Local Government Act 2002 Amendment Bill:
Six of One, Half A Dozen of the Other
Submission of the Society of Local Government Managers on the
Local Government Act 2002 Amendment Bill
June 2010
Building capability and excellence
among local government managers and staff
New Zealand Society of Local Government Managers (SOLGM)
8th Floor, Civic Assurance House
114-118 Lambton Quay, Wellington
PO Box 5538
Wellington 6145
Phone 04 978 1280
[email protected]
Fax 04 978 1285
www.solgm.org.nz
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Summary of Recommendations
SOLGM recommends that the Select Committee
1. Note that:
a. no systematic evidence has ever been found that the range of local government
activity has expanded since enactment of the Local Government Act 2002
b. over the past ten years key local government input costs have increased about fifty
percent faster than the rate of inflation1
2. Delete clause 5 (the so-called “core services” clause) from the Bill.
3. Either delete clause 6 from the Bill or move the duty to periodically assess the risk and
return from investments to section 101.
4. Either delete the references to the Pre-Election Report from the Bill or
5. Amend:
a. Schedule 1, clause 371)(a) to read “… for the first two years of the triennium and the
funding impact statement from the annual plan for the financial year preceding local
authority elections” and
b. Schedule 1, clause 37 by adding a subclause (3) requiring a statement of compliance
by the Mayor and the Chief Executive and
c. Schedule 1, clause 37(1)(a)(iii) to read “a statement setting out the extent to which
the local authority has:
i. complied with the limits on rates and expenditure in its financial strategy, and
the reasons for any non-compliance
ii. complied with the limits on borrowing in the financial strategy and the reasons
for any non-compliance
iii.achieved the targets for investments specified in the financial strategy”
d. Schedule 1, clause 37(1)(b)(c) to read “the significant projects ….” and
e. Clause 16 (the new section 99A) to require local authorities to “make the PER publicly
available” and
f. Amend clause 16 to empower local authorities to add such explanatory or supporting
material as they deem appropriate.
6. Amend the Bill to:
a. Save all existing statements of community outcomes until 30 June 2012 or such time
as the local authority chooses to review them (whichever is the earlier)
b. Make the repeal of section 92 retrospective to the date of introduction of the Bill (29
April 2010)
7. Amend clause 4, schedule 10 (dealing with the content of long-term plans) to
a. Replace the test of a “major” performance measure with a test that already exists –
the test of significance
1 BERL (2010) A Local Government Cost Index (unpublished).
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b. Clarify subclause 4(b) so that it cross-references to clause 4(a)
c. Clarify that subsection 4(d) should read “any intended changes to levels of service
and the reasons for the changes”.
8. Amend Clause Four of the Bill to define each mandatory group of activities as “as
(having) the definition given under regulations to (the) Act” and give the Department
the power to make regulations defining each of the mandatory groups of activity.
9. Delete clause 39 from the Bill.
10. Amend clause 41 of the Bill by replacing all references to “the Secretary” with “the
Government Statistician”
11. Amend the Bill by adding a section 94 A to the Local Government Act making a review
of the audit of LTPs mandatory (and putting a sunset provision on section 94 if such a
review does not occur)
12. Amend the requirements around financial strategies (clause 17) to:
a. relocate the proposed section 101A to Schedule 10 (thus making it a component of
the content of the long-term plan)
b. amend section 101A(3)(a)(ii) by deleting the words “network infrastructure and flood
protection and flood control works”
c. amend all references in section 101A(3)(a)(ii) to “capital expenditure” to read “capital
and operating expenditure”
d. replace all references in section 101A to “adequate” levels of service with either
“planned” or “intended” levels of service. This uses terminology from elsewhere in
the Act.
13. Change the name of the Funding Impact Statement in Clause 31 of Schedule One to
differentiate from those statements required in the long-term plan and annual plan.
14. Amend clause 5 of Schedule One by deleting the words “and the rationale for their
selection in terms of section 101(3)”. This removes one of two sets of duplication from
the Bill.
15. Delete requirements to report on projected and actual reserve movements and internal
borrowing
16. Amend clause 28 to completely repeal requirements to prepare an assessment of water
and sanitary services
17. Delete clause 6 of Schedule One; this is in part a consequential amendment to that in
recommendation 16, and in part deletes another requirement to include a summary of
the waste management plan in the LTP
18. Delete clause 12 of Schedule One, containing requirements to include summaries of the
waste management plan and affordable housing plan from the LTP
19. Amend the definition of development contributions policy in Schedule 2 of the Bill to
read “ … policy adopted under section 102(2)(d) of this Act”.
20. Amend clause 22 to clarify financial contributions need not be reviewed every three
years by adding the words “to avoid doubt, nothing in this section affects the local
authority’s powers or responsibilities under sections 64, 65 or 73 of the Resource
Management Act 1991.”
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Table of Contents
Summary of Recommendations . ............................................. 1
Table of Contents..................................................................... 5
Part A: Some General Comments ........................................... 7
Who Are We?.................................................................................................................7
The Bill: An Overview ...................................................................................................7
Part B: Specific Issues ........................................................... 17
Role of Local Authorities.............................................................................................17
Pre-Election Report ....................................................................................................19
Community Outcomes . .............................................................................................24
Performance Management ........................................................................................27
Benchmarking of Non-Financial Performance .........................................................29
Audit ............................................................................................................................32
Financial Strategy, Management and Reporting......................................................34
Amending Long-Term Plans ......................................................................................38
Decision-Making Processes .......................................................................................39
Water and Wastewater . .............................................................................................40
Community Board Funding .......................................................................................42
Policies and Policy Summaries ..................................................................................43
Development Contributions . ....................................................................................44
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Part A: Some General Comments
Who Are We?
1.
The Society of Local Government Managers (SOLGM) thanks the Select
Committee for the opportunity to submit on the Local Government Act 2002
Amendment Bill (the Bill).
2.
SOLGM represents approximately 570 local government managers (including
the Chief Executives of 81 of the 85 local authorities, and other managers with
significant management, policy or strategic development responsibilities). Our
vision is:
“to be the leading influence for local government managers and staff to advance
the sustainability of our communities”
3.
SOLGM represents and supports its members, local government managers
and staff through professional development and networking opportunities,
membership support services, good practice resources and advocacy work.
The Bill: An Overview
There is much in the Bill that SOLGM supports …
4.
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The Bill makes a number of amendments that simplify some of the procedural
requirements in the Act, or remove unnecessary operational detail from the longterm plan (LTP). These include the following:
•
the repeal of sections 91 and 92 – and amendments to the definition of
community outcomes to focus local authorities on what the council can
achieve while leaving it open for councils and their communities to determine
their own processes for getting to outcomes
•
the requirement to prepare a financial strategy – while this is viewed as good
practice already we consider that a statutory requirement will raise the overall
standard of practice in this area
•
simplification of the disclosures in the performance management area (at least
as they apply to the LTP)
•
the clarification of the decision-making process that has come through the
deletion of section 78(2)
•
removal of most section 102 policies from the LTP
•
raising the threshold of many of the statutory triggers for amendment to LTP
(and removal of some others) – this is the provision that achieves the only
genuine reduction in audit costs.
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The Bill is based on a fundamental misunderstanding of why rates are increasing …
“These changes to the Local Government Act 2002 will ensure that council
costs, rates and activities are better controlled. …. The reforms are about
local government focussing on core functions, managing within a defined
budget, and adopting transparent and accountable decision-making
processes”2
5.
The Minister apparently considers local government has expanded into so-called
“non-core” activities, and that this is driving rates. A 2006 report undertaken
by the Minister’s own department noted that there is very little evidence of any
system-wide expansion of activity noting that
“in the few cases where councils have taken on additional responsibilities
these have proved to be small in scale, and operational in nature”3.
6.
Many of the examples cited are various forms of grants to community
organisations, where local government has had a role for many years. Others have
involved the provision of a service that either central government or the private
sector have been unwilling or unable to provide and again have been things
councils have done for some years (so for example some councils subsidise GPs to
come to small rural communities and have done so since the mid-1990s, another
council subsidises a post office in an isolated coastal community and the like).
7.
Analysis of both the 2006 and 2009 LTCCPs reveals that the bulk of local authority
expenditure (over 70 percent)4 is actually on network infrastructure (land transport,
water supply, wastewater and sewage disposal, and flood protection/river control).
A further 25 percent goes on community infrastructure. To borrow the Minister’s
term – the so-called core services.
8.
The cost of providing core services is rising. BERL has recently prepared an
estimate of cost change for local government inputs since 1999 (this can be
thought of as a local government cost index) and found that over the past ten
years this index has increased 44 percent, as opposed to a 30 percent increase
in the CPI. In the year to June 2009 Statistics New Zealand’s Capital Goods Price
Index (CGPI) shows – the cost of pipelines increased 10.3 percent, transport 4.8
percent, and earthmoving 5.5 percent.
9.
The rapid rate of growth in the cost of providing infrastructure is not a new
phenomenon. The Independent Inquiry into Local Government Rates5 found that
the “transport ways” component of the CGPI increase by 34 percent between
June 1999 and June 2006, and the pipelines index increased by 40 percent over
the same time period. This compares with an increase of 20 percent in the CPI
over the same time period. The Inquiry noted that this was different from the
historic experience, where local government cost indices had tracked very close to
the CPI. They concluded that
2 Hon Rodney Hide (2009) “Reforms to help keep rate rises under control” media release,
3 Joint Central/Local Government Funding Project Team (2005), Local Government Funding Issues, page 20.
4 Joint Central/Local Government Funding Project Team (2006), Local Government Funding Issues – An
Update, page 17.
5Independent Inquiry into Rates (2007), pp81-82.
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“the local government sector faced and is likely to continue to face price
increases for some of its activities that are higher than the CPI. This has
resulted in an increase in costs to deliver the same levels of service.”
10.
The last sentence in that quote is very significant because it highlights the
quandary local authorities face – rates cannot be “controlled” in the medium term
without also controlling levels of service.
11.
So why might input prices be increasing to the extent they have? There is no
single factor, rising input prices are the result of the interplay of:
•
rising capital programmes both in local and central government leading to
competition for scarce civil construction resource – although the ‘trimming’ of
plans at both levels in 2009 may go some way to calm the market, we have no
doubt that there is an element of demand-pull in cost increases especially at
regional level
•
a shortage of skilled labour, particularly of civil engineers but also of people
in the trades relevant to civil construction (skills are not readily transferable
between building and civil construction). The 2007 Ministerial Advisory
Group (MAG) on roading costs also echoed this in their report
•
increased cost of raw materials in 2007 and the early part of 2008 – especially
for petroleum and related products, and steel and related products (MAG)
•
overheated demand in property markets had a real effect on tender prices
– increases in subdivision activity created greater demand in the civil
construction industry (new roads, branch lines for reticulation etc). Increasing
property values also increase the cost of acquiring land for public works, and
for its impact on asset replacement values and depreciation requirements.
12.
Standards for the provision of infrastructure have risen across the board in recent
years – especially the provision of network infrastructure. The main drivers
for these are primarily greater public awareness of environmental and health
risk, and lower public tolerance of service failure. At the present time, central
government’s consideration of the cost impacts of the new standards it proposes
is patchy at best. Proper cost/benefit analyses are not often performed – for
example, the moratorium placed on drinking water and air quality standards,
ostensibly so that a cost/benefit analysis can be undertaken. Even the suite of
Cabinet papers proposing the changes in this Bill lacks a rigorous analysis of costs.
13.
At the same time public expectations have increased - as the following quote
(actually from the State Services Commission brief to their Incoming Minister)
makes clear
“Probably the most important challenge that we face is the high and rising
level and increasing complexity of citizen’s expectations of service access
and delivery. This will pose a major challenge at the best of times, but it
will be even more of a challenge as we move through a period of financial
stringency.”
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14.
Globalisation means a nation needs a high quality stock of network infrastructure.
In the local government context this means a high quality transport network
and reliable and quality water supplies are “must haves”. But the place shaping
role and its contribution to economic transformation goes wider than network
infrastructure. Communities need to be vibrant, attractive places to live to attract
pools of skilled labour. In turn this means that a local authority cannot ignore its
stock of community infrastructure (libraries, parks, recreational facilities and the
like) and what is sometimes referred to as the “look and feel” of the community.
In short, all investment that supports the ability of a community to attract
investment and skilled labour must be viewed as “core business”. That means
communities are (and must be) prepared to invest in leisure complexes, conference
venues, cultural facilities and the like.
15.
One cannot fully understand the drivers of rates and charges without appreciating
that the real drivers of increased cost in recent years have come largely from
commodities where prices are set in international markets (such as bitumen and
steel). As such the price for these commodities is largely set by factors such as
increasing demand by the Chinese and Indian economies, by conflict in the Middle
East, and even by natural events such as hurricanes in the Gulf of Mexico.
16.
The comments that open this section are a considerable “oversell” that run the risk
of creating expectations that citizens can enjoy current levels of service without
paying “full price” for them. As the Department noted in the Regulatory Impact
Statement that accompanied the four Cabinet papers
For several years price indices published by Statistics New Zealand that are
specifically relevant to local government, for example the Producers Price
Index and subgroups of the Capital Goods Index for pipelines and transport
ways have increased at rates greater than the CPI. Therefore an expectation
that councils can deliver the same levels of service and keep rates increases
to the level of the CPI may be unrealistic6”.
Recommendation: Local Government Costs
1.That the Select Committee note that:
(a) no systematic evidence has ever been found that the range of local
government activity has expanded since enactment of the Local
Government Act 2002
(b) over the past ten years key local government input costs have
increased about 50 percent faster than the rate of inflation.
6Cabinet Paper ‘Local Government Transparency, Accountability and Financial Management: Improving
Transparency and Accountability” this quote can be found at paragraph 16 of the Regulatory Impact
Statement.
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The proposals in the Bill may make it easier to identify key issues in plans and
reports
“It may be possible to remove from LTCCPs a lot of the more descriptive,
technical and non-strategic material which has little relevance to most
ratepayers.7”
17.
Both the 2006 and 2009 LTCCPs as a group were extremely long documents full of
technical and operational detail. Even with very considerable efforts on the part
of the sector to produce good summaries of the long-term plan, and highlight the
key issues up the front of the main plan, it would have been far from easy for the
average reader to find any particular piece of information.
18.
The bill removes some operational and technical detail from the long-term plan –
in particular:
19.
•
all but one of the funding and financial policies has been removed from the
long-term plan and
•
disclosures of operational material at group of activities level have been
generally simplified
•
disclosures of performance information will be reduced to major measures
and those measures associated with planned changes to levels of service.
But on the other hand additional financial disclosures are required, all documents
must now articulate a financial strategy, and some disclosures of capital
programmes have been expanded. Likewise having five mandatory groups of
activities may obscure important detail in other areas. Those local authorities that
have worked through the requirements in details have suggested that the length of
their plans will be reduced by 10-15 percent – mostly through the removal of most
section 102 policies from the LTP.
The Bill does not introduce “plain English” financial reporting …
20.
Ministerial speeches and the Cabinet papers make much of changes that are said
to introduce “plain English” financial reporting into plans and reports under the
Local Government Act.
21.
However, there is little in the Bill that would introduce plain English financial
reporting. The changes to the Funding Impact Statement (FIS) that require
disclosure of both inflows and outflows of funding are actually developments of
a statement that already exists (the “new style” FIS is transplanted from existing
sector good practice material8). We are far from certain that this statement in and
of itself will be any more “plain English” to the public than any other aspect of the
financials.
22.
The additional disclosures for reserves and internal borrowing will add detail that
few citizens will find relevant.
7 Hon Rodney Hide, speech to SOLGM Annual Conference, 7 September 2009.
8 SOLGM (2007), Dollars and Sense, Financial Management under the Local Government Act.
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23.
The policy proposals in this Bill have apparently been developed based on a
misdiagnosis of the issue with local authority financial reporting. The issue is not
accrual accounting per se, but the near slavish application of International Financial
Reporting Standards (IFRS).
24.
We note that our concerns are shared by the outgoing Auditor-General, whose
recent report The Auditor-General’s Views on Setting Financial Reporting
Standards for the Public Sector suggested that
“In my view, NZ IFRS, have introduced a new and unnecessary level of
complexity to general purpose financial reporting. As a result, many public
sector entities now need external assistance to prepare financial reports.
Also, anecdotally members of governing bodies and other people who use
financial statements are finding it increasingly difficult to understand the
information.9”
25.
We agree with that and note that:
•
differential reporting concessions do not go far enough – especially in regards
to recognition and measurement requirements
•
the language used is too focussed on the private sector
•
reporting of some public sector restructuring is misleading – particularly
topical with Auckland governance reforms on the horizon
•
it is unclear which entities to include in public sector group level statements
•
typical public sector financial transactions are not addressed – examples
SOLGM is currently grappling with are loans at less than market rates or
interest, development contributions, and providing financial guarantees for
non-market consideration
•
public sector insurance liabilities are conservatively calculated – again topical
with leaky home liabilities on the horizon
•
the likely future treatment of borrowing costs (mandatory capitalisation) is
likely to inflate asset values with a resultant flow through to depreciation costs
•
current plans to alter the presentation of financial statements to rely on
classifications akin to cashflow statements will serve to further confuse the lay
user of balance sheets and income and expenditure statements.
26.
The primary use of local authority financial statements is as an accountability
document. The primary audience for these documents is meant to be the
residents and ratepayers. While not wanting to downplay the needs of capital
markets, these are very much secondary users with a much higher skill base, who
should be able to get what they need from statements prepared under any basis.
27.
Recently the Minister of Commerce has announced changes to processes for
setting of accounting standards that suggest in the long-run the accounting
9Office of the Auditor-General (2008), The Auditor-General’s Views on Setting Financial Reporting Standards
for the Public Sector, page 37
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profession will move to international standards that are set with the public sector in
mind. Our observation of these standards is that they are generally more practical
for the sector to work with. Nevertheless, even these standards do not address
some New Zealand issues – such as development contributions (where the current
accounting treatment is reliant on a gentlemen’s agreement with the Office of the
Auditor-General).
28.
If the Select Committee shares our view that sector plans and reports be made as
easy to understand as possible it might like to consider recommending that the
Minister of Commerce and External Reporting Board establish formal means for
receiving and considering the views of the local government sector on accounting
standards. Until that time, the claim that this Bill introduces plain English financials
is illusory.
Performance comparisons have risks as well as benefits …
29.
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There are four proposals in this Bill that are intended to promote the accountability
of local authorities to their communities by providing more consistent information
for comparing local government performance. These include:
•
standardising some disclosures in financial statements
•
disclosure of prior year information in financial statements
•
mandatory benchmarks for non-financial performance in five particular
activities
•
standardising certain disclosures of asset information (for five activities).
30.
When performance comparisons are approached with honesty of purpose and
integrity of method they can provide local authorities and ratepayers with useful
information (not least by helping identifying the “right questions to ask”). Most
local authorities undertake these sorts of comparisons, even if it is only asking
neighbouring local authorities for their planned levels of rates increases.
31.
Cabinet was advised that such comparisons would work best if they were used
constructively, and if so-called “league tables” were avoided. It would be naïve to
think that the media and the general public are not going to develop league tables
from the benchmarks when this information gets into the public domain. Once this
happens, even the best designed systems and measures create incentives for local
authorities to manage delivery of their services based on their “position on the
table” and less on sustainable delivery of community needs and priorities.
32.
One of the inherent dangers in this kind of comparison is that the benchmarking
process acquires a life of its own, especially if it is managed by central government.
For example, in the United Kingdom, the number of measures used for
benchmarking local government has in the past ballooned up to around 1100
measures before recent “trimming”. We need to ensure that the cost/benefit
ratio for benchmarking remains realistic – especially for small rural communities.
33.
In other words, care must be taken to ensure that the core purpose of local
government – responding to local needs and preferences is not compromised in a
rush to measure everything that moves.
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34.
The risks are all the greater because responsibility for these standards will be
assigned to the Department of Internal Affairs, the same agency that provides
policy advice to the Minister of Local Government and must implement that
Minister’s policy proposals. If benchmarking is to proceed it must be conducted
by an agency that is both neutral and independent of the political process - later
we will discuss why our preference is for Statistics New Zealand.
Across the board reductions in regulation and compliance burden are limited at
best …
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35.
While the Bill will streamline long-term plans to some extent, it would be a mistake
to assume that its proposals will result in any significant reduction in the cost of
complying with legislation and in the level of regulation of local government in
general.
36.
Why do we say this? Simply put there are at least as many new requirements as
there are requirements that have been removed from the Act. The small number
of local authorities that have attempted to cost requirements have generally found
that the removal of a mandatory outcomes process is offset by the pre-election
report and other disclosures. Any savings are generally four figures (possibly higher
where local authorities are saved amendments to LTPs). It is not uncommon for
LTPs to cost $200-250,000 to prepare. This is one of the reasons we have named
the submission Six of One, Half A Dozen of the Other.
37.
The largest of the new requirements is the Pre-Election Report (PER) . While
this document will draw on existing information to some extent, there is new
information, and in its present form the likelihood that smaller councils will have to
take on additional resources to manage the PER, Annual Report and Annual Plan in
the same window of time. Some resource will also be devoted to turning the bare
information requirements of the PER into something that might interest citizens.
38.
The Bill will require that local authorities disclose only their major performance
measures and targets in their long-term plans. Regardless of whether the Bill
requires disclosure only of major matters, annual reports must disclose and explain
any variances from planned levels of service. Auditors will still to audit levels of
service and measures as part of the LTP audit. Changes in audit standards for
non-financial performance information mean that an audit process not dissimilar to
the LTCCP audit, though smaller in scale, will be undertaken as part of the audit of
annual reports.
39.
At the same time the Bill will require local authorities to prepare a mandatory
statement setting out the amount of funds spent during the year on capital
works for five particular services vis-à-vis the levels intended, separated by driver
(growth, levels of service improvements, and replacement/renewal) and to have
that statement audited. This is an extension of an existing requirement but over
a narrower range of activities – the auditing of this statement could conceivably
lead to auditors taking a greater level of interest in the asset management plans
that drive these capital programmes during audits with a greater cost in the annual
attest.
40.
In addition to the performance information currently required, the mandatory
performance measures will also create additional costs for the sector. Most
immediately there is the cost of developing performance measures – which the
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Department has estimated will cost $1.26 million10, with the Department intending
to levy the sector to cover these costs. As an initiative of government, and where
government agencies will be the primary users, central government should be
meeting the cost. Furthermore, depending on the degree to which these measures
are different from the set of performance measures already that each local
authority uses there could be additional costs to set up the initial collection of
information, and to collect information on an ongoing basis.
41.
In a similar vein, most of the section 102 funding and financial policies have
been moved from the LTP which will reduce some of the cost in producing these
documents. But these are still required, and some must be reviewed and amended
via the special consultative procedure.
42.
The main cost savings in the Bill come from:
43.
•
the removal of a separate consultation process while developing community
outcomes and to produce a three yearly report on progress towards achieving
on community outcomes – though this is tempered somewhat by the
simple fact that performance frameworks will still need some element of
measurement of progress towards achievement of the council’s objectives
•
the changes to the decision-making provisions in section 78 should see some
reduction in risk averse behaviour – in particular, no local authority should now
feel it has to consult more than once on the same issue which means some
reduction in consultation.
•
changes to sections 97, 102 and 141 will reduce the frequency of
amendments to long-term plans with their consequent audit fees and costs of
consulting (where a local authority has for some reason not consulted on the
amendment in tandem with an annual plan).
In short, it is highly unlikely that this Bill will generate any significant savings in
the costs that local government incurs in preparing its accountability documents.
When compared to the overall costs of accountability it is clear that the savings are
incremental.
Whatever change is to happen, needs to happen in the next four months …
44.
The next long-term plans are due no later than 30 June 2012. Proper long-term
planning under the Act is a minimum 12-15 month process. Many prudent local
authorities will be starting their LTP soon after the local government elections in
October – especially around defining strategic issues and what the new councils
want to achieve. Some have already started. Some changes may require either
new investment in information and asset management systems or substantial
refinement of existing systems. Both the local government sector and audit service
providers need certainty around audit arrangements for the 2012/22 planning
round as soon as possible.
10This is a cost of approximately $5000 per council per year – to put this amount in context, its about $3
per rateable property in a district like Kaikoura and Mackenzie. We must question whether the average
ratepayer would really be willing to pay $3 per year for this information.
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45.
And getting all plans to a high standard both in terms of legal compliance, and
usefulness to the community will mean existing guidance will require a substantial
review. Our preliminary view is that the existing guidance on financial management
and performance management will each require major overhauls to ensure the
legislation is effectively implemented.
46.
Enactment of this Bill any later than the end of October places quality
implementation of the Bill at risk – especially the provisions relating to financial
strategy and disclosures in the 2011/12 Annual Plans and 2012/22 Long-Term
Plans.
47.
We encourage the Select Committee and Parliament in general to expedite
passage of the Bill, and if necessary to separate out the more contentious aspects
of the legislation (such as the changes to sections 135 and 136) to enable this to
happen.
48.
Many of the Government’s policy decisions about standard presentations of
information will require subordinate legislation. As with the Bill itself, the sector
needs to see the detail as soon as possible. We urge members of the Select
Committee to strongly encourage the Government to give the subordinate
legislation the time and resource it urgently needs.
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Part B: Specific Issues
Role of Local Authorities
The “Core Services Clause” – Clause 5
49.
SOLGM opposes clause 5 of this Bill as unnecessary and vague. The need for
amendment is unsupported by anything other than anecdote and philosophical
“world view”.
50.
We have already seen that there is no evidence that the local government sector
has significantly expanded the range of its activity over the past ten years. In
addition to the study cited in Part A, both the 2007 Independent Inquiry into
Local Government Rates and the 2008 Local Government Commission Review of
the Local Government Act similarly found no evidence that local government had
expanded the range of its activities.
51.
Part A of this submission demonstrated that the real driver of local authority costs
in recent years has been increases in the labour and input costs necessary to
deliver upon the core services (such as those listed in the Bill).
52.
It is therefore unclear both what the policy intent is, and whether it is actually
attempting to address a real issue. To the extent that “encouraging a focus on
core services” is the intent it is not clear that the sector is anything other than
focussed on the services listed in the Bill. Unclear policy objectives make for
unclear legislation, and carry a risk that the sector will not properly implement the
provisions for no other reason than it does not understand what the desired end
result is.
53.
There is no link between the four well-beings in clause 10 and the core services
listed in 5 of the Bill (proposed clause 11A of the Act). For example, while
promoting “economic well-being” is a purpose of local government, there is
no mention in the core services list of economic development activities beyond
the provision of infrastructure. A similar scenario presents itself with regard to
social well-being and the exclusion of community development from the list. This
inconsistency between key clauses of the Act is likely to create confusion for all
who have dealings with the Act.
54.
While some may consider the clause to be “window dressing”, experience with
the insertion of Treaty clauses into legislation and the repeal of section 59 of the
Crimes Act shows that these kinds of vague obligations can take on a life of their
own once they come before the judiciary. In particular any attempt to list a set of
functions to “have regard to” could be inviting an activist court to place its own
interpretation on what this duty actually means.
Recommendation
2.That clause 5 be deleted from the Bill.
17
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Risk and Return from Investments - Clause 6
55.
Clause 6 amends section 14 of the Act and requires local authorities to periodically
assess the risk and return involved in equity investments and commercial activities.
56.
This provision duplicates the existing content of section 14 in that local authorities
are under obligations to undertake commercial transactions in accordance with
sound business practice (section 14(1)(f)) and ensuring prudent stewardship and
efficient and effective use of resources (section 14(1)(g)). The provisions also
duplicate some of the existing content of section 105 on investment policies – in
particular (105)(a) and 105(e) covering the management of investments and their
associated risks.
57.
The placement of this amendment within section 14 also demonstrates a faulty
understanding of what section 14 is intended to do. The principles in section
14 are intended to be things that local authorities should take into account and
balance when performing their role. That is why all of the existing principles
are expressed as things that the local authority “should” do – by including the
proposed new (fa) as a “must do” the Bill is putting in an obligation in a set of
principles. The two do not sit well together.
58.
If the Select Committee considers that a requirement to periodically assess risk
and return from investments is necessary, then we suggest that it is more sensibly
located somewhere in the provisions on financial management – most probably
section 101.
Recommendation
3.That either clause 6 be deleted from the Bill or that the duty to
periodically assess the risk and return from investments be moved to
section 101 of the principal Act.
18
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Pre-Election Report - Clause 16
59.
This area of the Bill gives SOLGM a good deal of concern. Our concerns about the
pre-election report (PER) are based on:
•
the likely effectiveness, and hence value for money, of the PER
•
the timing of the PER
•
the risks in using an unaudited financial year-end result in the PER
•
the content of the PER.
PER – Value for Money?
60.
SOLGM supports a better informed local election debate, that focuses on issues
rather than almost exclusively on the public profile and personal attributes of the
candidates. The PER is designed as a tool to encourage that debate by making
information more accessible to the public, and to encourage more people to stand
for local councils.
61.
The content of the PER includes:
62.
•
an audited FIS from the previous two year’s annual reports (existing)
•
a provisional FIS for the year ended 30 June prior to PER . This would be
unaudited but even so would be, at best, very logistically challenging for the
sector to produce – especially for councils reliant on income from dividends
and interest (new)
•
audited summary balance sheets from the previous two year’s annual reports
(existing)
•
a provisional summary balance sheet for the year ended 30 June prior to PER
(new)
•
the LTP FIS for the next three years (existing)
•
the major projects planned for years 4-6 (existing)
•
a statement setting out the extent to which council has complied with the
financial strategy (another area where new information would be produced).
Four of the above seven items are a collation of information that will already be
in the public arena (for example in the library, service centres, or on the council
website). We are unclear that a re-release of this information will generate
significantly more interest than its first release. To the extent that a PER does
generate interest there are risks that
•
19
most people will pay attention to their “pet issues”, or to the media account
of the PER, especially as that financials are not “plain English”. We note
that elections will still be decided on the personalities of the candidates, and
occasionally on key projects or policy issues, not on financials (other than in
the very broadest sense)
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
•
the PER could be seen as the council attempting to restrict the scope of
debate or even be seen as the existing councils ‘platform’ for the election
campaign (all the more so because the financial forecasts and non-financial
information will all be based on existing policy settings)
•
the PER may well provide a further spur for policy auctions (e.g. candidates
bidding to out-do one another with promises to keep rates down, curb
spending etc) or alternatively see election campaigns taken over by debate
about a single project (e.g. the election campaign becomes transfixed by the
$500K expansion of the council office as opposed to the loss of economic
activity in the district or the $10 million water upgrade).
63.
It has been said that the PER is, loosely speaking, the equivalent of central
government’s Pre-election Fiscal Update (PREFU). The PREFU has a large
component about the state of the economy that won’t be in the PER, we would
invite the Committee to reflect on how effective a tool this is at promoting election
debate. The public vote on the policy proposals of the respective parties, and
media coverage of the PREFU is often little more than a single news cycle in
the three major dailies and the business press. If there has been any research
explaining how useful the public find the PREFU we are unaware of it.
64.
While the PER will draw largely on existing information, it will still carry a cost in
terms of direct financial costs and the opportunity cost of the staff time involved in
producing the document. While a local authority could just cut and paste existing
information, add the third FIS and a statement on the financial strategy into a word
document and comply with the letter of the law, such an approach would not meet
the intent of the legislation. Producing an effective PER will mean each council
will need to give the PER much the same level of attention that it would give a
summary LTP or summary Annual Plan which in turn means:
65.
•
some attention to presentation, layout, language, and other features that
make the document accessible to readers
•
time spent by staff preparing information that places the information in
the PER in its proper context i.e. links the information together to form a
coherent account of council performance and the future direction.
We submit that all provisions relating to the PER should be removed from the Bill.
Timing of the PER
20
66.
The Bill requires the publication of a PER no later than a fortnight before
nomination day i.e. the first Friday in August.
67.
With the present timetabling of local elections – the second Saturday in October
– and the present financial year ending on 30 June, the PER in its present form
described is simply not practicable for many small-medium sized councils. Local
authorities are required to adopt an annual plan by 30 June, and cannot legally
set rates until that document is adopted. In July local authority finance staff and
activity managers are involved with annual reports.
68.
There will be significant resource issues in preparing an additional report while
meeting other statutory responsibilities– especially in smaller local authorities –
and, frankly, addressing these issues is going to carry a significant cost.
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
69.
Linking the PER to nomination day suggests that it is the Government’s intent
that this document would also encourage people to stand for election to local
authorities. We submit that the date is too close to nomination day for the PER
to act as an effective encouragement to stand. In the bigger centres it is common
for many of the serious candidates for office to announce their candidacies well
in advance of nomination day (e.g. at the time of writing there are already three
announced candidacies for the Auckland Mayoralty and two for Christchurch).
70.
The main logistical challenge for local government will be preparing a FIS for the
year ended June 30 preceding the elections. When publication time is factored in,
most councils will find they have four weeks to prepare statements (at very most).
Councils that are reliant on significant revenue from dividends and interest (such as
a Christchurch City or an Environment BOP) will find it especially difficult to have
statements available less than a month after adoption. Those that are able to get
an estimated outturn together in this timeframe will generally find that they have
to make assumptions, and this invariably creates some degree of variance between
the PER statements and those that get adopted as final the following October.
71.
Not having accurate financial statements available by the time the PER must be
ready also raises issues around the accuracy of the report on compliance with the
financial strategy.
72.
If the Committee does not wish to remove all requirements for a PER, then one
way of making preparation of a PER less of a logistical challenge might be to
suggest that instead of an FIS forthe year to 30 June preceding the elections,
local authorities present the FIS from the annual plan for that year (so for example
a 2016 PER would have 2013/14 and 2014/15 annual report FIS and the FIS from
the 2015/16 annual plan). The annual plan FIS is intended to represent the council’s
best estimates of funding sources and uses for the year based on the policy and
service level decisions of council, and whatever forecast assumptions have been
made. Of course, we would expect that those assumptions would be disclosed.
Local authorities could also be placed under an obligation to disclose any factors
that might give rise to material differences between the forecast and the expected
result.
Unaudited Year End Results
21
73.
Making unaudited information publicly (as the third of the FIS and balance sheets)
available has risks – especially as some key CCO data will be missing that may
influence the overall financial picture (e.g. for example in a council that is heavily
dependent on a revenue stream from a CCO ).
74.
Unaudited financial information may lack public credibility – the public may view
the information and the document itself as “council spin”. There are risks that
statements could change materially pre and post audit. – some metropolitan local
authorities have noted that the impact of asset revaluations can mean their balance
sheets can change by as much as $20 million between July and October. There
are also risks that the forecasts in a PER are given undue weight because of the
electoral context and become seen as gospel in future years
75.
These risks can be mitigated by amending the Bill to require that the third of the
FIS come from the annual plan for the year preceding the elections. While this
information is also unaudited, it is the information on which the assessment of
rates (and hence the council’s main income stream) is based and should be reliable.
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
The annual plan FIS is also prepared, consulted on, re-prepared and has therefore
had community scrutiny and not been rushed in preparation.
Forecast Financial Information
76.
The PER has been designed to draw on information from already published
sources. This means that the forecast financial information for the three years after
election year will come from the current LTP. Significant changes can be made
to LTPs through the amendment process – when these occur the financial data is
reforecaseted. But other changes can occur without triggering an amendment –
for example where the cost of a project increases between the date of adoption
of an LTP and the start of the project. These sorts of changes are known as
variations and do not require LTP amendments – which may mean that the data in
the LTP may differ somewhat from say the most recent annual plan.
77.
With this in mind, and noting previous comments about the need for the PER to
provide explanations of the financials, SOLGM considers that either clause 16 or
the new clause 37 of schedule four should explicitly empower local authorities to
include such explanatory or supporting material as is considered necessary. This
amendment sits most logically in clause 16.
PER – The Chief Executive’s Role
22
78.
We agree that the document must not be seen as the basis for the sitting
members electioneering and therefore that statements from, and photographs
of sitting members or any other content that could be seen as promoting their
campaigns would be prohibited.
79.
However, there is another office holder who also faces political risk from
the document. The PER is a responsibility of the Chief Executive, and their
involvement has risks. Interpolation of the Chief Executive into this process could
mean their political neutrality is questioned by the incoming council and/or during
the election campaign. The report on compliance with the financial strategy, while
largely factual, will still be an intensely political component of the PER (especially
where any targets have been breached). The Chief Executive’s role is to ensure
that the staff prepare financial forecasts and the necessary supporting data that
are as complete and accurate as is possible.
80.
We also suggest that a PER “signed off” by the Chief Executive risks some public
confusion about the respective roles of governance and management. It seems
strange that the person whose job is to advise and implement is the only person
who has to sign off a document that is in part a record of, and in part shaped
by the policy decisions made by those who have governance responsibilities.
Without such a joint statement there is a real risk that Chief Executives will be
“injected” into the electoral process, contrary to both the spirit and letter of the
Local Electoral Act 2001.
81.
We note that the PREFU is signed by the Minister of Finance and Secretary of
the Treasury. We submit that a similar statement should be included in the PER,
signed by the Mayor and Chief Executive, accepting responsibility for the content
having been prepared:
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
•
in compliance with the law
•
on the basis of the policy and service level decisions of council as reflected
in the long-term plan (just as the PREFU is based on existing government
policy).
Distribution of the PER
82.
The term “published” in the proposed new section 99A(3) is vague – and provides
scope for widely varying interpretations as to how to distribute the guidance. We
submit that the distribution requirement should be to make the document publicly
available. This particular test is already used for the annual report summary and it
has its own existing definition in section 5(3) of the principal act.
Report on Compliance with the Financial Strategy
83.
The obligation to report on compliance with the financial strategy (Subclause 37(1)
(a)(iii) of Schedule One) is vaguely worded.
84.
Looking at the requirements of a financial strategy in the proposed new section
101 A, the only compliance issues are adherence to the limits on rates, borrowing
and expenditure that a council has set for itself, and the achievement or otherwise
of targets for investments. The rest of the information in a financial strategy
consists of statements about things that are expected to have an impact during
the life of the strategy and the identification of significant expenditures.
85.
We propose that the report on compliance be limited to adherence with:
86.
23
•
the limits on rates and expenditure
•
the limits on borrowing
•
the achievement (or otherwise) of targets for investments.
This is a purely technical amendment to better clarify the obligation to report on compliance with the financial strategy and does not undermine what a financial strategy is and does.
As one last amendment, and similar to those elsewhere – SOLGM has reservations
about introducing another test of importance – we suggest that references to
“major” projects should be replaced by the term “significant”.
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Recommendation
That the Select Committee either:
4. delete the references to the Pre-Election Report from the Bill or
5(a)amend schedule 1, clause 371)(a) to read “… for the first two years of
the triennium and the funding impact statement from the annual plan
for the financial year preceding local authority elections” and
5(b)amend schedule 1, clause 37 by adding a subclause (3) requiring a
statement of compliance by the Mayor and the Chief Executive and
5(c)amend schedule 1, clause 37(1)(a)(iii) to read “a statement setting out
the extent to which the local authority has:
a. complied with the limits on rates and expenditure in its financial
strategy, and the reasons for any non-compliance
b. complied with the limits on borrowing in the financial strategy and the
reasons for any non-compliance
c. achieved the targets for investments specified in the financial strategy”
5(d)amend schedule 1, clause 37(1)(b)(c) 11 to read “the significant projects
….”
5(e)amend clause 16 9the new section 99A(3) to require local authorities to
“make the PER publicly available”
5(f)amend clause 16 (the new section 99A) to empower local authorities to
add such explanatory or supporting material as they deem appropriate.
11There is a numbering error in this section – we think the correct number for the section is 37(1)(b)(iii).
24
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Community Outcomes – Clauses 4 and 12
Support for the Change in Focus
25
87.
SOLGM supports both clause 4(1) and clause 12 of the Bill.
88.
Taken together these two clauses shift the nature of the community outcomes
process from being a community process where the council is but one player, to
the council identifying how it intends to contribute to community wellbeing.
89.
We think many in the community, and even some within local authorities, have
struggled to understand what community outcomes are intended to achieve.
In particular, many within the community appear not to distinguish between
outcomes as being something that belong to the community and that council
contributes to, and something that the council owns and has to “do”
90.
The concept of community based planning was transplanted from the United
Kingdom in 2000 without a great deal of thought as to how the model should
apply in New Zealand. The UK is a jurisdiction where historically local government
has had a far greater agency role in delivery of service (e.g. police, education,
social services) and a corresponding level of funding from the centre (around 90
percent of funding for local authorities in England comes from the centre, in New
Zealand that figure is around 15 percent (and forecast to drop).
91.
Community outcomes in their present form rely heavily on central government,
the community sector and the private sector to “come to the party” not just
in identifying outcomes but also in making them mean something. Central
government involvement in the identification of community outcomes has been
‘spotty’ – some such as the Ministry of Social Development, DHBs and the Ministry
for the Environment were generally both frequent and useful contributors to the
process. Other government agencies of equal importance were often conspicuous
by their absence. As a general rule, metropolitan local authorities experienced
more and better engagement in the process than rural local authorities. Many
local authorities found the involvement of departments somewhat frustrating
in that they all appeared to be involved solely to push their own agendas, with
little overall evidence of any ‘whole of government’ thinking or approach to the
process. While some local authorities can point to successful central/local actions
or initiatives arising out of the process, we found that across the country few
government agencies have actually assisted much with the delivery of community
outcomes.
92.
SOLGM considers that the redefinition of community outcomes to those aims
that the council is attempting to achieve through its package of service and policy
choices, is one that better fits with the community and many elected member’s
understanding of the role. The important aspect of the process that is preserved is
that local authorities retain an outward focus and have to go through the process
of thinking how their services and policies impact on community wellbeing.
93.
The Bill removes most of the prescription around the process for identifying
community outcomes. The only requirement is that the outcomes must be stated
in the LTP – which effectively means that they will be open for consultation along
with the rest of the LTP. The removal of the need for separate engagement
processes and to get agreement of what can be a disparate group of stakeholders
to the process will save many local authorities an unnecessary cost. Those local
authorities that see value in a process that is similar to the present section 91 are
still free to use that (as local authorities such as Manukau and Porirua did prior to
2002).
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Transitional Arrangements
94.
Some of our members have raised an issue regarding the transitional arrangements
for these particular clauses. Some councils led community outcomes processes
that ended with identification of community outcomes in 2004, and thus are
due for re-identification in 2010. Failure to do so potentially leads to an audit
qualification for non-compliance with legislation. With the repeal of sections 91
and 92 taking affect from the date of enactment – it would seem the longer the
Bill spends in the Parliamentary process the more likelihood that councils in this
situation will need to review their outcomes this year. While that work would not
be wasted in the sense that councils could use these as outcomes in the 2012 pan,
it would be inequitable for these councils not to have the same freedom of choice
on how to discharge their new obligations as others. Similarly, the obligations to
produce a three yearly report on community outcomes are also to be repealed
with effect from date of enactment.
95.
We submit that the Bill should contain a transitional provision that relieves councils
that would otherwise be under obligations to re-identify outcomes or those that
are under an obligation to produce a three yearly report. This is probably best
achieved by adding a transitional clause that enable those sets of community
outcomes in existence on 1 January 2010 to continue to have effect until the local
authority next reviews them, and makes the repeal of section 92 retrospective to
the date of introduction12. Failure to do so will create an unnecessary compliance
cost for ratepayers.
Recommendation: Community Outcomes
6.That the Select Committee agree to amendments to the Bill that
would:
(i) save all existing statements of community outcomes until 30 June
2012 or such time as the local authority chooses to review them
(whichever is the earlier)
(ii) repeals section 92 of the principal Act with effect from date of
introduction of the Bill
12There is precedent for such an approach in law. Section 11(2)(b) of the Local Government Rating Act
provides that the renter of a property is legally regarded as liable for rates where the rental agreement was
entered into before 8 August 2001 (provided other conditions are met). The Rating Bill was introduced on
8 August 2001.
26
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Performance Management – Clause 13
LTP Disclosures
96.
SOLGM supports the intent of the changes proposed in the Bill i.e. that the longterm plans focus on levels of service and performance measures that are:
•
major in nature (and defining the major performance measures will be a key
aspect of the guidance SOLGM will be preparing on LTPs) or
•
expected to change during the life of the LTP.
97.
Disclosure of any variation from planned levels of service in the annual report is a
fundamental part of local accountability (i.e. did the ratepayer get what they paid
for) and should be retained.
98.
We are uncertain that clause 4 of schedule 10 as presently drafted actually
achieves this objective. Clause 4(b) is vague in some respects. In particular,
the phrase “major aspects of groups of activities” is open to a variety of
interpretations. The Cabinet papers suggest that the intent was that “major”
meant the really significant levels of service - which in our view points to those
that have significant financial costs (such as drinking water standards) or are
fundamental to promoting community wellbeing, or those that are contentious.
The rest of the Act uses the word “significant” to determine importance. The
reason for the change in terminology is unclear and unhelpful: is “major” more
significant than significant? Or is “major” important but not as important as
significant? The explanatory note to the Bill is silent on this matter.
99.
Clause 4(c) lacks specificity in that it could be read as referring to any performance
measures used by local authorities to define levels of service. This can easily be
fixed by adding the words “for any measure specified under section 261A or those
that the local authority defines as major under (b)” or similar.
100.
Clause 4(d) is worded with undue particularity and may not cover circumstances
where local authorities want to make incremental changes, or levels of service
are temporarily changed and then restored to their previous level. We suggest
amending 4(d) to read “any intended changes to the level of service and reasons
for the changes”.
Audit of Performance Measures
27
101.
We agree with the deletion of section 94(c), mostly because we consider that
there is an element of duplication between 94(c) and sections 94(a) and (b). As
an opinion on prospective information auditors will want to understand what
the financial drivers are, which means an understanding of levels of service and
performance measures are necessary to form an opinion on the financial forecasts.
102.
Coupled with changes to the disclosure in LTPs this should ensure that the audit
process focuses on the most important issues – some local authorities have
suggested that the audit of LTPs has become mired in relatively minor detail about
the merits of some measures as opposed to others.
103.
However, we do want to sound a note of caution about audit and performance
management. The audit opinion currently has three requirements (legal
compliance, robustness of assumptions and forecasts, and robustness of
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
measures). The bill removes only the third of these tests. Auditors will be required
to audit performance measures in forming an opinion on the other two aspects.
For example, levels of service and measures are a key forecasting assumption.
104.
The new auditing standard AG4 will shift the focus of the audit of non-financial
measures from merely attesting that the measures are an accurate reflection of
what happened to whether the measures are an appropriate way of measuring
performance. The practical consequence of this is that some of the work done in
an LTP audit will either be replicated or shift to the audit of the annual report.
105.
In the long-term we see no cost savings coming out of this aspect of TAFM.
Recommendation: Performance Management
7.That the Select Committee amend clause 4, schedule 10 by
28
(a)
replacing references to “major” in subclause 4(b) with “significant”
(b)
clarifying subclause 4(b) so that it cross-references to
clause 4(a)
(c)
amending subsection 4(d) to read “any intended changes to
levels of service and the reasons for the changes”.
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Benchmarking of Non-Financial Performance – Clauses 38 and 39
106.
107.
SOLGM notes that the Bill requires the Secretary for Local Government to
make rules specifying mandatory non-financial performance measures for local
government in five specified areas:
•
water supply
•
sewerage and treatment of sewage
•
stormwater drainage
•
flood protection and control works
•
and the provision of roads.
While the Bill empowers the Secretary to develop regulations – it would be naïve
to assume that league tables are not going to be developed (probably the first
time a Member of Parliament asks a Parliamentary Question). Benchmarking has
both costs and risks – these have been discussed in Part A. Here we comment on
the agency that this has been assigned to, and on the levy proposals.
Mandatory Groups of Activities
108.
Benchmarking of non-financial performance on a consistent basis requires a
consistent definition of the activities across all local authorities. Even though
clause 2(2) of the Bill establishes that roads, water, stormwater, flood protection
and wastewater disposal are separate groups of activities, there is no
comparability in definition between them.
109.
Historically the definition of groups of activities was left to individual local
authorities to determine because of differences in the rationale for service
provision, and the significance of individual activities in particular local authorities.
For example many territorial authorities would view the “provision of roads” as
part of a transportation group of activities, bound up with some element of public
transport, road safety programmes (engineering, enforcement and education)
and transport planning which don’t fall into the definition of road in the Act.
Requiring that these be treated as groups of activities removes a significant level
of discretion in the design of planning frameworks.
110.
The more one digs into these issues, the more it becomes obvious that a mere list
of five items in legislation will not be sufficient by itself. We submit that some form
of subordinate regulation will be required to define what each of these groups of
activities do and do not include – and since these activities are used elsewhere in
the Bill that cannot sit solely within the new section 261A. Each of these probably
needs a reference in section 5 of the principal Act with a note to the effect that the
definition is as defined in regulations made under the Act. Additional definitions
would be added to clause four of the Bill.
Agency
111.
29
SOLGM opposes giving powers to set the regulations to the Secretary for
Local Government. The sector would be extremely concerned at the loss of
independence that bringing this within the ambit of any Ministry/Department
will create (with one exception). The Department will, at times, be implementing
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Ministerial decisions and edicts affecting local authorities. The measurement
process should remain independent, in much the same way that the audit process
remains independent.
112.
In our view, responsibility for the regulation-setting (and ultimate measurement)
should be given to Statistics New Zealand. Section 13 of the Statistics Act gives
the Government Statistician complete independence from Government direction
as to the procedures and methods to be used in collating official statistics. Such
independence from political direction is vital for credibility of the process. As
a regular collector of financial information, Statistics New Zealand has more
knowledge of the local government sector than most, and a reasonable track
record in consulting with the sector. We also believe that Statistics New Zealand
is in the best position to market the data that is derived from the end use of the
process.
113.
If Statistics New Zealand is an undesirable option (and we see no reason why), then
we suggest that the Select Committee adopt the proposal flagged in the original
suite of Cabinet papers and assign responsibility to Standards New Zealand. This
agency has a good track record of working in a consultative fashion with local
government and its products and processes are well known to the sector.
Fee Regime
30
114.
SOLGM opposes the proposal that the Secretary of Local Government be given
the power to levy the sector for the regulations. This is a new unmandated
compliance cost.
115.
The associated Cabinet paper has set aside a budgetary appropriation of $1.26
million over three years to fund this work. The Cabinet paper somewhat glibly
says that the cost will decrease if local government takes the lead in developing
the regulations – in other words that local government is effectively paying for the
privilege of being consulted.
116.
We have yet to see any robust evidence that there is a demand from the general
community for performance comparators such as these. We submit that the
primary users of the performance measures will in fact be central government
agencies and the business community, although doubtless some local authorities
will use the data. If there is the demand that the Government considers there is,
then it should be sufficient to warrant charging for data on a user pays basis.
117.
In the event that the Select Committee decides that the costs of regulation-setting
should be met by local authorities, then we need to note that local authority
annual planning commences well in advance of the start of the financial year. Local
authorities are generally well advanced on annual plans by Christmas of the year
before the annual plan is meant to commence. Any levies must be notified to the
sector for incorporation into plans no later than December 20 of the year before
the Department intends to levy. For example, if the Department wishes to set a
levy in 2011/12 it should be notifying the levy by 20 December 2010.
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Recommendation:
Benchmarking Non-FInancial Performance
8.That the Select Committee amend Clause Four of the Bill to define
each mandatory group of activities as “as (having) the definition
given under regulations to (the) Act” and give the Department the
power to make regulations defining each of the mandatory groups
of activity.
9.That the Select Committee delete clause 39 from the Bill.
10.That the Select Committee amend clause 41 of the Bill by replacing
all references to “the Secretary” with “the Government Statistician”.
31
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Audit
118.
The local government sector doubts that the provisions in this Bill will have any
significant influence on the overall cost of meeting audit requirements, other than
a reduction in the number of LTP amendments.
119.
Audit is a useful device for ensuring that local authorities plan robustly, and that
the degree of robustness in the plan is maintained over the triennium. Audit can
serve as “red flag” to a community that there are issues with a plan that are worthy
of attention (for example, that a council’s estimates are not adjusted for price
change and thus understate the true costs, or that debt in another local authority
may be approaching the limits of financial sustainability).
120.
But audit carries a real financial cost, especially for smaller local authorities.
While the primary beneficiary of the audit was always intended to be the local
community:
“The auditor’s report would …. contribute to the information necessary for
communities to assess the quality of the long-term plan (sic) in the draft
stage and after adoption.13”
121.
It is highly arguable whether the community would be willing to pay for this
contribution – we are aware of a council where the audit fee equated to $19
per rateable assessment, and in many of the smaller local authorities it is not
uncommon for the audit fee to reach $7-10 per ratepayer.
122.
There was an expectation that the audit requirement would aid in the development
of good practice approaches and over time generate further improvement in the
robustness of documents. All of these objectives have been achieved. In the
past six years the sector has made considerable strides in the standard of its asset
management planning, and in the transparency of information that it provides to
the community about what they are paying, and what they can expect to receive in
return.
123.
If audit is to remain a feature of the legislation then the Department of Internal
Affairs, the audit sector, and the local government sector need to work together to
find ways to keep the cost of the audit down to the minimum level. Some of these
may include:
124.
•
clarifying the role of the auditor and the audit methodology
•
more professional development for auditors to strengthen their
understanding of the local government sector and planning.
While the associated Cabinet papers contain the comment that the sector “has
not yet reached a point where the costs of audit outweigh the benefits” we have
been unable to locate any rigorous cost/benefit analysis that would support (or
contradict) this comment. Given the median audit fee in 2009 was $60,000 and
the actual economic cost (such staff time responding to audit enquiries) far higher,
we consider that a regular rigorous independent cost/benefit assessment needs to
13 Local Government and Environment Select Committee 2002, Report on the Local Government Bill 2001,
page 14.
32
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
be performed. The Bill amends section 94, we suggest a further amendment to
place some form of sunset clause on the audit requirement – that requires a future
Minister to review and make a positive decision that audit will be renewed after
the 2012/22 plans are prepared.
Recommendation: AUdit
11.That the Select Committee amend the Bill by adding a new section
94A to the Local Government Act.
“Cessation of Section 94
(1) Section 94 shall cease to have effect from 31 December 2012 unless
the Minister first undertakes a review of the operation of section 94
of this Act.
(2)In performing a review under subsection (1) of this section the
Minister must;
(a)
consult
(i)
the New Zealand Local Government Association
Incorporated
(ii)
the New Zealand Society of Local Government
Managers
(iii)
the Auditor-General
(b)
cause an assessment of the financial, economic, and
other costs and benefits of the audit of long-term plans to
be commissioned
(c)
publish his or her decision, and the reasons for the decision
in the New Zealand Gazette.
(3)The agency performing the assessment under section 2(b) must not
be a department, ministry, or Crown agency.
(4)The Minister may consult other persons or organizations.”
33
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Financial Strategy, Management and Reporting
Financial Strategy - Clause 17
125.
SOLGM agrees “in principle” with the concept of a financial strategy. Currently
many local authorities either consciously or implicitly adopt financial parameters
at the beginning of their long-term planning processes. To some extent, these
provisions codify something many prudent councils are already doing – what
the Bill does is make these financial parameters and the consequences more
transparent for the public.
126.
The concept of a financial strategy must be firmly rooted in sustainability of service
which in turn requires thought about levels of service. A financial strategy cannot
just be a set of numbers arrived at with no concern for the downstream impact
of those numbers. For example it is perfectly valid for a local authority and its
community to arrive at a strategy that holds rates to the level of inflation if the
implications of that strategy for maintenance, renewal and capital programmes are
clear and made obvious to public and the public accepts the lower levels of service
that may result.
Linkage to the Other Requirements
127.
We agree it is important that local authorities have a strong financial component to
all their ongoing strategies. But it is unclear to us how the financial strategy links
to the other financial management obligations – the Bill presents it almost as an
add-on to the principles of financial management.
128.
Our understanding of the Cabinet papers suggests that the Government’s
intention was that the financial strategy was intended to form part of the content
of the LTP, and to be a tool for reporting against (hence its inclusion in the PER).
Given the purpose of the document it most logically sits in with the other contents
of the LTP – in the first part of Schedule Ten with perhaps a cross reference in the
present section 93.
Coverage of the Financial Strategy
34
129.
We would like to raise a number of issues regarding the scope and coverage of
the financial strategy. These issues are raised to clarify and give better effect to
the Government’s policy intentions and in no way undermine the strategy as a
concept.
130.
The proposed clause 17 (proposed new section 101A) appears to require includes
a statement of capital expenditure on network infrastructure, flood protection
and flood control works. This appears to be another signal to encourage local
authorities to focus on the so-called “core services”. This ignores that expenditure
on services other than these can be as important to the council’s contribution to
community wellbeing and significant drivers of financial requirements.
131.
The proposed clause 17 is very focused on capital expenditure (i.e. the big and
the new spending). Operating expenditure is also a significant component of
achieving and (particularly) maintaining levels of service especially in some of the
smaller councils where the only significant capital expenditure might be renewals.
We submit that all references to capital expenditure in section 17 need to be
amended by adding the words “and operating expenditure”.
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
132.
Also subsection 101A(3)(a)(ii) refers to the expenditure involved in providing and
maintaining existing levels of service – this should be planned levels of service. If a
local authority is planning to increase levels of service say by sealing a rural road,
that would not be factored into the strategy except perhaps as an “other factor” in
the Bill as drafted. Likewise in those (rare) cases where levels of service are being
cut, a local authority would still be tied to declaring the capex necessary for the
existing levels of service – clearly a quite silly result.
133.
The present section 101A(3)(b)(iii) refers to the provision and maintenance
of existing levels of service.. “Adequate” is vague and has elements of value
judgement. We consider the correct term is either “planned” or “intended” levels
of service.
Recommendation: Financial Strategy
12.That the Select Committee:
(a) relocate the proposed section 101A to Schedule 10 (thus making it a
component of the content of the long-term plan)
(b) amend section 101A(3)(a)(ii) by deleting the words “network
infrastructure and flood protection and flood control works”
(c) amend all references in section 101A(3)(a)(ii) to “capital
expenditure” to read “capital and operating expenditure”
(d) replace all references in section 101A to “adequate” levels of service
with either “planned” or “intended” levels of service.
Financial Statements
Funding Impact Statement – Schedule One
35
134.
SOLGM supports the inclusion of Funding Impact Statements (FIS) that report
on flows of funding into and out of local authorities. It is already a legislative
requirement to include FIS in current LTCCPs and Annual Plans that show the
sources of funding and some information about the basis for calculating rates. The
sector already regards showing both financial inputs and outputs at council level as
good practice. As we understand it the FIS will also apply at the level of group of
activities, and this will take the place of the existing statements councils produce.
135.
There are now a multiplicity of FIS – one in the LTP, one in the annual plan, and
now one in the annual report. The third (the annual report FIS) has quite a
different purpose from the others. The LTP and annual report FIS are prospective
and are a step in the lawful setting of rates (in that they enable ratepayers to draw
a clear link between what they can expect to pay and the proposals in the LTP and
annual plan). For that reason they contain both a financial statement and a good
deal of descriptive material about the rate-setting process (such as the valuation
system for the general rate, definition of separately used or inhabited part of a
property and the like). The annual report FIS is a retrospective record of the actual
flows of funding into and out of the local authority. We suggest that the FIS in
annual reports be given a different name – such as “funding report” or similar.
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
136.
The Bill has duplicated some of required disclosures around funding choices in
each of the council level funding impact statements (as they appear in both the
LTP and annual plan), the group of activity level FIS (in the LTP) and the revenue
and financing policy. As both the revenue and financing policy and council level FIS
must already contain an explanation of sources of funds and a rationale in terms of
section 101(3) a third explanation appears unnecessary. We would amend clause
5 of Schedule One by deleting references to the rationale for selection.
Disclosures of Reserves Movements and Internal Borrowing – Schedule One
137.
We consider both of these disclosures to be unnecessary, and which could
potentially create significant compliance costs for local authorities with large
numbers of targeted rates. For example, SOLGM is aware of a metropolitan local
authority that has around 200 reserves and is estimating meeting these disclosure
requirements will add nine pages to the LTP. We are also aware of a rural local
authority that anticipates this disclosure will add 17 pages to the LTP.
138.
We are unaware of significant issues having been raised around either movements
into or out of reserves, or internal borrowing. A local authority that is utilising
significant levels of reserves in a given year should be declaring that fact and
demonstrating the prudence of such an approach as part of its approach to
meeting the balanced budget and prudence requirements. In a similar vein, a local
authority that is running significant surpluses and deficits in activities may generally
be asked to demonstrate prudence, especially where funding via targeted rates is
involved.
139.
We are unconvinced of the need for mandatory disclosures in these areas – this
is an area where perhaps a good practice response from the sector is more
appropriate.
Recommendation: Financial Statements
13.That the Select Committee amend the Bill by changing the name
of the Funding Impact Statement in Clause 31 of Schedule One to
differentiate from those statements required in the long-term plan
and annual plan.
14.That the Select Committee amend clause 5 of Schedule One by
deleting the words “and the rationale for their selection in terms of
section 101(3)”.
15.That the Select Committee delete clauses 17, 28 and 32 of Schedule
One from the Bill.
36
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Financial Policies – Clauses 18 to 26
37
140.
SOLGM supports proposals to remove most funding and financial policies
from the LTP. We first suggested that approach in 2007 and recently renewed
the call for such an approach in our 2009 submission Tuning up the Engine:
Recommendations for Changes to the Local Government Act.
141.
We also support retaining the revenue and financing policy in the LTP. This is a
critical document that should make clear which part of the community is paying
for what, when and explains how those judgements have been arrived at. It is the
key link between a council’s financial strategy and the financial impost on particular
ratepayers and therefore must be considered alongside the bundle of levels of
service and other issues in the LTP.
142.
With the exception of issues such as debt limits, and targets for investments most
of the detail in the other policies is either purely operational in nature (such as
processes for reporting on investments) or can be covered off by other means
(for example a summary of rate remission policies must go on the back of rate
assessments).
143.
Removing most of these policies will also remove one of the most frequent triggers
of LTP amendment, and the consequent audit costs. The present section 102
has very little tolerance – technically any change to these policies qualifies as an
amendment (even correction of a typographical error).
144.
Removing these documents from the LTP will reduce the cost of printing and
producing documents. However, other costs are unlikely to change much – for
example auditors will still need to understand documents such as the development
contributions policy and the borrowing and investment policies to form a view on
the prudence of council’s financial management. Most councils will probably time
their reviews of policies to coincide with the LTP process so that consultation can
be run concurrently and hence manage costs.
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Amending Long-Term Plans – Clauses 14, 18 and 33
145.
SOLGM supports the proposals in this bill that raise the statutory triggers for
what constitutes an amendment to a long-term plan. Most of these have built on
suggestions for reform in our 2009 submission Tuning up the Engine.
146.
While these may seem like academic or debating points these changes actually
give rise to one of the bigger areas of cost saving. Under the current law
amendments to long-term plans require both an auditors report and consultation.
147.
Since adoption of the 2009-19 plans, 26 local authorities have made a total of
44 amendments to their plans, or are making amendments to their plans as part
of the 2010/11 annual plan process. The minimum audit fee that these local
authorities have been charged is $5000, one local authority selling a large block of
endowment land has been charged $17,500. Obviously then, these changes are a
good practical step to reducing overall compliance costs.
148.
We support proposals to abolish the requirement that local authorities amend LTPs
for changes that involve:
a. construction, replacement , or abandonment of a significant asset (this test
duplicates another test that requires amendments where local authorities are
planning to make significant changes to levels of service – it is hard to conceive
of circumstances where a local authority might construct a significant asset
without a change in level of service)
a. a decision that significantly affects the capacity of, or cost to the local authority
of any activity identified in an LTP or annual plan (this test is vague and has
given rise to many debates)
a. selling or exchanging endowment land (councils are already under an
obligation to consult with the donor of endowment land – or their successor.
This particular provision sees local authorities engaging in consultation and
audit processes that on occasion are out of proportion to the nature of the
transaction).
149.
38
Other parts of the submission comment on the removal of most of the section 102
policies from the LTP. We note that 23 of the 44 amendments to LTCCPs this year
relate to changes (often minor in nature) in these policies.
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Decision-Making Processes – Clause 8
39
150.
SOLGM supports the proposed changes to section 78 of the Local Government
Act (indeed it was SOLGM that first proposed this very change).
151.
The present section 78(2) lists a set of points where local authorities are obliged to
consider community views, which has provided the disaffected with an justiciable
issue (i.e. that a local authority should have consulted at this point and not that
one, or at more than one point in the decision-making process). This provision
gives rise to risk averse behaviours in local authorities – such as consulting on a
set of different options , and then consulting again on the “winner”. This creates
additional costs and does little to reduce any consultation “fatigue” on the part of
the public.
152.
These requirements have also recently been the subject of two judicial decisions
that have reached fundamentally different conclusions about the nature of the
requirements (Chisholm J in Council of Social Services vs Christchurch City Council
and Duffy J in Whakatane District Council and Others vs Bay of Plenty Regional
Council). We submit that a law that is open to this degree of interpretation is
exceptionally bad law and cannot stand in its present form.
153.
Deletion of section 78(2) will not impede a ratepayer’s right to have their views
considered. Councils will still be under an obligation to consider community
views when making decisions, subject to the tolerances of section 79 (which allow
a local authority to tailor its consideration to the nature of the decision and the
circumstances in which the decision is made).
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Water and Wastewater – Clauses 30 - 32
154.
SOLGM supports the provisions of the Bill that would allow local authorities
to better utilise the capability of the private sector to deliver better water and
wastewater services to the community.
155.
It will enable local authorities to make better use of arrangements such as Build
Own Operate Transfer (BOOT) schemes or to transfer day-to-day management of
schemes to the private sector for a sensible period of time.
156.
Significantly the amendments to section 136 expressly ensure that:
•
local authorities are not absolved of responsibility for the services so for
example if a waterborne illness is traced to poor treatment of water on a
service that has been contracted out it is still the local authority that faces any
legal recourse
•
local authorities retain control over all policy and pricing decisions. For
example a decision to fluoridate the water will still be made by people who
are democratically accountable for the decision14. Likewise, the normal
democratic safeguards would apply to a local authority that did not maintain
proper oversight of pricing and funding issues (i.e. the risks that some big
private sector company is going to “gouge” users or ratepayers is minimal).
157.
It seems to us that the present provisions were designed very much from the
view that public ownership and delivery of water and wastewater services was
important for its own sake – a view very much at odds with the outcome based
thinking the remainder of the Act was designed to promote.
158.
The provisions in this Bill carry through the same safeguards on cessation of
public ownership as exist now – including the right to a referendum (section 131).
Transfer of ownership out of the sector will be a controversial decision and one
which is bound to result in a mobilisation of the negative vote well in excess of any
positive vote.
159.
If a community considers that private sector delivery provides the most sustainable
deal for the community long-term (in every sense including financial sustainability)
it should not be impeded by what is essentially ideology.
160.
We want to allay a few fears. First, most water schemes in New Zealand will not
be of sufficient size to make private sector involvement an economic proposition
– in effect this clause is likely to be most of assistance to the metropolitan councils
and the larger urban councils. This means that in practice the councils with fewer
resources (where there could be increased risk that local authorities may lack the
resource to monitor private delivery) will not entertain this as an option, and where
the private sector will not contemplate these arrangements. To further mitigate
this risk SOLGM, LGNZ and possibly Ingenium will do further guidance work on
managing PPPs in the local government sector. This will for example, include
ensuring councils include minimum standards for public health and fire-fighting
purposes.
14And as a significant change to a level of service this will usually be subject to the same consultation and
audit requirements as any other amendment to a long-term plan under section 97 of the Act.
40
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
161.
It is sometimes argued that water is a necessary to sustain life and that private
sector delivery could place public health at risk. In fact, the proportion of water
use necessary to sustain life is actually a small percentage of the overall level of
water consumption. If one takes usage by families as a proxy we have seen recent
estimates that place the overall use by families at less than 10 percent of total
water use15 – in other words that industrial and other non-residential use provides
the overwhelming majority of public use. These concerns can be addressed in the
design of the charging systems (such as what are commonly known as increasing
block tariffs16) and mechanisms for collection (for example, the present prohibitions
on stopping water supply for non-payment).
162.
The cost of operating and building water and wastewater infrastructure has
increased markedly in recent years. For example, even in a recessionary
environment Statistics New Zealand estimated the cost of pipelines increased 10
percent in the year to June 2009. The Department of Internal Affairs has forecast
that local authorities are expecting to spend about $28.5 billion in water and waste
infrastructure over the next ten years.
163.
We urge the Select Committee to support these provisions in their current form.
If these provisions look likelty to delay enactment of the remainder of the Bill we
strongly recommend that the Committee seek leave to separate these provisions
from the rest.
15A recent Service and Food Workers Newsletter claimed that water usage by families accounted for 9
percent of total use – add in non-family residential use and it is unlikely that residential use accounts for
much more than 15 percent of total use.
16An increasing block tariff starts with a low rate for a set quantity of water (say the first 100 cubic metres)
and then each successive unit is charged at higher rate. Some schemes of this nature even make the first
block of use free.
41
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Community Board Funding – Clause 45
42
164.
SOLGM supports the proposed amendment to clause 39 of schedule seven of the
principal Act. The impact of this is to clarify that local communities can choose
how they wish to fund the activities of their community board e.g. either out of
the general revenues of the district or by some mechanism that targets only those
residents of the community board.
165.
This is an issue only in those local authorities where some parts of the district
are not served by a community board (for example, in Tasman where there are
boards only for Golden Bay and Motueka, but not the rest of the community).
Some councils in this situation have quite legitimately applied the principles of
section 101(3) of the Local Government Act 2002, and made a judgement that
as only the residents of these communities receive the benefit of the additional
governance, only they should pay. The affected communities have claimed a
reference to “community board expenses shall be paid from the general revenues
of the district” in Schedule Seven of the Act means they can only be funded by the
general rate.
166.
All the amendment does is clarify that those local authorities that want to target
funding to only the residents of the community board, may do so. We support the
principle of informed local choice and debate, without taking a position on how
community boards should be funded.
167.
We urge the Select Committee to pass this provision “as is”.
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Policies and Policy Summaries
Assessment of Water and Sanitary Services – Clause 28
168.
SOLGM considers that an assessment of water and sanitary services – even in the
form in the Bill – largely duplicates the content of the relevant asset management
plans for local authorities. We see no need for local authorities to prepare an
assessment and then disclose variations from it when most of the major variations
will already be required disclosures under parts of the Bill (for example changes in
levels of service, capital projects and the like).
169.
We submit that clause 28 should be amended to allow for the repeal of section
125. If the Select Committee agrees with this then a consequential amendment
will be required to delete references to the assessment from Clause Six of
Schedule One
Waste Management Plan and Affordable Housing Policy – Schedule One
170.
SOLGM is unable to determine what if anything about these two documents
makes these worthy of mandatory inclusion in an LTP when other plans or policies
that can often be of equal or greater importance are not (for example the District
Plan or Regional Land Transport Strategy). Adopting an Affordable Housing Policy
is not even a mandatory requirement. A requirement to discuss these effectively
says that these issues must be key issues for every local authority – which is simply
not the case. Their inclusion as mandatory content also sends a precedent to
future central policy-makers that their “pet policies’ could be placed in an LTP.
171.
We submit that both clauses 6 and 12 of schedule one should be deleted. They
give these plans a primacy that they simply do not have and add to the length of
the LTP without necessarily adding anything to the debate.
Recommendation: Policies and Policy Summaries
16.That the Select Committee amend clause 28 to completely repeal
section 125
17.That the Select Committee delete clause 6 of Schedule One
18.That the Select Committee delete clause 12 of Schedule One
43
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Development Contributions
172.
In the course of preparing this submission, several issues around development
contributions and development contribution policies have been drawn to our
attention. These matters are matters of clarification to give better effect to
Government policy decisions and in no way extends or alters the power to assess
development contributions.
Development Contributions Policies and the LTP - Schedule Two
173.
We support the Government’s decision that the policy on development
contributions should be removed from the LTP and subject to periodic review,
There is what appears to be a drafting “glitch’ in the definition of development
contributions policy in Schedule Two in that it refers to the policy on development
contributions included in the long-term plan. We suggest that this definition be
amended to define this policy as that which has been adopted under section
102(2)(d).
Development Contributions and the Resource Management Act - Clause 22
174.
44
Development contributions policies actually cover two different types of
contribution:
(a)
development contributions assessed under the Local
Government Act 2002
(b)
financial contributions assessed under the Resource
Management Act 1991.
175.
The policy acts as a record of decisions that have been made when reviewing each
under the applicable legislation.
176.
Clause 22 of the Bill adds a new subsection (6) to section 106 of the Act, providing
that the policy must be reviewed at least once every three years. But the Resource
Management Act requires that local authorities review their financial contributions
once every ten years using the (much more rigorous) consultation and submission
process laid down in the RMA. Read in one way it appears that clause 22
requires local authorities to review financial contributions once every three years,
in other words going through the process to change an operative district plan.
Among other things decisions made during this process can be appealed to the
Environment Court.
177.
We have found nothing in the Cabinet papers that would suggest that this was
actually the Government’s intention and suggest that clause 22 needs to clarify
that local authorities are not required to review financial contributions every three
years.
SOLGM 2010
Local Government Act 2002 Amendment Bill: Six of One, Half A Dozen of the Other
Recommendation: Development Contributions
19.That the Select Committee amend the definition of development
contributions policy in Schedule 2 of the Bill to read “ … policy
adopted under section 102(2)(d) of this Act”.
20.That the Select Committee amend clause 22 to clarify financial
contributions need not be reviewed every three years by adding
the words “to avoid doubt, nothing in this section affects the local
authority’s powers or responsibilities under sections 64, 65 or 73 of
the Resource Management Act 1991.”
45
SOLGM 2010
Building capability and excellence
among local government managers and staff
New Zealand Society of Local Government Managers (SOLGM)
8th Floor, Civic Assurance House
114-118 Lambton Quay, Wellington
PO Box 5538
Wellington 6145
Phone 04 978 1280
[email protected]
Fax 04 978 1285
www.solgm.org.nz