Archive | Long-term council community plans

Published 26 October 2009

Local Government Minister Rodney Hide said on Friday analysis of council long-term plans for 2009-19 showed councils’ operating costs would increase 39% over the next 10 years. Their planned capital expenditure would total $31.4 billion and their total debt was forecast to rise 56%, from $7 billion to $10.8 billion.

The bald ministerial pronouncement (minus a couple of the figures above and absent a few explanations derived from the report Mr Hide referred to) falls under my category of scary, meaningless & potentially misleading statistics and required a hunt through the report. A common perception is that councils merrily ignore CPI figures as they decide their budgets – the report helps understanding of this issue, too.

The figure does put figures in perspective – but that doesn’t mean they stop being scary. At the foot of this article, I’ve run figures from the Observations & trends report on rates & debt/dwelling for territorial authorities in the Auckland region. Both the figures & projected percentage increases vary widely.

Mr Hide said: "To help ratepayers stop their rates continuing to spiral out of control, the Government will soon announce changes to the Local Government Act. These changes have come from the review I set up to improve the transparency, accountability & financial management of local government.

"This work is about local government focusing on core functions, managing within a defined budget and adopting transparent & accountable decision-making processes. In these challenging economic times, councils need to think carefully about the impact of rates increases. There needs to be some serious thinking about the trade-offs between the services local communities want and what is an acceptable level of rates increases.

"The review is also looking at options to ensure local government operates within a defined budget, focuses on core activities and provides for ‘plain English’ financial disclosure."

The Observations & trends report, by the Department of Internal Affairs, noted that council costs are commonly compared with CPI (the consumers price index), but said this measure “does not factor in the cost of capital development and the operation of infrastructure, and therefore does not adequately reflect the drivers of costs facing councils for the delivery of their services. The CPI is a better proxy for the affordability of rates”.

It said part of the PPI –  the producers production index, local government & civil defence components – was a better measure of council costs because it measured “price changes in the costs of production such as the prices of materials, fuels & electricity, transport & communication, rent & lease of land, buildings, vehicles & plant (excluding labour & depreciation). This is seen as a better proxy for understanding the drivers of council costs.”

The PPI showed an increase of 10.8% from June 2007-09 compared to 5.9% for the CPI. “This degree of change may help explain the size of some of the reported increases in council operating expenditure. The national price adjusters for local government developed by BERL (Business & Economic Research Ltd) also estimate an increase in costs of 31% over 10 years. This is a significantly higher rate than the CPI forecast of 20-25% for the same period.

“Much of the forecast increase in council costs therefore appears to relate to increases in costs related to the provision of services. These differ from those incurred by a household (as indicated by the CPI). Councils are likely to face increasing pressure to provide the same levels of service while attempting to keep rates at ‘affordable’ levels.”

The report said total operating costs (excluding depreciation) were forecast to increase by 7.8% over the first 3 years of the long-term plan period and 35% over the 10 years.

Some of the highest direct costs/dwelling were seen among rural & some provincial councils with low or negative population growth: “This could potentially signal issues for some councils to fund ongoing service delivery.”

Of the total $31.4 billion capital programme over 10 years, the report said: “Accounting for inflation & population growth, this suggests councils are planning a reduced capital programme to that identified 3 years ago (when the budget was for $29.5 billion).”

The report said the spike in the final year of the plan was similar to that seen in the

2006 plans and might represent a number of “wish-list” projects that councils would make a final decision on in a later long-term plan: “This increase is being driven primarily by metropolitan councils. It is not possible to assess how many of these projects will actually be completed.”

Perhaps the most important comparison in the report is between the forecasts for growth in rates income between the 2006 & 2009 long-term plans. In the first year of the 2009 plan there was a $5 million gap between the 2 but, by the end of the 2006 plan period, councils expected to pull in $356 million more in rates under their revised 2009 plans.

But that figure also needs to be put in perspective of how councils put together their incomes: “Councils look set to become more reliant on rates as a source of income, with the proportion of total operating income from rates rising from 54% to 59% over the 10-year period. Some of the larger percentage increases are seen in councils with negative population growth – this could have implications for rates affordability in the future.”

The Rates Inquiry suggested councils could look to use debt as a tool to fund development: “The level of increase in debt over the next 10 years hints that there has been a change in the attitude of many in the sector toward the use of debt. Total public debt for the sector is forecast to increase by 98%, from $5.5 billion at the beginning of July 2009 to $10.8 billion at the end of June 2019. The peak in total debt ($11.15 billion) occurs in 2016-17.The majority of debt, and the largest percentage increases, occur in the metropolitan council sector.

“The largest proportion of debt is raised over the early part of the plans, with 32% of total debt over the 10-year period ($4.13 billion) taken on in the first 2 years. This coincides with the period of greatest capital expenditure. Over time, the focus moves to debt repayment, with the peak in debt matching the years of lowest capital expenditure. This suggests councils will be consolidating their position and focusing on repayment in the latter years of the long-term plans.

“Across all territorial authorities, the average debt/dwelling is forecast to increase by 41%, from $3295 to $4658. It should be noted that these are cumulative and not annual figures and that by using per-dwelling they do not account for growth in non-residential properties.”

According to the departmental report, “debt is seen as a prudent way to achieve intergenerational equity. However councils where the interest/rates ratio is greater than 15% may see a reduction in their ability to be able to respond to emergencies.”

In its conclusion, the report said: “Communities have come to expect their council will continue to provide these services at an appropriate cost & quality. However, the cost of council services has been and is expected to increase at a greater rate than inflation as measured by the CPI. While council costs are more aligned with the PPI, the ability of ratepayers to afford council services may be better aligned with the CPI. If council costs continue to increase, councils may need to consider how (or if) some services might be funded or provided differently in the future.”

You can probably think of a dozen reasons why rates or debt in your area are higher/lower than elsewhere or than they ought to be. The arrival of a single council for the Auckland region will change the projections, but how equitable resolution will be remains a question.

Rates/dwelling for Auckland councils & the whole local government sector, and the percentage increase from 2010 to 2019, followed by debt/dwelling & the percentage increase:

Auckland City, rates $2220, $2824, 27.2%; debt $3712, $6126, Franklin, $1734, $2308, 33.1%; $3330, $4142, 24.4%Manukau, $1195, $1780, 49%; $1666, $2311, 38.7%North Shore, $2109, $3430, 62.6%; $4385, 6331, 44.4%Papakura, $1342, $2170, 61.7%; $1996, $3722, 86.5%Rodney, $2256, $3050, 35.2%; $6644, $7184, 8.1%Waitakere, $1509, $3283, 117.6%; $7042, $8813, 25.1%Whole sector, $2099, $3082, 46.8%; $3548, $5117, 44.2%

Website: Local councils, observations & trends

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Attribution: Ministerial release, Observations & trends report, story written by Bob Dey for the Bob Dey Property Report.

Published 22 October 2009

Local Government Minister Rodney Hide said yesterday that recent analysis by the Department of Internal Affairs of data from long-term council plans for the next decade indicated rates income would continue to rise faster than council costs.

Addressing a Property Council breakfast in Wellington, Mr Hide said: “Even more concerning is that the cumulative increase in rates/head over the next 10 years is 49%, and that rates funding will increase as a proportion of councils’ operating receipts.

“At the same time, public debt for the sector is forecast to increase by 97% and interest expenses by 91%. And it is commercial & residential ratepayers who are expected to meet the increases. Something must be done. These trends must be stopped.

We are working to achieve more effective & responsive local government, and a brighter future for ratepayers, by improving aspects of the Local Government Act 2002.”

Mr Hide has stated his position many times. But in the rising heat as Auckland’s governance transition to a super-city council comes closer, it’s worth repeating. “The 3 underlying principles of the review are that: 

local government should operate within a defined fiscal envelopecouncils should focus on core activities, andcouncil decision-making should be clear, transparent & accountable.

“I am looking at key measures such as simplified long-term planss, plain English financial disclosures, a less costly service performance reporting system, greater use of polls or referenda and more effective use of the community outcomes process. And we need to improve decision-making processes.

“I believe councils’ consultation processes are unnecessarily onerous & complex. Worst of all, they are largely meaningless to the average ratepayer. That’s why I’ve got my officials looking into making the long-term plan process simpler and ensuring consultation is more effective.

“Most long-term plans are bulky documents, running to hundreds of pages and often more than one volume. This not only makes it difficult for ratepayers to identify the things that really matter to them, it can also deter them from taking part in decision-making processes.

“It must surely be possible to remove a lot of the more descriptive, highly technical & non-strategic material from long-term plans to produce a document people can actually understand!

“Councils vary hugely in their presentation of financial & performance information. I’ve found that even something as simple as rates income is being reported in 3 different ways in council plans & reports.

“Good quality comparative data is essential if we are to achieve accountable & transparent local government. We’re looking at how financial disclosures can be written in plain English, so you don’t need to be an accountant to understand them and so ratepayers can more easily compare how their council is performing against others.

“Another thing we’re looking at is how councils can prepare clear financial strategies to manage issues like rates, debt & expenditure levels a whole lot better, and then set priorities for expenditure.

“I am convinced that a good financial strategy will help councils, in consultation with ratepayers & residents, to make better decisions about trade-offs. It will provide a basis to measure a council’s financial management record and help identify future financial management issues.

“Included in the review is a proposal for pre-election financial reports. These would give an account of activities over the previous 3 years and list items of expenditure for the next 3 years.

“This would give ratepayers & residents up-to-date information about the performance of the current council and the state of the books, and a clear understanding of the issues the incoming council will need to consider.

“This would help promote well informed local debate about expenditure priorities and enable electors to put the hard questions to candidates about past & proposed expenditure.

“Local elections have not had a high turnout in recent years. Access to clear information on issues facing a council and the sorts of decisions that need to be made should help to stimulate greater interest in local government amongst voters, businesses & the media.

“The question of the core business of local government has been the subject of much publicity over recent months. I am definitely not proposing that central government prohibit local councils from undertaking certain activities. The review is about enabling councils to do a better job prioritising local expenditure and staying focused on providing essential services. They need to engage more effectively with their residents and think carefully before taking on risky or novel ventures that might best be left to the private sector.

“All New Zealanders share some expectations of what their councils will provide. I would like to see local authorities planning for & funding the services that have traditionally been council-funded, rather than indulging in more financially risky or novel activities.

“The use of referenda is another aspect of the review of the Local Government Act 2002. I strongly believe referenda can be a vital tool for strategic decision-making. A clear citizen mandate will overcome the division often accompanying proposals for significant expenditure.”

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Attribution: Ministerial release, story written by Bob Dey for the Bob Dey Property Report.

Published: 9 August 2005

Local body politicians have been searching for the meaning of life in recent times, helped by truckloads of legislation to ensure the exercise is an holistically complicated one.

One of the latest treats is the community outcome statement, one of which has been pieced together by the Auckland Regional Council and made it through another stage at that council’s regional strategy & planning committee today.

The regional community outcomes statement has been derived from submissions, turned into one-word themes, expanded into fuller statements, checked with the stakeholders originally consulted, then refined into a set of 17 draft outcomes.

The councillors were required to endorse the outline of outcomes and approve a shortlist for investigation, to be reported back to the committee by council staff in September or October.

It’s a good chance for people outside the council to promote their own interest, and for staff & councillors to do the same. The committee will make final decisions on the actions it wants in October, so budget estimates can be prepared for the long-term community council plan through to 2016, which will be finalised next July.

ARC chief executive Peter Winder said the council now had a legislated obligation to work with the community to come up with this statement of outcomes and then to monitor progress towards achieving them. Yet, despite all that, “we can choose to do absolutely nothing….. You have complete discretion,” he said.

To give you an idea of what your regional councillors are blathering about, here’s the summarised outcomes list:

Quality built environment
Efficient energy use based on clean & reliable sources
An innovative & internationally competitive regional economy
The ARC, the community, local & central government work to achieve results (I do not jest, that’s what it says)
Aucklanders have a choice of reliable, affordable & safe ways to move people & goods
Recreational & leisure opportunities that offer a range of choices & experiences for all
Aucklanders are educated and have access to appropriate learning opportunities
Aucklanders have access to appropriate healthcare
A choice of affordable housing
Neighbourhoods with a sense of community
Aucklanders caring for & enjoying a healthy environment
Auckland’s special places respected & conserved
The diversity of native species & habitats is protected & restored
Safer neighbourhoods & public places
Auckland is a welcoming place for migrants
Valuing our identity & the changing face of Auckland.

The list was apparently compiled to ensure Cllr Sandra Coney would read it. She did, noticed to her great consternation that parks & open spaces were missing and asked that they be added. It turned out that the printed list was one dot short, and Cllr Coney’s parks & spaces were supposed to have been included all along.

It’s helpful for a regional council to know its purpose, but is eternal navel-gazing the way forward? Well, the proposed actions for the council to take include numerous options on the level of intensity. They also include some options which would see the regional council taking a greater role in people’s affairs, in some cases cutting across work done by territorial councils, and other options which would specify no role for the ARC.

Among actions proposed to implement the regional growth strategy:

Metropolitan development agency, the council’s current annual plan budget has been increased to fund work on urban design “and the investigation of a metropolitan development agency”. I wasn’t aware of this agency proposal – needs further investigation
Heritage, natural environment, use economic instruments & conservation zoning to better protect regionally significant heritage resources, habitats & ecological areas
Population growth & immigration, more closely monitor population trends and integration of population & migration futures into reviews of the growth strategy
Housing, a specific focus on housing supply & housing affordability, perhaps in partnership with Housing NZ Corp
Built environment, more detailed planning of future urban form, including specific integration of land use, transport & infrastructure provision to improve the liveability of urban environments
Education, develop a closer relationship with the Ministry of Education to ensure that education needs are planned for in regional growth management decisions (Cllr Bill Burrill said such planning seemed to be absurdly absent)
Neighbourhoods, incorporate best practice urban design principles into the strategy to improve liveability & connectedness of residential neighbourhoods
Economic development, integrate the growth strategy with Areds (the regional economic development strategy, now a unit of the ARC) to ensure that future spatial planning takes account of Areds objectives.

The committee called in July for an issues & options paper on its potential role on energy issues. The council is also working on stormwater funding issues and now needs to examine what it will do on the waterfront after taking over Ports of Auckland Ltd, as well as the future ownership structure for both the port operations & waterfront land.

Most debated was whether the council needed a social issues forum. Some councillors felt there were plenty of agencies working in this area, but the vote to delete it from the list was defeated 5-4.

If you want to comment on this story, write to the BD Central Discussion forum or send an email to [email protected].

Peter Winefield – former Rodney District Council senior officer, nowadays working on management services for MWH NZ Ltd, an international consultancy with particular expertise in power, water & wastewater issues – produced a briefing paper last year on the Local Government Act, philosophical changes, new reports &administrative changes, and on financial provisions.

A central part of his briefing paper is a section on the long-term council community plan – which, as you might expect, gets abbreviated to LTCCP, and which North Shore City Council has kindly decided to call its city plan.

In the old-fashioned version of local government, elections are held every 3 years, people stand on a platform of issues, citizens vote, for the next 3 years the council puts into practice the majority view (which may or may not match platforms on which councillors were elected), and at the end of 3 years councillors are rated in a new election.

A new council, diametrically opposed to the views held by the previous majority, could be elected and put in place a raft of new policies & practices.

As Mr Winefield pointed out to me, the LTCCP process makes that style of operating historical. Yes, the elections are held, yes, we come back 3 years later for another whack at it, but councils are putting their long-term (10-year) plans in place now and the process under the Local Government Act means significant, sudden change will be virtually impossible.

For that reason, citizens holding strong views on any aspect of their council’s proposed 10-year plan need to look at that plan now, because it won’t be reviewed for another 3 years.

The briefing paper:

Introduction

The Local Government Act  2002 was enacted just before Christmas 2002. Some of it came into effect immediately and the rest on 1 July 2003. However, the act needs to be considered in the context of the much broader policy & legislative change affecting the sector at the moment. There are changes, either already in place or proposed, affecting transport, rating, health, water supply standards, the electoral process, emergency management & resource management. More change is on the horizon.

It is also important to note that not all of the old act has been replaced – about 200 sections of the 1974 act have not been repealed – mainly relating to transport, drainage & the special ‘Auckland provisions’. It is proposed that these will be reviewed over the next couple of years.

2.     Purpose of local government

Previously the “purpose” of local government was expressed in a convoluted, long-winded way. Now, it has been simplified down to two things (s.10):

a)     to promote local democracy and

b)     to promote the social, economic, environmental & cultural wellbeing of communities – in the present & for the future.

However, there are also a number of ‘principles’ which local authorities must adhere to – see sections 14 (General), 39 (Governance) and 82 (Consultation). Some of the key new concepts in these sections are canvassed below.

3.     Philosophical Changes

3.1  Full Capacity

A fundamental change to the act is the concept of ‘full capacity’. Traditionally, councils have only been able to do something if it was authorised by statute. Under the new act they have “full capacity to carry on any activity or business, do any act, or enter into any transaction…” Many, especially in the business community, expressed concern that this will result in councils ‘going mad’ under the heady influence of these new powers. But this is unlikely given the burden of public consultation that councils have. In fact the public consultation requirements of the new legislation are a lot more onerous than before – to the extent that there is probably a greater risk of ‘nothing happening’ than there is of councils going on a spending spree, or taking over new functions.

3.2  Sustainability

Councils now have an overriding responsibility to promote ‘sustainable development’. This term is not defined in the act but it is generally accepted to mean ‘development that meets the needs of the present without compromising the ability of future generations to meet their own needs’.

Achieving sustainable development requires a different way of thinking & working.

This requires:

·         focus on community needs

·         taking the long-term view

·         promoting the social, economic, environmental & cultural wellbeing of the community (incorporating these concepts in decisionmaking), and

·         encouraging participation & partnerships.

These concepts are all encapsulated in the Local Government Act 2002.

3.3  Maori

There is also a lot more emphasis in the legislation on the place of Maori in local government. Councils are required to have special procedures in place for consulting with Maori, they are required to involve Maori in decisionmaking and also to foster the development of Maori decisionmaking capacity.

Furthermore, when the act was passed there was a consequential amendment to the Local Electoral Act to enable the creation of Maori wards within a local authority – a bit like the Maori seats in Parliament.

3.4 ‘Whole of government’ approach

Another of the major conceptual changes is the ‘whole of government’ approach. In future, local authorities can not just look after their own affairs, as many have done in the past. They are required to assume a leadership role relating to the wider interests of the community they represent. The first step is to identify “community outcomes”. In other words, identify what the current issues for the community are, how the community wants the city or district to grow, what the relative priority of these various community outcomes are, and so on. These community outcomes might relate to health, education, transport, or anything else.

However this doesn’t mean that councils now have responsibility for all these things. It simply means that they have to identify what is important to the community and then facilitate some sort of action to help achieve them. For example, if one of the community outcomes relates to transport then the council most likely will have responsibility. But if there were community outcomes about crime or education, then it will probably sit down and work these through with the police or education authorities.

The key is that whereas in the past all these agencies have worked independently they are now expected to work together, with the local council being the co-ordinator. Community outcomes have to be reviewed at least every 6 years and councils are required to report on the community’s progress in achieving these outcomes every 3 years – including reporting on the contribution made by other organisations to those outcomes.

4.     New reports & administrative changes

As well as the philosophical changes referred to above there are also a number of new reports & administrative changes, some of which are very important and will have major implications.

4.1  Long-term council community plan

In future, every 3 years councils will have to produce a long-term council community plan (LTCCP). This will be the primary corporate planning instrument for a local authority. The LTCCP will contain a large amount of information focused on the long-term about community outcomes, the council’s plans & financial forecasts for each activity, a raft of asset management information plus a variety of other things. It has to be audited by the council’s auditor before it is published for public comment and another audit will occur prior to its adoption. The LTCCP will replace the annual plan in the year it is prepared. The clear intention of the act is that annual plans are expected to be relatively minor documents in future.

This (North Shore) council will produce its transitional (10-year) LTCCP for the 2004/05 year and its first full LTCCP for the 2006/07 year.

4.2  Water services & sanitary services assessments

Reflecting the Labour Government’s commitment to the public provision of basic infrastructure there is an obligation on local authorities to continue to provide water services and to maintain their capacity to supply. Generally speaking water assets can’t be sold, divested or used as security and contracts for water operations can’t exceed 15 years. (These provisions effectively remove the ability to enter into the type of franchise arrangement that the Papakura District Council did.)

But in addition to this, Parliament has introduced additional requirements for water & sanitary services “assessments”. These assessments are a major new public consultation process focused on the water, wastewater, stormwater, landfills, refuse collection, public toilet & cemetery activities of councils. In the past, these ‘less exciting’ issues have taken a back seat when it came to public consultation but the new legislation requires that they be the subject of specific community consultation.

4.3  Decisionmaking

The new Local Government Act has also introduced highly prescriptive & complex decisionmaking provisions. These provisions relate to all decisions, including a decision to ‘do nothing’, and require that for every decision “all reasonably practicable options” be assessed and that each option be considered in terms of:

·         the social, economic, environmental & cultural wellbeing of the district (now & in the future)

·         the extent to which community outcomes would be promoted or achieved

·         the council’s ability to meet its statutory obligations, now & in the future

·         any other matters that are relevant, and

·         where it is a “significant decision” relating to land or water, Maori values.  

It is also expected that community views be taken into account at all stages of the decisionmaking process.  The extent to which these “requirements” are complied with depends on the significance of the decision. 

The act has also increased the number of situations where a council is not able to make a decision without first undertaking a formal public consultation process. There is a lot of emphasis on consultation in the new act – including the introduction of consultation principles in s.82.

4.4  Miscellaneous

4.4.1      Bylaw review

The new act requires that all bylaws be reviewed by way of the ‘special consultative process’ (in other words, a process requiring extensive community consultation) by 2008.

4.4.2 Code of conduct

All councils are required to adopt a code of conduct – a document that regulates the behaviour of elected members.

4.4.3 Triennial agreement

All councils within a region are required to sign a ‘triennial agreement’.  The purpose of the agreement is to establish protocols for collaboration and co-operation between the councils.  The first such agreement has to be in place by 31 December 2003.

4.4.4 Governance statement

All councils are required to produce a governance statement every 3 years. The statement has to include a wide range of information relating to electoral matters, governance structures, meeting processes, etc. The first such statement is required by 31 December 2003.

4.5  Financial provisions

There is not a great deal of prescriptive change for local authorities in their financial management – but some of the wider philosophies behind the act will have a marked effect.

There is still a requirement for prudent financial management and a similar range of financial policies relating to funding, liability management, investment & so on. There are also a couple of additional policies required relating to development contributions & partnerships with the private sector.

There is still a ‘balanced budget’ requirement – but this can be varied where a local authority considers it financially prudent to do so (refer s.100).

The emphasis in the legislation on ‘sustainability’ might have the effect of changing the reporting structure of local authorities over time and this might be compounded by the requirement that in the LTCCP the council identify which community outcomes ‘activities’ (transport, water, landfills, etc) primarily contribute to.

However, as noted earlier in this paper, there is much more emphasis on robust, integrated, long-term financial forecasting – and the importance of this is underlined by the requirement to have the draft LTCCP audited before & after publication! The level of financial integrity contemplated for the LTCCP can only be achieved if there are comprehensive strategies in place for each activity supported by (in the case of infrastructure matters) detailed & accurate asset management plans. The need for improved infrastructure asset management & more robust long-term financial forecasting is one of the main implications of the act.

5.     Summary

The new Local Government Act is an important & interesting piece of legislation. But it is an enigma. For example, it entrusts councils with more power and a leadership role in their respective communities but it ties their hands with even more public consultation & a prescriptive decisionmaking regime. It also makes the local government environment more complex with the overriding (but undefined) mantra of ‘sustainability’. 

The cost of local government will undoubtedly increase as a result of this new act and some councils will struggle with the increased level of sophistication. On the other hand, the increased focus on long-term planning & integrated government is long overdue.

Websites: MWH Global Inc

Auckland City Council’s Focus on the Future

Manukau City Council’s first long-term plan runs for 10 years from 2003.

North Shore City (its city plan is at the top of its home page at the moment)

Rodney District Council launched its long-term plan on 18 March

Waitakere City Council will put out its annual plan on 13 April and intends to adopt it on 20 June. It’s the second year of its long-term plan.