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LGC drops one shoe – the other(s)?

  • February 16th, 2015

Does the DomPost still have a news editor?

Opposite the page this morning that headlined Annette King’s non-story on Health discarding a few thousand dollars worth of redundant pamphlets was a tiny item noting the Local Government Commission’s admission of a $30m under-estimate of the transition cost for its preferred Uber-City model for Wellington region.

Yet the DomPost thought amalgamation important enough to dignify with a weightless supporting opinion a few months ago. And it has recorded previous LGC confusion over such trivia as cost, though it has never thought to campaign for cost benefit analysis.  Could the Regional Council advertising budget have anything to do with the DomPost lack of curiousity about LGC incompetence?

Because today’s correction is a tip of the iceberg admission. There are two more glaring problems in the LGC report and draft recommendation. Will the LGC come clean on those?

First, they’ve ignored the very purposes of local government. Secondly there is a reasoning gap between their preferred solution, and their own financial analysis, that seems to show that the LGC’s objective for amalgamation is really bigness for its own sake, not the efficiency so often claimed.

Even after today’s correction ordinary people will not trust amalgamation cost estimates. Normal experience of empire-building IT and amalgamation projects should have made the LGC much more cautious about cost estimates. A glance at the woes of the Auckland integration ($100m over budget, late and still not delivered) should have been enough to tell the LGC its Wellington empire costings were unreliable.

But it may need a Court to set them straight on their other bungles.

Purposes – The LGC has set out to ignore the law that inconveniently tells them local government is about local government – that means decision-making by communities for themselves, not arrogant provincial government. The LGC is required to promote democratic local decision-making. Incredibly, in citing that criterion they blithely omit the vital statutory word “local”*. It is hard to think of more calculated ruler insolence or incompetence than a statutory body citing its own empowering legislation falsely, in the way it wants it to read, rather than how it actually reads.

Pretending the word ‘local’ is not there seems intended to help the Commission conclude that a single region-wide council with impotent/decorative local boards ranks higher in terms of [“local”] democracy than the existing genuine local self government by councils with real decision-making power.

The second bungle is equally important.

It seems the LGC chose to simply overlook efficiency – the other strand in the law for deciding on structural changes. They’ve recommended the option ranked fifth out of the eight alternatives in its own commissioned financial analysis.

Of the reorganisation options the standout performer was ‘Stronger Regional Delivery’ (the closest to the reform option advocated by Hutt City) It would build on current collaboration among the regions local authorities, for delivery of network services like transport and water. The net present value (NPV) of this option is expected to be $199m with an estimated transition cost of $129m.

In contrast, the LGC’s preferred option of a supercity is expected to cost $210m with a NPV of $58m.

How can the LGC have applied the statutory criterion when its recommended option is fifth out of the eight? How have they taken account of costs, expected returns, and implementation risks (things not turning out as hoped) if it is not in their own financial analysis?

Will there be another correction from the LGC. Will business ‘thought leaders’ in Wellington ask for them? Or might the Minister of Local Government step in as some councillors want?

Citizen opinion suspects LGC prejudice against genuine local self determination. But it is not easy for the Minister to now influence much other than the timetable. She’ll try to stay well away from the debacle looming for the LGC

*See paragraph Local Government Commission (p. 110, Section 4.96) – Draft Proposal for Reorganisation of Local Government in Wellington, Volume 2


  • Bill Foster
  • February 22nd, 2015
  • 1:09 pm


Sadly the media, who have an important role to play in informing public opinion on these important public issues, are more interested in presenting controversial or balanced viewpoints – where the so called “balance” ignores the weight of evidence on one side (as Eric Crampton”s last post from the NZ Initiative pointed out in relation to coverage of the debates on vaccination and genetically modified foods.

In meeting the challenge of achieving both fair representation and good local government you have talked about ways the system might be improved, I do not see much discussion on alternative forms of governance that might provide better and more stable local Council operations.

if the problem amalgamation seeks to resolve is simply one of too many Councillors, why not just reduce the number. (Even looking at supercity example like Auckland, it is hard to see how 23 Councillors, from diverse communities across the Auckland region, could ever agree unanimously on anything, and a majority simply reflects the preferences of Councillors elected by the greatest numbers of ratepayers.) The missing ingredient is any focussed commitment to the public interest purpose of providing effective and efficient local services to the whole community across the whole Council area.

Clearly smaller Councils are a better, more transparent and accountable, way of letting communities get what they want (and pay for) even if it costs ratepayers a bit more. And Councils have demonstrated that they can cooperate in planning and resource sharing if they have the right motivation.

So why not explore models for better governance to achieve these ends?

We know the “bigger is better” model is inadequate. We know that some local government services/functions are better provided regionally (across Councils) and that some are better provided locally. We know that all Councils and regions are different in some way. We understand the need for balancing investment in current and future service needs and the intergenerational implications. Lets find a more suitable model to manage this complexity stably and well.

Council managers often behave like bureaucrats and administrators rather than managers because of the conflicting objectives and lack of clarity of purpose or intent from Councils. This incentivises them to avoid accountability and mistakes by promoting and following detailed rules and restrictions that remove judgement from decisions and frustrate local ratepayers and residents.

Corporate governance experience suggests improving this calls for smaller Boards focussed on delivering excellent basic services through fully empowered management with strong accountability.

Council size should be left to local community ratepayers who can freely amalgamate Councils or separate from them to form new Councils as they choose. (Obviously a practical minimum size for accepted financial and economic operation is required, as in the Queensland examples. e.g. overseas experience suggests this might be between 10,000 and 30,000 ratepayers.)

Then what about alternative Governance structures?

Many may be proposed and I would like to see us start a discussion on this, but, as a start, how about a two tier governance system, similar to that familiar to many European companies, but designed to recognise the drivers of local democracy.

5 to 20 elected representatives (numbers depending on Council size by ratepayer) would form a Governing Board. The Governing Board in turn (using independent advice) would appoint a Management Board (not including any of its own members) of between 5 and 10 experienced Directors (selected on a strictly meritocratic and non-partisan basis) to govern the provision of Council services by management. The Management Board would include one Director from the Management Board (or Council) of each neighboring Council – to facilitate cooperation and resource sharing between Councils.

The Responsibility of the Governing Board would be solely to:

appoint and approve remuneration for the Management Board;

ensure the Management Board has a clear mandate and Charter and does not move away from the basic local government purpose (noted above) of providing effective and efficient services to the whole community across the whole Council area; including ensuring that the Local Council does not expand operations into areas which are the responsibility of national Government – such as social welfare, education, justice, national infrastructure, biosecurity and national cultural development for example – since these are national functional responsibilities undertaken for the benefit of, and funded by, all New Zealanders on a nation-wide basis and carried out by Departments across the country;

approve any borrowing (other than for regular operations purposes); and

report annually to ratepayers.

Strategic and operational plans and governance of executive management would be the responsibility of the Management Board – i.e. functioning more like a traditional corporate Board.

Your idea (in your comments) of a corporate style retirement/rotation policy would work more efficiently for such a Management Board, and assist in reducing insider capture. (For much on that subject see e.g. Francis Fukuyama: Political Order and Political Decay: 2014) Maximum tenures (10 years?) should be adopted for the Management Board to ensure it remains objective and focused.

Accompanying this structure Government should ideally delegate more responsibility for local infrastructure to local Councils e.g. to change the basis of rating funding, allowing them to charge more from user fees for any services that are not designated as national infrastructure. Local roading e.g. could then be provided and tolled for usage in the same way as water and waste disposal services. Funding (including cross-subsidies from other ratepayers for community services) would then be clearly identified to justify investment. Government funding of infrastructure (e.g. for roading) to rural areas would be clearly identified or the improvements provided directly by Government.

Councils should also have the right to seek equity investment in their riskier projects – as long as that equity funding did not carry any voting rights and investors had reasonable ways to exit in a secondary market).

This may not be the best of many alternatives but, in view of the significance of the impact of current local government reorganization proposals on our society, why are we not having some discussion on other options?

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