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Submission to Commission on Northland Reorganisation

21 February, 2014.

Submission to the Local Government Commission on the Northland Reorganisation Proposal

This submission is from Northland Inc Ltd, a Council Controlled Organisation (CCO) of the Northland Regional Council.  Northland Inc is Northlands regional economic development agency formed in 2012 from the amalgamation of two organisations; Destination Northland (1997) Ltd (Northlands prior Regional Tourism Organisation) and Enterprise Northland Trust (2000) (Northland’s prior economic development agency).  Accordingly, our submission considers primarily recommendations based on contemporary regional economic development thought as it relates to regional governance.

1.            Introduction

1.1.         The context for local government has and is changing. Local government plays a key role in working with their communities to help shape their future addressing complex social, environmental and economic issues with limited resources.  They do this by working with local institutions, the private sector and higher tiers of government in different forums and contexts and through innovative governance and operational arrangements.  The Northland Inter-sectoral Forum, Far North Holdings Ltd., Northland Emergency Services Trust and Northland Inc are examples.

1.2.         In their paper ‘Merging Municipalities: Is Bigger Better?’ Enid Slack and Richard Bird stated that while the amalgamation in Toronto solved no problems it had some benefits which included ‘a stronger presence in economic development, a fairer sharing of the tax base among rich and poor municipalities, and the opportunity to equalize (sic) local services so that everyone can enjoy a similar level of services.’  They go on to say that on the whole ‘two tier structures may be more effective in allowing municipalities to reap the benefits that come with large size, while retaining the responsiveness typical of smaller municipalities.’ 

1.3.         At a regional level better integration across central government ministries and with local government and local institutions is desirable and can be achieved.

1.4.         Two key streams of thought influence contemporary regional economic development.  One is “new economic geography” where the broad disciplines of geography and economics are being forced to join up bringing a spatial variable to economic growth theories;  in other words, recognising that development happens in places through people.  Regions are increasingly recognised as focal points for policy and action as they represent functional economies where the dynamics of social and economic life are concentrated and where environmental effects of human activity are more or less immediately apparent. 

1.5.         Secondly ‘over the past two decades regional economic development theory has shifted from a focus on exogenous factors to an increasing focus on endogenous factors.’  Endogenous factors include soft factors such as institutional vitality, governance, social capital, leadership, creativity, innovation, connectedness and the regions ability to capitalize on opportunities; alongside hard factors such as capital availability, infrastructure, comparative and competitive advantages. Increasingly it is recognized that the soft factors are key to unlocking a regions potential and contributing to the national economic development effort.  

1.6.         This means that a greater focus needs to be placed at the regional level on those factors that are within the region’s (and nation’s) control and that policies, programmes and interventions need to be developed and enacted at the regional level.  In this context the notion of regional governance (not just regional government)  becomes important as innovative and fit-for-purpose governance arrangements can be made drawing in sectors of the community alongside tiers of government to address complex and/or chronic issues.

1.7.         We support change to ensure that the performance of the Northland economy can improve, therefore benefitting the communities and people in Northland.

2.            Stronger local governance

2.1.         Local Boards. Both regional and local governance need to be strengthened in Northland in order to unlock the economic potential of the region.  Serious thought needs to be given to the roles and functions performed at both levels and the structures that underpin those roles.  Given Northland’s large geographic area, diverse communities and small population there is a strong argument for statutorily established ‘Local Boards’ with wider decision making powers and resources than those seen in Auckland.  This does not mean that smaller units of local government will necessarily be tasked with the delivery of onerous services devolved from a unitary council (see rationalisation and efficiency below), more that the principle of subsidiarity is considered by the transition authority in terms of decision making, staffing and resources.

2.2.         The most important advantages of smaller units of local government are accessibility and accountability, with better opportunities for direct contact with representatives and access to hearings and public forums.   In this way local democracy can be strengthened, especially if Local Boards have a number of services delivered on their behalf by the unitary authority and CCOs.

2.3.         Thought must be given however, to the relationship of ward councillors on the Northland Council with Local Boards, the relationship and accountability of CCO’s to Local Boards, and the ability of Local Boards to have input into regional planning.

2.4.         Further thought must also be given to ward boundaries and communities of interest, particularly with reference to hapu and iwi rohe, but also the local economy.

3.            Stronger regional governance

3.1.         Stronger more unified regional governance underpins better regional development.

3.2.         One Council, one Mayor, one plan.  A new Northland Council will have to ensure that there is an integrated and coordinated approach to development in Northland.  This can be achieved by having one overarching plan for Northland - a spatial plan that all other plans drop out of and talk to.  A plan that is driven by Northlanders, negotiated with Central Government and delivered in partnership.  One Mayor can give voice to the region at central government level and can advocate more powerfully on behalf of the region to deliver the plan.

3.3.         Mayoral executive powers should follow the example of the recent best practise legislation in New Zealand.

3.4.         A more representative model for the Northland Councillors.  Further thought needs to be given to the balance of elected members at the Northland Council level.  Currently there are two (out of nine) suggested councillors for Whangarei where approximately 50% of the region’s population and economy resides.  Whangarei is Northland’s largest economic hub and services the region in a number of ways.  It is not a matter of rural versus town or any other variant, it is more a matter of understanding the economic geography of the region and how that can be leveraged for the advancement of the whole region.     

3.5.         Governance for economic development in Northland can be best developed through a Council Controlled Organisation with a fit-for-purpose board and of sufficient size to negotiate on a strong footing with potential investors, business and government.  Northland Inc has been established to achieve this and has made significant progress since its inception in 2012.   A Regional Economic Development Agency (REDA) needs the capacity to manage and facilitate projects of regional significance and link and coordinate sub-regional economic development efforts.  Regions are focal points for economic development; further capacity must be built and supported at this level for Northland.

4.            Regional economic development; building prosperity for Northland/ Taitokerau

4.1.         A further empowered regional economic development agency for Northland.  A key task of Regional Economic Development Agencies is to work with both the private and public sectors in strengthening and diversifying the regional economy to enhance the quality of life for residents, workers, and visitors.   Internationally there is a diversity of arrangements for this function, ranging from centrally controlled government programmes to private companies and everything in between.  The consensus on the optimal arrangement seems to be that a separate legal entity is most desirable when working across and between the public and private sectors.

4.2.         Currently economic development services are fractured and split across local government in Northland. Northland Inc acting as the REDA deals with a number of differing arrangements in local government.  This produces duplication, inefficiency and confusion around priorities despite best efforts at coordination and collaboration.  As in Auckland a hub and spoke arrangement would be optimal for Northland.

4.3.         The CCO model developed in Auckland and in use in other regions such as Taranaki is a useful model in that the agency can be market facing and quick to react, have a different risk profile to that of [local] government, and be project-driven and business-like in its operations.  Being at arms-length from Council (and a separate legal entity) means that a REDA can navigate commercial sensitivities, but work in the public interest to facilitate jobs and investment and work to reduce market failure. 

4.4.         REDAs provide the focal point for the vertical and horizontal integration of economic plans and strategies.  They also provide access to business and market intelligence for regional economic development strategies and can facilitate the implementation of strategies.

4.5.         As in Auckland the REDA needs to consider all sectors in strategic planning and implementation. Tourism is an important sector in Northland, however it makes no sense in terms of the public interest to have separate institutional arrangements for one sector. The formation of Northland Inc has been a step in the right direction in that regard which allows for a more integrated approach to attracting visitors to Northland and in trying to create new jobs and increase prosperity in Northland.   

4.6.         The NRC has set up the Investment and Growth Reserve, a fund designed to spur economic development in Northland.  It is an insightful intervention which, combined with other sources of capital can be used to partner with the community and to leverage further investment into Northland.  This fund must be maintained as a key economic development tool for Northland alongside a further empowered regional economic development agency that can develop projects suitable for the fund.

5.            Rationalisation and efficiency

5.1.         One of the key aims of the reorganisation is to increase the efficiency and effectiveness of local government in Northland.  Bottom line cost savings should not be the only driving rationale for reorganisation.  The main benefits of the reorganisation are in the form of long term efficiency benefits such as better management and utilisation of assets and council owned investments, rationalisation of services, attracting and managing significant investments and integrated regional strategies, planning and policies.

5.2.         There is no one-size-fits-all in the allocation of services to either smaller or larger units of local government.  Some principles that can apply are that where there are commercial economies of scale or efficiencies to be gained and there are relatively undifferentiated consumer needs, rationalisation may provide better outcomes.  On the other hand thought should be given to those services where there are different consumer preferences or, even if they are undifferentiated such as building consents for example, it may be more efficient to deliver them locally.

5.3.         Council Controlled Organisations. Shared services are the second best option as institutional barriers still remain despite the best will in the world.  Council Controlled Organisations (CCOs) provide the opportunity to gain economies of scale, efficiencies and effectiveness in Council operations.  They also provide the opportunity to gain better governance through ‘fit-for-purpose’ boards being selected on skill and merit and better use of skills not normally found in Councils.  Examples could be water and waste-water, transport, council owned investments and property, and economic development – predominantly those functions with a strongly commercial aspect.  Longer horizons in planning and investment are a feature of CCOs and investment in regional infrastructure can become more aligned with region-wide business needs.  Having separate legal entities at arms-length from Council also reduces the kind of political interference that can come from vested interests or short term (three year) political horizons.

5.4.         Devolving decision-making should aid in efficiency at both levels.  If Local Boards are less encumbered with decisions on roading or waste water, for example, more attention can be turned to engaging with their community and working on local projects – “place shaping”.   A far more meaningful engagement.  The problem with small units of local Government with small rating bases is that large capital projects, whether they make sense or not, become all-encompassing and decisions are made in isolation.  Even if a larger council is managing debt prudently, but it regards itself as separate from its neighbour ignoring the social and economic interdependencies, it is sub-optimal for the region as a whole.  A better way of viewing the optimal governance arrangements is to consider the economic geography of the region and try to match that.  In this way the right capital investments can be made that benefit the region as a whole and the level of services can be equalised and fairer on residents.   

6.            Partnership with Maori

6.1.         A statutorily established Maori Advisory Board, with representation on key Northland Council committees could provide stronger partnership between Council and Maori.  The nature of representation on this board should be up to Maori to decide, but it needs to be high level.  The potential of the Maori economy needs to be unlocked for the benefit of all in Northland and an integrated strategic approach needs to be developed so that Maori can feel part of and contribute to the economic development of Northland.

7.            Partnership with Central Government

7.1.         A ‘Northland Council’ with strong local democracy and rationalised regional decisions and services, represented by an executive Mayor is better for Northland in two ways.  One, the Mayor carries the mandate and weight of the whole region when negotiating with Wellington.  Two, central government is more likely to align with regional priorities if they are agreed by the region, part of the plan, and in alignment with national priorities.  The problem with smaller units of local government in Northland is that they seldom have the levers available to them to make interventions of regional significance. A Northland Council with a larger balance sheet has much more scope to do this.   

8.            Conclusion

8.1.         Northland Inc supports the local government commission’s recommendation for a single unitary authority in Northland.  It is the best way to strengthen and diversify the economy, get better infrastructure, provide more and better jobs, higher incomes and to reduce inequality.  However Northland Inc believes that in order for the current proposal to work the second tier of local government needs to be strengthened in the current proposal.

8.2.         One Council, One Mayor, One Plan.  A unitary authority offers the opportunity to implement policy and strategies on a region-wide basis and to gain better alignment and integration with national, regional and local priorities.  It also provides the opportunity for Northland to negotiate with Wellington from a stronger position.

8.3.         Statutorily established Local Boards need to be part of the structure rather than community boards, giving a strengthened two tier structure.  Our submission is predicated on this being achieved.  The Northland region has differing community needs and dynamics from that of a metropolitan region such as Auckland.

8.4.         A statutorily established Maori Advisory Committee to advise the Northland Council will be needed to unlock the Maori economy for the benefit of all Northlanders.

8.5.         CCOs need to be established to gain efficiencies in Council investments, operations and service provision where the product, service or output is largely commercial in nature, relatively undifferentiated, savings and efficiencies can be made and where it is logical to do so.

8.6.         An empowered Regional Economic Development Agency as a CCO to provide a vehicle to plan, integrate, coordinate and action economic development efforts in Northland.

Northland Inc wishes to appear before the commission to speak to its submission.

Colin Mitten
Northland Inc

David Wilson
Chief Executive Officer
Northland Inc
Dated: 21.02.1014

Slack, E & Bird, R. (2013). Merging Municipalities: Is Bigger Better? Institute on Municipal Finance and Governance, Munk School of Global Affairs, University of Toronto.

Stough, R.R., Stimson, R.J. & Nijkamp, P. (2011). ‘ An Endogenous Perspective on Regional Development and Growth’ in Kourtit, K., Nijkamp, P. & Stough, R.R. Drivers of Innovation, Entrepreneurship and Regional Dynamics, Springer, Heidelberg.

Wilson, D., Neill, C. & Lambert, M. (2008). Governance for Economic Development in Auckland, paper prepared for the Auckland Regional Economic Development Association, Institute of Public Policy, AUT University, Auckland, April.

Stimson, R., Stough, R.R., & NijKamp, P. (2011). ‘Endogenous Regional Development’ in Endogenous Regional Development: Perspectives, Measurement and Empirical Investigation, Edward Elgar, Cheltenham, p.1.

Royal Commission on Auckland Governance (2009). Auckland Governance Report, Royal Commission on Auckland Governance, Auckland, vol. 1, March, p.17.

Slack, E & Bird, R. (2013). Merging Municipalities: Is Bigger Better? Institute on Municipal Finance and Governance, Munk School of Global Affairs, University of Toronto.

There is vast literature supporting this notion in the academic areas of new regionalism, new economic geography and regional development. See for a start the territorial forum and the cities and regions forum in the OECD.
Clark, G., Huxley, J. & Mountford, D. (2010). Organising Local Economic Development: The Role of Development Agencies and Companies, OECD, Paris, p.84.


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