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New Zealand Engineering 1999 July Feature 
A feature by Peter King Wagons in a circle holding off hostile Treasury ‘injuns’, or dinosaurs bemoaning colder weather. Whatever your point of view there can be little doubt that local government as an institution faces more challenges today than it ever has in its history. Currently the Government is looking at changing: roading service delivery; water and waste water service delivery; rating legislation; and resource consent procedures. About the only things local government is not being taken to task over are swimming pools and libraries. Combined, these reviews could constitute a completely new environment for communities around the country and radically revise the employment opportunities of local government and infrastructural engineers. So just what is on the table and just what is at stake? The Government’s Better Transport Better Roads1proposal is a refinement on the earlier Roading Advisory Group report which ran into fierce resistance from industry and public interest groups alike who accused it of setting the stage for privatisation of roading. Its core proposal is to take the roading operations of 74 local authorities and compress them into four to eight local roading companies. "They would take over all road improvements on roads currently owned by local authorities. Road improvements include all road and road safety related assets. Shares in the new companies would be issued to local authorities in exchange for these assets. Amenities in the road corridor, such as statues, bus shelters, toilet facilities and (non-safety related) garden beds, would continue to be owned by local authorities. The assets of utility providers, such as telecommunications cables, sewers, storm-water and water pipes and electricity reticulation assets, would remain the property of their current owners. "Ownership of the land in the local road corridor would remain with the local authority. Under the proposal, the local road company would have a statutory right of access to the road corridor. The proposal restricts them to road activities, and precludes the companies owning or participating in non-related businesses and assets. Public road companies would be able to enter into joint ventures with each other and with other companies. They would be able to borrow and invest capital in anticipation of future demands. They would pay taxes and would be able to pay dividends to their shareholders. Local road companies could transfer roads between themselves and to Transit, but Transit would not be able to transfer roads to local road companies . . . "However, in some cases, such as the setting of speed limits and weight restrictions, or dealing with overhanging trees affecting road safety, public road companies would need the ability to make enforceable rules. Public road companies would only have such powers when they are necessary to protect roads, or to ensure their safe and efficient use. Powers would only be given when the property rights of road companies were insufficient . . . "Should the proposal be implemented, public road companies would take over responsibility for parking management and enforcement. They would employ parking enforcement officers, who would be required to hold a warrant from the Commissioner of Police. While parking revenue would go to the public road companies, revenue from the enforcement of all parking offences would be paid to the Crown." Funding for the companies would come from: road user charges for heavy vehicles and light diesel vehicles; increases on fuel excise; and an "area roading levy" collected with vehicle registrations. Having achieved a source of revenue the companies would then invest it. "The focus would shift from Transfund’s administrative procedures, and what qualifies for subsidy, to what users really want. The current constraint on undertaking large, but potentially very worthwhile investments, imposed by the current policy prohibiting Transfund and Transit from borrowing, would be removed. The new entities would be able to assess road projects on the basis of expected future demand and revenue, not on the basis of current cash balances. Experience in other areas of transport and other sectors of the economy indicate that the long-run beneficial effect of this change in investment focus on the economy is likely to be considerable. "As regards maintenance, the shift away from technical criteria to a more business-like environment would focus attention on what maintenance is actually needed, and how it can be done cost effectively, and shift the emphasis away from what maintenance qualifies for a subsidy. There would also be some changes in emphasis between investment in improvements and maintenance as road companies face the true costs of these as alternatives." The plan also envisages roading companies competing, and makes provisions for local authority control via the Resource Management Act, or ‘buy-back’ of roads for plans such as creating malls. On the water industry front it is not possible yet to say exactly what central government is planning. A discussion paper which was to be released is currently with the Ministers who commissioned it, Max Bradford (commerce) and Tony Ryall (local government). The media release accompanying the announcement of the investigation said: ". . . concerns have been raised about NZ’s water and wastewater infrastructure over a number of years by local authorities, water industry participants and other groups interested in the water and wastewater sector. These concerns included:
This sounds innocuous enough but the terms of reference for the investigation into the water sector suggests that the review could be considerably more than simply poking around. The terms of reference explicitly refer to the experience with the telecommunications, electricity and gas industries (where there was extensive privatisation), the experience of other nations, and the extent to which water services can be considered natural monopolies, and the degree to which any negative consequences of such can be ameliorated. In short, the terms of reference for the study directly raise the prospect of privatisation of water and wastewater services even though the Ministers said at the time of announcing the study, "The review is about finding the best way of managing and maintaining water and wastewater infrastructure to get the services we all need. It is not about cost cutting or privatisation." In an election year, and with the egg Minister Bradford is still wearing over the electricity sector changes (a sector which in many ways modelled local authority privatisation) it is highly likely that the National Government will be soft-pedalling on contentious issues such as water privatisation. Already the Auckland City Council’s Local Authority Trading Enterprise (LATE) Metrowater, which is forecasting a 17 percent increase in metered water charges over three years, is throwing up political sparks. At issue is whether charges should be based on capacity to pay (as rates implied) or usage and naturally, in an electorate which has moved increasingly to the left over the last decade, user pays is not popular. New Zealand Engineering asked John Carnegie, manager of the natural resources division, Ministry of Commerce, to clarify the direction the report to Ministers was going to take but despite two weeks of emails and calls was unable to get a response before press time. Less contentious is the Department of Internal Affairs examination of the rating powers of local authorities. Its discussion document is available on the internet2 and although practitioners may have their points of conflict the changes it proposes are mild compared to the disastrous British poll tax experiment. The Department proposes a "funding toolbox" which is firmly based on property taxes but would make it possible for local authorities to recover a percentage of total costs for developments which yield a direct benefit to a particular group of property owners. More flexibility for councils to waive rates would be introduced and scope for flat, per property taxes would also be introduced. One issue which was contained in the discussion document’s terms of reference, but was not included in the final report, was the exemption of state-owned land from rates. Local Government New Zealand, the representative body for the 86 local authorities, and the Society of Local Government Managers, are strongly opposed to this exemption particularly where land ownership has been transferred to private sector owners. Another area where local government can expect to see changes is in the managing of resource management consent procedures. In September 1998 the Minister for the Environment, Simon Upton, published the Report of the Minister for the Environment’s Reference Group following on from the criticisms of business writer Owen McShane; then in January this year he released "Proposals for Amendment to the Resource Management Act", a study by private sector practitioners into approaches for streamlining the consent process. This attracted responses from officials and throughout this year the Minister has dropped hints3 about the eventual shape of amending legislation. The initial plan to have all consent applications heard before independent commissioners instead of district councillors, (although endorsed by constitutional lawyer Sir Geoffrey Palmer who criticised the current regime for allowing councillors to act as both legislature and judiciary), has been watered down to a user pays option for applicants. However, there is also talk that under amendments district councils may be completely bypassed in certain kinds of contentious applications if applicants wish to take matters, that would be appealed anyway, directly to the Environment Court. All of this is obviously going to put more pressure on councils to make their district plans legally bullet proof. Put it all together and, assuming the National Party remains in power and these policies implemented, five years from now the world of local government could look very different. Homeowners will be paying a roading company through increased petrol charges to mend the local pothole, paying a water company for water and sewerage, paying a waste company to remove their rubbish, going to commissioners for resource consents; and the much reduced rates bill could be the subject of much petty politicking over which flowers to put in the gardens, whether there are enough parks, books for the library and street beautification projects or facilities. The same people will probably be doing the same jobs but the ownership and method of payment will be entirely different. That is if the Government’s plans proceed and not everyone is satisfied that those plans are really what is called for. Local Government New Zealand represents 86 local authorities and it has had the unenviable task of responding to every one of the Government’s initiatives. Its chief executive, Carol Stigley, says many initiatives seem to be derived from a perception that the process of "reform" begun in the 1980s has not tackled network industries like roading and water and that these are matters of "unfinished business" for central government. She says often central government is driven by lack of knowledge rather than ideology. In the case of the water review she says Local Government New Zealand urged officials to visit the regions, and she says they were surprised to discover many things were happening already without a lead from Wellington. Of course Ms Stigley is perfectly aware that there are powerful industrial interests who see local authority assets as ripe for the picking and ideological groupings who are simply opposed to government in any shape or form, but she denies that Local Government New Zealand is simply another pressure group. "Local government is an elected tier of government with taxation powers, so we have a public mandate," she insists. Local Government New Zealand4 has a team of policy analysts who work to come up with counter proposals to those stemming from government. One example is Streets Ahead LGNZ’s counter to Better Transport Better Roads. LGNZ criticises the Government’s plan because it says there is not enough community influence on roading, no obligation on roading companies to stick to the National Land Transport Strategy, and not much for funding proposals for roading alternatives. It claims its Streets Ahead plan meets all these criteria. Similarly LGNZ has surveyed local government on water and waste water service delivery mechanisms in anticipation of the Government’s discussion document. The objective was to determine what is going on in local government and why. They found that many local authorities were tendering out water and wastewater services already but could not actually quantify the benefits. Local Authority Trading Enterprises were, as much as anything, a bad PR move because people mistrusted the reasons for their establishment. Political parochialism remained a barrier to cooperation between local authorities. Ms Stigley says local government is frustrated by central government’s lack of overall vision for the sector, its tendency to meddle in local affairs with sweeping changes which redress problems in one part of the country but create problems in another part of the country, and its impatience when local communities pointedly reject its policies or adopt solutions at their own rate of comfort. She says in many cases central government should simply fix the legal impediments and let local government and communities find their own solutions to their own problems. The desire for local determination is something which the Society of Local Government Managers chairman and Dunedin City Council chief executive, Murray Douglas, believes will survive any carve up of local authority assets were roading and water to be privatised. He says there are two outlooks being discussed informally in local government circles. "There are those who say the end is nigh because you can’t affect circumstances without an actual business and there are those who say that even if we don’t have assets we are a medium for democratic expression which cannot be replaced. I fall into the latter camp." Mr Douglas says that in his personal opinion communities will always have and need representative bodies which can influence their environment. He says overseas most nations have more local government at community level, not less. Moreover, he says regions are very different in New Zealand. He says what might work and be wanted in Papakura will not necessarily be the best system for Christchurch. More fundamentally, he says New Zealand is breaking up economically. "Sydney has become our hub. It’s cheaper to fly from Dunedin to Sydney than it is to get to Wellington." He sees devolution in central government, with more reliance on regional centres for agencies like the Police and Work and Income New Zealand, is a reflection of the importance of recognising New Zealand is not homogeneous. Closer relationships between these agencies and local authorities may not involve ownership, but can mean that communities can choose directions for matters such as public safety or economic development which reflect local realities and aspirations. In terms of assets and ownership, however, he says there are already good examples of councils in adjoining areas joining forces to provide a service beyond the scope of all of them. This provides a mechanism for accountability but can also generate economies of scale and provide hooks for private sector investment. Both Ms Stigley and Mr Douglas believe the current regime has ample scope for innovation and development by local initiatives with only minimal intervention by central government. It is, however, just a matter of time and letting matters sort themselves out at a local level. It is, of course, entirely possible that none of the National Government’s plans will come to fruition. With an election due by November and a trailing position in the polls it is probable that an incoming Labour government would change direction significantly. Labour local government spokeswoman, Judith Tizard, has signalled that Labour would review the Local Government Act and has made vague noises about changing the direction of the roading plan, but nothing specific has, to date, been released. The purported ancient Chinese curse "may you live in interesting times", seems to be the watchword for local government over the next three years or so. References
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