Government Continuing Its Reform of Local Government Sector

8 Apr 16

The Government has announced that it intends in June this year to propose a Bill to amend the Local Government Act 2002.  The aim is to have this Bill in force in 2016, so it is available for councils to use next year.  This legislative initiative is consistent with the announcement from the previous Minister of Local Government (Hon Paula Bennett) at last year’s LGNZ Conference that the Government will put in place a range of options to encourage more efficient local government.

For local authorities this means that an active focus will need to be kept on the development of the Bill, with engagement with the Minister on any issues that arise. Local authorities should also consider whether any other changes to the Act should be made at this time to make the functions of local government easier and more efficient.

Summary of Proposed Reforms
The Minister for Local Government, Hon Peseta Sam Lotu-Iiga, has released his Cabinet paper which analyses the proposals and indicates the Cabinet’s approval of these changes1.  The focus is on enabling “reorganisation” rather than “amalgamation”.

One of the principal changes is to empower the Local Government Commission to take proactive steps to analyse local authorities’ functions and enable transfer of a broader range of these functions between local authorities.  In addition the Local Government Commission will be able to establish CCOs controlled by multiple local authorities for transport and water services.

Local authorities will be able to propose a wider range of reorganisation options including jointly owned CCOs, joint governance arrangements, transfer of statutory and non-statutory powers, boundary changes and amalgamations.  In most cases the proposal is to remove the need for polls where councils lead a reorganisation proposal.

The statute will be broadened to enable councils to transfer not just statutory obligations but other functions such as economic development or tourism.

There will be more flexibility for regional and territorial councils to form a unitary authority in one district while continuing to operate a regional council in another adjoining district.

There will be encouragement for local authorities to establish a CCO for the supply of potable water.  This will be limited so that profits cannot be generated from water supply and distributed to council shareholders.

There is proposed to be two “template” CCOs to manage transport.  The first option is a CCO responsible for local roads, public transport and transport planning.  The second option is a CCO for local road maintenance, leaving regional transport planning and public transport with the regional council.  The intention is that a template CCO for these functions is available for a council to select.  An alternative “bespoke” CCO can be created by a council, with Ministerial approval.

There are proposed requirements for councils to report on non-financial performance measures.

Overall this proposed reform package is clearly intended to stimulate councils and the Local Government Commission to actively consider delivery of services, particularly in the water supply and transport areas.

Aligned with councils’ mandatory obligation to review the cost effectiveness of their current arrangements2, if passed, this reform package will inevitably require councils to consider these new CCO and cooperation arrangements as part of any review of its services.  No doubt there will be transaction and implementation costs in all of this for councils. Long term efficiency and savings is the goal and it will be interesting to monitor how these are realised over time.

This is an area where councils should closely scrutinise the proposals and consider whether they are in the best interests of their community, and whether there are other changes that this reform package could take the opportunity to include.

A link to more information on these proposals from the Minister is here.

If you would like assistance to understand these reforms or their implications please contact our local government legal experts.

PDF version: Government Continuing Its Reform of Local Government Sector

[2] Section 17A LGA 2002