Local government plans 'window-dressing'

The purchase of this Dunedin landmark and failure to on-sell it with suitable covenants is seen...
The purchase of this Dunedin landmark and failure to on-sell it with suitable covenants is seen as an example of "capture" by committed but narrowly focused interest groups. Photo by ODT Files
There are few ways ratepayers can rein in their local councils, writes Gerrard Eckhoff, of Alexandra.


When an industry has assets of $100 billion, it is not unreasonable to expect a very regular review of how it goes about its business.

Local government in New Zealand is such an industry.

The recently announced review of local government will take place under the confidence and supply agreement the National Government signed immediately after the last election.

The 2002 Local Government Act, which gave the power of general competence to local government, increased both the power and size of local government to a new level.

Rate increases during the past decade have removed an extra $1 billion from the private sector, or $500 per average household. The ability of individual ratepayers to pay these increases seems not to unduly trouble some councils.

A significant proportion of this increase is because of constant central government demands on local government to, for example, increase air quality in the towns and cities and raise drinking-water quality. According to the Minister's briefing paper, the latest labour cost index shows local government costs rising over the past three years at nearly double the rate of the core state sector.

Council debt has quadrupled over the past decade from $2 billion to $8 billion and rising. This is due to the singular and legal ability of all councils to put their hand into ratepayers' pockets with impunity. There are few ways ratepayers can rein in their local councils.

Local government is not subject to the same constraints as the public service and can ignore a directive from a Government, as happened recently when the Prime Minister called for a freeze on public service salaries. There is a reasonable expectation that local government should also have abided by that advice. That didn't happen.

The numbers of staff employed by councils continues to climb. It is not just the number of staff per se that is the problem, but also the need to keep staff gainfully employed. New projects must be found to ensure continuity of work, as (with all employees) they cannot be dismissed simply because there is a lack of work currently available.

That means a special rate is struck to undertake work that is possibly worthwhile but not essential.

It was determined during the passage of the 2002 Act in the select committee that there must be an increased and special level of consultation for councils wishing to engage in activities that are outside councils' normal scope of "public good" infrastructural needs of their community. No definition of special consultation was given, so it was left to councils to determine what the law actually meant.

That's a bit like allowing the fox to determine the rules of the hen house. If there is one pressing need to review the Local Government Act, it is around this requirement. Special consultation is not about presenting a plan to the public that is, in reality, unlikely to be changed, but engaging with interested parties at the formative stage and with all opinions given equal weighting or standing.

The Dunedin stadium is a case in point. Those with an alternative opinion were not engaged with in any meaningful way until the decision was effectively made.

The use of "in committee" and Chatham House rules meant real discussion could not take place in public, due to supposed "commercial sensitivity". That must change if the mission statements of councils, which often include the phrases "openness" and "transparency" are to be meaningful.

There is also a need to prevent special interest groups from capturing councils. The Dunedin City Council voted to buy Harbour Cone because of "public interest and concern" over the land's future, despite not knowing to what purpose the land could be put.

There is some merit in purchase and then immediate resale with covenants. The invitation to the public to donate cash to assist with the purchase resulted in a mere few thousand dollars being contributed, despite so-called "widespread public support" for the purchase.

The Government's paper on reform of local government appears not to have identified this "susceptibility to capture" by committed but narrowly focused interest groups.

The corporate model that is applied to management of local government is a case of the theory being fine but the practice flawed, as the incentives and sanctions are wrong. The larger the council, the bigger the salary for the executive members of council, therefore undermining any incentive to downsize and contract out council work.

In the corporate world, the CEO must operate in a competitive environment, whereas councils are natural monopolies.

Councils must ensure the wellbeing of the ratepayer/community and not the business known as the local authority. All too often, the compulsory donations to councils (rates) undermine the real reason for the existence of councils, which is to serve the people and not necessarily to grow the business of council.

Councils, unlike a Government's cabinet, consist of a diversity of political opinion. Some can be single-issue members, such as the ever popular environmental platform. Stating that you love the environment is far more appealing to voters than saying you put the welfare of people before that of a certain landscape that few even knew existed. The institutionalisation of long-serving members also needs to be addressed.

The failure of central government-funded institutions such as universities, schools, hospitals - in fact, all government departments - to pay rates places an increased burden on the private ratepayer. The Government's reform paper is silent on this issue.

The Minister's proposals appear to be window dressing and change little of substance, if one takes the view that local government reform should be of real advantage to the ratepayer. Where is the consultation with ratepayers?

Where is the review of monopoly charges enjoyed by 76 councils who compare themselves with each other and then declare themselves satisfied with the result?

John Key has the chance to show he heads a Government of substance and that popular acclaim with a powerful lobby group should not be that Government's end goal. There is little in this review of local government to show that "we the people" have been consulted. What principle does the Government employ that precludes engaging with the very people who are the directly affected by this review?

- Mr Eckhoff, a former MP, was on the select committee hearing the 2002 Local Government Bill and is an Otago Regional Councillor.



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