It makes sense the argument is sharper than usual. Inflation has hardened every debate around cost and who pays. Councils have stuck their necks out in voting for huge rates rises while making little effort to downsize their core cost structures.
The other big problem with some councils is poor performance. It would take herculean levels of restraint for a Prime Minister to speak in Wellington’s expensive new convention centre with burst water mains gushing down the street outside and not make a reference to priorities. He clearly decided not to restrain himself. Huge numbers of ratepayers up and down the country would have nodded along in agreement.
Variations of this argument have been going on for as long as I can remember. Left-leaning councils like to busy themselves on social issues like votes on the latest war and building more libraries, while being less interested in core infrastructure like water pipes and rubbish collections (unless it involves convoluted recycling schemes of course).
Right-leaning councils profess to be more interested in core business, arguing that social issues and geopolitics are the domain of central government. However they also often prioritise rates freezes, which can lead to delays in infrastructure replacement. It seems both sides can agree there are no votes in cutting a ribbon to open a water pipe, except perhaps more recently in Wellington.
There are other arguments in this realm which are so old they have whiskers on them. Many councillors like to argue the rating model is “broken” and they need “new revenue sources”. That’s code for “we don’t like the heat we get from property owners when we put up rates”. Others see the reliance on rates as an important accountability tool. If ratepayers don’t see the impact of council decisions visibly through their rates demand, there would be no financial discipline at all.
Governments like to tell councils to “stick to their knitting”. That is, focus on core services like rubbish, water, roading and parks. Councils retort that they would but central government keeps foisting more cost on them, which is sometimes true but nothing like the whole story. Even the role of local government is politicised. The last two Labour-led governments legislated to explicitly expand the remit of councils beyond core services, with the subsequent governments seeking to repeal them.
Some of this is political theatre that will go on forever. Where it gets serious though is in the provision of infrastructure.
Building assets with useful lives of 30 to 50 years is difficult when political lives are measured in three. We know that all too well with central government but it is even more acute in local government where the duelling political cycles of central and local politicians means priorities can change almost every year.
Even within a government policies can differ. Councils often have to deal with housing policy that is inconsistent with transport policy, which is inconsistent with water planning and so on. That can be almost impossible when trying to assemble the commitment and funding for a large project.
The good news is that there are mechanisms where some of this can be handled better, and the seeds of two important solutions are appearing now.
The first is in water. Water is a utility which needs to be managed by professionals. It is normally not that political. Most people just want water to flow when they turn the taps on, and wastewater to be efficiently taken away.
Water is also mostly about the infrastructure. It uses long-lasting assets which should be paid for over the life of those assets. That needs a secure income stream which can be relied on. Luckily all this isn’t a massive step from where we are heading.
Labour had the germ of a good idea when they proposed to set up water companies separate from councils. These were to be organisations that received an income stream in the form of an annual water rate, and used that to invest in the assets over a long time horizon. Where they came unstuck was tangling the solution up in Treaty issues, making the entities far bigger and more remote than is necessary, and in effectively confiscating the assets from local ratepayers.
The new Government has hung on to the same idea but got rid of the difficult bits. The new entities will be much more local in flavour, while obtaining the economies of scale neighbouring councils can achieve by sharing treatment stations and the like. Importantly their balance sheets will remain separate from council ones, and they will be able to borrow more over longer periods. Think Auckland’s Watercare, which is now doing a good methodical job, but with its own funding capacity.
Conversely don’t think of Wellington Water, which is a hodge-podge mess where each Wellington council votes on its financial contribution every year. That gives the agency no ability to embark on a long-term plan. It desperately needs the new model.
Genuinely separate water agencies will free councils up to focus more on other issues of genuine local political interest, while retaining oversight over the water companies. They should be lining up to create them.
The second important change being talked about is city and regional deals, which are proposed as long-term infrastructure partnerships between local councils and central government. A lot of people have been pretty cynical about these, and some will remain so given the lack of a “funding pot” with which to activate them.
But the idea is a strong one, in that it can be an arrangement both sides can sign up to that can survive political changes in either entity, and that can co-ordinate housing and transport policies, in particular at the central government end. After all the logical extension of requiring 30 years of housing supply is providing 30 years of agreed transport infrastructure investment to get people to and from those houses.
It won’t be easy to make these deals enduring. There will need to be a mechanism for evolving priorities, political and otherwise. But they have been done successfully overseas and there is a precedent here in the form of the Auckland ATAP agreement between a centre-right government and a centre-left council on transport priorities, which survived well until someone threw a massively expensive light rail curve ball into the middle of it.
If I was both National and Labour, I’d sign up to making these deals work. As well as limiting the see-saw of expensive infrastructure priority changes, it’s a way of working with local councils constructively and putting behind us at least some of the mudslinging between the two arms of government.
