2009 Auckland Governance and International Reflections

The future governance in the Auckland region remains the major preoccupation of most of us concerned with how local government in New Zealand should evolve to meet the changes which have taken place since the 1989 restructuring. Within the Local Government Centre we have placed a very strong emphasis on contributing to the public debate. Our activities in the current year have included a major conference on the future governance of Auckland and a series of seminars focused on helping people work through the issues, and understand how best to present their views to government.

The feature article in this newsletter, from the director of the Institute of Public Policy, considers how the Auckland Council will contribute to the quantum shift needed in the Auckland region's economic performance. Will the new structures be equal to the challenge of helping transform the Auckland economy?

It is complemented by a think piece from our research officer, Catherine Harland, drawing on her many years of experience in helping lead transport policy in Auckland, considering how the new Auckland transport agency will operate. Catherine poses the question how will an agency whose mandate is focused on improving regional land transport deal with the myriad of local issues it will inherit with its responsibility for local roads? This could become the most political of all of Auckland's new structures.

We look also at how one other jurisdiction has handled the challenge of regional governance; British Columbia and its regional districts. We are fortunate to have a contribution from the team at the Ministry of Community and Rural Development who have had 40 years of experience working with a statutorily enabled but optional approach to establishing regional structures. It's a fascinating but little known alternative to the standard government approach of restructuring by fiat.

We also provide coverage of how the Local Government Centre itself is developing. It has been a very good year for building our international connections, and establishing the Local Government Centre is a well respected player in the international local government research community. What we have experienced is a very warm welcome reflecting New Zealand's international reputation as a country which engages on the world stage in areas such as local government not to pursue its own interests, but to promote the collective interest. It is a real privilege to benefit from standing which New Zealand obviously has in international forums.

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Excerpts from Prime Minister John Key’s Speech to business breakfast hosted by Cullen Law, July 2009 highlight some of the core policy issues the government wishes to tackle:

“This Government has three key economic objectives, which together will result in improved and enduring economic growth. These are:

• increasing New Zealand’s productivity growth
• maintaining high levels of employment, and
• reducing New Zealand’s vulnerability to adverse events.

The most fundamental problem facing the New Zealand economy is poor productivity growth. Our productivity is already low by comparison with other developed countries, and in recent years has been growing much slower than in most other countries. A significant part of the poor productivity growth in New Zealand has been the stagnation of the tradeables sector of the economy.

The tradeables sector is made up of those firms that are in competition with the rest of the world – that is, they either export to other countries or they compete with imports here in New Zealand. This sector includes agriculture, fisheries, manufacturing, tourism, and forestry – the industries that make us money in the world.

The sad fact is that the tradeables sector has effectively been in recession for the last five years.’…We like to think of ourselves as a trading nation, yet we export less as a percentage of GDP than many other small OECD countries. And that percentage has only grown slowly over the last 30 years.

Over 90% of our exports come from just under 5% of exporters, and these exports are also very concentrated in a few sectors. We need our economy to become more productive through investment in sectors that are internationally competitive.

…And we must always be conscious that New Zealand’s wealth is generated by the private sector – by the small firms, the big companies, and the sole traders who generate the jobs, the profits, and the return on investment that drives our economy.

Read more. . . (7page pdf 180kb)

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Dr Emma Davies and David Wilson (The Institute of Public Policy) in partnership with Elizabeth Rowe Consulting are currently conducting research on the role of local government and the proposed Social Policy Forum in Auckland’s social and economic development.

The research team is supported by an Advisory Group comprising Grant Hewison (Kensington Swan), Tony Rae (Waitakere City Council), Chloe Harwood (ASB Community Trust), Bernadine Vester (COMET), Terry Hoskins (North Shore Enterprise), Gaelle Deighton (Enterprising Manukau), Tony Spellman and Rex Hewitt (Manukau City Council).

There are two dimensions to our work:

1. Documenting eight case studies of good practice in social and economic development in Auckland. These include:

• Counties Manukau Education Trust (COMET) including the Family Literacy Programme
• Early Childhood Education in Manukau
• Enterprising Manukau’s Food and Beverage Project
• Enterprise North Shore’s Business Development programmes
• Mangere Integrated Health Care
• Massey Matters
• Twin Streams
• WIRI Improvement Project

2. Thinking through how to maximise opportunities that exist under the new governance arrangements to pursue good social and economic outcomes in the Auckland region. This includes reference to the case studies above, the legislation for the new Auckland Council and Local Boards, improving the nexus between social and economic development and the proposal for the Social Policy Forum agreed by Cabinet in May. http://www.msd.govt.nz/about-msd-and-our-work/publications-resources/working-papers/wp-09-08-royal-commission-on-auckland-governance-social-issues.html

The research report will be launched at the ‘Passing Go: Social Wellbeing in the new Auckland Council’ Conference to be held at the North Harbour Stadium on Friday 20th November, see www.passing-go.org.
For more information, please contact Dr Emma Davies, Programme Director – Social Development, AUT’s Institute of Public Policy. Phone – 09 921 9999 ext 6036 Email - emma.davies@aut.ac.nz

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The Act sets out the basic structures for local government across the Auckland region. First, it offers the potential of a mayoral role which could provide genuine leadership in the region, whilst still leaving ultimate decision-making power with the Council itself. The role of the Mayor includes leading the development of the Council's plans, deciding the committee structure, appointing a Deputy Mayor and committee chairs and establishing the council's processes for engagement with the Auckland community. Uniquely in New Zealand it also provides for a separate mayoral office and a sufficient budget so that it should be effective in supporting the Mayor's leadership role in policy development. Despite some public claims to the contrary, this is not a strong mayoral role providing for an elected dictator. Rather, it simply provides a platform which will enable the Mayor genuinely to be the leader of Auckland provide that the Mayor can get the support of the council.

Next, it creates a structure which is unique in local government worldwide. In a very real sense New Zealand can be seen as pioneering in a new approach to striking a balance between creating a strong regionwide decision-making and service delivery body and seeking to preserve local democracy at the community level.

It does this by providing for between 20 and 30 local boards as genuine decision-makers on anything which is purely local whilst preserving the position of the Auckland Council as the sole employer, rating authority, asset owner and service delivery within the region's local government (the exact number of boards is to be determined by the Local Government Commission).

Generally the scheme of the Act is that regulatory decisions must be taken by the governing body but that non-regulatory decisions should be taken either by the governing body if they have implications that go beyond the area of the local board or by the local board if they do not. There is to be a local board agreement between the board and the Auckland Council covering matters such as the intended levels of service provision, the estimated expenses of achieving and maintaining those and how any expenses in excess of the local board's budget are to be met.

The Auckland Council must adopt a local boards funding policy which is to set out the formula by which the total funds allocated by the Council (1) for meeting the cost of local activities and (2) the cost of funding the administrative support to local boards are to be allocated to each local board.

Local boards are required to prepare a local board plan. Amongst the plethora of detail required, it has to reflect the priorities and preferences of its communities in respect of the level and nature of local activities to be provided, to inform the development of the next Auckland Council LTCCP especially in respect of non-regulatory activities, to provide a basis for accountability of the local board and to provide an opportunity for people to participate in decision-making processes on the nature and level of local activities to be provided by the Auckland Council in the local board area.

The Auckland Council will comprise a mayor, and 20 councillors elected on a ward basis. Management will be the responsibility of a chief executive who will be accountable to the Auckland Council both for advising the Council and for advising local boards - with the obvious challenge of determining how to discharge those separate responsibilities in any situation where the Council and the local board may have conflicts in objectives. This is potentially the most difficult part of the structure and will require the chief executive and the Council to put in place measures to ensure that independent advice can be given to the local boards without any negative consequences for the staff members giving that advice. This is a parallel but potentially more serious situation than the separation of regulatory and service delivery roles required of bodies such as unitary councils.

As far as practicable local board area boundaries are to coincide with ward boundaries. This should result in a strong relationship between individual councillors and the board or boards within their ward.

It is a structure which has the potential either to be highly successful in promoting local democracy, or to frustrate both local democracy and the overarching purpose of the Auckland reforms of creating a strong regionwide decision-making body. It will depend crucially on how the Auckland Council and its executive approach their dealings with local boards. Will they take a board by board approach, or will they try and negotiate collectively to get a broadly common approach?

On the first approach there is a real potential that elections for ward members will be driven by local concerns - what commitments will ward members make to ensuring that local boards have the decision-making powers they want, and adequate budget to deliver their objectives? This could repeat the difficulties of other recent metropolitan restructurings which have relied on ward-based councils such as Toronto and Ottawa - where elected councillors sit around the council table as defenders of their local wards rather than regional decision-makers.

On the second approach the potential is for the Auckland Council to pass over decisions on local matters, including local matters which might affect several local boards, to the local level leaving it free to concentrate on its regionwide and regulatory responsibilities. This would see ward-based councillors protecting the interests of the local boards within their wards not by acting parochially, but by ensuring that the Auckland Council took a genuinely empowering approach to its relationship with local boards. It's a genuine invitation to Auckland's local body politicians to understand how their commitment to local democracy could work to entrench local control over local matters despite the apparent lack of real power for local boards - if ever there were a case of "United we stand, divided we fall" this must surely be it.

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Steven Joyce, Minister of Transport, announced on 25 August 2009 that nine separate transport entities in Auckland will be replaced by a new arms length agency “responsible for all local authority transport delivery functions in Auckland, including local roads and public transport.” One month later a feature article in the NZ Herald had the Chairman of the Auckland Regional Council and the two publicly announced Mayoral candidates for the new Auckland Council all denouncing the decision indicating that transport is not a function appropriate for governance by remote control. Let’s consider the decision that was made.

Cabinet were advised of five high level governance options: three consolidated decision-making into one organisation and two split decisions between multiple agencies. In the end the choice came down to the “simplicity, integration and direct accountability offered by an elected council…and the focus, continuity and expertise offered by an appointed board” with the latter being adopted. The Royal Commission on Auckland Governance had also recommended the establishment of an arms length ‘Regional Transport Authority’ [RTA] however this council-controlled organisation was to have been responsible for public transport and arterial roads - not local roads, making it substantially different from what Cabinet decided. While legislative details are being worked through for inclusion in the third Auckland Governance Bill, what tensions or issues may arise under this unique model for transport decision making?

Read more. . . (108kb, 3 page pdf)

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This year our main seminar activity has been in partnership with leading law firm Kensington Swan focused on the legislative programme supporting the restructuring of local government in Auckland.

The first seminar in this series took place on 19 June and was designed to assist people who were making submissions on the second Auckland bill. Feedback was extremely positive with many people asking that we organise further seminars as the legislative process rolled on.

The second seminar took place on 6 October again hosted by Kensington Swan.  It covered the main provisions of the Local Government (Auckland Council) Act and discussed what they mean for local democracy in Auckland. Presentations from both these past seminars are located on our website www.ipp.org.nz/lgpastseminars.htm.

The third seminar took place in Wellington on Monday 16 November in partnership with Kensington Swan and Deloitte. It focused on the implications for the Wellington region of the Auckland local government changes.

The fourth seminar will take place on the afternoon of Tuesday 22 December from 1pm also hosted at Kensington Swan’s Auckland office. Its focus will be the third bill which is expected to set out the detailed arrangements for the future governance of Auckland, including, for example, the relationship between the Auckland Council and arms length entities for transport, water and potentially other major services.

Our current understanding is that the third bill will be introduced to the house in early December. The timing for the seminar will involve rapid assimilation of the bill to enable the presentations to take place early enough to be of value for people who are proposing to make submissions on the third bill.

An invitation to the seminars will be emailed to all the people currently on both the Kensington Swan and IPP’s Local Government Centre invitation lists. If you want to be certain of being invited, please email us asking to go on the list.

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One of the fascinating differences between local government as it has evolved within developed Commonwealth countries, and local government in leading European countries is the difference in the approach to the use of arms-length entities as a means of delivering local government services.

England still lacks an explicit statutory framework. Instead the creation of arms- length entities, especially the equivalent of our council controlled trading organisations, depends on the indirect authority assumed from the power which English local authorities have to do anything which will promote community well-being. This has proved to be a feast for lawyers and a disincentive because of procedural and other difficulties.

In Australia typically legislation provides for the establishment of local authority companies but only subject to the consent of the Minister, and without any robust framework governing the ongoing operation.

New Zealand has a much more explicit and robust framework, designed with a focus on striking a balance between democratic control, and the need for clear commercial disciplines, based generally on the state-owned enterprise model.

Despite the superiority of the New Zealand framework, we make relatively little use of council controlled organisations (CCOs) and council controlled trading organisations (CCTOs) especially when compared with European practice. As examples, in Germany municipalities with a population in excess of 50,000 own on average 90 different corporate entities. In Italy the figure is 25. Neither country is known as a hotbed of right wing ideologically driven public policy.

It is unclear why New Zealand local government makes such relatively little use of CCOs and CCTOs, especially as many of the activities of local government are effectively publicly owned businesses which arguably would benefit from the application of commercial principles and practices. Possible reasons include:

• A fear on the part of elected members that the use of CCOs and CCTOs may undermine democratic control
• A public perception that corporatisation implies privatisation
• A lack of the necessary capability and capacity for the establishment and effective management of arms-length entities - as central government's experience with SOEs has demonstrated, setting standards for monitoring the performance of significant arms-length entities is a demanding and complex task.

With the encouragement of Local Government New Zealand, the Local Government Centre is embarking on a study to scope the barriers and resistors to a greater use of arms-length entities to determine the extent to which there are real difficulties which need to be resolved, and propose means for doing so. Secondary purposes are to explore the potential for building a more positive relationship between local government and the business community, and consider why, in some cases, despite the use of arms length commercial structures, local authority owned businesses still seem to be operated for primarily non-commercial reasons.

This will include gaining a better understanding of elected member attitudes to the use of arms-length entities and their understanding of the statutory framework within which they are required to function, including the fact that it is essentially the elected members who negotiate the statement of intent with the board of any CCO or CCTO. This can be seen as enhancing democratic control over the activity.

The project will include an overview of relevant New Zealand writings on public sector corporate governance, interviews with a wide range of key informants including elected members, council management, government officials with SOE experience and directors with experience in the CCO/CCTO environment.

The project outputs are expected to include recommendations on how to strengthen the capability and capacity of local government, especially at the elected member level, with the objective of ensuring that the in-house versus CCO/CCTO choice is made on the merits with a clear understanding of the strengths and weaknesses of the CCO/CCTO model especially from a local democracy perspective.

The Centre is also in discussion with colleagues in Australia and England with the objective that this become a multi-country project. There is strong interest in both those jurisdictions in increasing the use of arms-length entities and an awareness that the New Zealand statutory framework is much more advanced than theirs.

International collaboration will both raise the profile of the project, and ensure that its findings are more robust (for example through the ability to draw on the extensive work which has been done in the United Kingdom on good practice in corporate governance generally). This should help ensure the ready adoption of findings by the New Zealand local government sector. It will also strengthen linkages between initiatives to improve the quality and performance of local government in Australia and the United Kingdom, and equivalent initiatives in New Zealand.

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A major theme of the deliberations of the Research Advisory Group at the recent Commonwealth Local Government Conference was the changing role of local government - the ongoing shift from being seen essentially as a second or third tier of 'government' in the sense of being primarily a deliverer of regulatory and public good services, to being seen as an integral part of the governance of communities - working with communities to determine their future direction.

The Local Government Centre put forward the concept of a multi-country project as a combination of both research in the pure sense and 'learning by doing' as an action-based approach to explore the potential of this new approach to understanding local government - essentially as an expression of governance rather than the narrow government focus which has dominated thinking until very recently. We put forward three basic propositions on local government to provide a framework within which to develop the project:

Basic proposition 1: The shift from government to governance is an attitudinal shift from local government regarding its powers as intended solely to deliver governmental outcomes to treating them as held in trust on behalf of the community to support it in pursuing its preferred goals. It is a shift from seeing its main role as a subsidiary level within a governmental framework, to one of community leadership working with its communities in support of their goals.

Basic proposition 2:  Local government is the single most critical catalytic resource for change at the community level but unleashing its potential requires a rethinking of its role best realised through practical demonstration of what can be achieved.

Basic proposition 3:  An essential precondition is the shift from formal consultation to effective engagement with communities.

The initiative will have both normative and positive elements. Normative in considering the role of local government drawing on political theory, and on research into the practice of local government internationally. Positive in considering actual case studies, including promoting activity consistent with the initiative's purpose of encouraging the shift from government to governance.

The first phase of the normative element of the project will be an edited book on current trends in local governance. That is currently being developed as a joint project of the Local Government Centre and the Australian Centre of Excellence for Local Government.

The positive element of the initiative will be the development and implementation of a series of projects intended both to demonstrate the potential for local governments to use their formal powers, and community leadership role in creative ways, and to achieve practical outcomes in the promotion of the well-being of their communities. Each project will be managed both in order to achieve the outcomes the particular community requires, and to develop good practice understanding of the policy and delivery issues involved, including issues of governance. The intention will be to produce case studies which will assist the replication of the projects within other local authorities and ideally other jurisdictions.

The first project within this part of the initiative is underway in Australia, with the participation of the Local Government Centre, looking at the creative use of local government rating powers to facilitate community objectives such as support for ageing in place.

At the Centre we have been very pleased with the response so far from our international colleagues to requests for involvement with this project. It represents a real opportunity for New Zealand to play a leadership role within the development of local government across the Commonwealth.

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2009 has been a good year for the Local Government Centre in further strengthening the international relations which underpin much of the Centre's work, especially our ability to access current thinking on developments in local government, and benefit from the critical insights of some of the world's leading researchers in this field.

In May the director attended both the fifth Future of Local Government Summit (FOLG) in Melbourne (an Annual Event Presented by the Municipal Association of Victoria) and the Commonwealth Local Government Conference.

FOLG brought together leading local government practitioners and researchers from Europe, North America and Australasia.

Two of the more fascinating presentations were from North American practitioners working with a range of local governments at the cutting edge of economic development and community governance. Carl Neu from the Centre for the Future of Local Governance spoke on the Emergence of New Local Government Working Orders. It was an in-depth look at the changing nature of the relationship between local government, higher tiers of government, and communities, reflecting a shift from representative to participatory governance as citizens demand involvement in issues which affect them.

Ron Kitchens, the chief executive of Southwest Michigan First, told the story of how the economy of Kalamazoo was turned around by an innovative partnership between local government and the business community. It was an inspiring account of how real commitment, and a strong partnership, can make an enormous difference.

These and other presentations can be seen on the FOLG website here.

The Commonwealth Local Government Forum (CLGF) links together local governments, local government ministries and the local government research community across the Commonwealth. Its biennial conference is the opportunity for local government leaders from across the Commonwealth to come together and share their views on the current challenges confronting local government and how best to deal with them. This year the emphasis was on the need for local governments to really engage with their communities. The Conference position was set out in what is known as the Freeport Declaration and includes the following statement of principle which is extremely relevant in the context of what is currently happening with New Zealand local government:

'Effective local government is built on strong citizen participation and consultation with a wide range of stakeholders, within an environment of local ownership of the issues facing communities. In the past, local government, like other spheres of government, has often been too remote or too bureaucratic and this needs to change by ensuring community empowerment at parish or neighbourhood level.'

The other highlight for the Local Government Centre from this years CLGF conference was the meeting of the CLGF Research Advisory Group (RAG) of which the director is a member. This group first came to prominence at the 2007 CLGF conference in Auckland as a joint initiative of the Centre and the Centre the Local Government at the University of Technology in Sydney. The research advisory group has been successful in gaining explicit recognition in the Freeport Declaration that "Evidence based policy and programmes are needed to support local government development and continuous improvement."

This will underpin the developing research programme which RAG is promoting, including a major cross-country project on "new local government" an initiative which arose out of the presentation by the Local Government Centre's director to the group.

The Conference was also notable for the role of Basil Morrison as CLGF chair. Basil's very skilful management of what is a large and complex international gathering was widely acknowledged by delegates and reflected real credit on New Zealand.

The Centre is currently working to strengthen its international relations, especially with trans-Tasman partners. The Australian federal government has recently made a one-off grant of $A8 million for the establishment of a Centre of Excellence for Local Government to a consortium led by the Centre for Local Government at UTS and the Local Government Managers Association. Part of the brief for that Centre is to build its own international connections, especially in "good practice" research. We are actively exploring the development of research projects with the Centre of Excellence, including its involvement with the governance of arms-linked entities project, and with the new local government project.

We will also be continuing to build our relationships with research institutes and think tanks especially in the United Kingdom and Canada where there are sufficient similarities (although differences) between their systems of local government and ours to make them a very valuable source of input for thinking about the future of local government here.

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