Feel free if you agree, to use any part of our submission to put in your own submission – Submissions close tomorrow Friday 21st February 2014
Local Government Commission
Draft Proposal for Reorganisation of Local Government in Northland
The Chamber of Commerce and Industry Northland Inc.
NZ Chambers of Commerce Northland (NZCCN) is part of the New Zealand Chambers of Commerce (Inc), NZCCI, is an umbrella organisation serving the interests of 29 Chambers of Commerce nationwide. These, in turn, represent more than 24,000 businesses around the country. While many NZCCI members are in the SME category, our membership includes most of the largest corporations in New Zealand.
NZCCI strongly supports policies that strengthen the development of New Zealand’s international, national and regional trade through:
- Freedom of enterprise to generate and contribute economic, social and cultural wealth to New Zealand;
- The development of a market economy in which there is minimal interference from central and local government;
- The strengthening of New Zealand’s performance as a pre-eminent commercial, industrial and communications centre.
Since 1903, the NZ Chambers of Commerce Northland has served the needs of the Northland business community through its public policy and advocacy initiatives and its business development programs and services. The Northland Chamber of Commerce currently has approximately 400 financial members that employ the equivalent of 3000 full time employees. Our membership includes many businesses that expect their views to be represented in this submission. The Chamber also works to ensure that Northland has a business-friendly environment where all businesses can grow and prosper. With this, also comes paying close attention to the quality of life the region offers our members’ employees and families. The Chamber works to make a difference in Northland’s future and to help Northland grow. Northland’s standard of living is fundamentally dependent on the productive performance of private sector. Businesses and individuals are therefore central to Northland’s economic development and are the engine of growth.
DRAFT PROPOSAL FOR REORGANISATION OF LOCAL GOVERNMENT IN NORTHLAND
NZ Chambers of Commerce Northland believe it is important that local government recognizes the critical role it has to enable a more competitive and productive economy through the delivery of efficient and responsive services. We desire a local government culture that is business-friendly.
When our board considered the matter of reorganisation they first asked what is the purpose of local government and what services and products it is expected to deliver. We did not start with amalgamation as the answer and attempt to make it fit but rather asked “why” are we reviewing our governance, is the status quo delivering the required services in an efficient and effective manner. In doing so we realised that we have a unique opportunity to look at our communities aspirations – how we wish to live, grow, create employment, attract investment and interact with other regions inside NZ and internationally.
As an over-arching principle, NZ Chambers of Commerce Northland believes that local government should focus on activities that cannot be undertaken efficiently by individuals, firms and voluntary groups, and that are not performed by central government. Within this there needs to be an underlying set of principles including;
- Strong accountable leadership able to speak with a single voice on behalf of the local government entity; i.e. council.
- Clarity of role and function so that it is clear which elements of local government (and central government) are responsible for what activities within the local government area.
- Efficient and effective service delivery recognizing that a least cost approach is a critical element in building a more responsible fiscal management and resulting competitiveness as an attractive place for businesses to invest and locate.
- Building public trust and confidence in the council’s governance which includes ensuring that due recognition is given to the “local” in local government.
- Taking a ‘least change’ approach to developing an optimal governance structure in order to minimize the cost of reform transition.
Council’s critically need decisive, accountable leadership which can:
- Embrace a vision and direction for the local area
- Represent the region to central government and in dealings with other regions (council areas) and internationally; and,
- Take and implement the major decisions required to ensure the council area (region) is a successful and attractive place to live, work, invest and visit.
IS THERE REALLY A PROBLEM
One issue which shows the current difficulties of local governance is the confusion of structure and responsibility over which functions are regional, district or local. There are several imperatives why local government system should be reviewed, they include the following:
- Nationally rates have increased by an average of 6.8% per annum since 2003 – more than double the rate of inflation. This is putting noticeable pressure on businesses, especially small-medium (SMEs) with low profitability, and people on fixed incomes. It is noteworthy that in the preceding decade (1992-2002) rates increased by an average 3.9% per annum, slightly above the inflation rate. If rates had increased at the same rate as the preceding decade, the average household today would be paying $500 per year less in rates, and the economy as a whole $1 billion per year less.
- Local government debt has quadrupled over the past decade from $2 billion to $8 billion. While businesses (and households) have pulled back on increased debt since the global financial crisis, council borrowing has increased from $900 million in 2008 to $1100 million in 2009 and to $1800 million in 2010. Meanwhile local government debt is expected to continue to grow.
- About 25% – or around 30 – of NZ’s 78 Territorial Authorities were classed as financially unsustainable, according to a Local Government League table published last year. The report noted: “Over the last 10 years or more, councils’ financial positions have deteriorated markedly. Their communities will soon be pressured with increases of Council rates and charges that if left unchecked will reach unacceptably high and unaffordable levels. Now is the time to turn these circumstances around.”
However, the rationale for considering local government reform in Northland at this time is about much more than just the issue of financial viability. There are many challenges which local government must confront in the coming decades. Councils will be required that possess strong balance sheets, together with the capacity to absorb shocks associated with significant change or unexpected events. The ability to attract and retain management and other expertise is essential if councils are to equip themselves to handle such eventualities.
They must also be of a size and scale sufficient to:
- remove inefficiencies resulting from duplication and sub-optimal use of assets;
- enable growth of knowledge, development of capacity and fostering of innovation; and
- provide effective political leadership to, and advocacy for, communities facing fast-paced change.
Considerable concerns have been raised about the responsiveness of councils to process consent applications in a timely and cost-effective way. A recent MYOB Business Monitor survey revealed that nearly half of New Zealand businesses surveyed (44%) are unhappy with the performance of their local council or regional authority. Business owners said they were “dissatisfied” with local government’s performance when it came to helping their business. Only 14% were satisfied.
The key sources of frustration were delays and inefficiencies in dealing with local governments. Almost 65% of business owners said they would support the introduction of minimum response times for local government, clearly sick of the delays being inflicted on their businesses. Northland was seen as having the worst performing local government in the country, with a staggering 64% of businesses upset over their councils’ performance, compared to only 7% satisfied. This marked a significant decline over the last MYOB Business Monitor in which only 47% of respondents registered their dissatisfaction. To see such deterioration in the ratings of an already poorly performing council is alarming.
The status quo does offer opportunity to address some of these issues through voluntary collaboration, voluntary cooperation and shared services but these opportunities have not been taken. In the recent report entitled “Local Government Options for Northland” report prepared by Sir Peter Trapski and Dr Don Brash the authors stated that there was an obligation on all local authorities to collaborate and co-operate however Sir Peter stated “sadly we saw little evidence of that”.
Voluntary collaboration is an alternative way that councils could have provided services across the region without resorting to reorganisation. Councils could of retained their autonomy with respect to identity and expenditure and rate/ revenue raising decisions but, at the same time, achieved economies of scale in service delivery and address externalities associated with service provision.
A variation on collaboration could have been voluntary ‘cooperation.’ This has been described as “minimal” government-led restructuring in which there is a case made for an “area-wide service delivery body based on voluntary cooperation between existing units of local government to deliver a coherent, efficient service with no permanent, independent institutional status.”
The voluntary model works well when policy objectives are shared by all policy-makers in the various local authorities. It does not work so well, however, when there are divergent objectives.
INFRASTRUCTURE, SHARED SERVICES AND PLANNING
Northland’s private sector has long commented on the issues of dealing with multiple councils, plans and policy across the region which can make doing business difficult and frustrating. There must be efficiencies to be had by removing duplication and inconsistencies that would be the result of a single authority. In doing so local government will be better placed as an enabler for private sector rather than a barrier to growth and development.
There is logic in a single authority responsible for the development of regional assets. While not the only element required for fostering economic growth, sound regional infrastructure (roading, transport, water) are essential. Lack of effective advocacy has hindered regional infrastructure in the past and there has been little effective collaboration between Northland’s councils in this area.
A REGIONAL APPROACH
Cities, especially major metropolitan centres, are increasingly dominant, not just in terms of population, but as domestic and international nodes of economic activity, as preferred locations for high skilled activity, and as important locations for and enablers of artistic, cultural and recreational activity. Secondary centres such as the major population centres in the Northland, need to understand the full significance of the interplay between the growth of metropolitan centres and the location decisions of high skill based businesses, especially multinational enterprises.
Part of that involves ensuring that Northland centres are as well equipped as possible to benefit from the growth of neighbouring Auckland. Our proximity to Auckland is one of our competitive and comparative advantages. This includes moving swiftly to fill major gaps in regional infrastructure, including the absence of any significant research based tertiary institution capable of working with the region’s major industries and resources.
There is little dispute over the advantages of better service coordination, streamlined decision-making, and funding fairness. From an efficiency perspective a whole of Northland approach embracing urban and rural areas have the potential to internalise externalities. A single tier organisation could also take advantage of economies of scale in service provision and raising capital for new infrastructure.
Northland is unique in the number of economic centres it has geographically spread throughout the region. While recognising that all these centres may have unique characteristics, it is also reasonable to acknowledge that a businessperson in Kaitaia will expect the same things from the local government as a businessperson in Mangawhai.
ECONOMIES OF SCALE
Obviously, economies of scale are important. Delivering a service that achieves ‘economies of scale’ for a project or service requires a business plan that confirms that the cost of the project or service is ‘affordable’ and ‘sustainable’ e.g. that when building a sewerage system there is a sufficient number of rate payers (or alternative revenue sources) to cover the capital required and maintain operating costs on a relatively constant or declining continuum thereafter.
There is considerable indicative evidence suggesting that a number of the local authorities whose financial positions have deteriorated markedly in recent years have done so because of poor planning and management to ensure projects and/or services can satisfy and/or exploit economies of scale; in simple terms, they undertake big high-cost projects on a revenue base that is too small. Their communities soon become pressured with increases of council rates and charges that reach unacceptably high and unaffordable levels. To achieve required scale, an integration or amalgamation with other councils is an obvious option.
However, achieving economies of scale does not on its own provide a rationale for local government reorganisation. This is because they are a function of individual services and, depending on the service, optimal scale will be reached at a street, neighbourhood, community, district or regional level. From this it follows that to realise economies of scale requires addressing the organisational arrangements involved service by service.
As an alternative model to reorganisation, local authorities could distinguish between their role as service enablers – determining the nature and quality of services which should be delivered to their communities – and providers. This latter role should be undertaken by the entity or entities best placed to do so on a least cost basis in relation to the nature of the service and the accountabilities involved with it.
This is not a case of arguing for privatisation, although the private sector does/ should have a role to play; internationally, it seems that most arrangements for contracting out, joint venturing etc, are within the public sector often as collaborative arrangements amongst two or more local authorities, and in some places (e.g. France) core services such as water, sewerage, transport, and rubbish collection a single provider will be contracted across many local authorities.
This approach may result in an organisation made up purely of councils; it could include other entities if their contribution is seen as best ensured through a governance involvement. If it is something which is best handled at a district or sub-district level, then the issue becomes one of how best to engage at that level whether through strategic partnerships (e.g. Northland’s four councils working together), or whatever other means seems appropriate.
REGIONAL ECONOMIC DEVELOPMENT
A ‘whole of Northland’ approach will allow for a stronger strategic vision for the region. It can provide certainty in relation to financial resources committed to economic development; recognise the limited size of Northland’s population and clarity in the role of local government
While infrastructure is an important aspect of economic development it is not the only one. Northland needs transformational change if we are to develop a high wage, high growth economy. This change can be facilitated and enabled by local government but it will rely on private sector to invest and develop. Private sector will require sufficient rewards to justify the risk and part of the enabling process should be reducing the risk exposure to encourage private sector investment and creating a more business friendly environment.
Private sector relies on public policy to ensure Northland’s potential can be maximised. Regardless of what local government chose to invest in, to enable and facilitate economic growth requires a culture within all levels of their organisations that recognises the role private sector plays in making this happen, the risk the developers take and the risk to Northland’s future growth when organisational culture unduly inhibits private sector endeavours. A new organisation allows the opportunity to develop the appropriate culture.
How people want to engage with their councils is going through quite major change. The old idea that you voted for your Councillor once every three years, and that was that no longer holds. The evidence is that, increasingly, people want the opportunity to take part in making decisions which affect where they live, work and play. Internationally councils are responding to this shift in a number of different ways, including supporting the development of community based organisations with a local mandate to address community issues of one kind or another – typically, these are non-statutory, and evolve in ways which meet the needs of the local community, rather than being required to conform to a standard template such as New Zealand’s community boards.
This is about much more than just better community involvement. It’s very much about building the legitimacy of Council decision making and strengthening council/community bonds – an important and timely benefit in the current central government policy environment.
The new mayoral powers are consistent with trends internationally to strengthen the role of the Mayor and have the potential to be an important enhancement of local democracy through enhanced democratic accountability to the community. For the first time in New Zealand it will be possible for mayoral candidates in all of New Zealand’s territorial local authorities to stand on the basis of a manifesto and make it clear how that manifesto will be delivered – the power to establish committees and appoint the deputy Mayor and committee chairs is effectively the power to build the team the Mayor requires to support him or her in delivering the manifesto.
It often makes better sense to focus specifically on what is the problem which requires a solution. In Northland finding an effective means for taking and implementing decisions on region-wide issues (land transport, major land use, strategic planning are likely candidates) is an immediate priority.
As an example should the region be forming a single region-wide infrastructure company to handle water, waste water and council involvement in roading? In principle, the answer is almost certainly yes when questions of economies of scale and strategic capability are considered. It also needs to be acknowledged that there is a real deficit in governance at the community level, especially if councils are to meet the interest people now have in taking part in decisions which affect them, and are to build the knowledge and networks to facilitate the better delivery of major social services, or local responses to challenges such as an ageing population.
We believe that well-resourced local boards – as opposed to community boards – with delegated decision making provide an opportunity for Northland’s communities to participate in local government in a meaningful and democratic way. They can bring a sense of local people continuing to be able to serve on elected councils and make decisions for their own communities.
We would expect the transitional organisation to consider carefully the proposed ward boundaries and consult with the wider public to ensure that geographically and culturally they reflect the constituents within them.
Maori are underrepresented in local government in Northland despite the fact that they form a significant proportion of our population. It is also likely that Northern iwi will, through Treaty settlements become a key driver in transforming Northland’s economy. It is essential that their aspirations are represented if we wish for the region’s economic potential to be fulfilled. NZ Chambers of Commerce Northland supports the Maori Board concept and representation at all local boards, committees and levels of local government functioning.
COUNCIL CONTROLLED ORGANISATIONS
There was insufficient detail within the proposal to allow for any meaningful comment on CCOs. It is hoped that there is clarity of role and function in any final structures and process that the transitional organisation develops in relation to CCOs. It needs to be clearly sated what elements any such organisations are responsible for and that these are focussed on the efficient and effective service delivery recognizing that a least cost approach is a critical element in building a more responsible fiscal management and resulting competitiveness as an attractive place for businesses to invest and locate.
CCOs can allow the delivery of services by professionals with decision-making somewhat removed from political influence. These services can be provided using more professional expertise than may be available to the municipal government; and dedicated revenues from user fees could be used to finance capital expenditures.
We would support treating any CCOs as a committee of council with a mixture of councillors and private sector appointees on the board at a regional level. We need the best and most able Northlanders wanting to contribute in these community service roles.
The governing structure for local governments affects their ability to provide services and raise revenues in a fair and efficient way. Of the wide variety of possible structures, none stand out as clearly superior in all respects. For larger city-regions, some form of ‘uniform’ structure which encompasses the entire city-region is needed to address problems of a region-wide nature such as fiscal disparities among authorities, overcome economies of scale issues and address problems associated with externalities in service provision.
The need for a unified structure is clear. Inter-council collaborative agreements for the efficient provision of core services are an option to improve efficiency – and which could provide a rationale for doing away with regional councils. However, this model does not provide a solution to the need for region-wide cooperation (e.g. environmental management and/or economic development).
Where local autonomy is paramount and where objectives are shared by policymakers in various local councils, voluntary collaboration and/or cooperation can work. It works less well when objectives are different among councils and when it comes time to implement those goals. A one-tier structure is simpler to understand and more transparent than a two-tier structure. For that reason, it does appear to enhance political and fiscal accountability. Two-tier structures however they are inherently more complex and may result in undesirable duplication, overlap, and general confusion among citizens as to who is responsible for what and who is paying for it.
Northland governance needs an organisation and processes that are a resilient and robust. A structure where strong and accountable leadership focuses on delivering efficient and effective service to our many communities. Many alternatives are reliant on voluntary political will across a number of councils if they are to do this. This voluntary political will cannot always be guaranteed. No Northlander belongs to any one single community; we are members of many shared communities all of which require many common elements that can be provided in a more effective manner than is being done at present.
It is important to recognise that the outcome of this review will be the structure that determines Northland’s future for several decades to come. NZ Chambers of Commerce Northland supports this proposal. A single council accompanied by suitably empowered local boards throughout the region, with appropriately representative, well considered wards would meet the purpose and principles of good local government. It provided the opportunity to create a new organisation with a new culture fit to meet the needs of Northland’s various communities.
There are many examples of councils amalgamating and sharing services across the world and we must encourage the identification of “best practice” and “lessons learn” to ensure we create the best organisational structure and business model for the unitary council to deliver the economic growth for the region. We see a single plan, single council, common policies when accompanied by local boards as allowing certainty for Northland business, enabling private sector to help Northland achieve is economic potential and providing the region with better leadership than the alternatives. It will enable decision making, benefit the entire region and provide a unified voice for effectively engaging with central government. We would welcome the opportunity to be heard on this submission.