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Dr Muriel Newman

The need for local government reform

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Over the last month ratepayer frustration with local government has been boiling over. The issues that have enraged locals are diverse. But that is the nature of local government.

In Christchurch some 4,000 angry ratepayers demonstrated against the awarding of a scandalous $68,000 increase in the Council Chief Executive’s salary by calling for an early election. In the Coromandel, hundreds of furious landowners turned out in protest against Waikato Regional Council planners, who intend imposing blanket restrictions on their property rights – through designating their land as areas of outstanding national significance – in order to protect the region’s landscape. Since the planners did not visit their properties, nor notify the owners directly, they missed out on the opportunity to submit to the regional policy statement that is behind this property right violation. In Auckland, news that the Maori Statutory Board was threatening legal action against the council – if they didn’t get the $295 million in special funding they have demanded for Maori-only projects – has led to calls for a region-wide referendum on Maori representation. And just last week, incensed Kaipara residents have called for a rates strike over a $50 million blow-out in council debt for a sewerage system that they believe was never legally approved. The debt blow-out has made the Kaipara District Council one of the most indebted on a per capita basis in the country and makes a double-digit rates rise likely.

These incidents are indicative of widespread problems with local government. At a time when central government is tightening its belt, striving to reduce debt and lower its costs, local government is accumulating debt, spending more, and increasing rates faster than inflation. In contrast to households and farms, which have been reducing debt since the onset of the recession in 2008, council debt has been on the rise. Borrowings have grown from $500 million in 2007, to $800 million in 2008, $1,100 million in 2009, and to $1,800 million in 2010. In fact, since 2002 – the year the Labour Government broadened the mandate of councils from property and community infrastructure to community ‘well-beings’ – their debt has quadrupled from $2 billion to almost $8 billion today.

According to Statistics New Zealand, the latest local authority quarterly financial statistics show that in the year to June 2011 the total cost of interest on debt paid by ratepayers was $468 million – a substantial 23.8 percent rise over the previous year. Interest will soon eclipse half a billion dollars. At the same time, local authorities are continuing to spend more with a total operating expenditure of $7,587 million, up 6.3 percent on the year before.

In addition, staff costs of almost $1.7 billion for an estimated 23,000 local government employees are running at 4.4 percent ahead of the same time last year, even though in most districts building activity has slumped. While central government and the private sector are reducing staff as part of their austerity measures, local government clearly sees no need to restrain their spending.

The upward pressure on rates from this profligate spending is unsustainable. In the decade immediately before 2002, rates were growing on average at 3.9 percent a year. In the decade after, rates grew at almost 7 percent a year, well ahead of inflation. The total rates take for the June 2011 year was $4,445 million, up from $4,154 million in 2010.

In some cases, the substantial increases in council spending are the result of expensive building projects such as new arts centres or sports facilities – the final cost of Dunedin’s controversial new stadium is expected to be over $200 million! In other cases councils have undertaken ambitious projects like the $40 million that the Hamilton City Council spent on hosting the V8 Supercars! Or councils have become involved in running businesses, like the New Plymouth District Council which owns farms in Tasmania!

But in addition, many new requirements have been foisted on councils which can cost a fortune while having dubious benefits for ratepayers. Prime amongst those is the whole local government planning process which has not only become a nightmare of appeals and counter appeals costing many millions of dollars, but a paper war as well, with ten-year plans being produced that are so complex that neither ratepayers nor councillors can possibly understand what is really going on.

This week’s Guest Commentator Owen McShane, the Director of the Centre for Resource Management Studies, provides a fascinating insight into how the whole planning process in some districts is now being controlled by large international conglomerates instead of locals who understand their communities in his article Let’s take our councils back:

“About twenty years ago, large consulting firms around the world realised that there was a whole new industry emerging around local government – an industry devoted to urban and rural planning, environmental management, and works contract management. They embarked on an international programme of mergers and acquisitions and targeted either those companies with monopoly contracts with councils already in place, or simply bid for the next round of contracts as they came up for tender. They typically bid low to get their foot in the door and then used their claimed “international expertise” to ramp up the scope, or nature of the projects, until the revenue streams looked more healthy to their shareholders.

“New Zealand’s RMA District Plans are supposed to serve and reflect the needs of the people and communities of the districts. That intensely democratic function is foreign to a corporate culture dedicated to solving large scale engineering problems. These multinationals have set up their planning divisions in a hurry and have staffed them with recent graduates. When small organisations contract with a large consulting firm the contract is handed to the junior staff – the senior staff have bigger fish to fry. In contrast, small consulting firms are managed by the owners or senior staff, who work on all their contracts, and any younger staff serve a proper “apprenticeship”. The end result has been that Kaipara District, like so many others, has been colonized by multinational corporations who are now busy exploiting the local resources, and the locals’ bank balances in particular. To the multinational corporations, our districts and cities are little more than well funded ATM machines.

“It’s time for people and communities to take back control of their Districts and their Plans.”

There is no doubt that the amendments to the Local Government Act introduced in 2002 by the Labour Government assumed too much when it gave councils the power of ‘general competence’, since on the whole, councils have shown themselves to be far from competent. As a collective, they appear to have lost sight of the fact that they are first and foremost a provider of services and utilities. They are not there to satisfy every desire of every group of residents – although the mandate to consider the social, economic, environmental and cultural ‘well-being’ of their community, delivered through Labour’s 2002 amendments, has clearly led many councils to believe that they can solve every problem. As a result councils have adopted a range of diverse objectives, such as as reducing poverty in their communities, preventing child abuse, and lifting education standards – for example, according to its 10-year plan, the Auckland Council wants to raise the NCEA pass rate!

In their 2002 reforms, Labour also enshrined special rights for Maori by including in the Act: “a local authority should provide opportunities for Maori to contribute to the decision-making processes”. This led councils to appoint Maori liaison officers and committees, creating in some cases, a lucrative ratepayer funded gravy train.

A 2001 amendment to the Local Electoral Act – also enacted by Labour – enabled councils to go further and establish Maori seats. At the present time, the only council to have dedicated Maori seats is the Bay of Plenty Regional Council, which had three seats established through a Local Government Bill in 2001. However, the Race Relations Commissioner Joris de Bres has been actively encouraging councils to introduce separate Maori seats by writing to all councils and Maori groups, urging them to adopt separate representation. According to Mr de Bres, two councils, the Nelson City Council and the Waikato Regional Council, “have made the decision to introduce Maori seats”. In fact, the Nelson decision has been challenged by ratepayers, who are in the process of gathering signatures from 5 percent of Nelson electors in order to initiate a binding referendum on the matter. While the Waikato Regional Council voted in favour of Maori seats, the neighbouring Hamilton City Council has opted to seek the view of residents through a referendum.

With claims that the Race Relations Commissioner has moved from advocacy to activism, one has to wonder whether Joris de Bres is in fact the reason why the government is abolishing the office of Race relations Commissioner. NZCPR Research Associate Mike Butler explains the background in his Breaking Views blog Abolish the race relations commissioner.

At a time when New Zealanders up and down the country are struggling to make ends meet, local government reform has become a priority. With that in mind, the New Zealand Centre for Political Research is launching a Local Government Reform Campaign designed to gather together like-minded citizens from throughout New Zealand who would like to join our push for change. If you share our concerns about local government and the need for back-to-basics reform, please register your support – and urge your family and friends to sign up too so we can keep you well informed of progress.

In particular the NZCPR is proposing five steps to reform.

1. Restrain Local Government: Remove the power of general competence and the requirement to focus on the four wellbeings from councils and restore their traditional focus on providing utilities (including roads, footpaths, street lighting, water, sewerage, rubbish collection, libraries, public toilets, parks and reserves) as well as issuing and monitoring consents. In addition, Regional Council responsibilities should be combined with those of District and City Councils to eliminate the need for two layers of local government.

2. Introduce Prudential Controls: Cap rate increase to the rate of inflation and a population growth adjustment and introduce prudential regulatory controls to limit debt – see NZCPR Associate Director Frank Newman’s Breaking Views blog Regulatory controls for local authorities. All property owners in a local authority area should be required to pay rates – including the Department of Conservation and other central government agencies.

3. Strengthen Private Property Rights: Private property should not be subjected to any council designations unless by mutual agreement between councils and landowners. Landowners’ rights should be sovereign.

4. Streamline Planning and Consultation: Council planning requirements should be reduced to one and three-year plans only, to cover the full term of a council, with greater use of referenda (sent out with rates bills) for ratepayer consultation on the prioritisation of major council projects. Air, soil, water, and coastal plans should be standard national plans with regional variations.

5. Colour Blind Councils: All residents and ratepayers must be treated equally with no race-based representation or special consultation status.