KEY POINTS:
In council chambers throughout the country, city and district councillors are hunkering down for the new year. At the top of their agenda is a review of council 10-year plans. It is from these Long Term Council Community Plans that budgets are put together and rates set.
The rates picture for most councils does not look good. To help contain rates increases to no more than the rate of inflation, as is the dictum of the new Minister of Local Government, many councils have signalled that they intend slashing infrastructure investment.
The pressure facing councils over rates for this year is considerable. All have been affected in some way by the global crisis. Those councils with reserves that have relied on investment returns to subsidise rates have seen this stream of revenue fall dramatically.
Those that have been increasing debt over the years to fund community amenities, including new roads and stormwater, are finding developer contributions drying up, as subdivision work ceases.
Councils are not permitted to run operating deficits so they have few options. They can cut overheads in recognition of reduced demands for such things as building consents but this will have a small impact, for user charges cover most such services.
They can, but should not, defer maintenance on infrastructure. They will be tempted to revisit accounting policies to soften the impact on current year rates, again extremely poor practice. Or they can reduce their planned investment in basic infrastructure. The latter is appealing to councils under pressure today.
We read daily of councils meeting to cut out projects that require capital expenditure. However, given that most local government infrastructure investment supports "national" good as much as "local" good, this strategy will often be counter-productive to the goals of the Government.
A cut in the investment in arterial and rural roads by local government for instance, will be at the cost to the Government's drive to have us become a more competitive nation.
Likewise, a cut in the investment in sewer and stormwater systems by local government will be at a cost to the nation's environment (and tourism industry), as harbours and waterways continue to be polluted.
Ironically, while councils cut investment in capital works, increasing such investment is at the top of the Government's agenda.
The message from National is that such investment is critical and urgent - critical to improve the nation's competitiveness, and urgent to stimulate the economy and create jobs.
Our two levels of government need to engineer a partnership. Not all local government capital investment projects about to be taken out of community plans will be worthy of retaining, but many are.
From the Government's perspective, those projects that are worthy have the advantage of being "ready to go". Given the time required by councils to consult and work through consent processes, these projects have advantages that should not be lost.
It is likely that a partnership will require a transfer of funds from the Crown to local government. The Crown could give local government incentives to proceed with the most worthy projects, by contributing grants to partly pay for projects that meet its criteria.
For instance, a 33 per cent grant made towards a local government transport or stormwater project, available only if begun in 2009, will lift capital investment, and meet the Government's objectives.
A $1 billion funding envelope might be considered, resulting in $3 billion of capital works. Before engagement between these two levels of government, the Government needs to prepare the framework.
It needs to define the envelope, some criteria for project selection, and the means by which a selection is made.
Such a process must also be able to deliver decisions rapidly, given the need to stimulate the economy without delay.
The concept of a the car tsar was floated in the US to work through the challenges of the car industry at speed - perhaps we need a local government "Infrastructure Tsar" to determine which projects are worthy of support, in an expeditious way.
Partnerships between local, state and central governments aimed at stimulating economic activity are being framed throughout the world.
New Zealand is well positioned to do the same, but, if left too long, council deliberations that cut deep into infrastructure projects through their planning process will reduce opportunities to do so.
* John Robertson is Dean, Faculty of Business, Manukau Institute of Technology. Formerly Chairman Infrastructure Auckland, Mayor of Papakura; and Chairman of Auckland's Mayoral Forum.
