Councils face big changes

The Government's eight-point local-body reform plan announced recently is a comprehensive package designed to "rein in" councils from high levels of rate increases and carrying out functions which are seen as beyond their core role, writes lawyer MICHAEL GARBETT.

Some of the changes contained in the reform programme Better Local Government will have a tangible and immediate impact on the operation of New Zealand's 78 councils.

In announcing the package, the then Local Government Minister Nick Smith said the reforms would help keep rates affordable and debt at prudent levels by focusing councils on their core roles, setting clear fiscal- responsibility requirements and giving councils more tools to better manage costs.

Four of the eight changes are to be made to the Local Government Act in a bill due to be introduced shortly and passed in September.

The four initial changes are to refocus the purpose of local government, introduce fiscal responsibility requirements, strengthen council governance provisions, and streamline council reorganisation procedures.

In refocusing the purpose of local government, the Government proposes to change the powers of local government from providing for the social, economic, environmental and cultural wellbeing of communities to a new purpose, to provide good quality local infrastructure, public services and regulatory functions at the least possible cost to households and business.

This change is intended to stop councils providing services that the private sector or central government can deliver. There is also a requirement to provide these restricted services at the least possible cost.

There is likely to be a wide range of views about what functions councils currently do that they should no longer perform.

Examples of functions in the "grey" area might include some sports facilities such as gyms, economic development, convention facilities, catering and social housing.

For ratepayers, this is intended to bring councils back to providing "core services" at the least cost. It might lead to lower rates. Introducing fiscal- responsibility requirements will allow the Government by regulation to set "benchmarks" for income and expenditure and prudent debt levels. This is described as a "soft cap" on spending.

Where a council is "out of kilter" with its peers, then any audit can report on this.

For councils, this is likely to lead to pressure to remain within the prudent benchmarks that the Government sets. A consequence could be the deferral of capital projects or reduced spending.

The change is recognition of the tone of the existing current public and media focus on council rate increases that seem to regularly exceed inflation.

Ratepayers will be able to scrutinise their council against nationally established benchmarks. A result could be lower levels of rate increases than have occurred in the past.

Such spending caps are likely to reduce a council's capacity to cope with unanticipated costs such as contributing funds to cater for growth, development or upgrades such as road improvements to cater for a new subdivision. This may frustrate or delay some developments.

By strengthening council governance provisions, the elected politicians are to be allowed to set a policy on the number of staff employed and an overall remuneration policy.

Annual reports will indicate employee numbers listed by salary bands. These changes give the council greater oversight over employment. Councils will be able to establish firm caps on the number of staff if they wish to. While councils could already create such policy, this change forces them to consider whether to do so.

Also, local authorities will be given new powers (the same as the mayor of Auckland) to appoint a deputy, establish committees and propose draft plans. This formalises the current practice of mayors having a significant influence on council direction which currently relies on convention rather than statutory powers.

Mayors are the public face of councils and publicly carry the responsibility for their decisions. There has been a mismatch between the high level of public interest in mayoral elections when they are elected for an entire city or district and their limited formal powers. The law change is likely to increase the power of a mayor and mean the position-holder has more influence in the direction of a council than occurs at present.

The Government is also to have a wider number of options to intervene in the management of local authorities, such as requiring information and appointing a Crown reviewer or observer. This signals a desire for central government to be able to more closely monitor and intervene in the management of councils.

While councils will have more ability to dictate staffing levels and the mayor will have greater formal influence, potentially there may well be more reporting to central Government.

Previously it was difficult or impossible for ratepayers to access information about staff numbers and salaries. Soon those details will be public information.

In streamlining council reorganisation procedures, there is to be a range of changes that will provide a new process for the Local Government Commission to consider proposals that change the boundaries or lead to amalgamation. The idea is that the process can be commenced by a community proposal for change or by a council. This signals the Government's intention to make reorganisation easier, without Government imposing change.

It could result in more regular reviews of councils and their boundaries by the Local Government Commission. Ratepayers have the prospect of being involved in or initiating reviews of council representation more easily.

These reforms build on the work that had already focused on the governance of Auckland and the new Auckland Council. The Auckland governance innovations have now been extended to all councils, providing opportunities for other regions to review their governance structures.

The four further programmes of work the Government is looking at introducing next year are: To consider streamlining and reducing costs of local- government planning, consultation and reporting; to decide whether local and central government are carrying out the right function; to investigate whether local-body infrastructure, such as water and waste, is provided at least cost; to review the development contributions being levied by councils following a report from the auditor general due later this year.

These four will feed into a second Local Government Reform Bill proposed for 2013.

Michael Garbett is a partner in Anderson Lloyd Lawyers, and specialises in resource management and local- government law.

The Press