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Brief Counsel

First step on a tumultuous journey

01 April 2009

The Royal Commission on Auckland Governance (the Commission) has thrown a very large pebble into the pond. The ripples are still emanating from the centre.

This will be a huge test for the Government as decisions will need to be made quickly if the new structure is to be in place for the 2010 local government elections. Cabinet will consider the Commission's report on Monday, indicating that the need for urgency is well-understood in the Beehive. There is much at stake.

This Brief Counsel is intended to provide a high-level guide to the Commission's key recommendations and to the likely process from here. Chapman Tripp recognises the importance to business and to the economy of this issue and plans to follow it closely.

Timeline

The Prime Minister has set a cracking pace for the implementation of the Royal Commission's report.
The October 2010 target is a big ask.  It means legislation needs to be introduced and passed this year so that new electoral boundaries can be calculated and transitional arrangements for the new framework put in place.
There are stages along this road requiring consultation (when the Bill reaches the select committee and again when proposed boundaries are released), which will provide a handbrake on progress.  But ultimately speed is required because by early next year Auckland voters and candidates need to know the structure they are working in.
The next few weeks will be pivotal.
John Key wants the Government to announce its intentions after Cabinet meets on Monday. Officials (drawn mainly from the Department of Internal Affairs, the Ministry of Social Development and the Ministry of Transport) are working through the details now. Their recommendations will be discussed by an ad-hoc committee of Ministers tonight (Wednesday, 1 April) and fine-tuned in time for Cabinet next week.
To date it appears there is Cabinet consensus on the merits of the one Auckland Council concept, but disagreement on how the six smaller councils below that will function and how local representation will be assured.

Problem identification

The Commission's recommendations are shaped by its analysis of the weaknesses afflicting the current arrangements.  It identifies the two major systemic problems as:
  • weak and fragmented regional governance, and
  • poor community engagement.

The Commission on the case for change in Auckland local government

Auckland's regional council and seven territorial authorities lack the collective sense of purpose, constitutional ability and momentum to address issues effectively for the overall good of Auckland.  Disputes are regular among councils over urban growth and the development and sharing of key infrastructure, including roads, water and waste facilities, and cultural and sporting amenities.  Councils cannot agree on, or apply, consistent standards and plans.  Sharing of services among councils is limited, yet there is scope for so much more activity in this area.
The end result is delayed and sometimes suboptimal decisions for the region. In its funding decisions, central government has to deal with multiple parties, with Auckland councils and agencies failing to articulate clear regional priorities.  Citizens and businesses get poorer services than they hope for, at a higher cost than is necessary.  There is waste1.

The Commission's proposed solution

The best one sentence description of the Commission's recipe for reform comes from the Commission itself in its executive summary, as follows:
There will be one long-term council community plan, one spatial plan, one district plan, one rating system, one rates bill, one voice for Auckland2.
We will need to await the result of Monday's Cabinet meeting to know the detail of the Government's response to the Commission's sheet of recommendations.

Main recommendations

  • A single unitary authority (the Auckland Council) to replace the Auckland Regional Council and seven territorial authorities.  The Council to comprise 23 representatives: 10 elected Auckland-wide, 10 ward representatives and 3 Māori representatives.  The Council would set policy for all aspects of local government, including the arterial road network, water collection and supply, waste water and solid waste management.  Staff from the abolished councils would be transferred to the Auckland Council "at least initially".
  • The Auckland Council to be led by the Mayor of Auckland. The Mayor would be elected in a presidential-style election and would have a large personal mandate, especially given the weakness of party structures in Auckland local government.  Further, the Mayor will have the power to appoint the Deputy Mayor and the 11 committee chairpersons.
  • Although the Commission says the Mayor's proposed powers will be "more modest than in many international models of mayoralty"3, they will be large by New Zealand standards.  The Mayor's relationship with the Auckland Council would be similar in model to the United States system of government in that, just as the President proposes federal budgets to the Congress for approval or veto, so would the Mayor propose policy and the annual budget to the Council for its vote.
  • Six new local councils to be appointed.  These would share governance in their areas with the Auckland Council but would be subsidiary to it. 
  • Community Boards to be disbanded with the exception of the Waiheke and Great Barrier Island Boards and a new City Centre and Waterfront Community Board.
  • All assets and liabilities of the abolished territorial authorities and the Auckland Regional Council to be transferred to the Auckland Council (with fair apportionment to the Waikato District Council and Waikato Regional Council to reflect boundary changes).  All interests in council and non-council organisations would also be transferred to the Auckland Council. (This would likely include the interest in Vector held by the Auckland City, Manukau City and Papakura District Councils.) 
  • The Government to enter a partnership agreement with the Auckland Council and appoint a Minister for Auckland together with a Cabinet Committee comprising Ministers with portfolios of significance to Auckland. (Discussed further below.)
  • A transport alliance to be established between a council-controlled organisation and New Zealand Transport Agency.
  • An Establishment Board to be set up to manage the transition to the new structure.  The membership and quality of this Board will be important as it will be responsible for defining the key roles and positions for council administration, staffing levels and staff locations.

The Commission on Auckland's economic development

The Commission says that, given the present economic difficulties, it would not be appropriate to wait until the Auckland Council is formed to begin "a new era of coherent and constructive interaction between central and local government, and other sectoral groups".  Accordingly, it recommends that the Cabinet Committee for Auckland and the Minister for Auckland be appointed immediately and begin working with the Establishment Board.
Two areas it highlights for immediate action are the Rugby World Cup and facilitation of the roll-out of an ultra-fast broadband network for Auckland.
The Commission notes that the single district plan and single unitary authority will deal with the issues of fragmentation and duplication which now bedevil Auckland.  But it sees a need beyond this for particular structures to govern economic development. Specific recommendations are:
  • A partnership between central government and Auckland to address the region's long-term economic development and to formulate responses to current economic conditions
  • The Auckland Council to adopt a comprehensive regional development plan
  • The Auckland Council to establish:
    • a regional development agency
    • local development agencies, and
    • a high-level, regional cross-sectoral advisory board comprising representatives from central government, local government, business, education and the voluntary sector
  • This agency to take an innovative approach to developing long-term funding relationships, drawing funding from the regional budget, central government economic development programmes and the private sector on specific projects.

Potential issues with the Commission's blueprint for change

The balance between efficiency and equity

The major concern raised so far about the Commission's blueprint is that it does not provide a sufficient voice for local communities.  This concern relates to the abolition of most community boards and to the dominance of the proposed unitary council.
Democracy is by definition inefficient and expensive so there is always a trade-off between providing coherent leadership and ensuring active local engagement in decision-making.Our observations are:
  • The Auckland Council would be the single biggest regional authority in Australasia.
  • The Commission says the council to voter ratio will be one councillor to 40,000 people.  The average electorate comprises around 54,000 people.
  • Whether the aggregation of power into a single council and the profile of a high rolling mayoral race will stimulate public interest in local government is difficult to predict but participation rates are now very poor.  Voter turnout for the 2007 local body elections was 40% in Auckland and 39% in Manukau.
  • The cost of campaigning in a region of the proposed Super City's dimensions will require deep pockets, supporters with deep pockets or a high public profile.  This may have the effect of limiting the field to the rich and the famous.
  • It will be necessary to decide how many positions individual candidates can stand for, and hold if elected.

The interface with central government and the rest of the country

Auckland is now home to more than a third of the population and the trend is for this proportion to continue to rise.  That will make the Mayor of Auckland an immensely powerful figure, even in relation to the Prime Minister.  National elections are contested on party lines with the result that the Prime Minister will always owe much of his or her vote to party affiliation whereas most of the Mayor's support will be personal.
The transformation of Auckland from four cities and three districts to a single city which presumably speaks with one voice, will give Auckland immense leverage and lobbying power with central government.  This may have implications for where the tax dollar is spent and could even accelerate the flow of population to Auckland.  (The Government is apparently sensitive to this and does not plan to proceed with the recommendation that there be a Minister for Auckland or an Auckland Cabinet Committee with direct access to departmental resources.)
Already Wellington is talking about the need to bulk up to avoid becoming a bit player against a dominant Auckland.  Amalgamations pursued only as a strategic response to the Super City may not be well-conceived and may fail to deliver any appreciable benefit.

The battle for efficiency

The positives which the Commission blueprint can offer are significant:
  • A single rates bill
  • A single district plan
  • A single transport authority
  • A single long-term community plan
  • Invigoration of the CBD and the waterfront
  • Consistent regional branding
  • Co-ordinated infrastructure.
But the Commission has been careful not to oversell the savings which will accrue from amalgamation.  It commissioned a preliminary analysis from corporate finance consultants Taylor Duignan Barry that shows savings in the indicative range of 2.5% to 3.5% which, on this year's budgets, translates into between $67 million and $113 million.
The Commission notes these figures would need to be quantified in detail by the Establishment Board and that securing them will require "excellent transition and management arrangements".  Further, Taylor Duignan Barry has observed that the evidence from other local government restructurings in Australasia is that they do not provide large efficiency gains.
There will also be costs identified with the transition.  The Commission estimates the cost of structural change at $120 million to $240 million over the first four years.

Conclusion

This project started with a general recognition that Auckland is not working well and that this is imposing real costs not only on Aucklanders but also on the whole economy.  The status quo is not an option.
Further, although the Commission's report may be more radical than some were anticipating, it is well within the Commission's terms of reference and National has made it clear that this Royal Commission will not be ignored.  Therefore it is safe to assume that, although some of the Commission's ideas will end up on the cutting room floor, enough will be carried through that what emerges at the end of this process will be recognisably the Commission's vision.
Chapman Tripp will be following the reform of Auckland governance closely and has significant expertise to offer.  We will keep clients informed of events as they develop.
Footnotes
  1. The Royal Commission Report.
  2. Ibid.
  3. Ibid.
  4. Ibid.

Contacts