With the sector already subject to reform of the Resource Management Act (RMA), the so-called three waters – drinking, waste and stormwater – and major new policy development to combat climate change, Local Government Minister Nanaia Mahuta recently announced the appointment of a five-person review panel to examine local government roles and funding.
Potentially the largest shake-up of the sector since reforms in 1989 under the fourth Labour government and then minister Michael Bassett, Mahuta says the time was right for review.
“They are now facing a wave of reforms that will significantly affect their traditional roles and functions. They have told us the timing is right to determine what our system of local democracy should look like to make sure it is fit for the future, and I agree,” Mahuta said.
Infrastructure New Zealand policy director Hamish Glenn welcomed the review, saying it was a “genuine opportunity to address a wave of serious issues across housing, transport and water, by strengthening the ability of councils to execute, address longstanding infrastructure funding and financing challenges, and ensure that NZ becomes a more competitive, equitable and sustainable society”.
Led by former Waimakariri district mayor Jim Palmer, the review panel has until April 2023 to produce a final report, although an interim report due by September 30 this year, is required to “signal the probable direction of the review and key next steps”, with a draft set of recommendations due in September next year.
The draft recommendations will land to coincide with local government elections, while the final recommendations will be delivered in the same year that the next general election is scheduled.
The review comes at a time not only of major reforms that have impacts on local government, but also after years of high population growth and tourism influxes many councils have failed to keep up with, creating costly, unfunded infrastructure deficits.
Mahuta’s statement and the terms of reference for the review panel marks out “funding and financing” as one of the three core areas of focus for review, along with “roles, functions and partnerships”, and “representation and governance”.
It also points the review panel to the final recommendations of the Productivity Commission’s 2019 report into local government funding and financing, to which today’s announcements constitute the Government’s response.
The commission found that while levying rates based on property values should remain councils’ primary revenue-gathering tool, there was a case for more use of targeted rates to capture value uplift caused by local government infrastructure investment, congestion charging, water charges and special purpose vehicles for new development financing.
Terms of reference for the review emphasise the need for “public trust/confidence in local authorities”, effective partnerships with Māori interests, and a re-examination of what local government is expected to fund versus what central government funds.
The review will also examine reforms for the way councils are run and the way they plan their activities.
“The scope of this matter comprises what local government does, how it does it, and how it pays for it,” the terms of reference say, while seeking “stronger local democratic participation, active citizenship and inclusion”.
The terms of reference make no reference to an optimal number of local government entities, with suggestions of council amalgamations being a longstanding lightning rod for political trouble.
However, Glenn says “effective strategic planning and infrastructure delivery needs a degree of scale that 67 territorial authorities are not optimised to implement”.
“Equally, there are a range of public services which do not benefit from scale and which can and should be delivered closer to affected communities,” he said.
Local Government NZ, the sector’s lobbying arm, welcomed the review as a response to its own calls to examine “how local choice and voice will be enabled in the wake of policy reform across three waters, resource management, climate change and the health system”.
“The operational realities for local government are huge urban growth and tourism pressures, greater focus on environmental protections and climate change pressures, all matched to outdated funding tools,” LGNZ president Stuart Crosby said in a statement.
“The review panel must deliver a bold response that is in tune with the needs of our diverse communities … and how their local initiatives are funded.”
