Connecting New Zealand Lawyers

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1 Connecting New Zealand Lawyers ADLS ENVIRONMENT & RESOURCE MANAGEMENT LAW COMMITTEE SUBMISSION TO THE GOVERNANCE AND ADMINISTRATION COMMITTEE ON THE LOCAL GOVERNMENT (COMMUNITY WELL-BEING) AMENDMENT BILL 25 May 2018 Committee Secretariat Governance and Administration Committee Parliament Buildings WELLINGTON 6143 The ADLS Environment & Resource Management Law Committee (the Committee) welcomes the opportunity to submit on the Local Government (Community Well-Being) Amendment Bill ('Bill'). The Committee would like the opportunity to make oral submissions. Overview and submission grounds 1. The Committee welcomes the proposed amendments to the purposes of local government, which are set out in clauses 4-9 of the Bill. The Committee supports the return of general wellbeing as a major purpose of local government. 2. Historically, prior to 2002, the general law provided that the principle of ultra vires applied to local authority activities. For an activity to be lawful, it had to be specifically authorised under statute or found to be lawful by necessary implication from the authorised activities. Numerous cases arose over time as to whether or not local authorities could undertake certain activities. For example, the construction of motels by the council in Kennedy Park, Napier, was one of the outstanding issues which courts and Parliament debated in the 1960s. Another issue was the ability of a local authority to add fluoride to the water supply, in carrying out its function of supplying pure water. 3. To provide a degree of flexibility, the pre 2002 legislation defined permissible "non-authorised expenditure" for local authorities to a limited percentage, to allow for expenditure on small matters, such as Christmas dinners, donations to charities, support of local events, which might otherwise not be strictly authorised. This provision allowed a degree of flexibility which the Audit Office, at the time of the annual audit, could take into consideration. The unauthorised expenditure provision become superfluous after 2002, and is not contained in the LGA 2002.

2 4. In 2002, the Local Government Act 2002 was enacted to remove the former constraints and to introduce a power of general wellbeing. This statutory reform was relatively apolitical, and supported by all local authorities. The immeasurable benefit was to avoid uncertainty as to legality, to enable positive and creative approaches by local authorities to innovation and enterprise. Many local authorities utilised these opportunities to significant enhancement of the communities and economic wellbeing of regions and districts. 5. Then in March 2012, the National-led Government announced a reform programme for local government as part of that Government's broader programme for building what it considered a more productive, competitive economy and better public services. The first phase of the programme culminated in the Local Government Act 2002 Amendment Act 2012, which amended the Local Government Act 2002 by introducing a new purpose. 6. Although the first part of the purpose of local government continued to be to "enable democratic local decision-making and action by, and on behalf of, communities", the amendment replaced the second general well-being purpose and narrowed the purpose to become: "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." 7. The intention of the amendment in 2012 was to refocus local authorities on doing the things only they could do. The former government's paper "Better Local Government" March 2012 indicated an intention of central government to require local government to refocus on a narrower purpose and to introduce fiscal responsibility requirements. In dealing with the refocus of purpose, the statement was made (p 6) "The problem is illustrated by councils setting targets for NCEA pass rates, greenhouse gas emission reductions and reduced child abuse in their communities. These are very real and important issues but they are not the responsibility of councils". 8. The 2012 amendment was also aimed to encourage local authorities to reduce red tape and compliance costs, minimise rates, lower debt, and provide high quality infrastructure in a more cost-effective way. The amendment was intended to reinforce that local government should focus on what local services and infrastructure will be provided and at minimal cost. 9. The Committee made a submission to the Parliamentary Committee in 2012 strongly opposing the amendments to the purpose of local government. The submission stated: "[12]. Further, the amendment under clause 7 introduces a definition of "goodquality", that in itself indicates a distrust that local authorities can recognise goodquality as part of their administrative standards. More seriously, the Bill does not provide any definition of "local infrastructure", or "local public services". Also, under the proposed section 10(b) all three functions or purposes are qualified as requiring performance in a way that "is most cost effective for households and businesses". [13]. From a legal perspective, these proposed changes, open up a substantial range of opportunities for community bodies, businesses and disaffected persons, to challenge the decision-making by local authorities by complaints to the Ombudsmen, the Auditor-General, and by way of judicial review.

3 [14]. Questions may be raised as to whether firstly something is of "good-quality". Secondly whether it represents "local infrastructure". Thirdly whether it might in the alternative represent "local public services". Further, overall the question of whether the decisions are the "most cost effective for households and businesses" could become a point of law open to a judge of the High Court to adjudicate on judicial review. Although a Court may decline to adjudicate on these matters, except in extreme circumstances (as indicated in decisions on judicial review of rating decisions) the local authority could be obliged to prove something to be the "most cost-effective for households and businesses". The process would be expensive and largely against the interests of the community, council managers and elected representatives. [16]. Assuming clause 7 of the Bill is enacted without change, consideration may be given to the legality of the following actions commonly undertaken (in Auckland): Local boards are granted funds to support community initiatives and club wellbeing (small grant support); other grants may support orchestras, bands, art exhibitions, street festivals, outdoor concerts, fairs, parades, charities, and fireworks displays. On a strict reading of the redefined powers to be given to local authorities, the latter activities are unlikely to qualify as constituting local infrastructure, local public services, or the performance of regulatory functions. Expenditure on sister city relationships and trade promotion could be eliminated. The former specific ability (prior to 2002) of a rural council to provide a free or low rental house and surgery to attract a local GP doctor could be in doubt. Activities to improve educational achievement, law abiding behaviour by young persons, relief of poverty, and promotion of affordable housing may arguably be within community needs of local public services, but legal doubt will arise." 10. In an unusual outcome, the Parliamentary committee in 2012 made no recommendation on the submissions, and reported the Bill back to the House without change. The 2012 amendment to purpose was opposed by the Labour members in opposition, and was passed by a bare majority. 11. By way of examples as to potential problematic consequences of the 2012 amendment, in 2016 controversy arose over the introduction of a targeted rate in Auckland on hotels and motels to raise revenue for promotion of tourism and events in the city and region. Although no challenge has been made in the Courts regarding the legality of this type of expenditure, that risk arose following the 2012 amendment. In a further example, in 2015 the Wellington Chamber of Commerce considered judicial review of the Wellington City Council's decision to introduce a living wage. Another more recent example is the increase in fuel tax to benefit local authorities. Under the present law the validity of the increase could be challenged in the Courts as based on Council decisions to increase expenditure on reading or public transport infrastructure that is not "most cost effective for households and businesses". Many persons may regard no fuel tax increase to be the only cost effective outcome. These examples illustrate the unfortunate potential limitations of the 2012 amendment. Affordable housing promoted by local authorities is another area of legal uncertainty where going beyond the provision of infrastructure. Council expenditure on actual house construction could be challenged as not a traditional "local public service", and not "cost effective for households and businesses". 12. The proposed Local Government (Community Well-being) Amendment Bill 2018 intends to reverse this narrow vision of local government and instead restores the purpose of councils to be "to play a broad role in promoting the social, economic, environmental, and cultural well-

4 being of communities, taking a sustainable development approach" (the 4 aspects of wellbeing). This new purpose restores the initial purpose in the Local Government Act 2002, and endorses the inclusion of taking a sustainable development approach. The environmental sustainable development approach is otherwise presently recognised as a governing principle under section 14(l)(h), but deserves greater recognition. 13. The Committee supports the return and enhancement of general well-being to provide flexibility and focus by local authorities on long-term plans and annual plans. Any inappropriate expenditure can be the subject of comment and possible action by the Audit Office on the audit of the Plans and annual reports. 14. Greater consistency between LGA and RMA purposes will be restored. The purpose of the Resource Management Act (section 5) is to promote sustainable management of natural and physical resources, and "sustainable management" includes by definition enabling "people and communities to provide for their social, economic, and cultural well-being and for their health and safety". 15. The purpose of councils under the Bill will be "to play a broad role in promoting the social, economic, environmental, and cultural well-being of communities, taking a sustainable development approach" (the four aspects of well-being). The restoration of the general wellbeing purpose from the Local Government Act will produce more harmony between the RMA and LGA, with the broader role of councils to take a sustainable development approach being appropriate in terms of the RMA's sustainable management approach. Local authorities will be able to plan for district and regional wellbeing under the RMA, and will again have full powers to expend revenues to achieve the wellbeing objectives. Presently local authorities can plan under the RMA, but do not necessarily have the powers to expend revenues to implement the plans and must rely on private enterprise. 16. Greater consistency may be achieved with purposes of Auckland council-controlled organisations which are generally limited in scope of activities of the parent councils. The change in purpose of councils under the Bill to "a broad role in promoting the social, economic, environmental, and cultural well-being of communities, taking a sustainable development approach" could require in the case of Auckland, consideration of further amendment to the purpose of the key council-controlled organisations, such as Auckland Transport. 17. Currently the purpose of Auckland Transport in section 39 of the Local Government Auckland Council Act 2009 is to "contribute to an effective, efficient, and safe Auckland land transport system in the public interest". This purpose substituted the initial purpose, which was "to contribute to an effective and efficient land transport system to support Auckland's soc/'o// economic, environmental, and cultural well-being." Detailed submissions on clauses PART 1 - REINSTATEMENT OF 4 ASPECTS OF COMMUNITY WELL-BEING A. Clause 4: Section 3 amended (Purpose) Replace section 3(d) with: "(d) Provides for local authorities to play a broad role in promoting the social, economic, environmental, and cultural well-being of their communities, taking a sustainable development approach."

5 Submission: For the reasons stated above, this amendment is wholly supported. B. Clause 5: Section 5 amended (Interpretation) (1) In section 5(1), replace the definition of community outcomes with: "Community outcomes means the outcomes that a local authority aims to achieve in order to promote the social, economic, environmental, and cultural well-being of its district or region in the present and for the future." Submission: This amendment is supported as consistent with the amended purpose of local government. (2) In section 5(1), replace the definition of good-quality with: "Good-quality, in relation to local infrastructure, local public services, and performance of regulatory functions, means infrastructure, services, and performance that are (a) Efficient; and (b) Effective; and (c) Appropriate to present and anticipated future circumstances." Submission: Following the deletion of the term "good-quality" as part of the purpose of local government in section 3(d), and from section 10(b), this definition of "good-quality" is only necessary to the extent that the term remains in LGA section 17A, as follows: "Section 17A Delivery of services (1) A local authority must review the cost-effective ness of current arrangements for meeting the needs of communities within its district or region for good-quality local infrastructure, local public services, and performance of regulatory functions. (2) Subject to subsection (3), a review under subsection (1) must be undertaken- (a) In conjunction with consideration of any significant change to relevant service levels; and (b) Within 2 years before the expiry of any contract or other binding agreement relating to the delivery of that infrastructure, service, or regulatory function; and (c) At such other times as the local authority considers desirable, but not later than 6 years following the last review under subsection (1). To be consistent with the amendments overall, a question can be raised as to whether the former wording found in section 3(b) and section 10(b) should be retained in section 17A(1). Alternatively, section 17A could be left unchanged in that councils have been undertaking reviews in accordance with section 17A, since the provision was inserted in (3) In section 5(1), definition of significance, replace paragraph (a) with: "(a) The current and future social, economic, environmental, or cultural well-being of the district or region:"

6 Submission: For the reasons stated above, this amendment is supported. C. Clause 6: Section 10 amended (Purpose of local government) (1) Replace section 10(l)(b) with: "(b) To promote the social, economic, environmental, and cultural well-being of communities in the present and for the future." (2) Repeal section 10(2). Submission: For the reasons set out above, this amendment is strongly supported. D. Clause 7: Section 14 amended (Principles relating to local authorities) (1) Replace section 14(l)(c)(iii) with: "(Hi) The likely impact of any decision on each aspect of well-being referred to in section 10." (2) In section 14(l)(h)(i), replace "interests" with "well-being". (3) In section 14(2), after "principles", insert ", or any aspects of well-being referred to in section 10, are in". E. Clause 8: Section 101 amended (Financial management) F. Clause 9: Schedule 10 amended Submission: For the reasons set out above, the amendments in clauses 7, 8 and 9 are supported. PART 2 - OTHER AMENDMENTS G. Clause 10: Section 11A repealed (Core services to be considered in performing role) Repeal section 11A. Submission: The Committee recommends that the repeal of s 11A be given further consideration. Section 11A was first inserted in 2010, before the changes to section 3 and section 10 in Section 11A reads: "11A Core services to be considered in performing role In performing its role, a local authority must have particular regard to the contribution that the following core services make to its communities: (a) Network infrastructure: (b) Public transport services: (c) Solid waste collection and disposal: (d) The avoidance or mitigation of natural hazards: (e) Libraries, museums, reserves, and other recreational facilities and community amenities. "

7 Section 11A was inserted at a time when significant uncertainty and variations of policy existed among local authorities, councilors, officers, and communities as to whether any commonality should be recognised as to the basic functions and services of local government. For example, in the Queenstown - Lakes area decisions were formerly made to contract out almost all operational activities of the local authority to private contractors (eg planning administration). The Auckland City Council disposed of all its public housing stock on a policy that it was not a function of the Council to provide any social housing. Recognition of libraries and museums as possible core functions: In the past various councils have considered the provision of libraries and museums to be not a necessary function, and libraries could be closed. This later situation could arise again if section 11A is repealed. Libraries form a vital social and educational function in communities. In particular access to libraries by young children, students, unemployed persons, and the elderly is a positive social benefit of many local authorities, and comes wholly under the banner of promoting social and cultural well-being. The Committee is of the view that the restoration of the four aspects of community well-being would not be qualified in any manner by the retention of section 11A. Section 11A is indicative of basic functions and does not compel the local authority to provide all the listed infrastructure, services, and community amenities. It does, however, signal that vulnerable amenities such as libraries and museums are legitimate establishments in all districts. H. Clauses 11,12, and 13 The Committee supports these amendments. We look forward to receiving further information informing us of the Select Committee's consideration of the submissions and the progress of the Bill. If you have any questions please direct them to the Committee Secretary Jodi Libbey (09) orjodi.libbey@adls.org.nz. Yours faithfully fc^ L^ck^LA/-) Helen Andrews Convenor ADLS Environment & Resource Management Law Committee