Better Local Government

Overview
Implementing the Act
What’s new in Phase 2
Sector consultation
Background
Other information
Resources (fact sheets, technical background information, articles)

Keep in touch - If you would like to be kept in the loop about updates and changes to this website please email blg@dia.govt.nz

Overview

In March 2012 the Government announced an eight point reform programme for local government. This is part of the Government’s broader programme for building a more productive, competitive economy and better public services.

The first four points were part of a work programme which culminated in the first piece of legislation which was passed in December 2012. The Act provides for:

1. A new purpose statement
2. New financial prudence requirements
3. Changes to the way councils are governed, and
4. Changes to the process for reorganising local government.Save & Publish

The new purpose statement and the changes to the reorganisation process came into effect as soon as the Act was passed.

The changes to the governance arrangements also came into effect with the passing of the Act, except for new mayoral powers which apply from the October 2013 elections. The Minister has published, in the NZ Gazette, a list of matters to be considered when deciding whether assistance or intervention is required. Councils can also ask for help. These changes mean central government can give councils the right level of help at the right time to meet the nature and seriousness of problems, and before situations become critical.

The financial prudence requirements are to be set by regulation. The work to develop those regulations is underway, in consultation with Local Government New Zealand.

Work is also underway on the second phase of the reform programme which now consists of six streams of work:

Note: The Government added points five and six since the announcement was made in March.

1. An efficiency taskforce
2. An expert advisory group on local government infrastructure efficiency
3. A review of development contributions
4. A framework to guide the allocation of regulatory roles between local and central government
5. Investigation of a dual or two-tiered governance model for local government
6. Development of options for a performance framework for local government.

Each of these streams of work will feed in to a second amendment Act in late 2013. There may also be changes which can be made without legislation. These will likely include process and practice changes.

For more detail and to keep up-to-date with progress email blg@dia.govt.nz

Implementing the Act

The new purpose statement

The purpose of local government, as defined in the Act, continues to be to “enable democratic local decision-making and action by, and on behalf of, communities”. This hasn’t changed.

The second part of the purpose of local government is now: “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”.

The change focuses local authorities on doing the things only they can do, and do well. It encourages them to reduce red tape and compliance costs; minimise rates; lower debt and provide high quality infrastructure in a cost-effective way.

The new Act reinforces that local government acts on behalf of its communities and works with them to decide what local services and infrastructure will be provided and at what cost.

The new purpose statement encourages local authorities to take a fresh look at what they are doing and why, and to seek guidance from their communities about what they want from their council now and into the future.

Financial prudence regulations

Benchmarks or parameters can now be set for councils’ financial performance by way of regulations to be made in consultation with Local Government New Zealand.

Under the regulations local authorities may be required to disclose specified financial benchmarks in their annual and long-term plans and to report performance against benchmarks in their annual reports.

The Auditor-General will report on the completeness and accuracy of local authorities’ reporting against the benchmarks as part of her audit of long-term plans and annual reports.

The changes will encourage greater financial discipline in the local government sector, and will meet concerns about rising rates and council debt. The regulations will also provide information about councils’ financial health.

The changes will also make it easier for ratepayers to assess their council’s financial state, and will promote better financial decision-making.

Governance arrangements

There are three planks to the new governance provisions: a menu of assistance or intervention options for the Minister of Local Government, some changes to Mayoral powers, and a number of smaller changes to governance arrangements.

Menu of assistance or intervention options

There is now a “menu” of ways the Minister can step in to help councils deal with crises – or avoid them altogether.

The menu of options only applies to local authorities - if there is an issue with a council-controlled organisation it will be up to the relevant council to manage that.

The menu provides for six powers: request information from a council, appoint a Crown Review Team, appoint a Crown Observer, appoint a Crown Manager, appoint a Commission, or call a general election.

Request information

This is a new power under which a council would be asked to give the Minister information about a problem and the steps that are being taken to deal with it.

Appoint a Crown Review Team

This power is based on an existing power. It means the Minister can appoint a Review Team to investigate a significant problem in a council, make recommendations about how to address it, and if necessary, recommend further action to the Minister.

Appoint a Crown Observer

This is a new power and is based on voluntary initiatives which have been agreed between the Government and a council in the past. A Crown Observer would be appointed to monitor a council’s progress on addressing a significant problem, help the council address the problem and, if necessary, recommend further action to the Minister.

Appoint a Crown Manager

This is a new power under which a Crown Manager would be appointed to direct a council to the extent needed to resolve a significant problem, and if necessary, recommend further action to the Minister.

Appoint a Commission

This is an existing power where a Commission can be appointed to perform and exercise a council’s responsibilities, duties, and powers. Under this power the Minister can postpone the next local election.

Call a general election

This is an existing power, under which the Minister can dismiss a council and call a general election. This would happen if a council is unable or unwilling to perform its functions or duties.

Mayoral powers

Mayors now have a greater ability to lead their council, but this is tempered by powers of full councils. Council decisions and policies must be made by the majority of council members and councils can disestablish a committee established by a mayor, or remove any chairs the mayor has appointed.

The new powers are not available to regional council chairs as they are not directly elected by voters.

There is more detail about this in the Mayoral Powers Fact Sheet.

Other governance arrangements

Councils can now set policies on staff numbers and their pay; must review those at least once every three years; and must include information on the number of staff employed by salary bands, in their annual report. These changes will make it easier for councillors to control council labour costs and informs ratepayers about these costs for their council.

Reorganisations under the Act

Under the new Act, anyone will be able to apply for a local government reorganisation, so long as they can show there is community support; identify the rationale for change; and explain how the proposed option promotes good local government.

The Local Government Commission’s role and responsibilities will change. An important part of the Commission’s role will be to decide which of the options best promotes good local government in a particular area. This will involve considering whether the available options achieve the purpose of local government and aid improved economic performance. The Commission’s preferred option will then be turned into a draft proposal and issued for consultation with communities.

A petition signed by 10 per cent of affected electors in any affected district can demand a poll on a final reorganisation proposal. There will be 60 working days to prepare a petition. If a poll happens, the result will be determined across the whole area affected by the proposal.

The changes provide clarity about the transition arrangements that will apply if a proposal goes ahead. For example, transition bodies will be set up to work with the Commission while it prepares reorganisation schemes. These bodies will include people from the affected councils, ensuring there is local input into the detailed schemes.

Further information about the new procedures, including how to make a reorganisation application, is provided on the Local Government Commission’s website: www.lgc.govt.nz

The impact for Auckland

The changes to the Act will apply to the Auckland Council but slightly differently to other councils because it has specific legislation.

The change in the purpose statement for local government: “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” will apply to both the Auckland Council's governing body and its local boards.

This means that the next time local boards review or amend their plans they will need to take into account the new purpose, although it will be up to the governing body and the local boards to work out how the new purpose statement is reflected in their plans.

The council will also need to make sure its work plan aligns with the new purpose.

Because the Auckland spatial plan was developed for the whole of Auckland, including the council, the private sector and the government, and has a broader perspective, it will not be affected by the new purpose statement.

The Auckland legislation also states there cannot be any reorganisations in Auckland until after the October 2013 elections – so the new re-organisation process will not affect Auckland until then. After that it will apply to reorganisations of both local boards and the governing body.

And while the new governance arrangements will apply to Auckland, the Auckland Mayor already has enhanced powers similar to those being made available to other mayors.

What’s new in Phase 2

Efficiency Taskforce

The efficiency taskforce has looked at the effectiveness and efficiency of the planning, consultation and financial reporting requirements and practices local government faces. Its report is under consideration by the Minister and officials.

View the task force terms of reference (PDF, 70KB)*
View the biographies of the task force members (PDF, 50KB)*
View the Minister's press release 7 June 2012 (Beehive website)
View the Local Government Efficiency Taskforce Report (PDF, 736KB)*
View the Local Government Efficiency Taskforce Report (DOC, 611KB)
View the Minister's press release: Local government efficiency taskforce report released (Beehive website)

Expert Advisory Group on local government infrastructure provision

The expert advisory group is looking at the efficiency of local government infrastructure purchasing, provision and maintenance. It is expected to report back early in 2013.

Link here to the Minister's media release: http://www.beehive.govt.nz/release/local-government-infrastructure-group-appointed
Link here to the infrastructure efficiency expert advisory group's Terms of Reference (PDF, 54KB)*
Link here to Beehive press release: Councils infrastructure under spot light (17 April 2013)

Front cover of the Report of the Local Government Infrastructure Efficiency Expert Advisory Group

Report of the Local Government Infrastructure Efficiency Expert Advisory Group (DOC, 6.8MB)
Report of the Local Government Infrastructure Efficiency Expert Advisory Group (PDF, 4.6MB)*

A framework for central/local government regulatory roles

The regulatory roles work will build on an inquiry by the Productivity Commission into local government regulation. The Commission reported in May 2013. See: 'Towards Better Local Government' - final report from the Productivity Commission (13 May 2013)

Development Contributions

The review of development contributions is considering whether these are still an appropriate means to fund infrastructure, the impact they have on housing affordability and business, and whether there are alternatives to the current system.

The Minister of Local Government released a discussion document about the current development contributions regime in February. Submissions were due on 15 March 2013. Below is a link to the discussion document and a link to submissions received.

Submissions received (link to submissions)
Development Contributions Review Discussion Paper (.doc) 586k
Development Contributions Review Discussion Paper (.pdf) 617k*

Dual or two tier governance model

The challenge for a two-tiered or dual model for local government is to find a way to combine the benefits of large scale institutions with the benefits of local community based governance.

Local government performance monitoring framework

The work to explore options for a performance framework for local government will also draw on the Productivity Commission’s report. It will look at ways to improve the efficiency and effectiveness of local government and monitor local government performance.

Sector Consultation

Consultation is currently running with Local Government New Zealand on the financial prudence regulations.

Background

Q & A

Questions and Answers about the Local Government Act 2002 Amendment Act 2012 (Parliament website)

Questions and Answers (PDF, 23KB)*
Questions and Answers (DOC, 79KB)

Legislation

View the text of the Act (Legislation website)

Summary of the legislation

Summary of the Local Government Act 2002 Amendment Act 2012

Links to other Government programmes

Productivity Commission Inquiry

The Productivity Commission has conducted an inquiry into local government regulation. Its report is available on its website at: http://www.productivity.govt.nz/inquiry-content/1510

Housing Affordability

In October 2012 the Government announced its response to the Productivity Commission’s inquiry into housing affordability.

The Government’s response has broadened the review of development contributions and added the workstream to explore options for a local government performance monitoring framework to phase 2 of the programme.

The Local Government Act 2002 Amendment Act

The Local Government Act 2002 Amendment Act 2010 was given Royal assent on 26 November 2010. The Act implements Cabinet's decisions on a package of reforms to improve the transparency, accountability and financial management of local government.

In February 2013 the Department completed consulting with the public and local authorities on a set of draft performance measures for each group of activities. Feedback provided is currently being considered and will be used to develop the final performance measures.

Other information

Visit www.localcouncils.govt.nz for more information about local government in New Zealand.

Resources

These resources are for general information only and are not a substitute for independent, professional legal advice. Feel free to re-use them as appropriate.

Technical Background Information

Download: Technical Background Information (PDF, 79KB)*
Download: Technical Background Information (DOC, 79KB)*

Article: New Act brings in changes for councils

Download Article: New Act brings in changes for councils (PDF, 17KB)*
Download Article: New Act brings in changes for councils (DOC, 78KB)