Christopher Luxton, Local Government spokesperson, National Party.
There is no doubt that it is a challenging time for local government across New Zealand. While some councils are managing better than others, the sector is overwhelmed and facing the most significant period of change in 30 years.
Local government is struggling on several fronts – infrastructure maintenance and funding to enable growth; three waters reform; resource management reform and glacial consenting processes; mitigation and adaptation of climate change impacts; dysfunctional council dynamics and governance; poor strategic planning; low capacity, capability and skills; poor customer experiences; and erosion of public trust.
There are several major contributors to the situation, but at the heart of the issue is that the funding model between central and local government is fundamentally broken.
We need to develop a new model to power the country into the 2030s rather than continuing to “band-aid and No. 8 wire” our outdated system. This is critical if we are to plan, enable and complete the infrastructure we so desperately need to support growth.
A new funding model
The core problem is that we have separated the public costs and the benefits of development. Largely, local government incurs the development costs while central government receives the taxation benefits. This disconnect makes central government pro-development, and local government an obstacle to growth by definition.
While our system of property rates retains many positive features (predictable and stable with low administration costs), it needs to be complemented with funding mechanisms that help local government address our growth and infrastructure challenges.
I think we should be up for at least discussing returning GST on rates to councils. In the case of Auckland alone this would amount to $250 million.
Now is the time to have the bolder and braver conversations on how we could best align the goals and actions of both central and local government. This includes ideas like revenue and cost sharing mechanisms, retaining the share of any value uplift from economic activity related to local investment, off-balance sheet borrowing mechanisms to provide access to flexible funding, and revisiting statutory exempted and non-rateable land.
Personally, I think we should be up for at least discussing returning GST on rates to councils. In the case of Auckland alone this would amount to $250 million.
Another challenge impacting local government is infrastructure, which as we all know, is at a crisis point. The issues are multi-generational and systemic.
At a recent Transport & Infrastructure Committee I unearthed in the discussion with NZTA that there is no ability to add more traffic to the Harbour Bridge in the coming years, but there is also no costed or timed plan for a second harbour crossing.
My frustration is that while we will continue to have population growth in Auckland, we have no masterplan or strategic management of the harbour crossing which is so important to both the future of Auckland and New Zealand.
Unfortunately, this poor long term strategic planning for infrastructure is a theme across our country. That has to change if we are to build the world class country we all want to see emerge in the 2030s and beyond. We need an overarching vision, new funding and financing mechanisms, upgraded legislation, and much better project management and execution.
The success of the newly formed Infrastructure Commission is mission critical to helping us achieve this and deliver through different political cycles.
Reforming the system for regulating and delivering drinking water, wastewater and storm water services is the most significant ongoing local government programme of work by central government. Taumata Arowai, the new Crown regulator for drinking water that also has an oversight role for waste water and storm water, is expected to be up and running in the second half of this year.
The Scottish water regulator recently reviewed our water infrastructure and concluded we collectively are a long way off from being truly world class.
Local government across New Zealand struggles to manage water infrastructure as evidenced by repeated eruptions of sewage in Wellington and ongoing water restrictions in Auckland. The situation has been exacerbated by decades of significant underinvestment.
Cabinet estimates that the cost of remedying the infrastructure deficit over the next 30 years is between $30 billion to $50 billion, and this is clearly outside the fiscal parameters and debt limits of most councils. To pay for that, household water charges would have to increase between 1.8 to 3.3 times in real terms, and would be much higher and likely unaffordable in smaller and more rural communities.
The options we should be discussing here range from mechanisms that see central government co-funding with local government, through to councils divesting responsibility for the three waters to a small number of specialist water authorities.
The purpose of these changes has to be to concentrate water expertise, economies of scale, and the ability to borrow better. The financial benefit to the councils would be the avoidance of cost and risk.
However, if councils are to be given more central government support, they need to show they are capable of managing it. This is needed to combat perceptions of councils as incompetent and imprudent spenders of public money. It has to be a rights and responsibilities deal.
Poor customer experience and slow response times frustrate residents and further undermine trust. We need our councils to “deliver the basics brilliantly” and to improve their customer experience. Monitoring their performance and holding them accountable along with greater digital delivery of basic services (as seen with NSW’s e-consenting and Singapore’s digital services) is critical.
Just as I have found in my business career, cost efficient operations are a hallmark of the highest performing local governments all over the world.
The elimination of wasteful spending and the deployment of limited resources for maximum impact must be priorities at all times.
This includes deploying activities like outsourcing, leveraging public-private partnerships, cost efficient IT investments, eliminating duplication and overlapping roles, constantly improving processes, smarter procurement, zero based budgeting, avoiding over-specification, developing robust business cases, faster approval processes, superior project management, embracing technology and automation, and greater use of data and analytics.
I apologise in advance, knowing I will have provoked much more experienced local and central government politicians and officials with these remarks.
I am doing so because we will all ultimately get the country we deserve, and we deserve the very best. However, that requires us together to preserve and enhance the good things in our system, and also to have the courage to change things when they are no longer working.
If we are up for that, New Zealand can be an even better place.
This article was first published in the April 2021 issue of NZ Local Government Magazine.