Update - 4 May 2020

COVID-19 Local Government Response Unit main page

Financial implications of COVID-19 for Councils: Report #2

Read the Finance Workstream’s second report on potential financial implications of COVID-19 on councils (PDF, 953KB).

This report builds on the information in our first report, released a couple of weeks ago. It provides more detailed information with reference to three potential COVID-19 Alert Level scenarios, assumptions and further information collected from councils about impacts in the fourth quarter of 2019/20 and rate-setting intentions for 2020/21.

The report confirms there will be highly variable impacts on different types of councils, but key overall findings are:

• A significant reduction in non-rate revenue in the fourth-quarter of 2019/20.
• Revenues for 2020/21 are likely to be 2.3% – 11% less than pre-COVID-19 forecasts (some rates will not be collected and less income from fees/charges and investments). This projected impact is lower than the first report, which indicated potential revenue reductions ranging between 15 and 20 percent. 
• Within this national picture, there are councils that will be in a very challenging situation.  These include councils with a high tourism dependence, high levels of growth and/or reliance on significant revenue from investments and dividends.
• Councils’ fixed costs means small reductions in revenue can have a large practical impact.
• Without action to maintain revenue or reduce expenditure, eight councils could be at-risk of breaching LGFA net debt/revenue covenants.
• A further 13 councils could come within 20% of the covenant thresholds, giving little headroom in case of a further financial shock (eg, due to a natural disaster).
• Many councils are considering lower expenditure and lesser rates increases than indicated in long-term plans.

Once again, producing the report was a great team effort directly involving LGNZ, SOLGM, DIA, LGFA, councils responding to surveys, assessments of other published data (Statistics NZ, MBIE and in the media) and support from others such as Treasury, NZTA and Ministry of Transport. Thanks to everyone involved.

This report is intended to help inform decision-making on the recovery, nationally and locally.

If you have questions or wish to discuss the report in more detail, please contact us Local Government COVID-19 Response Communication Group 

COVID-19 small business cashflow scheme

Our financial implications reports have highlighted council rate collection challenges over the next year will most likely involve businesses experiencing financial hardship.

In dealing with those businesses, councils might wish to draw business owners’ attention to the Government announcement on 1 May that it will provide interest free loans for a year to small businesses impacted by the COVID-19 economic shock to support their immediate cashflow needs and meet fixed costs.

The scheme will provide assistance of up to $100,000 to firms employing 50 or fewer full time equivalent employees.

Eligibility will be essentially the same criteria as for the wage subsidy, plus the business will also have to declare that:

• they are a viable business; and
• money will be used for core business operating costs.

Businesses will have to enter into a legally binding loan contract.

Loan applications will be managed by Inland Revenue and applications are expected to be open from May 12.

More information can be found on the Inland Revenue website.

Local Government Representative in the Fusion Centre

NZ Police have been working with MBIE, Worksafe, Health and MPI to develop and implement a COVID-19 compliance model to ensure a common approach to compliance with the COVID-19 Alert Level restrictions.

This compliance model includes a Fusion Centre with agency representatives from across government to coordinate responses to compliance issues at Alert level 3 and 2.

The Response Unit has been working with NZ Police since the Fusion Centre was stood up on Tuesday 28 April to determine the best way local government can be represented in this function.

We are pleased to confirm Mark Pattemore from Wellington City Council has been nominated through SOLGM as a local government contact for the compliance work of the Fusion Centre. We would like to thank Mark in advance for the role he will play in providing a link through to the wider local government sector and the Response Unit.

From the Ministry for the Environment: Feedback on proposals to better manage the international trade in plastic waste

Following a decision in May 2019 by parties to the Basel Convention (including New Zealand), the rules for the import and export of plastic waste will be changing from 1 January 2021.

The Government intends to implement the new international requirements and is proposing to introduce new regulations to do so.

The Ministry for the Environment is seeking feedback from stakeholders in the waste sector on proposals to require a permit for imports and exports of most mixed plastic waste. Feedback will be used to finalise policy proposals and help measure their impacts

The Ministry is working with WasteMINZ to engage with key stakeholders in the sector. Today, WasteMINZ has emailed stakeholders with information about the proposals and how to provide feedback. As part of the engagement process the Ministry is hosting a virtual workshop on Thursday 7 May to discuss the proposals. Feedback on the proposals is due by 5pm 22 May.

For more information on the new international requirements or the proposed changes please email basel@mfe.govt.nz

Guidance on council services at Alert Level 2

The Prime Minister noted today that no decision has yet been made on a change to Alert Level 2. The announcement of a decision is expected on Monday 11 May.

She indicated she will give further details on Thursday on what a move to Alert Level 2 will mean.

We thank you for your patience as we continue to work on providing guidance on council operations and services at Alert Level 2.

SOLGM tested a DRAFT set of guidance last week; we note this guidance is still being refined with central government agencies and is subject to change.

We would like to acknowledge those of you who have been engaged in this process with us: it is your expertise that will ensure this guidance is fit for purpose.  

We can assure you we are working to have this guidance finalised ahead of any change in Alert Level and hope to be able to provide this specific guidance by the end of Friday this week.

When local government guidance is finalised we will distribute it via this email and publish it on the COVID-19 Local Government Response Unit webpage: https://www.dia.govt.nz/Local-Government-COVID-19-Response

In the meantime, a general principles approach to the different Alert Levels, including Level 2, can be found under “Alert system’’ at:  www.covid19.govt.nz We would note, however, that this central guidance may evolve in the light of lessons from the transition to Level 3.

For the moment we remain at Alert Level 3

Information on life under Alert levels 3, 2 and 1 is available on the COVID-19 Government website.

A wide range of new content has been added to the business.govt.nz website regarding workplace restrictions at different alert levels.

Worksafe has provided "Transitioning from Alert Level 4" advice including the necessary health and safety requirements for businesses.

Read more information on the WorkSafe website.   

The Government has released the Golden Rules for businesses. Read more information on the COVID-19 website for more information.  

The Ministry of Health has provided updated information for those managing other health conditions during COVID-19. Read more information. 

The Ministry of Health also has specific infectious disease control advice for workplaces here.

Reference Group for the evolving role of the Response Unit

The Response Unit is considering how its role and functions should evolve to best support local government as New Zealand begins to consider a recovery from COVID-19.

The Recovery workstream are setting up a small reference group to test our thinking on the recovery focused roles and functions. As with all reference groups we are looking to strike a balance across local government expertise (rural, metro, regional councils).

This reference group will be meeting early next week. We will communicate further information on these changes in the near future.