NSW Local Government Professionals Lessons from New Zealand How Structural options line up with community expectations.

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1 NSW Local Government Professionals Lessons from New Zealand How Structural options line up with community expectations. These are the research findings of Kathryn Parker, Principal Analyst Corporate Performance and Strategy, Manly Council; and the LGMA NSW 2015 Study Scholarship recipient. Summary There are some economics, strategy and policy lessons for us as local government professionals to learn from New Zealand from its recent amalgamations experience and merger considerations. The policy lessons are about: collaborating with state government agencies; co-ordinating regional structures; facilitating proper regional strategic planning; enabling whole of region/city infrastructure coordination & planning; investigating Control Controlled Corporations that work in New Zealand across council boundaries; continuing to deliver services wanted by our communities in a resource constrained environment; and enabling structural options that will enable the growth of larger metropolitan cities. Introduction The appetite for mergers was recently dropped by the New Zealand Central Government in the Wellington region, Northland, and the Hawkes Bay areas via its Local Government Commission, and voter polls in September 2015 in the Hawkes Bay area. Voters and community surveys resoundingly rejected merging councils to better deliver services and reduce costs in these various New Zealand regions. The New Zealand Central Government has adopted a voluntary proposal framework, and is choosing to work collaboratively with its councils (these include regional councils, local councils and unitary councils). It is a similar policy framework as that demonstrated (to date) by the NSW Government. The language used by the respective NSW and New Zealand local government ministers is almost identical, and policy positions encourage voluntary structural changes, and reorganisations. In a revenue and tax constrained public sector (such as NSW and other Australian states), local government in New Zealand, despite being the link to the community is being encouraged to merge, amalgamate, and expend less resources. 1

2 The following provides a brief summary of some of the merger considerations studied in New Zealand in the context of future NSW local government mergers in Sydney metropolitan area, as well as forthcoming district planning emerging with the Greater Sydney Commission 1. Background to New Zealand Local Government The purpose of local government, and the role and powers of local authorities are defined in the New Zealand Local Government Act , and this is: to enable democratic local decision-making and action by, and on behalf of, communities; to meet the current and future needs of communities for good-quality local infrastructure, local public services and performance of regulatory functions in a way that is most cost-effective for households and businesses. Over the last 20 years there have been several changes to the structure, role and powers of councils 3. New Zealand s local government structural arrangements were significantly reformed in 1989, when approximately 700 councils and special purpose bodies were amalgamated to create 86 local authorities. As of 1 November 2010, the 1 regional council and 7 territorial authorities that make up the Auckland area were amalgamated further to form the Auckland Council unitary authority. There are now 78 local authorities, comprised of 11 regional councils and 67 territorial authorities (city/district councils and unitary authorities) in New Zealand. New Zealand local government is required to: Separate policy setting from operational functions as far as possible. Prepare long-term plans, annual plans and budgets in consultation with their communities. Report annually on performance in relation to their plans. Prepare long-term financial strategies including funding, financial management and investment policies. There are different community conversations for local councils, city councils, regional councils and district councils. For instance, New Zealand regional councils have broader and wider responsibilities for regional environmental planning, transport, infrastructure co-ordination, rivers, regional well-being; while district and city councils manage the day to day provision of water, sewer, roads, stormwater, local infrastructure, environmental safety & effects of land use. The general powers given to local authorities apply equally to regional councils and territorial authorities, and to avoid services or functions being duplicated, the Act requires all local authorities within a region to agree to protocols for communication and co-ordination (triennial 1 Commission. The Greater Sydney Commission Act 2015 No 57 legislation was passed by the NSW Parliament on 19 November New Zealand Local Government Act 2002, Part 2, Section Zealand Accessed on 7 December

3 agreements). There are also processes for resolving situations where agreements cannot be reached. Regional councils responsibilities 4 include Sustainable regional well-being. Managing the effects of using freshwater, land, air and coastal waters, by developing regional policy statements and the issuing of consents. Managing rivers, mitigating soil erosion and flood control. Regional emergency management and civil defence preparedness. Regional land transport planning and contracting passenger services. Harbour navigation and safety, oil spills and other marine pollution. Territorial Authorities (district and city councils) responsibilities include Sustainable district well-being. The provision of local infrastructure, including water, sewerage, stormwater, roads. Environmental safety and health, district emergency management and civil defence preparedness, building control, public health inspections and other environmental health matters. Controlling the effects of land use (including hazardous substances, natural hazards and indigenous biodiversity), noise, and the effects of activities on the surface of lakes and rivers. The powers and responsibilities of city and district councils are the same - both are territorial authorities. The only difference is that city councils serve a population of more than 50,000 in a predominantly urban area. Six of the territorial authorities also have the powers of a regional council, making them unitary authorities: these are Auckland Council, Nelson City Council, Gisborne, Marlborough, Tasman District and the Chatham Islands Council. New Zealand community consultation regarding structural change Community consultation was also important in recent New Zealand local government merger considerations. Some of the recent structural change consultations and actions arising are discussed in the paragraphs below. New Zealand Local Government Commission The New Zealand Local Government Commission (NZ Commission) has the ability under the Local Government Act 2002 to make decisions to reorganise councils/authorities. It is an independent body established by legislation that acts as a permanent Commission of Inquiry into local government reform. The Commission can decide representation arrangements for councils, make boundary changes, transfer responsibilities between local authorities, or 4 Zealand-Councils-roles-and-functions 3

4 recommend the creation, abolition or union of local authorities. It can report or make recommendations to the Minister of Local Government on any matter relating to local authorities. The report can be on the Commission s own initiative or in response to a request from the Minister 5. Greater Wellington region In the Wellington region, the NZ Commission was asked to consider two applications in 2013 for local government structural reorganisation. The first was from three Wairarapa Councils (Masterton, Carterton and South Wairarapa District Councils) that in May 2013 sought to amalgamate and establish a stand-alone unitary authority; and incorporate the roles of all three district Councils and the Greater Wellington Regional Council. The second, in June 2013, was an application from the Greater Wellington Regional Council that sought to establish a Single Unitary Authority for the whole region. The proposal was to establish a single council that would combine the roles of all of the district councils in the region and those of the regional council. This Council would be complemented by a number of local boards with responsibility for managing defined local issues. Community support Consultation on the proposals showed there was a lack of community support for a single council in this region in New Zealand. It also showed there was support from councils and the community to improve local government. However, it was less clear as to what option would be supported by most in their communities. The NZ Commission saw that there were opportunities to improve the performance of both Northland and Wellington regions through changes to the way local government is organised, and these are currently being explored with the communities. The NZ Commission is currently exploring a new collaborative approach to develop options and reflect community feedback, and examine consensus on the opportunities and challenges in the regions and how good local government can help to manage them. It is also determined that the views of the Northland and Wellington communities were important in determining future options for their respective regions. Themes emerging from the Wellington consultation? 89% of submitters did not support the draft proposal, with opposition strongest in the Hutt Valley; Most opposed the proposal because of a preference for the status quo, more localised democracy, and concerns about the risks of large scale change; 5 provides extensive information on the various mergers proposals and their consideration in recent years. This paper attempts to summarise some of the lessons relevant for NSW local government policy. 4

5 A minority supported the proposal because it would streamline and improve decisionmaking and set a foundation for future prosperity; There was a mood for change to improve local government services in the region; many submissions favoured either smaller-scale mergers or increased use of shared services; and Most affected Councils recognised the need for change and submitted options for improvements to the current system. Northland In Northland region (north island), the Far North District Council applied for a local government reorganisation in December 2012 proposing a single unitary authority for the Far North District, with arrangements for the remainder of the region unspecified. Themes emerging from the Northland process? 90% of submitters did not support the draft proposal, with strong opposition in the 2 Whangarei District; Most opposed the proposal because of a preference for the status quo or an enhanced version of it. There was concern that a single unitary authority would not provide for local decision-making, be harder to administer, and potentially trigger an increased rates burden; Some concern was also expressed about the loss of environmental regulatory checks and balances if regional functions were placed in the same organisation that delivered services; A minority supported the proposal because it would streamline decision-making and provide a more effective basis for economic development in the region; Some submitters did indicate support for smaller scale mergers, transferring functions or developing a shared service arrangement between the existing councils; All existing councils in the region recognised the need for improvements in both strategic decision-making and the delivery of services. Hawkes Bay 5 councils North Island The NZ Local Government Commission on 15 September 2015 decided not to proceed with reorganising 5 local government councils in the Hawkes Bay region (north island). This was the result of the Hawke s Bay community voting against amalgamation of its five councils in a poll undertaken in September 2015 that showed a 66 per cent vote against the proposal. The poll was the culmination of a local government reorganisation process that began with an application for amalgamation by A Better Hawke s Bay trust to the Local Government Commission beginning in February Commission Chair Sir Wira Gardiner said in September 2015 While the region has decided against formal amalgamation of its five councils, many of those opposed to the proposal agreed that much more can and must be done to work together to achieve permanent, positive and effective change. 5

6 Hawke s Bay has huge economic potential and everything to gain through improved delivery of cost-effective services and infrastructure more jobs, better growth, and improved prospects across all sectors of the community for the people of Hawke s Bay. The region now has the opportunity to capitalise on the energy and ideas the reorganisation process has generated. 6 So as a result of community consultation The NZ Commission decided not to proceed with draft proposals for single councils in Northland and Wellington regions and has decided to return to those communities to work with them and seek to develop other options to address the challenges those regions face. Local Government Commission chief executive Sandra Preston said there was little support for the major structural option proposed for Wellington but there was a widespread mood for some form of change. There needs to be more emphasis on the role of communities identifying the challenges they face, the options that can address those challenges, and the development of more consensus on their preferred approach to change, said Ms Preston. Our goal will be to assist both communities to reach sufficient consensus on the changes required and the best form of local government. As required under the Local Government Act, if this process results in new options for reform with community support the Commission would then prepare new draft proposals for wider consultation in Wellington. Ms Preston was planning to meet key local government stakeholders in these various New Zealand regions during November What about Auckland Amalgamations 10 years on Have they worked, or not? There are also take-away lessons for us as a result of the Auckland amalgamation experience 5 years ago. In this amalgamation, 8 councils were joined together via central government legislation and proclamation. The Auckland Council took over the functions of the Auckland Regional Council (formed in 1989) and the region's seven city and district councils and serves a population of 1.4 million (2013 Census) with a land area of 4,938km2 comprising: Auckland City Council, Manukau City Council, Waitakere City Council, North Shore City Council, Papakura District Council, Rodney District Council and most of Franklin District Council 7. Auckland Council is the local government council for the Auckland Region in New Zealand: 6 Local Government Commission, Proposal-June-2015.pdf 7 6

7 The governing body consists of a mayor and 20 councillors, elected from 13 wards. There are also 149 members of 21 local boards who make decisions on matters local to their communities, with a $3 billion annual budget, $29 billion of ratepayer equity, and Approx. 8,000 staff. It began operating on 1 November 2010, combining the functions of the previous regional council and the region's seven city and district councils into one "super council" or "super city". The Council was established by a number of Acts of Parliament, and an Auckland Transition Agency, also created by the central government. Both the means by which the Council was established and its structure came under repeated criticism from a broad spectrum during the establishment period. What are the Auckland Amalgamations lessons? In hindsight, and after 5 years, Auckland amalgamations is widely considered an appropriate solution for peculiar problems that the region had with different systems for transport, planning, rating structures, council democratic rules and regulations. The amalgamations are noted to have achieved significant and large back office savings in legal, admin, payroll, IT, and go beyond cooperation, collaboration, or corporate possibilities from other or previous district arrangements. Conversations with the council, and other independent observers acknowledge that benefits from amalgamations are widely acknowledged in terms of savings, collaboration, planning, and infrastructure coordination. Outcomes achieved through one council for the region has been effective in these areas: wins are recognised in terms of dealings and cooperation with state agencies, planning as one authority for a region rather than through numerous and disparate plans, policies and requirements that added to complexity, costs, and lack of coordination. However, the failure in amalgamations is also recognised as less local democracy, and less controlled resource allocations for local boards. Also, know-how is often sidelined in favour centralised expertise and what Council chooses to deliver 8. In Auckland, local boards have fewer resources than their previous revenue collections provided; causing issues, and defections in some areas. Council Controlled Organisations The main avenue used to ensure more effective systems of operation throughout New Zealand Councils have also been the establishment of CCOs - or Council Controlled Corporations. 8 Vicki Jayne, The Pulse of A City, Auckland s Amalgamation Five years On, 7

8 They are established by the council, supported by central legislation 9 and frameworks, while resourced for functions through the council, and managed through separate independent corporate boards. They are removed from the political processes which is seen as a benefit in terms of independence from political interferences, voter preferences, etc. These corporations operate throughout NZ and controlled by various regional and local councils. They have been established to run services and assets for: transport, waste, economic development, events, land development and growth functions. Auckland Council s Council-controlled organisations (CCOs) are organisations in which the council controls 50 per cent or more of the votes or has the right to appoint 50 per cent (or more) of directors or trustees. A substantive CCO is a CCO that is either responsible for the delivery of a significant service or activity on behalf of Auckland Council, or owns or manages assets with a value of more than $10 million. Auckland Council has six substantive CCOs: Auckland Council Investments Limited; Panuku Development Auckland; Auckland Tourism, Events and Economic Development Limited; Auckland Transport; Regional Facilities Auckland; Watercare Services Limited. While each CCO has its own specific objectives, the Local Government Act 2002 identifies the principal objective of all CCOs as: achieve the objectives of its shareholders, both commercial and non-commercial as specified in the statement of intent be a good employer exhibit a sense of social and environmental responsibility by having regard to the interests of the community in which it operates and by endeavouring to accommodate or encourage these when able to do so; and conduct affairs in accordance with sound business practice. The overall direction for CCOs is set in line with the Auckland Plan, the council s long-term plan, including the CCO Accountability policy, which sets how the council will hold its CCOs accountable for meeting its objectives and priorities for them. 9 Refer to Local Government Act 2002 Part 5 for further details on functions. 8

9 CCOs are governed by their boards of directors or trustees, and operate at arm s length to the council. They are accountable to the council, which determines the objectives for each CCO and monitors their performance. The CCO Governance and External Partnerships Department, CCO Finance Department, Auckland Council s Accountability and Performance Committee and the CCO Strategy Review Subcommittee assist the council in this governance. Auckland Council is currently undertaking a review of its seven council-controlled organisations (CCOs) 10. The review will evaluate how things have been working for the past three years and investigate whether any changes are needed. The review is expected to take approximately 15 months, aims to ensure efficient, integrated services and value for money from council and CCOs. The February 2014 review conducted by PWC of the various Auckland CCOs shows that on the whole the CCO model is delivering well for Auckland and significant progress had been made over the last 3 years. Feedback during the review was that Auckland Council should drive strategy and policy for its CCOS, and that CCOs had an important role to play in providing strategic advice. Anecdotal evidence is also that sometimes there have been conflicts between public duties and revenue raising responsibilities, and other corporate responsibilities on waterfront or developments in social and other housing. What are the lessons re: NZ Central Government policy framework with local councils? The appetite for mergers and forcing amalgamations by the NZ central government is not there! At the SOLGM (local government professionals) conference on 11 November 2015, the Assistant Minister for Local Government, the Hon Louise Upton welcomed the fact that "central and local government were going to be working together". Regarding LG asset management, she called for 'resilience and adaptability'. She said that local government also had to be "fit for the future", and to be organised differently, and that "no one size fits all". She also said that "do nothing is not an option". To anyone in NSW, this sounds very familiar policy rhetoric. The NZ Minister for Local Government, Paula Bennett's speech to New Zealand Central Government Cabinet (in early November 2015) also detailed fit for future policy actions for NZ councils, and called upon cabinet to approve measures to assist councils in these endeavours that might take a variety of different forms. The NZ central government is encouraging voluntary proposals, fit for future scenarios, and collaborative partnerships! NSW Government seems to have influenced NZ approaches in language, rhetoric, and policy practices. 10 Auckland Council CCO Review, Current State Assessment (Council Perspective), February

10 Across NZ, councils are being encouraged with financial incentives (not readily accessible) to merge, create joint services partnerships, district or unitary plans that escalate land use planning out of the local sphere to regional. District councils have already been in place for some years e.g Greater Wellington District Council has responsibility for regional planning, transport, water catchments, and transport. However, there are mixed views on the benefits of regional structures and they are not seen as powerful as a merged entity. The merged entities are regarded to have scale, financial clout with the central government. They are organisations that are powerful enough to get services delivered efficiently and effectively to all areas, save money, have fewer democratic structures, coordinated back office functions, transport and bus coordination, land use & planning improvements, and new required infrastructure built. Therefore, when communities resoundingly reject amalgamations (evidence in voting undertaken by the NZ LG Commission), it was not considered a political good decision by the central government to force mergers, reductions in political autonomy, and/or local services. This was also the theme of the key speaker from Coventry Council chief executive Martin Reeves spoke at the SOLGM New Zealand Conference in Palmerston North about his council's experiences in the United Kingdom with fewer resources. In his Coventry Council, there was a need for a new type of leadership in a massive change environment where 50-60% of revenue has been cut by central agencies to local government in last 5 years. Mergers have happened in the UK in a variety of different forms simply because there is no alternative to deliver local services, and they have been forced to be innovative, use resources, staff carefully in highly constrained circumstances. Conclusions and New Zealand Local Government takeaways So in conclusion, my takeaways from our NZ local government neighbours is that they are both similar and different to us in NSW. As a second tier of government, they have more responsibilities, revenue and abilities and encourage to: 1. Set up council controlled corporations and operations controlled by specific legislation and strict MOUs. These corporations provide an interesting alternative to manage, control assets and separate the functions between quasi-commercial entities that councils run. However, there are also issues with these organisations operating across previous council borders, regions and being separated from council functions & control. In NSW, although there has been investigation of the possibilities of joint organisations operating in regional areas, this has not been enabled or fully investigated in the Sydney metropolitan area to date. As well, the success of cooperative arrangements via County Councils, and Regional Organisations of Councils has also been questioned (e.g by the NSW Parliament s General Purpose Standing Committee No. 6 Local Government in New South Wales). 2. Amalgamated structures enable the joint provision of services throughout a region that would otherwise have not occurred in a collaborative or cooperative arrangement. It is acknowledged with evidence in savings that there are considerable benefits that arise to reduce costs through amalgamating council services and functions across a region. The most obvious benefits are the back office functions and duplication of services across a newly established region (e.g Human Resources, Information Technology services, 10

11 Accounting, Payroll, and Corporate Services, and other duplicated functions in a council area). In the NSW context these were quantified by various councils in their submissions and the findings of IPART 11, and the NSW Parliament s General Purpose Standing Committee No. 6 Local Government in New South Wales, October inquiry findings. 3. Undertaking and enabling regional and district planning. New Zealand local councils have been separating regional functions for some time and there are benefits in have a separate organisation to manage services for the region based on catchments, environment, transport routes, and regional infrastructure requirements. In NSW, future challenges in this area and the operations of the Greater Sydney Commission are yet to be tested, and the future of regional planning and possible conflicts with existing local environmental plans will be critical to the determination of future infrastructure provision in Sydney. 4. Encouragement of local government mergers, and the voluntary approach to proposals via the Local Government Commission is interesting as are their powers to be a permanent Commission of Inquiry into possible structural changes. The new central government approach has interestingly borrowed the NSW policies of enabling Fit For Future councils, without legislative force as much as possible. The carrot approach has been the approach of the NSW and NZ central governments to date; and may be more productive in the long term to encourage community and regional partnerships with real economies of scale. Again the no one size fits all approach is prevalent in New Zealand and NSW local government policy environments. 5. Mergers that are well planned, and supported by central government with enabling legislation to fix real stated problems, with intensive community consultation in initial planning processes, and strategy development appear to work in the long run and overall. Auckland demonstrates that some of these aspects were successful. 6. Increased strategic capacity is a benefit of amalgamation & outcome talked about in Auckland council ability to do business with central government in terms of water, transport, planning and infrastructure planning. Future possibilities in Sydney NSW could arise as a result of the Greater Sydney Commission, and Joint Organisations (both regional and Metropolitan Sydney) and should be further investigated in NSW. 7. Streamlined administrative processes, back office functions (payroll, corporate services, IT, legal) can be harmonised, and may take time to fix, however, benefits of reduced operating expenses, improved service delivery and simpler planning systems are evident in Auckland amalgamations - but these can take time to work out and deliver and may cost more in the long run. 8. Financial capacity can be enhanced greater strength, stability and lower administrative costs, increasing purchasing power this is occurring now in Auckland Council. 9. Local Democracy: accountable governance, local democracy can be enhanced through boards and greater representation Auckland; maintenance of local identify through more effective management. These are the lessons, and the takeaways from our neighbours in New Zealand local government. In the end it appears that mergers that are wanted, sensible and can be efficient are the way to go to facilitate state policies in NSW. This is particularly the case in Sydney metropolitan area where 41 councils is too many for the state, public, visitors and future economic investment, infrastructure provision and environmental planning. 11 Final Report on Fit For Future Council proposals released. 20 October See 12 General Purpose Standing Committee No. 6 Local Government in New South Wales, October 2015, NSW Parliament website. 11