Welcome to 2009.

Or should it be welcome to the perfect storm? The worst economic outlook for at least the past 50 years, ratepayers (and many councillors) demanding what amount to real cuts in expenditure, a new government expecting local government to play its part in reviving the economy through infrastructure investment, a Royal Commission about to report, a new minister who will clearly have an activist agenda and much more besides.

It would be easy to decide that this is all too hard, and wait for others to find the solutions to the complexities we face. Here at the Local Government Centre we believe that this would be to miss the greatest opportunity New Zealand local government has had for many years to entrench itself as an essential and important part of New Zealand's governance. Amongst the trends which led us to this judgement there are two which stand out.

The first is the wealth of evidence from practical experience that dealing with the complex social and economic issues modern societies seek to tackle requires working at a regional and local level, and with a high degree of collaboration and ability to tap into local networks, knowledge and support. Without local government, other tiers of government cannot achieve this.

The next and in many respects most important is the impact on central governments of the economic downturn and collapse in financial markets. For many years the myth that governments can be omniscient in designing and delivering interventions to resolve complex problems has been underpinned by fiscal surpluses – if the programme doesn't work, put another one in place and write another cheque. That ability has now gone. For at least a decade to come most Western governments will operate deficits outside their comfort zone and with debt increasing to levels which markets will increasingly penalise. Governments will be forced to look behind the relatively easy solution of throwing another cheque at a bureaucrat's or minister's proposal to the more complex but more effective approach of understanding and working regionally and locally to design and deliver the collaborative solutions we need. Virtually by definition local government will be at the heart of this process because of its unique regional and local presence, knowledge and potential.

This will require local government to be highly innovative in how it works with its communities, and mediates between them and central government and other stakeholders. It will be doing so in a situation of ongoing fiscal pressure. Government's ability to provide further funding for local government activity is going to be extremely limited, at least outside the core area of infrastructure development. Ratepayers will be more and more reluctant to fund increases (consider the impact on older ratepayers of the economic downturn, including the sharp reduction in interest rates). Capital markets will be more challenging (although the opportunity to borrow directly from their communities may offset much of the impact of this on individual councils).

Expect to see councils looking more and more toward how they can use their powers to facilitate new ways of addressing community challenges such as our ageing population, affordable housing, place shaping to attract and retrain skilled workers, and acting on behalf of communities to ensure that central government plays its part effectively in areas such as education, health and labour market development. Also expect to see central government looking more and more to local government as a partner, perhaps pragmatically rather than as a matter of consistent principle, as a way of connecting with the community networks and support central government needs to achieve the objectives it is pursuing for New Zealand.

It's going to make for interesting times in how central government works with local government. The argument that central government will need greater involvement from local government, and greater creativity on local government’s part, suggests a broader and more significant role for individual councils. At the same time, we have a new Minister of Local Government who is setting some clear objectives for improving local government efficiency, and reducing its burden on ratepayers including a renewed emphasis on 'core functions' as the principal business of local government. Few would disagree that there is scope for improving the performance of local government and that this should include revisiting some of the reforms of 20 years ago, including the balance between elected members and management.

If government consistently wants greater involvement by local government, as seems virtually certain, and the Minister wants local government to refocus on its 'core business', both levels of government will need to be very clear about how these potentially conflicting objectives are managed. Already there are signs of councils being hesitant to undertake activities because of mixed signals from different ministers. New Zealand's parlous economic state suggests this is a luxury we cannot afford.

We think that this dilemma will be resolved and positively, especially as government confronts its major challenges in areas such as infrastructure development, and responding to the report of the Royal Commission. These are matters which are crucial to New Zealand's future and where speaking with a single voice is absolutely essential if we are to make the progress we need.

Finally, we share the view expressed by the Wellington-based investment banker Rob Cameron that recent events represent a tectonic shift. The world we live in is changing substantially and permanently. The opportunity for local government is to ensure those changes both support local democracy and enhance New Zealand's social economic, cultural and environmental performance.

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At the end of this month the Royal Commission will deliver its report on the future governance of Auckland to the Governor-General. The commissioners may, in a sense, be wondering whether they have already missed the deadline. The media has decided that Auckland will be a single super city. Assorted television stars, past and present, have concluded that they personally would make the ideal elected executive mayor. With so much already "decided" what is there left to wait for when the Royal Commission reports?

Actually, quite a lot. Although the media seem very confident that a super city is going to be the answer, an evidence based analysis of the possible options suggests this is extremely unlikely. First, the research papers on the Commission's own website do not support this approach - and those papers were prepared by people whose opinion the Royal Commission clearly respects. Next, the evidence from international experience argues strongly against the super city approach but in favour of a strong regional body responsible ONLY for those functions which are of regional strategic significance. Both the evidence and the Commission's own reports counsel against cluttering that regional body with conventional local government service delivery activities.

At the Local Government Centre our analysis suggests that the key elements of the Commission's report will be:

• A directly elected executive mayor.
• A carefully designed set of checks and balances to constrain how the executive mayor exercises his or her powers.
• A strong regional body responsible only for functions with a major regional strategic component - regional economic development, regional spatial planning, regional land transport planning, the three waters, public passenger transport, regional parks, regionally significant arts and cultural facilities and waste management look likely to be the core.
• A version of the current territorial local authorities for the major but not regionally strategic service delivery activities of local government.
• A third tier of enhanced community boards with a set of functions whose impacts are primarily within the boundaries of those boards (note both the Commission's references to the number of submissions which asked it to put the 'local' back into local government, and the quality and depth of analysis many of those submissions displayed).

The pivotal role in all of this will be the directly elected executive mayor. He or she will have ultimate decision-making responsibility for all of the major strategic issues confronting metropolitan Auckland (although in fact much of the actual work will take place through arms length entities such as those which will control the three waters). This is a fundamentally different role from the 'television star' concept of mayor which seems to be based on a combination of local cheerleader and baby kisser.

The Centre understands the public concern that a celebrity of some kind could parachute into the position but does not regard it as a real risk. Once the job of executive mayor is clearly defined it will become clear that this will be one of New Zealand's most significant and complex executive positions. It's not just that candidates will need to be well qualified to attract voter support. Much more importantly it is that they will need to be well qualified to survive the pressures of the job. The executive mayor is going to be making final decisions on major transport and water infrastructure, the framework for the region's economic development, roading, regional spatial planning.... although he or she can expect to have strong support from qualified professionals, this is going to be very much the archetypal 'the buck stops here' job. Without the skills and experience required to do it and do it well, the pressures on the mayor will be intolerable.

On 28 April we will be presenting a one-day conference on metropolitan governance. The main purpose will be to consider what the Royal Commission's report really means for the future of Auckland. The keynote speaker will be the Commission's advisor on metropolitan governance, Robin Hambleton, who is Professor of City Leadership at the University of the West of England. Other speakers will deal with issues such as reinforcing Auckland’s position as a leading city in the Asia-Pacific region, the checks and balances required to complement the powers of the executive mayor, and what to do with the non-executive councillors.

It will also be an early opportunity to consider what the government's response should be. This is not just a matter of the governance of Auckland, it is also how the government should respond to the report's implications for the rest of New Zealand. As an example, if the Royal Commission recommends that the Auckland region needs a strong network of community boards, and the government accepts that recommendation, it will be very hard to argue against introducing strong community boards in the rest of local government or at the very least in the larger urban centres.

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The global recession is affecting all sectors of society; with both private and public sectors being affected in different ways.  In fact, councils are often faced with a decrease in revenues on the one hand and an increase in those wanting to utilise their services on the other.  It is interesting to review how local councils in different countries are dealing with the effects of the recession and what solutions they are implementing.

It is particularly important that councils are proactive in addressing the issues associated with the recession as they are often the ones closest to the community and are the ones to whom communities turn in hard times.  One group in society which will be particularly hard hit is older ratepayers, the stress on them to keep up with rate payments will increase as many are dependent on investment income which is being hard hit by the economic situation.  Losses following the collapse of finance companies, falling values in the share market and a dramatic decline in interest rates will mean a significant fall in income for many older people and an equivalent pressure on their ability to pay rates.  

United Kingdom
The United Kingdom has been focused on the recession for a while now.  There is a lot of activity in UK local government aimed at reducing the impact of the recession on their communities. 
The following examples show the diverse ways in which UK’s councils are working with their communities during this time(1):

• Westminister City Council is investing more than £1million to help almost 3,000 people find work during the economic downturn;
• South Holland has set up an innovative community interest housing company, boosting its efforts to build affordable homes for local residents;
• Essex County Council has put in place a one-off financial assistance scheme to help families and older people on low incomes in Essex cope with the economic downturn;
• An extra £800,000 was paid out to Lancashire residents last year thanks to a campaign encouraging people to claim the benefits they are entitled to such as council tax benefits;
• Stroud District Council is helping its residents for the UK winter by publishing advice on cost-effective ways to save energy in the home

Some research suggests that councils are actually well placed to ride out the immediate effects of the credit crunch as many have anticipated the decrease in revenues and the increase in costs.  A survey in the UK of council Chief Executives has found that 13% of respondents had cut jobs as a result of the slowdown and 22.1% had introduced a recruitment freeze(2).

Australia
While local government agencies around the world are struggling, Australia’s local government was gifted a windfall in these tough economic times.  The Australian Federal Government’s $42 billion stimulus package was passed by the Senate and will mean that funds will now flow into local communities and can be utilised for projects such as libraries, civic spaces and sporting facilities.  As a result of this stimulus package, the Regional and Local Community Infrastructure Program has been granted a total of $800 million of funding for local government to stimulate growth and economic activity across Australia and support national productivity and community well-being.  These funds will be delivered by allocating $550 million for strategic projects and $250 million directly allocated to councils and shires.
The final version of the package allowed councils to submit new projects for strategic projects component of the Local Community Infrastructure fund (from $50 million to $550 million), emergency funding for bioremediation of the Lower Lakes region of the Murray-Darling Basin, $60 million for heritage infrastructure, and an extra $40 million for green infrastructure projects such as cycle paths.
It is interesting to note that there is a distinct lack of focus on local government agency websites and other such sources about the global recession, particularly compared to what is happening in the UK.  This could be due to the promise of a flow of funds to ease local government’s problems or to the fact that Australia’s local councils do not seem to have had the same impact on their ability to borrow as they have in the UK.

New Zealand
New Zealand councils face a dilemma.  Ratepayers, and the current Local Government Minister, want them to reduce rates and hold back on expenditure and others want them to increase spending on infrastructure and other activities that maintain employment. 
Almost all 85 councils have indicated to Local Government New Zealand that they are aiming to cut costs.  These efforts are being done in different ways, for example:

• A number of mayors and their councillors have decided not to accept a pay rise this year;
• Auckland City Council has cut back sharply on its expenditure, Mr Banks has said that “we are monitoring costs day by day, line by line, dollar by dollar”;
• Wellington City Council is aiming to cut between 3% and 5% a year from the council’s operating expenditure; some projects could be deferred until better economic times while others could be cancelled altogether;
• Staff recruitment procedures at Queenstown Lakes District Council have been tightened and overhead costs trimmed; and
• Councils around the country are looking at their costs and cutting back where possible.

During these times Local Authorities should be looking very closely at the scope given by section 100 of the Local Government Act 2002 which allows them to operate at a deficit if they think it is financially prudent to do so.  This is particularly important following the shift to full accrual accounting that requires local authorities to depreciate their infrastructure assets.  For many councils depreciation is now their single largest operating expenditure and it compounds the burden on current ratepayers when councils invest in new or replacement infrastructure.  In practice ratepayers are required both to meet the cost of the new infrastructure investment and to set aside funds, through depreciation, so that future ratepayers can replace the investment when it reaches the end of its life.

There has been some good news for local government with the confirmation of the latest initiative under the Government’s Jobs and Growth Plan which will see $142.5 million of spending on transport infrastructure.  These funds will span five large state highway projects and a programme of smaller, regional roading improvement projects.  Funds will also be put into education and housing and will make a difference to the community where it is needed. These are good steps but the Local Government Centre would like to see better partnership with Local Government and some investment in local economies and communities to complement what are largely centrally funded big ticket items.

No doubt as the recession progresses and its effects continue to be felt globally the impacts on local government around the globe will also change.  The Local Government Centre will be keeping a close eye on the situation here and overseas and will keep you up to date with any significant developments.

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Comment from ABN AMRO Craigs on the ability of Local Authorities to access funding from the retail market

We are now experiencing what was thought by many to be inconceivable, a collapse in the global financial system, nationalisation of banks in the USA and Europe, and rescue packages totalling trillions. As the shake up of global financial markets continues, two key funding groups within the NZ economy, banks and institutional investors, have pulled back lending. One of the few markets that remain open for debt raising is the retail investor market. As a result, many local authorities are looking to diversify their lending programmes and are likely to follow Tauranga City Council and Auckland City Council by issuing into the retail bond market.

A major step forward last year was approval of the Securities (Local Authorities Exemption) Amendments Act allowing local authorities to issue under an Investment Statement rather than a prospectus. As a result local authorities can more easily offer “mum and dad” access to bonds which are the equivalent of the old “local authority stock” with the benefit of security against the rates revenue.

We consider local authority bonds, with security against the rates revenue, to be second only in terms of risk profile to New Zealand Government securities. While not all local authorities are an equal credit risk, we hold this view for most (although not all) local authorities. A number of local authorities have obtained independent credit ratings. We view these as a useful tool when assessing an investment and do offer some ability to compare across different groups of issuers as well as within a group. While the bond coupons will not be as high as other debt securities, we believe investors are looking for strong capital protection. The issuance by local authorities provides investors diversity in their investment portfolios and an alternative to banks, which dominated fixed interest offers to the NZ market in 2008.

We have seen two bond offers in recent months. Tauranga City Council was the first local authority for a number of years to launch a retail bond offer late last year. This was brought to the market jointly by ANZ National Bank and ABN AMRO Craigs and was very well received. The five-year offer was filled at a coupon of 7.05% p.a. (credit margin of 75bps). Auckland City Council has a bond offer open currently. Auckland City is seeking to raise five-year funds for up to $150 million at a minimum coupon of 6.00% (credit spread of 200bps) and this offer is expected close fully subscribed in March. Credit spreads generally have continued to widen given the global credit crisis. Local authorities are now issuing at margins ten-fold over levels seen in past years although absolute coupons are at relatively low levels given the fall in swap yields. A risk averse investor will benefit from the higher margin, which will offset at least some of the fall in benchmark swap rates over the past year.

Around the globe, Governments and Central Banks are pulling out all stops to stabilize the world’s financial markets to return economies to a growth path. New Zealand’s local authorities can also assist in stimulating their regions’ economies.

Recently the World Bank has said that the world economy “is likely to shrink this year for the first time since World War Two, with growth at least 5 percentage points below potential”, adding that “world trade is on track in 2009 to record its largest decline in 80 years, with the sharpest losses in East Asia”. 
Warren Buffett, one of the world’s richest men and considered by many to be the world’s greatest investor, has said the U.S. economy had "fallen off a cliff" but would eventually recover, although a rebound could kindle inflation worse than that experienced in the late 1970s. He went on to say the country is experiencing a "close to the worst-case" scenario of falling business activity and rising unemployment, causing consumer confidence and spending to tumble”.

The key here is that our economy will recover. Local authorities may be able to use these difficult economic times to fast track certain regional development with sound long-term benefits. Ideally local authorities need to maintain diversified funding lines, ensuring they take control of their future funding requirements. We see the retail investor market as being a very good funding option, yet one largely untapped in recent years. Regular bond issues should provide local authorities with relatively secure access to longer term funding from what is likely to become a loyal investor base.

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The future appears bright for local government in Australia.  However, the sector is undoubtedly at a critical juncture and the next few years will determine whether it is able to seize the opportunities which currently exist in order to increase its position and relevance within the broader government of Australia. 

More so than at any time in the past, the challenges now confronting councils lie largely at the national level rather than at the state level.  There is much riding on the shoulders of the Australian Local Government Association (ALGA) as the representative body of the 562 councils across Australia as we pursue these national objectives.  

The focus over the coming year is essentially on securing a more financially sustainable local government sector, pursuing reform of the Australian constitution so the three levels of government function better and positioning local government to play an effective part in Australia's response to the global financial crisis. 

A report in 2006 by PricewaterhouseCoopers (PwC) commissioned by ALGA concluded that more than 30% of Australian councils were in a perilous financial situation and were bordering on being unsustainable.  In response, ALGA has stepped up its campaign for an increased share of federally collected tax revenue to be transferred to councils.

Community infrastructure was cited in the PwC report as needing urgent attention.  It identified a $14.5 billion backlog in expenditure on community infrastructure such as town halls at the local level.  We are hopeful that a current wide ranging review of the Australian taxation system in which we have participated, will result in a more appropriate revenue sharing arrangement across all three levels of government.

As well as financial challenges, local government is also experiencing institutional challenges.  The Australian constitution does not currently mention local government.  As local government’s roles and responsibilities have expanded, the structural flaws inherent in our position within the Australian system of government have become acutely more apparent.  Constitutional reform to modernise these structures is critical. 

We have an unprecedented opportunity to push for constructive and far reaching reform.  The newly elected Australian Prime Minister, Kevin Rudd, has made it clear he supports a place for local government in the constitution.  At the Prime Minister's request, ALGA convened a Constitutional Summit in Melbourne during December so councils could begin to develop a sector position on how this should be achieved.  Almost 600 Mayors and Councillors from all states and territories reached a consensus view on a model for constitutional change which:

• inserts a new power in the constitution to expressly empower the Australian Government to fund local councils;
• reflects the existence of local government in the constitution; and
• provides for the right of people to democratically elect their local council.

This is all about modernising Australian federalism so government functions better and more seamlessly. Inserting a financial power for the Australian Government to directly fund local councils reflects the growing links between the two levels and will strengthen the opportunity to provide local infrastructure and services which meet the expectations of local communities. 

The model proposed offers sensible, sober and logical improvement that will improve the accountability of local councils and councillors to their communities and entrench the principles of democratic decision-making at the local level.  ALGA will now work with the Australian Government to develop the path towards constitutional reform.  I want to ensure that we don’t waste this opportunity.  Constitutional recognition of local government has been attempted twice before in Australia and has failed on both occasions.  It is without doubt an extremely difficult goal to achieve. However, I believe it is unfinished business that ought to be pursued in the interests of improving the way government functions in Australia.

Of course, local government's financial and institutional reform goals must be tempered by the current world economic climate.  However, the so called 'global financial crisis' also presents a number of significant opportunities for councils.  In November, as part of the Rudd Government's efforts to safeguard the Australian economy from the effects of the current global turmoil, the Prime Minister announced a local stimulus package of $300 million for community infrastructure projects.  This money has been split between all councils and is contingent on councils being able to spend it over the next eight months.  The funding has been eagerly welcomed and demonstrates the economic stimulus able to be delivered by councils at the local level.  It is clear that the Australian government correctly recognizes that local government with its dispersed and localized networks is the best placed level of government to spend money quickly and at short notice throughout all local communities in Australia. 

As the world economy continues to experience uncertainty into 2009, local government stands ready to play an increased role in the Australian domestic response to the economic challenges faced.

In a nutshell, 2009 will be a pivotal year for local government where we seek to lock in some of the gains achieved in recent times but most importantly where we seek to realise some long sought but elusive goals.  This will require councils to demonstrate innovation and leadership more than ever before.   It will be a difficult task but the revitalised local government sector in Australia is well equipped and ideally placed to give it a shake.

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We have decided to include the new Minister of Local Government's recent speech to rural and provincial councils because we believe it provides important insights into the approach which the Minister intends taking. It highlights his focus on three key areas; keeping down costs to ratepayers (including a renewed focus on 'core functions'), improving local government efficiency and reducing the regulatory burdens associated with local government. As can be seen from a separate item in this newsletter on the Employment Summit, the Minister's approach is very far from being a single-minded focus on cutting councils back to size. Instead, it looks much more like a two pronged approach - I want you to be more effective, more efficient and less of a burden on your communities. I also want to make your job easier where I can, and help ensure that what you do for your communities genuinely adds value. 

*Hon. Rodney Hide, Minister of Local Government
v
Local Government - The Way Ahead
LGNZ conference Rural & Provincial Sector Council Meeting
19th Feb 2009

I have to say, ladies and gentlemen, that I don't regard myself the Minister of Local Government - I consider myself the Minister for Ratepayers.  I don't represent councils.  I represent the people whose hard work and savings pay the rates.  And provide councils with their income.

That sums up the way I approach to my job.  When ACT went into its support agreement with National after the election, I took on my two ministerial portfolios - Local Government and Regulatory Reform ... Because these are important areas that affect people and their communities in so many ways.  I also took them on because these are areas in real need of change.

Here are my aims.  First, I want to keep rate rises down and encourage you to focus on core activities.  On the necessities, not the luxuries.  There can be no doubt that, overwhelmingly, ratepayers right across the country support this goal.  No one wants to pay more rates than they have to.  And there can also be no doubt that rates have been rising way beyond the rate of inflation for a good many years.  As have other charges and fees.  So I will be pushing for councils to accept that rates rises should be capped at the rate of inflation, or less.  Sure, councils for good reason may need to increase rates faster than inflation.  But they should get the consent of ratepayers for such increases.  After all, it's their money.  And it's a good test for a planned spend-up to get the agreement of those who are paying for it.  We all know the perilous state of the economy.

We must be a lot more careful with money than we were in the past.  That includes councils - although there've been calls from ratepayers and ratepayers groups for many years to cut back the big rates rises.  And to get back to basics, to what should be the core roles of councils.

Providing public services such as rubbish removal, road maintenance, parks, libraries, and light handed-regulatory controls.  We all have wish lists - but councils must make better judgements about what they decide to support and spend money on.  They should not be running banks, investing in hotels, or paying for some superstar to visit.  Councils need to ask themselves each time a spending proposal comes up - "Is this a core service for local government to provide - and can our ratepayers afford it?"

When I look at the expanding breadth of activities that councils engage in, the answer must surely be, "Businesses should be doing this - not the council."  Even if it is a job appropriate for local government, the answer may still be "No, our ratepayers can't afford it."

So there are two fiscal tests we should be applying to councils.  Here's my second aim.  Ratepayers want greater transparency and accountability in local government.  Right now, council processes are murky and confusing.  I want to change that.  Ratepayers want to know who is responsible for council decisions - and who to hold to account.  For good decisions, we need good governance.  Good governance requires transparency and accountability.  I believe we can and should do better.

My third aim is to cut the red tape that's strangling businesses, and driving ordinary people and homeowners crazy.  I want to see fewer of the absurd compliance demands in the regulatory area.  I want to see the burden that is placed by central government on local government reduced.  I want to see respect for private property rights.  I want the freedom of individual New Zealanders enhanced.

When I went on the TV show Close Up late last year, I asked viewers to write to me about the problems they'd been having with their councils.  I got literally a sack full of mail.  Once it was known I wanted change in the local government sector, people wrote to me en masse.  I've had around 1100 letters so far, and more come in each day.  But that's just the tip of the iceberg in terms of the extent of the problems people are having with councils.

I accept that much of the overbearing regulations and petty restrictions imposed by councils come from government legislation such as the RMA and the Building Act.  And that's why we're making changes to both.  The first raft of changes to the RMA was announced earlier this month.  There will be more work on the RMA and related issues.  Next, we're looking at the Building Act.

I'm working with Building and Construction Minister Maurice Williamson on these improvements.  But that's not all.  The practice of central government imposing more and more obligations on councils, which leads to more costs being passed onto ratepayers and the wider public, must stop.

I understand that just to put a Para Pool in your background for the kids will take months to get the paperwork done, and can cost thousands of dollars.  That's just for the council consent alone - which can cost up to fifty per cent as much as the pool itself.  Families can't afford a Para Pool because of the council costs and even if they can do so, they may not get the consent through in time for a swim till next summer.  That's ridiculous.

Some of these situations impact directly on just a few people.  Others affect many.  But the cumulative effect of getting rid of them will be substantial.  Like smoothing out a whole series of small potholes in a road.  Much of the problem lies with poor legislation.  But councils have also become very risk-averse and over zealous.

Earlier this week I visited a fantastic New Zealand business that is being driven to its knees by local council demands.  It's one of many in that situation.  The company is called Access Automation, based in the Hutt Valley.  Simply trying to carry out their everyday business is now a nightmare.  They constantly have to battle councils just to carry out their business.  They make cable cars to give people access up steep hill sides and cliff faces, which we have a lot of in Wellington.

It's a clever, innovative, and successful company.  But it only has eleven workers.  That makes it a typical New Zealand company.  There's not a lot of fat.

Over the last four years, the council rules and regulations about what it can and cannot do have got tighter and tighter.  The company is now at risk - and so are the jobs of those eleven people.  Two and a half managers now spend 80 per cent of their time filling out council documentation simply to get resource consents.  No matter what is provided, the council wants more.  More reports, more analysis, more information, more data, more forms to be filled in.

Blah blah blah.

It's taking nine months to get a resource consent to put in a cable car... so that an elderly lady can get to her house easily up a steep cliff from the street.

Things have got much worse over the past four years - as the council throws more and more absurd barriers in their way.  They get contradictory advice from council staff, departments don't talk to each other, and they often have to deal with different people from the ones they dealt with last week.

The guys at Access Automation are being ground down.  The company's at risk, the jobs are at risk, but imagine the combined effect of the same thing happening to thousands of similar companies around New Zealand.  They've had enough.  They want change.  And they're not alone - as I said earlier, my mail bag confirms that.  So do my emails, and conversations from people who come up to me all the time at airports and events around New Zealand.

It's my belief that we can and we must do better in local government.  That means greater transparency and accountability.  Getting our costs down.  Greater respect for taxpayers and ratepayers, and their rights.  Ending the petty red tape that's tying us up in knots.  We need to make it easier for New Zealanders to go about their business and everyday lives ...  not harder.

Together we can do it.

Thank you.

ENDS

* This speech is reproduced exactly how it was recorded on the website.

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Phil McDermott, an adjunct professor of Urban and Regional Development with the Institute of Public Policy, has drafted a discussion paper on New Zealand’s population geography. 
This paper explores changes in New Zealand’s population geography, including inter-regional movements and international settlement patterns.  It places the residential preferences revealed by these movements in a national setting and examines them at the city and district, metropolitan and local levels.  It relates recent Census-based evidence on population change to experience elsewhere, to employment trends, and to lifestyle issues to suggest that decentralisation will become a more important force.  Auckland’s primacy will continue for the foreseeable future. But questions are raised over the level at which that primacy is sustained as an emerging decentralisation is evident in different growth rates among local council areas both within Auckland Region and between the region and other parts of New Zealand.

The paper analyses the components of recent population change.  The evidence suggests that population expectations founded on “the drift north”, slow growth in the south, structural disadvantages facing Wellington, rural depopulation, and the primacy of Auckland need revision.  The resurgence of second tier and provincial cities, the revitalisation of the rural periphery around major urban areas, and burgeoning lifestyle settlements, both in the shadow of urban areas and beyond, are new facets of New Zealand’s population geography.

This paper has not brought all the evidence together, and the propositions it contains may need to be tested further. Nevertheless, they raise some interesting policy issues, both for the major metropolitan areas and for smaller peripheral and provincial towns and cities.

[Link to discussion paper]
[Comments Page]

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Community boards have enjoyed a chequered history since their establishment as part of the 1989 reforms. There are some districts where community boards are an integral and important part of local governance (Southland provides the best example). Generally, however, where there are community boards their functions are relatively insignificant in terms of local decision-making or the ability to influence local outcomes.

The apparent ambivalence arises from several causes including:

• The only functions which community boards have as of right are essentially advocacy in various forms (see section 52 of the Local Government Act). Any additional functions must be delegated by the local authority.
• Too often the advocacy role appears to set community boards up in opposition to the parent Council.
• The remuneration arrangements for community boards are interpreted by the elected members of many parent councils as requiring them personally to pay part of community board members remuneration - a function of the Remuneration Authority requirement that one half of the remuneration for community board members be met from the remuneration pool for elected members on the assumption (incorrect in the view of the Local Government Centre) that the existence of community boards reduces the governance burden on elected members of the parent Council. The result is often to create a measure of resentment which gets in the way of good working relationships.

The Royal Commission report may signal a change in the role and importance of community boards. The Commission has clearly heard the strong message from many submitters on the importance of putting the 'local' back into local government, typically by strengthening the role of community boards. It's own research includes a paper by Mike Richardson, a former chief executive of Christchurch City Council (see here).

The paper includes within its executive summary the statement that "I recommend that the Royal Commission adopts an enhanced community board model as outlined in this report. I am attracted to the ‘enhanced plus revenue raising’ model."

Mike Richardson's report sends a very clear signal that Auckland needs an enhanced third tier within local government. The same logic applies to much of the rest of local government. It does seem as though the ugly duckling of New Zealand's local government sector may yet have its time as a swan.

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Peter McKinlay attended the Prime Minister's Employment Summit as a member of the local government work stream.

This work stream brought together leaders from within local government, business, central government and economic development. The focus was very much on what steps could be taken to enhance local government's contribution to job creation/retention.

Two main themes came through - encouraging job rich local government activity and minimising the regulatory burden both on people whose activities were covered by local government regulation (planning, building, health etc) and on local government itself especially in the consultation/compliance area.

A major highlight of this work stream was a very positive working relationship between Local Government New Zealand and the Minister of Local Government. Two priorities from this work stream form part of the 'top 20' recommendations from the Summit (4). They are:

• Aggregate local government debt to gain access to debt funding at lower than current interest rates. Also, prioritise New Zealand investment plan across central/local government, that ensures a job creation focus, incentives for expenditure, quality spend that best positions New Zealand for medium to long term and avoids competition for capacity and capability.
• Adopt a permissive approach to increase the range of permitted activities in e.g.  building and housing, food safety. Enable local government to determine appropriate level of consultation.  Seek a moratorium on drinking water and air quality standards. Improve practice in council processing of regulatory consents.

Both were developed collaboratively with strong input from the Minister. On infrastructure, he was very concerned to see that New Zealand gets the best bang for the taxpayer's buck, so that 'shovel ready' projects from both central and local government should be ranked in a single ranking to ensure that the best projects get the go-ahead, rather than central government projects getting the lion's share of funding simply because the taxpayer is putting up most of the cost.

On regulation and compliance, very important progress was made. The Minister will be supporting a moratorium on drinking water and air quality standards to ensure that time is taken to do the work needed to be certain that investment in these areas is genuinely necessary. On local government’s own consenting and regulatory practices, there was a consensus on the need to improve performance, share best practice, and minimise the extent to which regulatory interventions or requirements delay or add cost to activity in the real economy. Finally, and as a breath of fresh air for local government, there is a commitment to revisit the consultation provisions of the Local Government Act, including the consultation and compulsory audit requirements for the Long Term Council Community Plan.

The work stream was a clear demonstration that the Minister intends to work closely with local government and listen to its concerns, as he considers the best ways of achieving the objectives he has for the sector. This looks very much like a strong and productive partnership in the making.

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Local Council Infrastructure Procurement in comparison to UK Council practice

In general the procurement practices used by local government in the UK to procure major infrastructure projects appear to have moved ahead of the equivalent practice of local government in New Zealand. This article briefly sets out some of the areas where New Zealand Councils appear to be falling behind, and why this may be the case.

In the UK procurement has developed significantly from the late 1980’s where local councils still emphasised the importance of the lowest cost bid and procured mostly by traditional means. This was not assisted by an opaque legislative and legal position on council powers and duties which dissuaded councils from considering new or more innovative approaches.

In the last 20 years or so there has been a very significant shift away from this towards the use of alternative procurement methods and a much greater appreciation of the value that well run procurement can have to the bottom line of a project. For example, for many major projects there is now a preference to use ‘design and build’ contracts as the norm, which reduces the risks on councils by making the contractor responsible for design as well as construction, whilst at the same time encouraging better design through early contractor involvement in the process.

More radical procurement alternatives are now frequently seen, and are usually chosen after a careful analysis of what would be ‘best value’ for an individual project. Some of the most common examples include:

• Design-Build-Maintain Contracts, where a contract is entered into with a single contractor to both construct a project and to maintain it for a fixed period of time;
• Batched Procurement, where smaller projects are lumped together in a single package and awarded to a single Contractor;
• Joint Procurement, where two or more local authorities procure their projects through a single process, and on some occasions through a single joint contract;
• Partnering, where the traditional form of contract is abandoned altogether in favour of a collaborative working contract that fairly allocates risk and provides financial incentives to complete the work on-time and on-budget.
• Frameworking, where long term arrangements are entered into with individual suppliers and contractors to provide repeat services on an ‘as needed’ basis, without the need for repetitive tendering;
• Output Specification, where a council procures an output or result and invites designed solutions, rather than designing the solution themselves; and
• Private Financing, where a Council invites the private sector to design a solution and finance the up-front capital cost, in return for a long term contract to maintain and operate the facility to a required standard.

In the UK water and wastewater is not the responsibility of local government, but these more advanced procurement methods are widely used in the education, leisure, roading, streetlighting, housing and waste sectors. The result is a greater tendency for these projects to be completed on time and meet budget.

The UK local government sector has benefited enormously from a determination by UK central government to ‘shake up’ procurement practice. Central Government has provided a great deal of assistance to local authorities to change their culture and practices, including:

• the provision of extensive written guidance;
• the establishment of central bodies such as the 4Ps who are briefed with providing hands on training and assistance;
• the funding of research into the construction industry; and
• legislative changes making it easier for local authorities to use alternative procurement means.

Most crucially, the UK government has made aspects of its local government funding conditional on the use by local authorities of alternative procurement means, especially through the Private Finance Initiative. New thinking developed by councils on these projects have then been applied to other projects procured by other means.

In New Zealand there is not the same Central Government support. The limited procurement guidance available to date has mostly been provided by the NZTA and its predecessors. The CPP is now being reviewed to give New Zealand councils greater flexibility and to encourage innovative procurement, and this is to be highly commended. However, a great deal of the pressure to effect a re-thinking of procurement remains solely with the local councils. It would be of real benefit if central government were able to provide the level of support shown in the UK to enable New Zealand’s local councils to advance their procurement practices and begin shutting the gap with their UK counterparts.

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IPP Annual Report can be downloaded here. (pdf 4.6mb)

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