Local Government Magazine

Infrastructure New Zealand report suggests changes for local authorities

A new report calls for incentives and flexibility to resolve problems with infrastructure and urban development in this country. Importantly, it puts forward a number of changes for local government.

Infrastructure New Zealand’s report, Enabling City Growth: Lessons from the USA, bases its findings on a visit to Portland, Denver, Dallas and Houston in April this year by 42 public and private sector infrastructure leaders.

Stephen Selwood, CEO of Infrastructure New Zealand, says the four big, fast-growing cities face the same challenges as cities in our country but have different economic, social and environmental outcomes.

He acknowledges the US cities may not be able to match New Zealand centres for liveability but says they do know how
to grow.

“Homes are being built, roads and public transport are being delivered and homelessness is down by a third in the past decade.”

In contrast, he says, “New Zealand’s urban growth system is broken and must be revised to incentivise cities to grow, and city leaders must be given the flexibility and tools they need to succeed.”

He says the key to US success is an urban growth system which is incentivised to want growth and has the tools and flexibility to overcome challenges.

“The metro areas of the US, including the constituents and governments, benefit from growth. Sales and income taxes complement property taxes. More homes, residents and investment means more revenue for local authorities. Federal and state agencies sweeten the deal with grants and funds to encourage performance.”

He adds that America’s “thin” welfare net doubles the importance of successful urban performance.

Turning to local authorities, he says New Zealand must revise its governance responsibilities and funding.

“It is not working having a multiplicity of small councils with limited capability manage limited funds for such an
important task.

“We must re-gear local governance so that local authorities benefit from growth and have the tools to respond. A review of local government funding and responsibilities should be launched as part of the review of planning statute and alongside the Tax Working Group.”

Referring specifically to local authorities, the report says that in the US, competitive tensions which are evident between cities are much less obvious within cities.

“The grants and transfers approach of the federal and state governments to city investment appears to assist with regional collaboration.

“It is strongly in the interests of all municipalities and counties comprising a metropolitan area to work together to attract federal transport and other funding. The process has been successful enough that some Metropolitan Planning Organisations now participate in a wider range of activities than just transport.”

It goes on to note that collaboration is occurring across political lines, as well as government boundaries.

In contrast, the report says, New Zealand councils across the same metropolitan area have a poor history of collaboration.

“Auckland’s pre-2010 inability for councils to respond effectively to the region’s growth need precipitated the recommendation for amalgamation. District and city councils across New Zealand have a litigious and confrontational approach to growth. Environment court processes are extensively used to resolve issues like shifts of an
urban boundary.

Central government has established regional councils to plan regionally, but funding from the centre is allocated by council territory. There are no central grants or transfers in New Zealand which require councils to work together to receive additional funding.

“In transport, the only sector where local and central government share responsibilities, NZTA allocates funding to each council. Funding is not available at a metro scale, other than to support regional council public transport services.

“Territorial authorities compete with each other for road and other improvement funding.”

Furthermore, the report says councils in our country are constraining urban growth because they are poorly incentivised.

It notes that councils in New Zealand play a critical role in growth management but their revenue is weakly linked to performance.

“Council revenues are instead linked to cost and councils feel compelled to manage costs down even if wider value to New Zealand is undermined.”

The report concludes that councils need to be rewarded for increasing housing and development supply by:

• Enabling councils to share in taxes that the Government receives from growth through city or regional deals; and

• Greater use of competitive grants and transfers to councils, like the Provincial Growth Fund, to encourage city-regions to compete for growth and invest in their future.

It also suggests councils need to carry the costs of growth failure by incurring funding and responsibility for some central activities, for example, homelessness.

To download a copy of the report go to: bit.ly/CityGrowthUSA

This article was first published in the July 2018 issue of NZ Local Government Magazine.

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