Second Reading of the Local Government Act Amendment Bill
Hon Peseta Sam Lotu-Iiga
Associate Minister of Local Government
22 May 2014
Second Reading of the Local Government Act 2002 Amendment Bill (No 3)
Mr Speaker, when the previous Minister of Local Government introduced this Bill, he followed on from the good work of his predecessors, particularly Hon Nick Dr Smith. Dr Smith initiated the Government’s Better Local Government reform programme back in 2012.
I now add to those credits the fine work that Hon Chris Tremain did in 2012 / 2013. This included the preparation and introduction of this Bill.
This Bill is the final legislation in the better Local Government programme.
This Bill is to support Local Government to become better. Better accountability; better at managing assets; and leads to New Zealanders living bolder, brighter and better lives.
In 2002, the first Bill introduced a new purpose statement, this compelled local authorities to take a fresh look at their activities and priorities.
It encouraged them to re-engage with their communities. This is so that their needs and preferences have first call on scarce resources.
Better way to work
We are seeing the benefits of the more sensible approach most councils are taking to expenditure. It’s a better way to work.
The first Bill provided new and improved mechanisms which local communities could initiate investigation of alternative local government arrangements for their area.
Mr Speaker, several communities are exploring those alternatives even as I speak.
We will see the fruits of that in coming years.
That Bill also provided an updated and expanded range of options for Ministers to support and assist councils that were struggling.
This second Bill builds upon that work.
It increases the range of options through which local authorities can achieve efficiencies. This is at the scale at which services and facilities are better delivered.
For some councils and communities, the best option may be to follow the reorganisation path to amalgamation or restructuring.
The Bill expands the options for local authority reorganisations so they are better able to support their vision for the community.
The Local Government Commission can consider establishing local boards as part of the governance arrangements for new and existing unitary authorities.
These may have features similar to those in Auckland, but can be tailored to local circumstances.
The Bill makes it clear that reorganisation schemes can deal with council controlled organisations. They also can put in place joint committees where these are warranted.
Bill makes alternative solutions easier
For circumstances where reorganisation is not justified or not possible, the Bill makes it easier for councils to find alternative solutions such as working together and sharing services.
The Bill’s provisions encourage councils to cooperate and collaborate to improve and provide better service for ratepayers.
The Bill also includes measures to enable councils to achieve efficiencies in other ways.
For example, it provides councils with more flexibility about how they consult their communities.
This Bill enables councils to design and use engagement processes that are appropriate to varying circumstances and community interests. All this should be done at less cost.
The new significance and engagement policy will provide a clearer guide about how and when communities can expect to be engaged.
This Bill reduces the number of occasions where the costly and time-consuming special consultation procedure is implemented.
It facilitates the wider use of technology with which councils can communicate with their communities. The Bill also improves consultation on council long-term plans and annual plans. (How)
It provides for consultation on specialised documents with a focus on the issues that are important to ratepayers, they should not focus on draft plans containing hundreds of pages of detailed information that is understood by few.
The Bill also seeks to improve the strategic management of local authority infrastructure.
Local authorities own more than $96 billion in fixed assets. This is mostly in infrastructure used to provide basic services that families and businesses rely on every day.
Managing assets well
The majority of councils manage their assets well on a day-to-day basis. But all communities need assurances that their critical infrastructure are managed strategically and sustainably over the long term, and are resilient to natural hazards.
This Bill therefore strengthens the emphasis on asset management planning as a key aspect of council obligations. This will ensure prudent stewardship of resources.
To support that principle, clause 34 of the Bill requires local authorities to include, in their long-term plans, an infrastructure strategy covering at least the next 30 years.
The strategy will identify the significant infrastructure issues that will be faced by the local authority over that period. It should also disclose the options for addressing the issues and the implications of those options.
The Select Committee has made a number of changes to provide greater clarity about the purpose and expectations of the strategy.
Submissions, and other feedback, revealed concerns about the uncertainty involved in anticipating what will or is likely to occur up to 30 years in the future.
Some councils feared they would be held to account if their projections subsequently proved wrong.
That is not the purpose of these strategies. They are not accountability documents and they are not plans.
Outline of scenarios
The changes to the Bill make it clear that what is sought is an outline of the scenarios for the provision, renewal or replacement of major infrastructure. These are assets the local authority consider most likely to unfold over the 30 year period.
Rather than detailed costings, what is expected are estimates that indicate the “ballpark” impacts of projects, this will mean councils and communities are aware of these and can plan how to manage them.
The Select Committee also emphasised this by allowing in blocks of 5 years for the last 20 years covered by each strategy.
One means through which local authorities raise money to pay for infrastructure to meet growth is through development contributions.
Development contributions are one of the costs of building new houses, and therefore contribute to their sale price.
It is therefore important that development contributions are fair and no higher than they need to be.
This Government does not want future generations priced out of home ownership. However local authorities should be prevented from investing in the infrastructure necessary to help our communities grow.
A balance is required.
This Bill introduces measures to ensure that development contributions are better focused, more transparent, and support development to meet demand for new housing.
The Bill does this in a number of ways.
The range of community infrastructure for which development contributions can be charged will be narrowed.
This change reflects the principle that new home buyers should only pay for the basic infrastructure that is required for the completion of the development.
Infrastructure that will benefit the whole community, including larger community assets such as sports stadiums, should be paid for by the whole community.
For some territorial authorities, this will require them to find alternative revenue sources to replace development contributions funding facilities not defined under the Act.
In those cases, we expect that communities will enter into debates as to whether they are prepared to pay the extra that will now be required to fund the projects.
I believe this to be healthier than obscuring the true costs with a veil of unclear development contribution levies.
However the Select Committee heard from councils that have already completed or were building such projects in anticipation of future funding from development contributions.
It would be unfair to ratepayers, and to those who have already paid development contributions, for that stream of revenue to be cut off at this late stage.
That would leave an unavoidable shortfall that ratepayers would have no choice but to fund.
The Select Committee has avoided this by inserting a transitional “grand-parenting” clause in the Bill.
This provides that a territorial authority can continue to require and collect development contributions for a project that is completed or substantially completed. These assets may in fact be outside the scope of the new definition of community infrastructure.
Many of the other changes in the Bill are more technical. They are designed to ensure greater transparency and fairness in the way development contributions operate.
These include the introduction of purpose and principles statements as well as the provision of both formal and informal objection processes. These classes will also require territorial authorities to publish a schedule of projects for which development contributions are required.
Greater clarity is also provided about obligations in respect of proposals for agreements under which developers themselves provide infrastructure. These are welcome and deal with the relationship between agreements and development contributions.
These are all complex and detailed provisions, and the select committee process provided an opportunity for their improvement and refinement. (Example)
Constructive input from within both local government and the development industry has enabled the Bill to be much improved.
I am heartened by this, and by the generally positive and constructive response of the local government sector to the Bill as a whole.
Many of the provisions encourage and facilitate good practice, or remove unnecessary and inappropriate constraints and requirements.
User input is important
This is exactly the sort of legislation where user input is important. It ensures that it will be effective and ensure that unwanted consequences are avoided.
Another example of this relates to the new requirements for transparency in service delivery arrangements.
Some submitters raised concerns that the Bill would have generated significant compliance difficulties and costs for individual councils and the sector as a whole.
Submissions from councils enabled the select committee to identify the problem and make amendments that ensure review requirements will be better targeted, more effective, and avoid unnecessary compliance difficulties.
Mr Speaker, this is another endorsement of the select committee process.
The Select Committee received 120 submissions on the bill, predominantly from local authorities and the development industry.
There was strong support for the Bill’s objectives, and there were many useful suggestions for improvement.
I want to thank all those who made the effort to make a submission for their input.
I would also like to thank all members of the Local Government and Environment Committee for their thoughtful consideration of the Bill and for their cooperation in enabling it to be reported back within a constrained timeframe.
A pragmatic and fair Bill
Mr Speaker, this is a Bill based on pragmatism and fairness.
It makes the, timely, hard choices that this Government knew were needed.
The Bill is an important milestone that will improve the affordability of homes and effectiveness of local authorities. Significantly, it will lead to better outcomes for citizens and ratepayers in the coming years.
For these reasons I wholeheartedly commend this Bill to the House.