Rates on land and buildings provide the greater part of the revenue of territorial authorities and of many special-purpose authorities. Prior to 1896 there were only two systems of rating — rating on the capital value (the sum a vendor might expect to receive from the sale of his property on reasonable terms and conditions and free of mortgage) and rating on annual value (the rent at which a property would let from year to year after certain specified deductions are made). Rating on unimproved value (the sum a vendor might expect to receive from the sale of his property on reasonable terms and conditions, free of mortgage, and if no improvements had been made) was authorised in 1896. Since then there has been a slow but steady swing to this system, until today more than 80 per cent of the territorial authorities use it. Rates on the capital value and unimproved value are based on valuations made by the Government Valuation Department, while the annual value is usually determined by the local authority concerned. The maximum rates which may be levied for general expenditure and, to some extent, for specific works or services such as water supply or sanitation, are fixed by legislation. Special rates to meet loan charges are not fixed by statute but are effectively controlled by the supervision of borrowing exercised by the Local Authorities Loans Board. The one territorial authority without power to rate property is the Chatham Islands County Council which, because of its location and the economy of the islands, levies dues on imports and exports.

Some important types of special-purpose authorities can also rate, although they do not always do so. Some which can rate do not do so directly, but instead make a levy on territorial local authorities, which in turn are required to meet the levy out of rate revenue.

Government grants for various purposes also provide a substantial portion of local authority revenue, roading subsidies being the most important to territorial authorities. Although Crown property is, in general, traditionally exempt from the payment of rates, nevertheless the Government makes substantial ex gratia payments to local authorities in lieu of rates on its property. These payments are frequently the equivalent of the rates which would be levied on the property concerned if it were not owned by the Crown, and this is invariably the case with residential property fronting dedicated roads. Rate subsidies are available to rabbit boards, while fire authorities, catchment boards, and nassella tussock boards also receive substantial assistance. Other special-purpose authorities may also receive subsidies and grants for specific purposes. Hospital boards are unique in that, since 1957, the responsibility for providing their finance has been completely assumed by Central Government.

Other local authority revenue derives from the proceeds of trading undertakings, such as the sale of electricity, and from licence fees, fines, and other charges. Urban transport undertakings of local authorities have not, in general, been a source of profit in recent years.

Local authority borrowing has been controlled since the inception of the local government system in 1876 and the principles laid down in legislation at that time still apply. These, in general, require that loans shall be raised only for the construction of public works and utilities or to permit engagement in any undertaking (but not for normal maintenance expenditure), that all loan proposals be publicised, and that ratepayers be given the opportunity to vote on loan proposals. Such loans require the sanction of the Local Authorities Loans Board, a statutory body established in 1926 to ensure more effective control and authorisation of local authority borrowing. Within defined limits money may be borrowed in anticipation of revenue, usually by way of bank overdraft.

The volume, incidence, and nature of local government taxation, and the difficulties caused by the competition for capital among local authorities, have been controversial questions for many years. A Royal Commission investigated the whole problem of territorial local authority finance in 1958. Some of its recommendations have since been adopted, including the suggestion that portion of the national petrol tax be diverted to the National Roads Board for distribution to local authorities as roading subsidies. Its more radical recommendations, including the recommendation that a citizens' tax on earnings and profits be collected and distributed by Central Government, that Crown rating exemption be abolished, and that a local authority finance corporation be established, have not been implemented. The financial difficulties experienced by territorial local authorities are undoubtedly a contributing cause of the increasing interest in the structural reorganisation of local government.