Infrastructure: A fork in the road for local government

Susan Freeman Greene: "Central government has to reflect on what it does best and what can be better done by those closest to the communities."

Local government and New Zealand has reached a fork in the road. Well, that was the theme of the Building Nations 2021 symposium organised by Infrastructure NZ which has a strong part to play in dealing with the country's huge infrastructure deficit.

And the future of local government is up for grabs. Susan Freeman-Greene, chief executive of Local Government NZ, told the symposium a juggernaut of change is coming down the pipeline, and "how we engage with that is important".

She said local democracy is at stake. "Thriving, sustainable and inclusive local democracy driven by inter-generational community interests is going to be critical in meeting all our wicked problems.

"Local government must re-imagine what local democracy looks like in the future which will be different to how it is today and has been in the past. Central government has to reflect on what it does best and what can be better done by those closest to the communities.

"Communities must actively want to be part of the decisions about how they live, work and play. All of us must contemplate the important role of iwi in the concept of local governance and to be at the forefront of the conversation," Freeman-Greene said.

The reform coming down the pipeline is not only Three Waters but also Resource Management Act, National Policy Statement on Urban Development, Local Government Review, and even transport, health and climate change.

One Building Nations delegate asked: "Will the role of local government be parks, libraries and pools?"

Freeman-Greene said the "wicked problems" facing local councils included creaking infrastructure, changing demographics, climate change and social change, for example a growing divergence between older and younger generations, urban and rural, and the good and bad of internet. "We are playing into the breakdown of what we used to take for granted — scientific-based consensus. Your facts aren't my facts. While this may be a legacy of a certain US president, it's becoming much more pervasive in political debate in New Zealand with a growing tendency to play the person and the not the issue.

"We are seeing it in the Three Waters Reform which has become a lightning rod for reacting to change.

In this context of massive immediate or future crisis, this government has launched wave after wave of proposals for fundamental change.

"Not only do they have direct and material implications on local government, they risk swamping us."

Freeman-Greene said the Local Government Review is an exciting opportunity not just for local councils but central government. "It's a once in a generation re-set. There are things that central government does that may be best suited for local councils and vice versa. Will central government let go?"

She suggested local councils could deal with housing, public health and social services because they are directly aligned and involved with the wellbeing of their communities.

So, what's her view of the future of Local Government? "Our responsibility is giving people visibility, creating places to express what it is to be human, be better partners and see each other's dreams and aspirations.

"We need to have courageous conversations about what is intrinsic, what we need to keep hold of and what we can let go of. We need to have a living, breathing, thriving local democracy that reflects our modern, progressive, unique nation and our responsibilities to the Treaty of Waitangi — where central and local government and iwi are partners in the future, where local government is valued and where our communities are engaged."

The timeline for some of the reform is:

• National Policy Statement on Urban Development (already delivered) and backed up with Housing Supply Bill now at the Select Committee stage. The bill directs local councils to remove overly-restrictive urban development rules (zoning), increase the supply of land and speed up new housing including affordable that meets the different needs of people and communities.
• Replacing the Resource Management Act 1991 with three bills, which should be introduced to Parliament by the end of this year. There's the Natural and Built Environments Act — the effective replacement of the current Resource Management Act; Strategic Planning Act and Managed Retreat and Climate Change Adaptation Act.
• Local Government Review — interim scoping report already released; draft report and recommendations issued for public consultation at the end of September next year; and final report to government on April 30, 2023. The Future for Local Government Panel will introduce an online platform early next year for feedback, workshops, webinars, surveys and local government meetings.
•Three Waters Reform — the government has mandated that the four new regional water services entities will begin operating on July 1, 2024, replacing the current services provided by 67 local councils.

David Norman, former chief economist at Auckland Council and GHD executive advisor economics and strategy, said local councils will have (millions of dollars) debt removed from their balance sheets but they will have less revenue when their water assets are transferred to the new entities.

"A line item for water, say $300 a year, gets taken out of the rates bill, and people are now paying that amount, more or less, to the new water utility.

"Will the councils be in a position to give the ratepayers $300 back, or will they say 'we are going to give back slightly less than that'?

"That is not necessarily a bad thing, but councils will have to think carefully about the sort of projects to take on with the extra funding.

"They will need to prioritise other infrastructure that has been under-invested," said Norman.

"Will councils' suddenly-improved financial position, with debt capacity freed up, create a disincentive for them to take other actions they should, such as increasing development contributions to reflect the true economic cost of new development?

"We have seen councils right up against the debt cap working hard to make sure true costs align with the cost of delivering infrastructure. But other councils may have taken a laissez faire approach because they don't feel the same pressure.

"Will the water user, ratepayer and taxpayer be better off financially or will they get a better mix of services — or neither," Norman asked.

In its scoping report, the Future for Local Government Panel said councils lack the levers to fulfil wellbeing purpose; the framework fails to encourage collaboration or innovation (though that may appear unjustified); the institution (of local government) fails to embody Te Tiriti o Waitangi; and some local authorities are facing significant financial and capacity challenges.

The review is an opportunity to look beyond fixed structures and roles and to design a system of local governance that is built on:

• Relationships that are agile, flexible, anticipatory and sustainable enough to meet future challenges, even those that are large and unpredictable
• The right mix of scale and community voice
• Harnesses collective strength of government, iwi, business, communities and others
• Maximises common benefit and wellbeing and creating conditions in which communities can thrive in future generations.

The panel, chaired by former Waimakariri District Council chief executive Jim Palmer, said the suggestion that small councils lack capability and need to amalgamate needs to be closely examined.

"International evidence among OECD countries shows extensive evidence of where councils have innovated around the challenge of scale without having to resort to amalgamation. These include shared services, outsourcing and franchising, for example — and many of these arrangements are employed by councils in New Zealand today," the panel said.