not be performed by the chief executive.
Regulatory impact statements
The Department of Internal Affairs produced regulatory impact statements on 5 November 2025 and 16 March 2026 to help inform the main policy decisions taken by the Government relating to the contents of this Bill.
Copies of these regulatory impact statements can be found at https://www.regulation.govt.nz/publications-and-resources/regulatory-analysis-summaries/
Regulatory analysis summary
The Ministry for Cities, Environment, Regions, and Transport prepared a regulatory analysis summary on 7 July 2026 about which entity should be designated as the regulator.
Copies of the regulatory analysis summary can be found at—
Consistency with principles of responsible regulation
The Ministry for Cities, Environment, Regions, and Transport provided the following documents relating to its review of this Bill, and its process for developing it, for consistency with the principles of responsible regulation under the Regulatory Standards Act 2025:
a consistency accountability statement on 6 August 2026:
a summary of underpinning analysis on 6 August 2026.
Copies of these documents can be found at https://www.mcert.govt.nz/publications/
The Minister of Local Government prepared a statement on 28 July 2026 that briefly explains the Government’s reasons for any inconsistency with the principles of responsible regulation that is identified in the consistency accountability statement.
A copy of the document can be found at—
Clause by clause analysis
Clause 1 is the Title clause.
Clause 2 provides that the Act comes into force on the day after Royal assent.
Part 1Amendments to Local Government (Rating) Act 2002
Clause 3 provides that Part 1 amends the Local Government (Rating) Act 2002 (the principal Act).
Clause 4 adds a new purpose to the purpose provision of the principal Act, section 3. The new purpose is to promote fiscal responsibility and predictability of costs to ratepayers by providing a framework to limit annual increases in certain kinds of rates.
Clause 5 adds 3 new definitions to the interpretation section of the principal Act (section 5). The changes—
define the term exemption as any of 3 types of exemption: a Type-1 exemption granted under new section 26I, a Type-2 exemption granted under new section 26N, or an exemption applied for by a local authority under new clause 12 or 16 of Schedule 1AA and granted by the regulator; and
define the term rates price by reference to new section 26A; and
define the term target range by reference to new section 26B.
Clause 6 inserts new section 5AA, which introduces the term regulator into the principal Act. New section 5AA—
defines the regulator as a statutory officer appointed by the chief executive of the department responsible for administering the Act; and
requires that the statutory officer be an employee of that department; and
permits the statutory officer, with the chief executive’s approval, to delegate any of their functions or powers under the principal Act to any other employee of the department (other than the chief executive).
Clause 7 amends section 23 of the principal Act, which sets out the procedure for local authorities when setting rates. Section 23(2) currently requires rates to relate to a financial year or part of a financial year and to be set in accordance with the local authority’s long-term plan and funding impact statement. The amendment adds the further requirement that rates must also comply with the target range unless an exemption applies.
Clause 8 inserts new Part 1A into the principal Act. The new Part establishes a framework for a rates price target range that limits how much local authorities may increase their rates from year to year. The main elements are as follows:
new section 26A defines the rates price for a financial year as a per-rating-unit average calculated using a formula. Amounts that are for the purpose of providing water services within the meaning of section 4 of the Local Government (Water Services) Act 2025 (which covers water supply services, stormwater services, and wastewater services) and rates set under section 115 of the Local Government Act 2002 are excluded from this calculation:
new section 26B defines the target range as the minimum and maximum allowable annual rate of increase to the rates price, prescribed by Order in Council on the recommendation of the Minister. Before recommending the target range, the Minister must consult local authorities, receive and consider advice from the regulator, and consider local authority costs (including any future costs the Minister has reasonable grounds to believe will fall on local authorities due to government decisions or legislative changes, any costs already incurred by local authorities due to government decisions or legislative changes that were not provided for when the previous target range was set, and any costs already incurred by local authorities as a consequence of unanticipated economic trends or indicators). The Minister must also consider any cost index specified by the regulator. Orders in Council made under this section are secondary legislation that must be confirmed by an Act:
new section 26C requires the Minister to ensure a target range is in force at all times. Under new section 26C(2) and (3),—
after the first order, each subsequent order must be made no later than 12 months before the latest date on which every second long-term plan must be adopted:
if that deadline is missed,—
the previous target range continues in force until a new one is prescribed; and
the order prescribing the new target range may be made between 24 and 36 months after the date on which the subsequent order was originally due to have been made:
new section 26D—
provides that a target range prescribed by Order in Council applies to a local authority from the date it next adopts a long-term plan after the order is made, and continues to apply until the local authority adopts its next long-term plan after a new target range is prescribed:
deals with the situation where a Commission has been appointed to the local authority under Part 10 of the Local Government Act 2002. Under new section 26D(2) and (3), the target range does not apply if the Minister specifies in the Commission’s terms of reference that the target range does not apply to a long-term plan adopted by the Commission or to any rates, a uniform annual general charge, or penalties referred to in new section 26A(1) that are set by the Commission:
new section 26E provides that a local authority may set rates, a uniform annual general charge, or penalties referred to in new section 26A(1) that do not comply with the target range only if it has been granted a Type-1 or Type-2 exemption:
new sections 26F to 26J establish the Type-1 exemption regime. Under those provisions,—
a local authority may apply to the Minister for a Type-1 exemption at any time if exceptional circumstances have arisen during its current or most recent previous long-term plan period:
the application must specify the exceptional circumstances, the amount or rate of increase by which the local authority is applying for the rates price to exceed the target range, the duration for which the exemption is sought, and the reasons for the application:
the Minister must receive and consider advice from the regulator and make a decision on the application within 60 calendar days after receiving it:
the Minister may grant the exemption, decline the application, or substitute their own decision on the application by granting an exemption for either a different amount or rate of increase to the rates price than that applied for or a different duration than that applied for, or both, and may impose conditions:
the Minister may grant an exemption only if satisfied that exceptional circumstances exist and that the exemption is necessary or desirable to enable the local authority to respond to or recover from those circumstances:
if a Type-1 exemption is granted, the target range specified in the exemption replaces the prescribed target range for the duration of the exemption and the local authority is not required to follow the usual long-term plan consultation requirements if it amends its long-term plan to reflect the exemption:
new sections 26K to 26Q establish the Type-2 exemption regime. Under those provisions,—
a local authority may apply to the regulator for a Type-2 exemption as part of preparing a long-term plan, before consulting on that plan, and no later than 11 months before the plan is due to commence:
the application must specify the amount or rate of increase by which the local authority is either applying for the rates price to exceed the upper bound of the target range or for the rates price to fall below the lower bound of the target range, the duration (up to 10 years) for which the exemption is sought, the reasons for the application, and why the proposal is consistent with prudent financial management:
the regulator must make a decision on the application within 60 calendar days after receiving it:
the regulator may grant the exemption, decline the application, or substitute their own decision on the application by granting an exemption for either a different amount or rate of increase by which the rates price may exceed the upper bound of the target range or, as the case may be, fall below the lower bound of the target range, or for a different duration than that applied for, or both, and may impose conditions:
the regulator may grant an exemption only if they are satisfied that it demonstrates, or is consistent with, prudent financial management and, for this purpose,—
when assessing applications for the amount or rate of increase to the rates price to exceed the upper bound of the target range, the regulator must consider the purpose of local government, whether and to what extent the local authority has made use of other financial sources or considered asset recycling, the nature and duration of the exemption, and any other matters prescribed by regulations; and
when assessing applications for the amount or rate of increase to the rates price to fall below the lower bound of the target range, the regulator must consider whether depreciation is being funded appropriately, whether assets are being maintained in accordance with asset management plans, the nature and duration of the proposed exemption, and any other matters prescribed by regulations:
if a Type-2 exemption application is granted, the target range specified in the exemption replaces the prescribed target range for the duration for which the exemption is granted.
new sections 26R to 26X deal with local authority reorganisations. Under those provisions—
a reorganisation means 1 or more of the matters described in section 24(1) of the Local Government Act 2002 to which, under subsection (2) of that section, Schedule 3 of that Act applies, and a significant reorganisation is a reorganisation of the type described in section 24(1)(a), (b),(c), (f) or (g) of that Act, or one that the regulator determines under new section 26S to be significant:
following a significant reorganisation, each new or changed local authority must determine and provide to the regulator an indicative rates price for the most recent financial year for the rating units in its jurisdiction following the reorganisation, to serve as a baseline for measuring future annual increases to the rates price. The indicative rates price is calculated by reference to the mean of the rates, a uniform annual charge and penalties referred to in new section 26A(1) charged to the rating units in the most recent full financial year before the reorganisation (excluding any amounts for providing water services), adjusted at the local authority’s discretion after having regard to historic rates, reorganisation costs, and any changes in its rates revenue available for funding as a result of the reorganisation:
before adopting its first long-term plan following a significant reorganisation, the local authority must have regard to the target range, and its first long-term plan must comply with the target range unless an exemption applies:
new section 26X specifies that new sections 26T to 26W apply to any transition body that is established and continues in existence under Part 3 of Schedule 3 of the Local Government Act 2002 before and when the first long-term plan is adopted following the reorganisation:
new section 26Y sets out the regulator’s functions under new Part 1A, which include advising the Minister on the target range, issuing invitations to local authorities to apply for exemptions in relation to the 2029/30 financial year, and making decisions on the specified exemption applications:
new section 26Z gives the regulator power to direct a local authority to make a replacement decision if the regulator is satisfied that the local authority has made a decision to set rates, a uniform annual general charge, or penalties referred to in new section 26A(1) that do not comply with the target range, or has included in a long-term plan a forecast rate of increase to the rates price that does not comply with the target range, without having been granted an exemption. The local authority must comply with such a direction and make the replacement decision in accordance with the applicable statutory procedure:
new section 26ZA requires the regulator to prepare and publish reports on trends, observations, issues, and risks relating to the target range and its implementation every 3 years starting from 1 July 2029, with publication required by 31 December 2029 and every 3 years after that:
new section 26ZB enables the Governor-General, by Order in Council made on the Minister’s recommendation, to make regulations for purposes that include specifying standards, measures, and thresholds for the regulator’s prudent financial management assessments and specifying information that local authorities must provide to the regulator for compliance monitoring purposes, including details of amounts that a local authority has excluded from its rates price calculations and how a local authority’s most recent rating unit figure has been calculated:
new section 26ZC requires the Minister to commence a review of the operation and effectiveness of the amendments made by the Bill and any secondary legislation made under those amendments. The Minister must consult local authorities and the regulator during the review, and must present a report on the review to the House of Representatives no later than 31 December 2033. The regulator must publish that report no later than 31 December 2033.
Transitional, savings, and related provisions
Clause 9 amends Schedule 1AA of the principal Act, which contains transitional, savings, and related provisions. It inserts a new Part (new Part 3, set out in Schedule 1 of the Bill) as the last Part of Schedule 1AA. The references that follow are to the individual clauses of the new Part 3 of Schedule 1AA.
New clause 7 defines the term amendment Act in new Part 3 as meaning the Local Government (Rates Capping) Amendment Act 2006. New clause 7 also clarifies that references to sections are to those sections as amended or substituted by that Act.
New clause 8 sets an interim target range of 2% to 4% that applies from 1 March 2027 until the first target range prescribed by Order in Council under new section 26B comes into force. This interim range applies despite the definition of target range in new section 26B.
New clause 9 requires the first target range prescribed by Order in Council to come into force no earlier than 1 July 2028 and no later than 1 July 2029.
New clause 10 applies to local authorities setting rates, a uniform annual general charge, or penalties referred to in new section 26A(1) for the 2027/28 and 2028/29 financial years. For those 2 years, local authorities must have regard to the target range when exercising that power, rather than being required to comply with the target range. This is a lesser obligation than the requirement that applies under new section 23(2)(c) for the 2029/30 financial year onwards.
New clause 11 limits when a local authority may apply for an exemption from the requirement to comply with the target range for the 2029/30 financial year. Unless the exemption application is made under new section 26F on the grounds of exceptional circumstances (for which an application may be made at any time), a local authority may only apply if the regulator has first invited it to do so under new clause 12 or 16.
New clause 12 allows the regulator to invite a local authority to apply for an exemption for the 2029/30 financial year if the regulator determines that the local authority has a significant capital works project or programme, that the relevant capital expenditure was incurred or planned before 1 March 2027, and that funding that expenditure would require setting rates, a uniform annual general charge, or penalties referred to in new section 26A(1) that would not comply with the target range. In making that assessment, the regulator must consider the local authority’s long-term plan that commenced on 1 July 2024 and any relevant infrastructure priorities identified by the New Zealand Infrastructure Commission/Te Waihanga, and may consider other relevant information.
New clause 13 sets out what a local authority’s application for an exemption invited under new clause 12 must and may contain. The application must provide up-to-date information on the capital works project or programme and the local authority’s relevant capital expenditure and revenue, and must provide an indication of the amount or rate of increase by which the local authority is proposing for the rates price to exceed the target range. The local authority may also include any other information it considers relevant.
New clause 14 requires the regulator to decide on any exemption application made in response to an invitation under new clause 12 by no later than 29 June 2027. The regulator may grant the exemption only if satisfied that the circumstances specified in new clause 12(1)(a) to (c) apply.
New clause 15 provides that a local authority that is granted an exemption in response to an invitation under new clause 12 must have regard to the target range for the 2029/30 financial year in its 2027 long-term plan and when making a decision to set rates, a uniform annual general charge, or penalties referred to in new section 26A(1) for that financial year.
New clause 16 allows the regulator to invite a local authority to apply for an exemption for the 2029/30 financial year on financial difficulty grounds. The regulator may issue an invitation if they determine that the local authority is at risk of being unable to comply with the target range from 1 July 2029 or is at risk of becoming financially unsustainable. In making that assessment, the regulator must consider the local authority’s long-term plan that commenced on 1 July 2027 and may consider other relevant information.
New clause 17 sets out what a local authority’s application for an exemption under new clause 16 must and may contain. The application must provide up-to-date information on the local authority’s fiscal circumstances, an indication of the amount or rate of increase by which the local authority is proposing for the rates price to exceed the upper bound of the target range, and specify the duration of the proposed exemption (which may extend beyond the 2029/30 financial year). The local authority may also include any other information it considers relevant.
New clause 18 requires the regulator to decide on any exemption application made in response to an invitation under new clause 16 by no later than 29 June 2029. The regulator may grant the exemption only after having regard to—
whether the local authority will be unable to comply with the target range from 1 July 2029 or is at risk of becoming otherwise financially unsustainable; and
the extent to which the local authority’s operating expenditure exceeds or is projected to exceed its operating revenue; and
the extent to which the local authority is using or is likely to be able to use alternative fiscal tools or policies to comply with the target range or become financially sustainable; and
the local authority’s debt levels, including whether those levels exceed or are at risk of exceeding New Zealand Local Government Funding Agency limits.
Under new clause 18(3), the regulator may grant the application subject to any conditions the regulator considers necessary.
New clause 19 requires a local authority that is granted an exemption under new clause 16 for the 2029/30 financial year to have regard to the target range when making a decision to set rates, a uniform annual charge, or penalties on unpaid rates referred to in new section 26A(1). The exemption relieves the local authority of the obligation to comply with the target range but does not remove the obligation to have regard to it.
Part 2Amendments to other legislation
Amendment to Legislation Act 2019
Clause 10 of the Bill provides that clause 11 amends the Legislation Act 2019.
Clause 11 amends Part 1 of Schedule 4 of the Legislation Act 2019, which lists secondary legislation that must be confirmed by an Act before a specified deadline. The amendment adds to that list new section 26B of the principal Act (which provides for the target range to be prescribed by Order in Council) so that secondary legislation made under that section becomes subject to the confirmation-by-Act requirement.
Amendments to Local Government Act 2002
Clause 12 provides that clauses 13 to 17 amend the Local Government Act 2002.
Clause 13 amends section 93 of the Local Government Act 2002, which governs long-term plans. It inserts new subsections (9A) to (9C), which impose a new condition on local authorities when adopting or amending a long-term plan. The new condition means that a local authority must not adopt or amend a long-term plan unless its revenue and financing policy and its funding impact statement both comply with the target range. New subsection (9C) defines the following terms for the purposes of sections and 93 and 95 (as amended):
target range has the meaning set out in new section 26B of the Local Government (Rating) Act 2002 (as inserted by clause 8 of the Bill):
comply with the target range, in this context (and in relation to section 95 of the Local Government Act 2002), means that the local authority’s proposed annual rate of increase to the rates price must, on average over years 1 to 3 of the 10-year long-term plan period, fall within that target range, and must, in years 4 to 10 of the 10-year long-term plan period, fall within the target range in each of those 7 years:
rates price has the meaning set out in new section 26A of the Local Government (Rating) Act 2002 (as inserted by clause 8 of the Bill).
The requirement does not apply if the local authority has been granted an exemption, which has the meaning set out in section 5 of the Local Government (Rating) Act 2002 (as inserted by clause 5 of the Bill).
Clause 14 amends section 95 of the Local Government Act 2002, which requires local authorities to prepare and adopt an annual plan for each financial year. The amendment inserts new subsections (6B) and (6C) to provide that, unless a local authority has an exemption, the local authority must not adopt an annual plan unless the information required to be included in the plan under Part 2 of Schedule 10 of the Local Government Act 2002 complies with the target range.
Clause 15 amends section 101 of the Local Government Act 2002, which sets out financial management duties for local authorities. The amendment adds a new subsection (1AAA) which provides that section 101 is subject to a local authority’s duty to comply with the target range under new section 23(2)(c) of the Local Government (Rating) Act 2002.
Clause 16 amends section 258G of the Local Government Act 2002, which sets out how a Commission is appointed to a local authority. Section 258G(3) requires the Minister to include the terms of reference of the Commission in the appointment notice. The amendment adds new subsection (4), which requires the Minister, when appointing a Commission, to specify in those terms of reference whether or not the Commission must comply with the target range if it adopts a long-term plan or makes any decision to set rates, a uniform annual general charge, or penalties referred to in section 26A(1) of the Local Government (Rating) Act 2002.
Transitional provisions
Clause 17 amends Schedule 1AA of the Local Government Act 2002, which contains application, savings, and transitional provisions. It inserts a new Part (new Part 12), as set out in Schedule 2 of this Bill, as the last Part of Schedule 1AA. The references that follow are to the individual clauses of new Part 12.
New clause 64 defines the term amendment Act in new Part 12 as meaning the Local Government (Rates Capping) Amendment Act 2026. New clause 64 also clarifies that references to sections are references to those sections as amended or substituted by that Act.
New clause 65 provides that new clauses 66 to 68 do not apply to a local authority if a Commission is appointed to that local authority under Part 10 of the Local Government Act 2002 and the Minister specifies in the terms of reference that the target range does not apply to any rates, a uniform annual general charge, or penalties referred to in section 26A(1) of the Local Government (Rating) Act 2002 that are set by the Commission.
New clause 66 sets out the following transitional requirements for local authorities adopting or amending a long-term plan covering the period of 1 July 2027 to 30 June 2037:
for the 2027/28 and 2028/29 financial years, the local authority must have regard to the target range:
for the 2029/30 financial year, the local authority’s proposed annual rate of increase to the rates price must comply with the target range unless an exemption applies.
This overrides the general requirement in section 93 of the Local Government Act 2002 for the proposed annual rate of increase,—
in years 1 to 3 of a long-term plan, to comply with the target range on average over those 3 years; and
in years 4 to 10 of a long-term plan, to comply with the target range in each of those 7 years.
New clause 67 provides that when a local authority adopts an annual plan for the 2028/29 financial year, it must have regard to the target range. This overrides the general requirement in section 95 of the Local Government Act 2002 for the proposed annual rate of increase to comply with the target range.
New clause 68 provides that when a local authority adopts an annual plan for the 2029/30 financial year, it must comply with the target range unless an exemption applies. This overrides the general requirement in section 95 of the Local Government Act 2002 for the proposed annual rate of increase in years 1 to 3 of a long-term plan, to comply with the target range on average over those 3 years.
Hon Simon Watts
Local Government (Rates Capping) Amendment Bill
Government Bill
340—1
Contents
The Parliament of New Zealand enacts as follows:
1 Title
This Act is the Local Government (Rates Capping) Amendment Act 2026.
2 Commencement
This Act comes into force on the day after Royal assent.
Part 1 Amendments to Local Government (Rating) Act 2002
3 Principal Act
This Part amends the Local Government (Rating) Act 2002.
4 Section 3 amended (Purpose)
After section 3(a), insert:
(aa)
promote fiscal responsibility, and predictability of costs to ratepayers, by providing for a framework to limit annual increases in certain kinds of rates; and
5 Section 5 amended (Interpretation)
In section 5, insert in their appropriate alphabetical order:
exemption means, as the case may require,—
(a)
a Type-1 exemption granted under section 26I:
(b)
a Type-2 exemption granted under section 26N:
(c)
an exemption applied for by a local authority in response to an invitation issued by the regulator under clause 12 or 16 of Schedule 1AA and granted by the regulator
rates price has the meaning given in section 26A
target range has the meaning given in section 26B
6 New section 5AA inserted (Meaning of regulator)
After section 5, insert:
5AA Meaning of regulator
(1)
In this Act, the regulator means a statutory officer appointed by the chief executive of the department responsible for the administration of this Act.
(2)
The statutory officer appointed under this section—
(a)
must be an employee of the department; and
(b)
may, with the approval of the chief executive, delegate any of their functions or powers under this Act to any employee (other than the chief executive) of the department.
7 Section 23 amended (Procedure for setting rates)
After section 23(2)(b), insert:
(c)
comply with the target range unless an exemption applies.
8 New Part 1A inserted
After section 26, insert:
Part 1A Provisions concerning target range for rates
26A Meaning of rates price
(1)
In this Act, rates price means, for a financial year, the rates price for that year calculated by applying the following formula in accordance with the requirements specified in subsection (2):
rates price = ∑(gr + uagc + tr + rp) ÷ RU
where—
- ∑
means the sum of
- gr
is general rates set under section 13
- uagc
is a uniform annual general charge set under section 15
- tr
is targeted rates set under section 16
- rp
is penalties on unpaid rates set under section 57
- RU
is the most recent rating units figure projected by the local authority in the preceding financial year.
(2)
In applying the formula in subsection (1), the following must be excluded from the sum that must be divided by the most recent rating units figure specified:
(a)
any, or any portion, of the rates, a uniform annual general charge, or penalties referred to that is for the purpose of providing any water services within the meaning of section 4 of the Local Government (Water Services) Act 2025:
(b)
any rate set under section 115 of the Local Government Act 2002.
26B Meaning of target range
(1)
In this Act, the target range means the range specifying the minimum and maximum allowable annual rate of increase to the rates price relative to the previous year’s rates price that a local authority may make, prescribed by the Governor-General by Order in Council made on the recommendation of the Minister in accordance with the requirements specified in subsection (2).
(2)
The Minister, before determining the minimum and maximum allowable annual rate of increase to the rates price that should be recommended for the purpose of prescribing the target range, must—
(a)
consult local authorities; and
(b)
receive and consider advice from the regulator; and
(c)
consider the costs to local authorities of carrying out their functions, including the following:
(i)
any future costs that the Minister has reasonable grounds to believe will fall on local authorities due to government decisions or legislative change:
(ii)
any costs already incurred by local authorities due to government decisions or legislative change that were not provided for when the previous target range was set:
(iii)
any costs already incurred by local authorities as a consequence of unanticipated economic trends or indicators (for example, higher than expected inflation or interest rates); and
(d)
when considering the costs referred to in paragraph (c), consider any cost index specified by the regulator.
(3)
The regulator may develop their own cost index or specify an existing cost index for the purpose referred to in subsection (2)(d).
(4)
The Minister may, in addition to the persons and entities referred to in subsection (2), consult any other person they consider appropriate before making their determination.
(5)
An Order in Council made under this section—
(a)
is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements); and
(b)
must be confirmed by an Act (see subpart 3 of Part 5 of that Act).
26C Requirements concerning setting of target range
(1)
The Minister must ensure that there is a target range in force at all times.
(2)
Every Order in Council after the first Order in Council is made under section 26B must be made no later than 12 months before the latest date on which every second long-term plan must be adopted.
(3)
Despite subsection (2), if no Order in Council is made within the time specified,—
(a)
the previous target range continues in force, in accordance with section 26D, until a new target range is prescribed by Order in Council; and
(b)
the next Order in Council prescribing a target range may be made between 24 and 36 months after the date on which the Order in Council was due to have been made under subsection (2).
26D When target range applies to local authorities
(1)
The target range prescribed by Order in Council under section 26B—
(a)
applies to every local authority from the date of the next occasion, after the making of the order, on which the local authority adopts a long-term plan under section 93 of the Local Government Act 2002; and
(b)
continues to apply until the local authority adopts its next long-term plan following the prescribing of a new target range by Order in Council under section 26B.
(2)
Despite subsection (1), the target range does not apply to a local authority if a Commission has been appointed to the local authority under Part 10 of the Local Government Act 2002 and the Minister specifies in the Commission’s terms of reference that the target range does not apply to a long-term plan adopted by the Commission or to any rates, a uniform annual general charge, or penalties referred to in section 26A(1) that are set by the Commission.
(3)
To avoid doubt, subsection (2) also applies for the purposes of sections 26T to 26W and clause 10 of Schedule 1AA.
Exemptions
26E Requirement to comply with target range is subject to power to grant exemption
A local authority may make a decision to set rates, a uniform annual general charge, or penalties referred to in section 26A(1) that would not comply with the target range only if, and to the extent that, the local authority is granted a Type-1 or Type-2 exemption.
26F When local authority may apply for Type-1 exemption
A local authority may apply to the Minister for a Type-1 exemption at any time if exceptional circumstances apply and those circumstances have arisen in the period corresponding with either or both of the following:
(a)
the local authority’s long-term plan at the time of the application:
(b)
the local authority’s most recent previous long-term plan.
26G Information to be included in Type-1 exemption application
An application for a Type-1 exemption must—
(a)
specify the relevant exceptional circumstances giving rise to the application; and
(b)
specify the amount, or rate of increase, by which the local authority is applying to exceed the target range; and
(c)
specify the duration for which the exemption is sought; and
(d)
explain the local authority’s reasons for applying for the exemption.
26H Time within which Minister’s decision on Type-1 exemption application must be made
(1)
The Minister must make a decision on a Type-1 exemption application no later than 60 calendar days after receiving it.
(2)
For the purpose of calculating the period referred to in subsection (1), any day in the period commencing with 25 December in any year and ending with 15 January in the following year must be excluded.
26I Decisions Minister may make on Type-1 exemption application
(1)
The Minister, after considering the relevant exceptional circumstances specified in a Type-1 exemption application and receiving and considering advice from the regulator, may—
(a)
grant the exemption; or
(b)
decline the application; or
(c)
substitute their own decision on the application by granting an exemption for either or both of the following:
(i)
a different amount or rate of increase by which the local authority may exceed the target range than that specified in the application:
(ii)
a different duration for which the exemption is to apply than that specified in the application.
(2)
The Minister may grant the Type-1 exemption subject to any conditions that the Minister considers necessary.
(3)
However, the Minister may grant the exemption, or substitute their own exemption decision on the application, only if, in the Minister’s opinion,—
(a)
there are exceptional circumstances; and
(b)
the exemption is necessary or desirable to enable the local authority to respond to, or recover from, those circumstances.
26J Consequences of Type-1 exemption
If a Type-1 exemption is granted,—
(a)
the prescribed target range does not apply to rates, a uniform annual general charge, or penalties referred to in section 26A(1) for the duration for which the exemption is granted; and
(b)
the target range specified in the exemption applies for the duration for which the exemption is granted; and
(c)
the local authority, if it amends its long-term plan under section 93(4) of the Local Government Act 2002 to reflect the exemption, is not required to use the special consultative procedure for amending a long-term plan.
26K When local authority may apply for Type-2 exemption
A local authority may apply to the regulator for a Type-2 exemption if—
(a)
the local authority proposes the exemption as part of its process for preparing and adopting a long-term plan under section 93 of the Local Government Act 2002; and
(b)
the application is made before consulting on that plan in accordance with section 93(2) of the Local Government Act 2002; and
(c)
the application is made no later than 11 months before the long-term plan to which it relates is due to commence.
26L Information to be included in Type-2 exemption application
(1)
An application for a Type-2 exemption must—
(a)
specify the amount or rate of increase by which the local authority is applying for the rates price increase to exceed the upper bound of the target range or, as the case may be, for the rates price increase to fall below the lower bound of the target range; and
(b)
specify the duration, not exceeding 10 years, for which the exemption is sought; and
(c)
explain the local authority’s reasons for applying for the exemption; and
(d)
explain why the proposal is consistent with prudent financial management.
(2)
The local authority may include any other information in the application that it considers relevant.
26M Time within which regulator’s decision on Type-2 exemption application must be made
(1)
The regulator must make a decision on a Type-2 exemption application no later than 60 calendar days after receiving it.
(2)
For the purpose of calculating the period referred to in subsection (1), any day in the period commencing on 25 December in any year and ending on 15 January in the following year must be excluded.
26N Decisions regulator may make on Type-2 exemption application
(1)
The regulator, after considering the information provided in a Type-2 exemption application, may—
(a)
grant the exemption; or
(b)
decline the application; or
(c)
substitute their own decision on the application by granting an exemption for either or both of the following:
(i)
a different amount or rate of increase by which the rates price increase may exceed the upper bound of the target range or, as the case may be, fall below the lower bound of the target range than that specified in the application:
(ii)
a different duration (which may not exceed 10 years) for which the exemption is to apply than that specified in the application.
(2)
The regulator may grant the Type-2 exemption subject to any conditions, in addition to the new applicable target range and the duration of the exemption, that the regulator considers necessary.
(3)
However, the regulator may grant the exemption or substitute their own decision on the application only if they are satisfied that the exemption, including the nature of the exemption, its duration, and the reasons for it, demonstrate, or would be consistent with, prudent financial management.
26O Mandatory considerations applying to regulator’s assessment of prudent financial management: application for rates price increase to exceed upper bound of target range
(1)
If the application for a Type-2 exemption is for the purpose of enabling a local authority to impose rates, a uniform annual general charge, or penalties referred to in section 26A(1) that would cause the rates price increase to exceed the upper bound of the target range, the regulator, in assessing whether the local authority has demonstrated prudent financial management, must consider the following:
(a)
the purpose of local government, as set out in section 10 of the Local Government Act 2002; and
(b)
whether, and if so to what extent, the local authority has made use of other sources of revenue, funding, or finance; and
(c)
whether, and if so to what extent, the local authority has considered asset recycling; and
(d)
the nature and duration of the proposed exemption; and
(e)
any other matters prescribed in regulations.
(2)
The regulator may also consider any other matter they consider relevant to the assessment of prudent financial management.
26P Mandatory considerations applying to regulator’s assessment of prudent financial management: application for rates price increase to fall below lower bound of target range
(1)
If the application for a Type-2 exemption is for the purpose of enabling a local authority to make a decision to impose rates, a uniform annual general charge, or penalties referred to in section 26A(1) that would cause the rates price increase to fall below the lower bound of the target range, the regulator, in assessing whether the local authority has demonstrated prudent financial management, must consider the following:
(a)
whether and, if so, to what extent, the local authority is funding depreciation appropriately; and
(b)
whether and, if so, to what extent, the local authority is maintaining its assets in accordance with asset management plans; and
(c)
the nature and duration of the proposed exemption; and
(d)
any other matters prescribed in regulations.
(2)
The regulator may also consider any other matter they consider relevant to the assessment of prudent financial management.
26Q Consequences of Type-2 exemption
If a Type-2 exemption is granted,—
(a)
the prescribed target range does not apply to rates, a uniform annual general charge, or penalties referred to in section 26A(1) for the duration for which the exemption is granted; and
(b)
the target range specified in the exemption applies for the duration for which the exemption is granted.
Local authority reorganisations
26R Definitions for purposes of sections 26S to 26W (local authority reorganisations)
In sections 26S to 26W,—
reorganisation means 1 or more of the matters described in section 24(1) of the Local Government Act 2002 to which section 24(2) of that Act applies
significant reorganisation means—
(a)
a reorganisation of the type described in section 24(1)(a), (b), (c), (f), or (g) of the Local Government Act 2002:
(b)
a reorganisation that the regulator determines under section 26S to be significant.
26S Regulator must determine whether other reorganisations are significant
(1)
This section applies if a reorganisation (other than a reorganisation of a kind described in section 24(1)(a), (b), (c), (f), or (g) of the Local Government Act 2002) is notified under clause 13 of Schedule 3 of the Local Government Act 2002.
(2)
The regulator must, as soon as practicable after the relevant reorganisation plan is notified, determine whether, in the regulator’s opinion, the reorganisation is a significant reorganisation for the purposes of sections 26T to 26W.
(3)
Before making a determination, the regulator must consider any changes to the number, nature, or value of rating units that will fall within the local authority’s jurisdiction as a result of the reorganisation.
26T Local authority that undergoes significant reorganisation must determine indicative rates price
(1)
As soon as practicable after the Order in Council giving effect to a significant reorganisation plan is made under section 25 of the Local Government Act 2002, every new or changed local authority following the reorganisation must—
(a)
determine, at its discretion, an indicative rates price for the purpose of providing a reasonably accurate rates price baseline against which to compare future annual increases in the rates price; and
(b)
provide the indicative rates price to the regulator.
(2)
The indicative rates price determined by the new or changed local authority applies for the purposes of the following, as the case may be:
(a)
having regard to the target range in accordance with section 26W(2):
(b)
complying with the target range in accordance with section 26W(3).
26U Local authority required to determine indicative rates price must determine mean of latest rates charged to rating units
(1)
A new or changed local authority that is required to determine an indicative rates price under section 26T must calculate in accordance with subsection (2) a rates price, for the most recent full financial year, for the rating units in its jurisdiction following the reorganisation.
(2)
The local authority must—
(a)
identify every rating unit within the local authority’s jurisdiction following the reorganisation; and
(b)
calculate the sum of the following charged to those rating units in the most recent full financial year before the reorganisation (excluding any, or any portion, of them that were for the purpose of providing any water services within the meaning of section 4 of the Local Government (Water Services) Act 2025):
(i)
general rates set under section 13:
(ii)
a uniform annual general charge set under section 15:
(iii)
targeted rates set under section 16:
(iv)
penalties on unpaid rates set under section 57; and
(c)
divide the sum calculated in accordance with paragraph (b) by the number of rating units identified in accordance with paragraph (a).
26V How local authority must determine indicative rates price
A new or changed local authority that is required to determine an indicative rates price at its discretion under section 26U must do so only after having regard to the following:
(a)
the historic rates price calculated under section 26U:
(b)
the costs of implementing the reorganisation:
(c)
any changes in the rates revenue available to fund any local government duty, function, power, or service as a result of the reorganisation.
26W Obligations on local authorities concerning target range following significant reorganisation
(1)
This section applies to a new or changed local authority following a significant reorganisation.
(2)
The local authority, before it adopts its first long-term plan following the reorganisation, must have regard to the target range when making a decision to set rates, a uniform annual general charge, or penalties referred to in section 26A(1).
(3)
The first long-term plan adopted by the local authority must—
(a)
include a forecast rate of increase to the rates price that complies with the target range (within the meaning given in section 93(9C) of the Local Government Act 2002) in accordance with the requirement under section 93(9A) of that Act; and
(b)
be consistent with the requirement under section 23(2)(c) that rates that are set must comply with the target range unless an exemption applies.
26X Application of sections 26T to 26W to transition bodies under Local Government Act 2002
Sections 26T to 26W apply to any transition body that is established and in existence under Part 3 of Schedule 3 of the Local Government Act 2002 before and when the first long-term plan is adopted following the reorganisation, as if every reference in those sections to a new or changed local authority were a reference to the transition body.
Regulator’s functions and power
26Y Regulator’s functions
The regulator’s functions are as follows:
(a)
to provide advice to the Minister in relation to the Minister’s determination of the minimum and maximum allowable annual rate of increase to the rates price, relative to the previous year’s rates price, that should be recommended for the purpose of prescribing the target range:
(b)
to provide advice to the Minister in relation to applications for Type-1 exemptions:
(c)
to provide advice to the Minister in relation to the review under section 26ZC:
(d)
to issue invitations to local authorities to apply for exemptions under Part 3 of Schedule 1AA:
(e)
to make decisions on applications for Type-2 exemptions:
(f)
to make decisions on applications for exemptions under Part 3 of Schedule 1AA:
(g)
to issue guidance in relation to any matter provided for under this Part:
(h)
to monitor compliance by local authorities with their duties under this Part.
26Z Regulator’s power to direct local authority to make replacement decision
(1)
If the regulator is satisfied that a local authority has made a specified decision and the local authority has not been granted an exemption from the requirement to comply with the target range, the regulator may direct the local authority to make a replacement decision that complies with the target range.
(2)
If the regulator directs a local authority to make a replacement decision under subsection (1), that local authority must—
(a)
comply with the direction; and
(b)
make the replacement decision in accordance with the procedure for making that decision set out in this Act or, as the case may be, in the Local Government Act 2002.
(3)
For the purposes of this section, a specified decision means a decision by a local authority—
(a)
to set rates, a uniform annual general charge, or penalties referred to in section 26A(1) that would not comply with the target range; or
(b)
to include in a long-term plan a forecast rate of increase to the rates price that would not comply with the target range.
Reports on implementation of target range for rates
26ZA Reports on implementation of target range for rates
(1)
The regulator must prepare reports that describe trends, observations, issues, and risks in relation to the target range for rates and its implementation by local authorities.
(2)
A report under subsection (1) must be—
(a)
prepared every 3 years starting from 1 July 2029; and
(b)
published on an Internet site maintained by or on behalf of the regulator every 3 years starting from 31 December 2029.
Regulations relating to target range for rates
26ZB Regulations relating to target range for rates
(1)
The Governor-General may, by Order in Council made on the recommendation of the Minister, make regulations for all or any of the following purposes:
(a)
providing for anything this Part says may or must be provided for by regulations:
(b)
specifying standards, measures, and thresholds that must be used by the regulator when determining whether a local authority has demonstrated prudent financial management under section 26O or 26P:
(c)
specifying—
(i)
information that must be provided by local authorities to the regulator in relation to the regulator’s function under section 26Y(h), including, for example,—
(A)
details of any, or any portion, of the rates, a uniform annual general charge, penalties, or any rate set under section 115 of the Local Government Act 2002 that a local authority has excluded from its calculation of the rates price under section 26A(2)(a) or (b); or
(B)
information about how a local authority’s most recent rating units figure was calculated; and
(ii)
the manner in which, and how often, the information must be provided.
(2)
Regulations made under this section are secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).
Review of Local Government (Rates Capping) Amendment Act 2026
26ZC Review of Local Government (Rates Capping) Amendment Act 2026
(1)
The Minister must commence a review of the operation and effectiveness of—
(a)
the amendments to this Act made by the Local Government (Rates Capping) Amendment Act 2026; and
(b)
any secondary legislation made under those amendments.
(2)
The Minister must ensure that, during the review, the following entities and person are consulted:
(a)
local authorities; and
(b)
the regulator.
(3)
The Minister may, in addition to the entities and person referred to in subsection (2), consult any other person the Minister considers has an interest in the review.
(4)
The Minister must prepare a report on the review and, no later than 31 December 2033, present the report to the House of Representatives.
(5)
The regulator must publish the report on an Internet site maintained by or on behalf of the regulator no later than 31 December 2033.
9 Schedule 1AA amended
In Schedule 1AA,—
(a)
insert the Part set out in Schedule 1 of this Act as the last Part; and
(b)
make all necessary consequential amendments.
Part 2 Amendments to other legislation
Amendment to Legislation Act 2019
10 Principal Act
Section 11 amends the Legislation Act 2019.
11 Schedule 4 amended
In Schedule 4, Part 1, insert in its appropriate alphabetical order:
| Local Government (Rating) Act 2002 | 26B |
Amendments to Local Government Act 2002
12 Principal Act
Sections 13 to 17 amend the Local Government Act 2002.
13 Section 93 amended (Long-term plan)
After section 93(9), insert:
(9A)
A local authority must not adopt or amend a long-term plan unless—
(a)
its revenue and financing policy under section 102(2)(a) complies with the target range; and
(b)
its funding impact statement prepared in accordance with clause 15 of Schedule 10 complies with the target range.
(9B)
Subsection (9A) does not apply if the local authority has an exemption.
(9C)
For the purposes of this section and section 95,—
comply with the target range means that the local authority’s proposed annual rate of increase to the rates price must,—
(a)
in years 1 to 3 of the 10 consecutive financial years of a long-term plan, comply with the target range on average over those 3 years; and
(b)
in years 4 to 10 of the 10 consecutive financial years of a long-term plan, comply with the target range in each of those 7 years
exemption has the meaning given in section 5 of the Local Government (Rating) Act 2002
rates price has the meaning given in section 26A of the Local Government (Rating) Act 2002
target range has the meaning given in section 26B of the Local Government (Rating) Act 2002.
14 Section 95 amended (Annual plan)
After section 95(6A), insert:
(6B)
A local authority must not adopt an annual plan unless the information required to be included in the plan under Part 2 of Schedule 10 complies with the target range.
(6C)
Subsection (6B) does not apply if the local authority has an exemption.
15 Section 101 amended (Financial management)
Before section 101(1), insert:
(1AAA)
This section is subject to a local authority’s duty to comply with the target range under section 23(2)(c) of the Local Government (Rating) Act 2002.
16 Section 258G amended (How Commission appointed)
After section 258G(3), insert:
(4)
The Minister, when appointing a Commission, must specify in the terms of reference whether or not the Commission, if it adopts a long-term plan or makes any decision to set rates, a uniform annual general charge, or penalties referred to in section 26A(1) of the Local Government (Rating) Act 2002, is required to comply with the target range.
17 Schedule 1AA amended
In Schedule 1AA,—
(a)
insert the Part set out in the Schedule 2 of this Act as the last Part; and
(b)
make all necessary consequential amendments.
Schedule 1 New Part 3 inserted into Schedule 1AA of Local Government (Rating) Act 2002
s 9
Part 3 Provisions relating to Local Government (Rates Capping) Amendment Act 2026
7 Definition of amendment Act
(1)
In this Part, amendment Act means the Local Government (Rates Capping) Amendment Act 2026.
(2)
A reference to a section (or a provision of that section) is a reference to that section as amended or substituted by the amendment Act.
8 Meaning of target range before 1 July 2029
Target range, despite the meaning given to that term in section 26B, for the purposes of the period starting on the commencement of this clause and ending on the day before the date on which the first target range prescribed under section 26B comes into force, means the range having a lower bound of 2% and an upper bound of 4%.
9 When first target range prescribed by Order in Council must come into force
The first target range prescribed by Order in Council under section 26B must come into force no earlier than 1 July 2028 and no later than 1 July 2029.
10 Local authorities exercising power to set rates, uniform annual general charge, or penalties for 2027/28 and 2028/29 financial years must have regard to target range
(1)
The power of a local authority to set, for the 2027/28 and 2028/29 financial years respectively, rates, a uniform annual general charge, or penalties referred to in section 26A(1) is subject to the requirement that the local authority have regard to the target range.
(2)
Subclause (1) applies despite the requirement in section 23(2)(c) for rates set by a local authority to comply with the target range unless an exemption applies.
11 Local authorities may apply for exemption from requirement to comply with target range for 2029/30 financial year by invitation only
(1)
A local authority may apply for an exemption from the requirement to comply with the target range for the financial year commencing on 1 July 2029 only if the regulator invites the local authority to do so under clause 12 or 16.
(2)
Subclause (1) does not apply to an exemption application under section 26F.
12 Regulator may issue invitation to local authority with significant capital works projects to apply for exemption
(1)
The regulator may issue an invitation to a local authority to apply for an exemption from the requirement to comply with the target range for the 2029/30 financial year if the regulator determines that—
(a)
the local authority has a significant capital works project or programme; and
(b)
capital expenditure to fund the capital works project or programme in the 2029/30 financial year was incurred before or planned before the date of commencement of this clause; and
(c)
to fund the capital expenditure, or the costs associated with financing the capital expenditure, a decision to set rates, a uniform annual general charge, or penalties referred to in section 26A(1) is necessary or desirable but would not comply with the target range for the 2029/30 financial year.
(2)
In assessing whether an application meets the criteria to issue an invitation, the regulator—
(a)
must consider the local authority’s long-term plan that commenced on 1 July 2024 (including any amendments to that plan); and
(b)
must consider any relevant infrastructure priorities identified by the New Zealand Infrastructure Commission/Te Waihanga; and
(c)
may consider any other relevant information.
13 Information to be provided in application for exemption invited under clause 12
If a local authority issued with an invitation by the regulator under clause 12 applies for an exemption, the local authority’s application—
(a)
must provide the regulator with the most up-to-date information available on the capital works project or programme and the local authority’s relevant capital expenditure and revenue; and
(b)
must provide an indication of the amount by which the local authority is proposing to exceed the upper bound of the target range; and
(c)
may include any other information that the local authority considers relevant.
14 Requirements concerning regulator’s decision on exemption application invited under clause 12
(1)
The regulator must make a decision on any exemption application made by a local authority in response to an invitation issued under clause 12 not later than 29 June 2027.
(2)
The regulator may grant the exemption only if the regulator, after considering the information provided in the local authority’s application, is satisfied that the circumstances specified in clause 12(1)(a) to (c) apply.
(3)
The regulator may grant the application subject to any conditions the regulator considers necessary.
15 Local authority granted an exemption under clause 14 must have regard to target range
A local authority that is granted, on an application invited under clause 12, an exemption from complying with the target range for the 2029/30 financial year must have regard to the target range for that financial year in its 2027 long-term plan and when making a decision to set rates, a uniform annual charge, or penalties on unpaid rates referred to in section 26A(1) for the 2029/30 financial year.
16 Regulator may issue invitation to local authority in financial difficulty to apply for exemption for 2029/30 financial year
(1)
If the regulator determines that in their opinion a local authority is at risk of being unable to comply with the target range on and from 1 July 2029 or is at risk of becoming otherwise financially unsustainable, the regulator may—
(a)
determine that the local authority may qualify for an exemption from the requirement to comply with the target range for the 2029/30 financial year (and, as the circumstances may apply, possibly for financial years beyond that year); and
(b)
issue an invitation to the local authority to apply for an exemption.
(2)
The regulator, in carrying out its assessment of a local authority’s financial position for the purpose of making a determination under subclause (1),—
(a)
must consider the local authority’s long-term plan that commenced on 1 July 2027 (including any amendments to that plan); and
(b)
may consider any other relevant information.
17 Information to be provided in application for exemption invited under clause 16
If a local authority issued with an invitation by the regulator under clause 16 applies for an exemption, the local authority—
(a)
must provide the most up-to-date information available on the authority’s fiscal circumstances; and
(b)
must specify the duration (which may extend beyond the 2029/30 financial year) of the proposed exemption; and
(c)
must provide an indication of the amount by which the local authority is proposing to exceed the upper bound of the target range; and
(d)
may include any other information that the local authority considers relevant.
18 Requirements concerning regulator’s decision on exemption application invited under clause 16
(1)
The regulator must make a decision on any application made by a local authority in response to an invitation issued under clause 16 not later than 29 June 2029.
(2)
The regulator may grant the application only after having regard to the following matters:
(a)
whether they are satisfied that the local authority will be unable to comply with the target range on and from 1 July 2029 or is at risk of becoming otherwise financially unsustainable; and
(b)
the extent to which the local authority’s operating expenditure exceeds, or is projected to exceed, its operating revenue; and
(c)
the extent to which the local authority is using, or is likely to be able to use, alternative fiscal tools or policies to comply with the target range for the 2029/30 and subsequent financial years or to become otherwise financially sustainable; and
(d)
the local authority’s debt levels, including the extent to which those levels exceed, or are at risk of exceeding, New Zealand Local Government Funding Agency limits.
(3)
The regulator may grant the exemption subject to any conditions the regulator considers necessary.
19 Local authority granted an exemption under clause 16 for 2029/30 financial year must have regard to target range
A local authority that is granted, on an application invited under clause 16, an exemption from complying with the target range for the 2029/30 financial year must, for the duration of the exemption, have regard to the target range when making a decision to set rates, a uniform annual charge, or penalties on unpaid rates referred to in section 26A(1).
Schedule 2 New Part 12 inserted into Schedule 1AA of Local Government Act 2002
s 17
Part 12 Provisions relating to Local Government (Rates Capping) Amendment Act 2026
64 Definition of amendment Act
(1)
In this Part, amendment Act means the Local Government (Rates Capping) Amendment Act 2026.
(2)
A reference to a section (or a provision of that section) is a reference to that section as amended or substituted by the amendment Act.
65 Application of clauses 66 to 68
Clauses 66 to 68 do not apply to a local authority if a Commission is appointed to that local authority under Part 10 of this Act and the Minister specifies in the terms of reference that the target range does not apply to any rates, a uniform annual general charge, or penalties referred to in section 26A(1) of the Local Government (Rating) Act 2002 that are set by the Commission.
66 Local authorities adopting or amending long-term plan for 2027–37 period
(1)
The power of a local authority to adopt or amend a long-term plan under section 93 that relates to the period starting on 1 July 2027 and ending on 30 June 2037 is, for the 2027/28 and 2028/29 financial years respectively, subject to the requirement that the local authority have regard to the target range.
(2)
The power of a local authority to adopt or amend a long-term plan under section 93 that relates to the period starting on 1 July 2027 and ending on 30 June 2037 is, for the 2029/30 financial year, subject to the requirement that the local authority’s proposed annual rate of increase to the rates price must comply with the target range unless an exemption applies.
(3)
Subclauses (1) and (2) apply despite the requirement in section 93 for a local authority’s proposed annual rate of increase to the rates price,—
(a)
in years 1 to 3 of the 10 consecutive years of a long-term plan, to comply with the target range on average over those 3 years; and
(b)
in years 4 to 10 of the 10 consecutive years of a long-term plan, to comply with the target range in each of those 7 years.
67 Local authorities adopting annual plan for 2028/29 financial year must have regard to target range
(1)
The power of a local authority to adopt, for the 2028/29 financial year, an annual plan under section 95 is subject to the requirement that the local authority have regard to the target range.
(2)
Subclause (1) applies despite the requirement in section 95 for a local authority’s proposed annual rate of increase to the rates price to comply with the target range.
68 Local authorities adopting annual plan for 2029/30 financial year must comply with target range
(1)
The power of a local authority to adopt, for the 2029/30 financial year, an annual plan under section 95 is subject to the requirement that the local authority must comply with the target range unless an exemption applies.
(2)
Subclause (1) applies despite the requirement in section 95 for a local authority’s proposed annual rate of increase to the rates price, in years 1 to 3 of the 10 consecutive years of a long-term plan, to comply with the target range on average over those 3 years.
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