Protecting Our Parks, Pools, and Places: Why the Rates Capping Bill Threatens Active Recreation

Local government is the single largest investor in Aotearoa New Zealand’s sport, play, and active recreation network, contributing over $1.3bn annually to community parks, playgrounds, aquatic centres, and regional parks. This investment generates $8.4bn in net health benefits and yields a $2.12 in social return for every $1 spent.

However, a major legislative proposal currently before Parliament threatens to undermine the financial foundation of our public recreation infrastructure.

The Local Government (Rates Capping) Amendment Bill 2026 introduces a statutory mechanism to limit annual non-water general rates increases across all territorial authorities. Under the proposed framework:

• Interim Rates Cap: An interim target range capping average non-water rates growth between 2% and 4% will apply.
• Statutory Regulator: A new statutory officer will monitor council compliance and holds the power to direct councils to overturn non-compliant rating decisions.
• Mandatory Compliance: Adherence to the rates cap will be mandatory for council Long-Term Plans (LTPs) and Annual Plans beginning in the 2029/30 financial year.

While fiscal predictability is a worthy goal, the Bill’s structural design creates a severe financial squeeze on community assets. Crucially, the Bill explicitly excludes water services rates (drinking water, wastewater, and stormwater) from the cap calculation. This exclusion creates an artificial hierarchy. Councils are currently navigating an unexpected inflation gap exceeding 20% above prior expectations, driven by a 19% increase in operating costs, a 27% surge in civil construction costs, and a 64% jump in interest repayments. Economic analysis indicates that councils must cut capital budgets by a fifth simply to fund cost escalation on remaining works.

Because water utilities are uncapped, councils facing steep cost increases will be legally forced to absorb budget pressures within capped non-water budgets. Discretionary community services—specifically parks, sports grounds, trails, and swimming pool – risks becoming the primary target for budget cuts, deferred maintenance, or closure.

Equally concerning is the framework governing cap exemptions. To exceed the upper limit of the target range under a Type-2 exemption, councils must prove "prudent financial management" to the regulator. The Bill explicitly mandates that the regulator consider whether the council has engaged in "asset recycling"—the sale of existing public assets to fund new expenditure.

Conditioning financial relief on asset sales creates an incentive for local authorities to sell off public open space, parkland, or reserve sites to meet short-term operational shortfalls. Once lost to urban infill, these open spaces are very difficult to regain.

Recreation Aotearoa is actively preparing a comprehensive submission to the Select Committee to challenge the Bill's flaws and present constructive alternatives:

1. Reject Mandatory Asset Recycling: We will oppose section 26O(1)(c) and advocate that public recreation land be protected from forced sales.
2. Recognise Open Space as Essential Infrastructure: We will advocate for statutory recognition of public open spaces and green networks alongside traditional water and transport utilities.
3. Condition Capping on Genuine Funding Reform: We will advocate for central government to provide sustainable alternative revenue tools, rather than imposing unfunded rate caps.

We urge all members to join us in highlighting the immense preventative health and social value delivered by active recreation.