Speech to the Local Government Asset Management and Engineering Directors' Forum

Good afternoon and my thanks to INGENIUM for the invitation to speak at this forum today.

You have asked me to talk about:

- my proposed amendments to the Local Government Act 2002 to increase transparency, accountability and fiscal management, including increasing the flexibility of water service provision;

- the structure of the new Auckland Council and how this could impact upon asset management;

- whether the Government is considering more local authority amalgamations across NewZealand; and

- changes to the Resource Management Act 1991, and how these could impact upon asset management and local government.

I will briefly touch on all these topics and then look forward to hearing your views and your questions on these issues.

TAFM

As you know I have been promoting work to improve the transparency, accountability and fiscal management in the local government sector. In-house, we call this TAFM.

I started this work because it very quickly became clear to me, from letters I received and the public meetings I attended, that very many ratepayers are concerned about increasing rates, and many are struggling to pay these increases.

These concerns are well founded.

Recent analysis by the Department of Internal Affairs of data from 2009 to 2019 long-term council community plans (LTCCPs) shows that the cumulative increase in rates per head over the next 10 years is 49 per cent, and that rates funding will increase as a proportion of councils' operating receipts.

At the same time, public debt for the sector is forecast to increase by 97 per cent and interest expenses by 91 per cent.

More effective and responsive local government and a brighter future for ratepayers are most easily achieved by improving certain aspects of the Local Government Act 2002.

The three underlying principles guiding this work are:

- local government should operate within a defined fiscal envelope

- councils should focus on core activities

- council decision-making should be clear, transparent and accountable.

In general the changes agreed to by Cabinet will help ratepayers and residents to understand council costs, rates and activities a whole lot better so they can exert greater influence and control during planning and decision-making.

Long-term council community plans will be simpler and more strategic in focus, financial disclosures will be in plain English, and councils will have more flexibility in choosing effective and efficient delivery methods for water services.

Council reporting will be consistent so that residents and ratepayers will be able to make comparisons between different councils.

From 2013, every council will produce a pre-election financial report to allow voters to make a more informed choice about candidates and which projects they are likely to support, and spend ratepayer money on.

The changes will result in greater attention, from councils and communities, to the prioritisation and affordability of proposals, allowing communities to decide the issues they want their council to consider, and clearer links between a council's outcomes and how it proposes to achieve them.

This is where your work is particularly important. I agree with the auditor general - who I understand is speaking tomorrow morning- when he says that excellent asset planning needs to underpin all financial projections and council decision making about spending. I want to encourage you to make your work more visible, more interesting, and more valued by your councils and the communities they serve.  After all, where would we be without roads, pipes and water supplies?

I believe councils' consultation processes are unnecessarily onerous and complex. Worst of all, they are largely meaningless to the average ratepayer.

Most LTCCPs are bulky documents running to hundred of pages and often more than one volume. This makes it difficult for residents to identify the things that really matter to their communities, and can also deter them from taking part in decision-making processes.

It is possible to remove a lot of the more descriptive, highly technical and non-strategic material from LTCCPs to produce a document people can more easily understand.

The community outcomes process will be merged into the long-term council community plan.  LTCCPs will be renamed "long-term plan" and will have a more strategic focus. This will eliminate the costs and inefficiencies of running two separate long-term planning processes.

Essentially, there will be greater flexibility for councils in responding to community needs and clearer information for the public by integrating community outcomes into strategic planning.

The return in focus to core council services will mean that processes are simplified and streamlined. By core services, I mean, those things that most people understand and expect their councils to provide. I'm sure you know what they are! 

Despite what you may have heard, I'm not in the business of dictating to councils what they should be doing, but I do believe that decisions about council spending need to made locally, by well informed ratepayers, rather than by central government.

Council activities and decisions should match the priorities of ratepayers who foot the bill.

WATER SERVICES

Local Authorities are responsible for supplying drinking water to about 87% of our population, and for managing water supply infrastructure estimated in 2009 to be worth $1.1 billion. They collectively budget $605 million on opex and $390 million on capex to maintain and manage these water supplies.  The recent auditor-general's report into local governments water services planning found that one in four local authorities needed to do more to forecast and plan for future demand, manage demand, and upgrade water infrastructure.

The present law restricts councils from structuring their water services in ways that best meet the needs and preferences of ratepayers and residents. Current restrictions reduce councils' flexibility to choose effective and efficient delivery methods for water services.

The Government has agreed on changes to allow greater use of public-private partnerships in the construction and operation of water and wastewater treatment plants. Build - Own - Operate - Transfer (BOOT) schemes will become more feasible. However, ownership of assets would revert to councils at the end of any agreement to ensure public ownership is retained.

We are proposing legislative changes to extend the 15 year limit on water services contracts and joint arrangements with the private sector to 35 years to make these arrangements more workable.

The changes will repeal provisions that require councils entering into a contract or joint arrangement with the private sector to retain control over the management of water services, with control over pricing and policy to be retained by councils.

These changes will be provided for in the Local Government Amendment Bill, which I plan to introduce to the House this year. There will, of course be a chance for public input through the Select Committee process, and I encourage you to make your views known.

AUCKLAND

As you know, successive Government have attempted different arrangements for Auckland's local governance in an effort to assist the Auckland region to speak with one voice, and to become the marvellous city and region that we know it can be. 

Auckland is New Zealand's only city and region that is positioned to take on the global connections NZ needs to succeed and prosper.  

Auckland already exhibits a number of characteristics of a strong international city.  We can be proud of Auckland with its natural beauty, a jewel of a harbour and its wonderful diversity. But in my view there is a huge untapped potential. It could be so much better.

That is why the Government is determined to set up a regional governance structure that both enhances productivity and ensures that Auckland continues to be a great place to live and work. 

Auckland's future depends on critical decisions being taken at a regional level.  Effective region-wide decision-making must have region-wide governance arrangements to overcome the competing interests, parochialism and factionalism that held Auckland back for so long. 

The Government's changes will provide a better environment for Auckland citizens and businesses to interact with their local authority. 

I'm excited about the potential we can unleash through these changes, and I'm getting more excited as the final pieces of the new picture start to fall into place.  

Some of these final pieces are:

- The Local Government (Auckland Law Reform) Bill - the third and final Bill to effect the Auckland Governance changes, which as you know is currently before the select committee;

- The Local Government Commission's final determination as to Local Boards and their members;

- The ATA's discussion documents on Local Boards and CCOs

I will just briefly touch on these now.

Third Bill

The third Bill (Local Government (Auckland Law Reform) Bill) develops and enhances the two earlier Auckland Acts and amends other pieces of legislation.

It will give the new Auckland Council the tools to be up and running effectively in November this year, following the election of new representatives in the October 2010 local government elections.   

The Auckland Governance Legislation Committee received over 800 submissions on the bill, and has recently finished its hearings. They will report back to the House in early May and the Bill needs to be passed shortly afterwards so that arrangements are in place for the elections.

Local Boards and the Council

The new Auckland council is going to have two complementary levels of decision-making in the new Council - the governing body made up of the Mayor and councillors, and the local boards which have specific decision-making responsibilities in their own right.

One of the most difficult issues facing us in designing these new arrangements is how to effectively provide for the local voice in regional decisions, and the regional impact of local decisions. We have tried to do this in several ways.

The governing body is responsible for decisions on the regulatory functions of the Council as a local authority, although it has the power to delegate many of these to local boards. 

The governing body is also responsible for financial management, and ensuring the Council as a whole has the capacity to provide, or ensure the provision of, services and facilities, including local activities, across the region. 

In meeting these responsibilities, the governing body must consider any views and preferences expressed by a local board, if the decision may affect the local board or the well-being of communities within its local board area.

The Council's local boards are responsible for identifying and communicating the interests and preferences of the people in their local board areas. It will consider the content of the strategies, policies, plans, and bylaws of the Council, and developing bylaws for their local board areas and proposing them to the governing body.

Responsibility for the Council's non-regulatory activities has been specifically designed to reflect and support the different roles that the governing body and the local boards have in the Council structure.

The Local Government Commission has made its final determination and has made a few changes as a result of submissions on the draft determination.

One of the proposed 2 member wards (Orakei - Maungakiekie) has been split into 2 single member wards (Orakei Ward and Maungakiekie -Tāmaki Ward);

Two of the largest proposed Local Boards have both been split into two new boards. The Hibiscus, Albany, East Coast Bays board is now split into the Hibiscus and Bays Local Board and the Upper Harbour Local Board. 

The proposed Waitakere Board has been split into two separate boards (Waitakere Ranges Local Board and the Henderson-Massey Local Board).

A number of other ward and local board boundary have been made to ensure communities of interest are not split and to provide for fair representation across Auckland (i.e. within plus/minus 10 percent). For example, all of Mt Eden community is now in one ward

CCOs

There are currently over 300 council-owned entities with some form of corporate or business-like structure, spread across the existing eight councils in Auckland. 

The Government asked the ATA to review and rationalise the council-owned entities prior to 1 November 2010, and to develop proposals for a consolidated structure for the new Auckland Council. 

The proposals need to meet certain criteria before the Government will agree to them. They need to:

- address inconsistencies in service delivery methods across the existing local authorities to achieve a consistent approach for the new Auckland Council; and

- eliminate multiple CCOs with the same purpose, to provide the Auckland Council with a consolidation of the entities.

The Government has already approved three CCOs for Auckland - these are Auckland Transport, Watercare Services Limited and the Waterfront Development Agency. 

We expect that the stocktake and review of council-owned entities that the ATA is undertaking will result in the establishment of a small number of new CCOs, primarily based on the rationalisation of like activities that presently operate independently from local authorities through CCOs, trusts or business units. 

Any of the existing 300 council entities that are not affected by the new CCO structure will simply transfer, as is, to the Auckland Council on 1 November 2010.

The CCO structure, once fully developed by the ATA and approved by the Government, will remain in place from 1 November 2010 until the new Auckland Council has completed consultation with Aucklanders, along with LTCCP consultation, on any proposed changes.

The Government is looking for effectiveness and efficiency in service delivery while also providing for the Auckland Council to remain democratically accountable for the delivery of those services.

These changes herald a new and exciting tomorrow for local government in Auckland. One that should definitely assist with improved planning and asset management.

AMALGAMATIONS

The Government isn't considering any amalgamations of councils in other areas at the moment. It makes sense to give the Auckland changes time to work and to embed themselves into the local government tapestry in NZ.

Many districts and regions have approached me to consider amalgamations.  My view is that the existing provisions in the Local Government Act 2002 are the appropriate place to start.  Council can approach the Local Government Commission who will assess the merits of any such proposal.

Any requests for Government to over-ride this process need to demonstrate why region-specific legislation is necessary. They would also need to show that a sufficient level of support exists among communities and local iwi, and that thorough consultation has been undertaken.

Further down the track, the Government will consider the implications of the review of Auckland's governance for local government in general.

RMA

My colleague, Minister for the Environment Nick Smith, and I recognise that the uncertainty and delays created by the current requirements of the Resource Management Act 1991 are affecting New Zealand's economic growth and productivity, and are causing frustrations for applications.

Current processes under the RMA are a cause of frustration for councils, as local decision makers, and can be costly to administer.

The Government has passed the Resource Management (Simplifying and Streamlining) Amendment Act, which will reduce unnecessary red tape for New Zealanders without compromising environmental protections.

The second phase of the RMA reform will include looking at issues such as the alignment of various pieces of legislation, including aquaculture legislation reform, urban development and water allocation.

The Government is also proposing to improve the resource consent process by introducing incentives. We are seeking feedback on the details of these regulations, and will then work to have them in place by 1 July 2010.

That's enough talking from me - I would like to take your questions now.

Ends