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What’s Auckland’s Problem? Reining in Councils' Spending and Powers (Part 1).

Governments should correctly identify a problem before formulating the solution.

Given that all the great cities in the world are made up of a multitude of local governments it seems that mega-amalgamation is unlikely to be the correct solution to whatever problem Auckland is deemed to have. Paris has 1300 local councils and most people seem to like it.

Auckland’s problems cannot be that great because Auckland continues to rank highly in the ranking of the world’s most attractive cities to live. A casual visitor touring the region would probably conclude that Auckland's Central City is the failure while the peripheral cities have the look and feel of success. The popular perception seems to be that the peripheral cities will go out of existence and Auckland City Council survives to invade the neighbouring territory. However, the Government’s web page (http://www.auckland.govt.nz/) makes it clear that all eight of the Councils of Auckland (seven councils and the ARC) disappear and a new Super City is created from the Mayor down, or from the cleaners up.

This seems to be a massive over-response to the need to solve Auckland’s roading congestion which is easily solved by legislative changes and by simplifying the structure for planning and implementing roading networks. Other infrastructure problems are similarly easily resolved by matching the organization to the scope and territory of the engineering.

Again France has 130,000 local councils (A mayor for every 300 people), but five water companies manage all the water and wastewater for the country.

However, commentators and politicians continue to complain about the bickering and conflict between the councils of the Auckland region, and identify these tensions as no more than patch protection and as an obstacle to progress. In most metropolitan areas around the world similar behaviour is regarded as “competitive federalism” and is generally acknowledged to be a good thing.

However, the complaints are somewhat justified because we have failed to observe a fundamental principle of management that says management structures or entities should have clearly defined and differentiated tasks, responsibilities, and practices. (See Peter Drucker’s seminal text Management: Tasks, Responsibilities, Practices.)

 In most jurisdictions, local government has been divided between city and town councils – which looked after urban settlements; and the county councils – which looked after the rural areas in between and around them; often supplemented by roads boards and drainage boards and other special agencies responsible for special region wide functions.

Then, during the late eighties and early nineties, as part of the major reforms to our economy, Government replaced this model with one in which Regional Councils governed the whole region, while City and District Councils governed small territories within the Region and which combined to fill the Region. The Counties, which had governed the rural hinterlands, disappeared. The raisins expanded to fill the whole cake. This meant that each property in a region was governed by two levels of local government – a Regional Council, and a City or District Council.

The RMA, as passed in 1991, established different tasks, duties and practices for the two levels of government and rejected any notion of hierarchy where Regions ruled over Districts and Cities. In essence (and simplifying for brevity) Regional Councils were charged with managing the effects of activities on the soil, water, and air, while the city and district councils were charged with managing the effects of land use and related issues.

However, it did not take long for the Regional Councils to persuade the courts that they could not manage the effects on soil water and air without managing land use, and in particular directing and controlling the integration of transport and land use, and even managing urban form and the relationship between the rural and urban economies.

This created tensions between the regional and the district and city councils because they now had overlapping tasks, duties, and responsibilities which led to endless objections, conflicts and litigation.

To resolve this confusion and conflict the last Government amended the Local Government Act to give Regional Councils increased powers and to become in effect Master Land Use Planners for the whole region and to direct District and City councils to implement the Regional Plans and Policies. The new Local Government Act hence established a clear hierarchy making the District and City Councils subservient to the Regional Councils.

The cities and districts did not like it.

This did nothing to resolve the conflicts and indeed the courts continue to deal with litigation between regional and district and city councils as each tries to resolve where its powers lie and to what extent the local interest should be subservient to the regional interest and why.

The fundamental tension is that in larger cities the Regional Councils tend to promote a mono-centric model of the city where all roads lead to the central area, and peripheral development should be repressed to maintain the ongoing viability of the central areas.

The peripheral towns and cities naturally resist this model because the reality is that modern cities are multi-nodal and the central areas become less and less significant in the overall scheme of things, even though they may – but not always – remain the largest centre of population and employment. For example, San Jose is now larger in population and area than the City of San Francisco.

So the lesson of our recent history is clear. The way to transform counterproductive conflict into productive competitive behaviour is not to dissolve the cities and districts and to create a Leviathan but instead to revert to the model where the Regional Councils have one set of clearly defined tasks, responsibilities and practices, and the District and City Councils have another.

In spite of having so much temptation placed in its path, the Northland Regional Council has reached a policy decision not to be involved in land use issues and hence has never taken any of its District Councils to Court over such matters.

There is residual conflict between the councils of Northland which sometimes goes beyond healthy competition, but most of this counterproductive activity can be laid at the feet of the recent reforms to the Local Government Act which gave all Councils unbridled ‘powers of general competence’. Most have followed the course laid down by The Peter Principle and have inevitably risen to their level of general incompetence.

The original RMA had it largely right.

Big Budget Councils can use the Courts to exercise unbridled power over their Citizens. Reining in Councils’ Spending and Powers (Part 2)

One way citizens can keep their council bureaucrats honest is by the threat of appeals to the Environment Court.

This is a powerful weapon with smaller councils whose budgets cannot stand too much expensive litigation given the costs of their own legal counsel and witnesses, and the shame of potential defeat.

So if I am seriously unhappy with the way an individual or family has been treated by a decision or process I can simply file an application to appeal to the Environment  Court (for only $55) and in most cases a small or medium sized council will agree to mediate.

Of course I have to be confident that the case is sound and simple because the applicant will have to lead their own case and call on maybe only a single witness to minimize their own costs.

However, as councils get larger so do their budgets. I first noticed the power of the threat of litigation during my research into the report for the Reserve Bank – The Impact of the RMA on the ‘Housing and Construction’ Components of the Consumer Price Index – in 1995/96.

Papakura was running an efficient consents process and was focusing on RMA issues rather than directing and controlling the use of land, and protecting productive farmland, and similar hangovers from the Town and Country Planning Act.

The ARC was unhappy with Papakura’s adherence to the RMA and to Section 5 in particular and soon took to advising the Council that if they granted a consent for a rural subdivision the ARC would appeal the decision to the Environment court and beyond.

When Council passed this information on to the applicants they would normally back off immediately because they could not face the costs of endless litigation with a party spending other people’s money.

Aucklanders are now faced with the prospect of being governed by a Super City with a budget of over a billion dollars a year. Such a council will be able to threaten applicants with appeals to the Environment Court, and on to the High Court, and on to the Appeal Court, and finally to the Supreme Court.

Families or individuals will not stand a chance; the Super City will barely notice the cost.

It would be interesting to gather a summary of the total amounts the present councils have spent on litigation during the last year and see how closely their expenditure correlates to their annual budget and to the number of residents. (i.e. dollars spent on litigation as a percentage of total budget and per head of population) I suspect the ARC will come out on top because they spend so much money litigating against other councils, and are so reluctant to concede defeat.

And their budget and philosophy are compounded by the ARC councilors’ relative remoteness from the electorate.

In other words the Super City with a Super Budget will become a Leviathan getting its own way against all but the biggest corporates who alone will be able to match their funding.

Democracy is expressed in many ways. And we have to remember democracy is a means of restraining the power of governments.

Aucklanders are about to lose a powerful restraint on bureaucratic power.

Super City takes everyone's Eyes of the Ball.

Every day the New Zealand Herald has stories about the proposed Super City essentially reporting on how the Government is making policy “on the hoof”.

Clearly, this proposal is absorbing huge amounts of time, and certainly both the time and resources available to the Minister of Local Government and Regulatory Reform.

In the meantime, people continue to email me with copies of their correspondence to their MPs and Ministers about how their projects are stopped in their tracks by bureaucratic road-blocks or by demands for massive development levies. Most councils want these development levies paid before they will issue title or allow construction to begin, which means the banks will not lend the funds because there is no security. Finance companies used to fill the gap but they are no longer around, or those that remain are being equally cautious.

The country is in serious recession and must build its way out of it. So the first duty of Government is surely to remove such roadblocks.

Most of these roadblocks occur at the grassroots level and are caused by breakdowns between applicants and council staff or consultants. However, by the nature of overall governance our MPs and Ministers tend to be advised about difficulties at the top end as recorded by Environment Court decisions and the case law they generate.

However, those of who work with the scores of individuals, families, farmers and small businesses, know that granting of consents depends on the relationships built between applicants and their consultants, and the consultants and staff advising the consenting councils. It is common practice for an RMA consultant to refer potential clients onto other consultants because they are more familiar with the plans of their districts and the people who administer them. We become experts in our own territories, the planning documents, and the personalities and prejudices of those we have to deal with.

Consequently, the proposed Super City for the Auckland region, even if it is the greatest idea since GST, could not come at a worse time.

Investors, developers and entrepreneurs are all involved in taking risk, and while they can never eliminate risk, they all attempt to manage the level of risk as best they can.

Uncertainty is a pernicious form of risk because it is inherently unmanageable, especially if the uncertainty lies in the external environment.

An exporter can hedge against currency movements, and can arrange alternative suppliers, and can have sub-contractors lined up to cope with sudden extra demand. However, it is near impossible to cope with rapid or unexpected changes in the external legal or legislative environment.

The proposed Super City involves massive changes in the legislative, administrative, and legal environment as well as massive changes in the network of people with whom Auckland investors, developers and entrepreneurs have built up working relationships over the years.

An integral part of the Super City mega-amalgamation is the proposed new ‘One Plan’.

No one really has any idea how long it will take to put in place an administrative unit able to even begin to work on such a plan, let alone prepare it, notify it, hear the scores of thousands of submissions, and deliver decisions and manage the appeals. One thing we can be sure of. Given the precedent of the Wairarapa One-Plan, Auckland’s One-Plan, which will have to deal with environmental and land use issues from the Viaduct Basin to Port Albert and Orere Point, will be thicker than all the existing plans piled one on top of the other.

When the single rate is applied to every property in the region the rates revolt will make the last one look tame.

And the uncertainty generated by this set of reforms will be compounded by the changes proposed in the Resource Management (Simplifying and Streamlining) Amendment Bill now at Select Committee stage.

Councils have been told to wind down or defer new projects to ensure such activities will not be contrary to the policies of the Super-Mayor governing the Super-City.

Yet the same councils are being asked to spend up large on infrastructure as a means of softening the impact of the recession. Which of these mixed messages should they heed?

The last major amalgamation in 1989 generated a major and extended pause in investments while Councils wound themselves up, disposed of their assets and cash, and developed new structures and staffing. This pause extended the 1987 for some years.

The impact of the proposed mega-amalgamation on the Auckland region will be even greater this time round because potential investors will have to cope with much greater uncertainties arising from the combination of reforms to the RMA and the new law governing the Super City. For example will the Super City be a unitary authority incorporating the present functions of the ARC or will the ARC functions be replaced by the Environmental Protection Agency as proposed in the Resource Management (Simplifying and Streamlining) Amendment Bill?

While the transition is underway what law will apply?

Investors will simply put everything on hold and wait for the dust to settle.

It will be a long wait and while they wait the recession will drag on – and on – and on.

It’s time to stop this sideshow and focus on promoting and enabling new investment and create an environment that encourages investors to make their decision today – not in five years time.

A Footnote:  

Our constitutional conventions require that all bills presented to Parliament be supported by a regulatory impact statement. Such a statement should address three issues:

• First, that there is a real problem.

• Second, that all relevant alternative solutions have been identified and considered.

• And third, that the proposed law will solve the problem better than all the alternatives, and its benefits will exceed its costs.

These assessments should be undertaken diligently, impartially and from a non-partisan position. Where is the Regulatory Impact Statement for this major constitutional upheaval?

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