Better Local GVT Pr08
Better Local GVT Pr08
Better Local GVT Pr08
March 2012
Contents
Ministers Foreword ....................................................................................................................................3 Background ................................................................................................................................................4 1. Refocus the purpose of local government ...............................................................................................6 2. Introduce fiscal responsibility requirements.......................................................................................... 7 3. Strengthen council governance provisions ............................................................................................ 8 Employment and remuneration policy ................................................................................................. 8 Mayoral powers ................................................................................................................................... 8 Assistance and intervention framework ............................................................................................... 9 4. Streamline council reorganisation procedures ..................................................................................... 10 5. Establish local government efficiency taskforce .................................................................................. 12 6. Develop a framework for central/local government regulatory roles .................................................. 12 7. Investigate the efficiency of local government infrastructure provision ............................................... 13 8. Review the use of development contributions...................................................................................... 13 Local authority financial statistics ........................................................................................................... 14
Foreword
Better Local Government is an eight point reform programme to improve the legislative framework for New Zealands 78 councils. It will provide better clarity about councils roles, stronger governance, improved efficiency and more responsible fiscal management. These local government reforms are part of the Governments broader agenda. We are rebalancing the New Zealand economy away from the increased public spending and debt of the previous decade. We are building a more competitive and productive economy. This requires that both central and local government improve the efficiency of delivering public services. It is also critical to New Zealands future that both government and councils take a prudent approach to public debt. The reforms build on the work in our first term that focused on enhanced governance of Auckland. The new Auckland Council poses a challenge for the rest of New Zealand. It is important to this Government that not just Auckland succeeds, but that the whole country grows and prospers. We are extending some of the Auckland governance innovations to all councils and are providing opportunities for other regions to modernise their governance structure. The specifics of the Better Local Government work programme are detailed in subsequent sections and include: 1. 2. 3. 4. 5. 6. 7. 8. Refocus the purpose of local government Introduce fiscal responsibility requirements Strengthen council governance provisions Streamline council reorganisation procedures Establish a local government efficiency taskforce Develop a framework for central/local government regulatory roles Investigate the efficiency of local government infrastructure provision Review the use of development contributions
The first four points will be included in legislation which will be introduced to Parliament in May and will be passed by September. This will enable the Local Government Commission to consider council reorganisation proposals in time for the October 2013 local government elections. The subsequent four points will feed into a second Local Government Reform Bill proposed for 2013. The Government recognises the importance of local democracy and the key role mayors, regional chairs, councillors and board members play in their communities. We welcome Local Government New Zealands input into the fiscal responsibility requirements, the efficiency taskforce and the work on infrastructure, the regulatory framework and the development levies. This work programme is about central and local government working together in challenging financial times to secure a brighter future for New Zealand.
Background
A decade ago the government rewrote the statutes covering local government, rating and local elections. The most significant change was to give councils broad responsibility covering the social, economic, cultural and environmental wellbeing of communities. This broad mandate in the Local Government Act 2002 was accompanied by extensive new planning, consultation and reporting requirements. Assurances were given that these changes would not add significant costs. The experience has been quite different. Rate Increases Relative to Consumer Prices
8% 8% 7% 7% % Annual increase in Index 6% 6% 5% 5% 4% 4% 3% 3% 2% 2% 1% 1% 0% 0% 0.09% CPI Rates Energy Housing Health 0.06% Food Transport Clothing Furniture & Appliances 3.00% 5.01% 6.85% 6.48%
3.40%
3.28% 2.56%
4.5 4.0
12% 3.5
10.8%
2.0
8%
7.4% 7.4% 6.7% 5.5% 4.6% 3.7% 3.5% 2.9% 3.8% 2.9% 4.6% 3.7% 4.3% 3.9% 5.7% 5.9% 6.9% 6.6%
2001
1993
1994
1995
1996
1997
1998
1999
2000
2002
2003
2004
2005
2006
2007
2008
2009
Average 3.9%
Average 6.8%
Rates have increased by an average of 6.8% per annum since - more than double the rate of inflation. 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. 4
2010
2011
8% 7% 6% 5%
The local government proportion of GDP, that had been stable at about 3%, consistently grew in the years following the 2002 changes 3%reach 4%. Analysis of direct salary costs shows significant increases after 2002. to These rose from $884 million in 2002 to $1608 million in 2010, an 86% increase as compared to an increase of 2% 8.7% in the preceding eight 1% years. The latest Labour Cost Index shows local government costs rising over the past three years at nearly double the rate of the core state sector.
0%
4%
Local government debt has quadrupled over the past decade from $2 billion to $8 billion. While households and businesses 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. Local government debt is expected to continue to grow. Local Government Debt
$12,000 $10,000 $8,000 Debt ($ million) $6,000 $4,000 $2,000 $0 $1,981 $2,372 $10,996
$7,016
2000
2005
2010
2015
In February 2011, following the completion of the Auckland Council governance reform, the previous Minister of Local Government, the Hon Rodney Hide, initiated a review of the local government system called Smarter Government, Stronger Communities: Towards Better Local Governance and Public Services. The first report back was due in February 2012 and has been superseded by this Better Local Government work programme. 5
Mayoral powers
Mayors are the public face of councils and publicly carry the responsibility for their decisions. The problem is that there is a mismatch in the current local government framework between the high level of public interest, scrutiny and engagement in mayoral elections, where they are elected for an entire city or district, and their limited formal powers over the governing body of a council. Mayors need the capacity to provide clearer and stronger leadership. This was recognised with the Auckland Council reform. The Local Government (Auckland Council) Act 2009 provides Aucklands mayor with governance powers not available to other mayors, although substantial decision making remains with the full council. It makes good sense for mayors across New Zealand to have similar governance powers. All mayors will be empowered, from the 2013 local elections, to appoint deputy mayors, to establish committees and to approve committee chairpersons. The role of the mayor will explicitly include leadership over the development of plans, policies and budgets. These provisions will not include regional council chairs, who are not directly elected by voters. 3.2 The Local Government (Auckland Council) Act 2009 mayoral powers in respect of appointing deputy mayors, establishing committees, appointing committee chairpersons and proposing plans and budgets will be extended to all mayors from October 2013. 8
Threshold tests would apply to each power linked to the new fiscal responsibility requirements. They could be used in other circumstances if requested by a council. 3.3 The Local Government Act (2002) is to be amended to provide a simpler, graduated scale of intervention linked to new fiscal responsibility requirements ranging from the request to provide information, to have a crown reviewer, observer or manager; or in extreme circumstances, commissioners or an early election.
The Commission approves and publishes a draft proposal for consultation; The Commission hears submissions on the draft proposal from affected communities and other interested parties; The Commission determines whether the proposal has sufficient public support and if so, proceeds to a final proposal; If a petition of at least 10% of the affected electors of the proposed new council request a poll, this will be undertaken and determined by a simple majority over the area of the proposed council area; The Commission prepares a final reorganisation scheme that is implemented by Order in Council.
A significant change in the process is that the existing process requires a petition of 10% of electors to initiate a proposal. In the new process this mechanism is used to trigger a poll on a draft proposal for reform. A further change is that, to be successful, a poll requires majority support over the area of the new council, and not of every existing district or city. The statutory criteria to be used by the Local Government Commission will also be amended. It will specifically require the Commission to consider the benefits of a reform proposal for simplifying planning processes. This change may mean there is more interest in unitary authority models because of their potential to simplify planning processes. Where such a model is proposed, the Commission would need to be satisfied that catchment based flooding and water allocation management issues can be dealt with effectively. The changes will also mean any new unitary authorities, like Auckland, will be simply named the <name of District> Council. The statutory criteria will also be amended to put greater weight on the benefits of efficiency improvements. It will also require that, to proceed, there must be significant community support in each of the affected territorial authorities. This will ensure that a larger council cannot simply take over a smaller council by weight of numbers, as the Commission will have to be satisfied that there is significant support for reform in the smaller district or city.
1 A poll of a union of the Christchurch and Banks Peninsula Councils was initially defeated when Banks Peninsula voted in favour and Christchurch against. Banks Peninsula subsequently voted for its own abolition in 2005.
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The Local Government Commission can reject initiatives where it is clear they would not meet the criteria, offer no improvement, are poorly conceived or frivolous, or where the proposal might have a negative consequence for neighbouring councils.
Existing process
Proposal submitted by petition or agreement of affected councils Reject Commission checks proposal is valid and consults on proposal
New process
Proposal withdrawn
Reject
Commission hears submissions and determines if proposal meets statutory criteria. If so proposal is finalised
Commission issues final scheme NO vote scheme not put into effect
Scheme implemented
The new process needs to be flexible enough to accommodate all kinds of proposals and solutions, which requires the Local Government Commission to have sufficient powers to consider a wide range of ideas and options and to develop proposals for achieving good local government across the area concerned. The establishment of Mori committees may be considered by the Commission as part of the development of any proposal. The Commission will have greater powers to deal with transition issues. The Commission will also set deadlines for receiving initiatives and information and will deal with all proposals, including those relating to boundary changes and the transfer of statutory obligations from one council to another. 4.1 The Local Government Act 2002 will be amended to streamline consideration of reorganisation proposals and to extend the criteria to specifically include the benefits to be gained from simplifying planning processes and efficiency improvements. A significant concern with reorganisation proposals and councils regular reviews of their representation is the quite rigid existing Local Electoral Act 2001 criteria that make determining ward boundaries in rural communities unworkable. This is because the population formula for large rural areas makes it very difficult for the Local Council Commission to adequately consider communities of interest. The Government intends amending this criteria to give the Commission greater discretion. These changes, announced last year, have been incorporated into these Better Local Government reforms. 4.2 The Local Electoral Act 2001 will be amended to give councils and the Local Government Commission greater flexibility in the determination of ward boundaries in rural areas to take into account communities of interest. 11
13
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REGIONAL COUNCILS Bay of Plenty Region Canterbury Region Hawkes Bay Region Manawatu-Wanganui Region Northland Region Otago Region Southland Region Taranaki Region Waikato Region Wellington Region West Coast Region NEW ZEALAND
Debt/capita 2010 no debt $12 $50 $108 no debt no debt no debt no debt no debt $208 $78 $1,606
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