This years’ local government conference, SuperLocal 2025 is nearly upon us again. On July 16-17 Local Government New Zealand (LGNZ) will host the local government community including speakers, sponsors, elected members and senior staff at the Te Pae Convention Centre in Christchurch, with the theme “Brilliant Basics and Beyond”.
Brillant basics
With the government doubling down on making sure local government knows its place, the theme is right on point. On RNZ’s Morning Report, the Finance Minister made it clear that “council’s don’t always do a great job of spending your money like you would spend it…there are wasteful projects….there is evidence of that…..we want Council’s focusing on the things people expect them to do, which is rubbish, the roads, the pipes, the basics – not all the fanciful projects”.
So with those expectations, how does local government effectively and efficiently deliver its core services (the rubbish, roads, pipes etc) while also building places where people actually want to live? While getting the basics done well is important (and expected), towns and cities are much more than simply pipes and roads. If they were, they would be uninspiring places to work, live, learn and play with dwindling populations as a result.
The challenge laid down by government is a fair question when it comes to ensuring basic services are delivered efficiently and rate payers get value for money. But in isolation, the expectation overlooks the broader role local government plays, particularly at a time where many towns and cities are struggling with increased retail vacancies, crime, homelessness and concerns for public safety? If local government is not responsible for creating economically successful and vibrant communities, then who is?
Cost challenges
There has been a lot of discussion in recent years around whether rating, as a funding tool, is fit for purpose. In many communities rating revenue (calculated from property values) is not keeping up with the cost of maintaining, renewing and extending critical infrastructure needed, including roads, water and pipes for example. This is requiring councils to increase rates to help fund these shortfalls to keep within their debt limits.
In the meantime, the current debate has moved to whether rates increases should be capped to avoid excessive spending by councils. Most communities have seen large increases in rates in the last period. Capping rate increases is seen as a way to slow spending and to avoid unnecessary projects.
The debate is still unfolding. Christchurch Mayor Phil Mauger has come out in support of some cap. Others are not convinced. For example, Sam Broughton, LGNZ Chair and Selwyn Mayor points out a large part of rating revenue is spent on critical infrastructure not fanciful projects. This is a good point given it is widely accepted there is a large infrastructure catch-up needed to fix aging assets (as a result of poor planning and a lack of historic investment) and in some communities, in response to rapid urban growth and new development.
So how would a rate increase cap apply? Is it linked to inflation (as suggested by the Taxpayer’s Union) or is it set using an educated guess? Does the cap apply to all council spending or is rating revenue directed towards infrastructure for example excluded? And if so, how is infrastructure defined? Is it the boring horizontal stuff underground along with roads etc that we rely on but don’t fully appreciate or does it include community infrastructure like museums, libraries and similar assets? These types of facilities are also considered to be infrastructure if you look at the definitions used by the Infrastructure Commission, which differentiates between network infrastructure and social infrastructure (see Draft National Infrastructure Plan).
At a time where everyone is looking at cost, it is a good discussion to have. It raises plenty of questions. And no doubt there will be more to come.
Beyond the basics
While communities are clearly facing a cost of living challenge, and rates make up part of that cost, most rate payers also want pools for their kids to learn to swim, libraries for their kids to learn to read and sports fields for their kids to play on. Whether you have children or not, hopefully you get the point. These community assets (social infrastructure) are expensive to build and maintain, but they build our community fabric and sense of belonging. We need to avoid fanciful projects but we can’t avoid the need to invest and renew this infrastructure as well.
At the same time, we are also seeing communities looking for ways to boost economic activity and to revitalise city and town centres. We are increasingly engaged in these conversations with local government. Experience shows that the private sector will respond with private sector investment when they see proactive leadership from local government and investment in key infrastructure, as this builds confidence that the city or town is worth investing in. Many of our urban areas are facing similar challenges as the role of the city or town centre changes. These places become vibrant when they attract businesses and supporting enterprises who bring people and activity. Without the pull of people, they are very hard to stimulate.
Draft national infrastructure plan
Alongside the debate about rates and wasteful spending, government has just released its draft infrastructure plan. While I’m still working through the detail and intend to provide some feedback, a coordinated national plan is well overdue and desperately needed.
And while you may take from comments from the Minister of Finance and others that council’s don’t need to invest in like of swimming pools and libraries (with the emphasis on the basics) as noted the infrastructure plan does call out the need for social infrastructure investment. While you could argue government means infrastructure like education, health, public administration and social housing, it does include community facilities and parks and open spaces for example, albeit not quantified at this point.
So despite the current focus on the basics, it’s fair to say that the government equally appreciates the need for community and social investment.
In terms of the current dialogue, in effect what it is saying is that any new projects/new investment has to follow sound business case principles, as they should. In our experience, that would extend to:
- Community and organisational needs are well founded, scoped and challenged
- Those needs are converted into a robust set of requirements that are optimised for efficiency, have built-in flexibility for change and are benchmarked to others
- A full range of potential solutions are fully explored and tested to meet the requirements, including the adaptive re-use of existing assets and private sector delivery
- The true whole of life costs are considered, including the need for asset renewal and replacement over the lift of the asset, which is often missing, leading to deferred maintenance, obsolesce and catch-up costs as we are seeing across large parts of the Crown’s estate
- All funding and ownership solutions are explored before accepting the default setting of ownership and capital funding via the Long Term Plan
- Thorough procurement strategies are put in place to drive value for money and the best outcome
- Robust business cases are developed, setting out the strategic rationale, case for change, basis for investment and funding, delivery and management pathways
- Private sector expertise and experience is used to help ensure successful delivery
- Sound governance processes and independent expertise is used to oversee projects from inception to completion
- Assets are progressively maintained once in use (using best practice asset management principles) and ongoing maintenance and renewal funding is not diverted for other purposes
These principles follow best practice strategy, planning, procurement, delivery and management principles for large scale projects. They are not new but unfortunately, they are not universally applied. And that problem is not unique to local government.
While some great progress has been made in improving the thoroughness of planning and delivery of projects, if these principles were applied more consistently, governments (of any persuasion) and ratepayers alike would be less worried about fanciful projects and wasteful spending and more confident prudent long term investment decisions were being made in the interests of local communities and NZ Inc. Something the sector can continue to work on.
