ChchLibrary2 blog

Local government – A new approach to new problems

16 September 2021, by Dean Croucher

The independent local government review announced by Minister of Local Government Nanaia Mahuta on 23 April is not before time. 

While it’s just the first move – with the interim review due this month, the draft report by September 2022 and the final report in April 2023 – it’s a big step in exploring how councils can maintain and improve New Zealanders’ wellbeing in the communities they serve far into the future.

Since the last meaningful review of the sector 30 years ago, the world is a very different and increasingly complex place. And in the last 5 to 10 years in particular, local councils have been grappling more than ever with how they keep their services and facilities current, safe, valid and fit for purpose.

“It is about our people” says Nanaia Mahuta, “The approach was needed to improve wellbeing of communities and environment.”

The pressure today on local government is huge. Population growth, ageing infrastructure, a capped funding base (via rates), increased community demand for new facilities and services and constrained balance sheets (limiting borrowing) make for a challenging time. 

On top of this, councils are faced with a number of broader social and environmental issues affecting wider NZ, including an affordable housing shortage, increased homelessness and climate change to name a mere few – some of the solutions of which probably lie more at the feet of central government rather than with community-governed entities.

Part of central government’s response to date has been an injection of economic funding, particularly in regional New Zealand, to encourage economic development and infrastructure investment. While this is a positive initiative, it ironically increases the demands on many of the faster growing regions to provide even greater levels of infrastructure investment! So how does local government fund all of these demands?

Asset base

Local authorities’ combined asset base (circa $150 billion) is largely made up of “property-related” assets such as land, buildings and infrastructure (fixed assets). This is a vast and complex portfolio including diverse assets such as in-ground infrastructure like the water assets (for the moment pending the Three Waters reform), roading, recreational and community facilities, town centre “spaces”, specialist facilities (like airports, ports, quarries etc) and the operational facilities occupied by local authorities themselves.

Much has been said about the ageing nature of this asset base, particularly in-ground infrastructure (the pipes). Many community facilities have also often been only maintained to a minimum level of service rather than being proactively renewed through planned reinvestment. As a result, councils are faced with not only “catch up” investment needed to replace these assets (take Wellington City’s water assets as an example) but a further surge in investment to meet growing demand.

Property touches everything

So where does TwentyTwo come into it? What role do we, as independent property advisers, play in any of this? It’s simple… property touches everything. 

If you look at the asset base, most of councils’ assets involve “property” in some shape or form. Whether it is a swimming pool, library, wharf or council’s own civic facilities, the ageing nature of many of these assets, coupled with the increased demand and increased expectations from communities, is requiring councils to reconsider how these services are delivered and how reinvestment is funded.

“We find ourselves in a really privileged position of being able to talk to elected members, chief executives and leadership teams about how some of the priorities (within or outside the LTP process) are funded and delivered – “what is the “strategy” to do more in a quicker time” contends David Lambie, TwentyTwo’s Practice Lead for Advisory, who works with many local authorities up and down the motu.

“In a constrained funding environment (the solution of which is clearly in the line of sight of the local government reforms), councils are looking for alternative solutions to traditional funding and delivery. Invariably, this involves partnering, either with the private sector or Iwi. We are increasingly involved in helping clients navigate through the strategy, engagement, procurement and commercial negotiation processes required and put together solutions that allow facilities to be delivered much sooner than having to wait for headroom in the Balance Sheet or queuing in the LTP process alongside other priorities”. 

TwentyTwo’s 30+ years’ experience in helping clients develop innovative commercial solutions and strong roots in the public sector, is being increasingly called upon by local government to help design and lead new initiatives. This coincides with private sector property developers and investors waking up to the opportunity that both local government and regional New Zealand potentially provides.

As David explains, many of the leading developers and investors have historically focused on central government and Auckland and Wellington, with some “early innovator” exceptions. “I think the market is recognising that local government is a large sector with pressing issues to resolve and a sector open to innovation. Many years ago we saw councils like Wellington and Auckland unlock their waterfront precincts by selling long-term ground lease interests to the private sector in exchange for investment and activation. Some of this was “trial and error” but the pre-paid, long-term arrangements (100 years + terminating ground leases) have generally been successful in accelerating development and changing the nature of these areas. The same principles are now being used for other facilities/initiatives that councils would have always funded/owned through their own funding and LTP processes”.

What options are available?

Local authorities have traditionally owned and managed everything! With such a wide role and mandate to deliver services and manage assets, with a long-term planning horizon, ownership of land, buildings and infrastructure (all things being equal) has been a logical decision. However, many of these local authorities are now very large businesses in their own right. A recent presentation by Peter Winder (McGredy Winder & Co) to the Institute of Directors highlighted that Wellington City Council, for example, sits alongside large businesses like Auckland International Airport, Port of Tauranga and Genesis, for example, on a league table when you compare revenue, expenses, assets and liabilities. They also employ large numbers of people either directly or through contracting relationships. As a result, local authorities face the same challenges as any business, including remaining agile to cope with change and how they use limited resourcing in the most economic way.

These dynamics are requiring local authorities to turn their minds to alternatives. When considering civic or community facilities, for example, (which is some of what we are involved with), you have three simple choices:

  • Fund the development/redevelopment using council debt or equity on the basis of long-term use, ownership and management (probably with an expected life of 50+ years depending on the nature of the facility)
  • Partner with a development partner to develop the facility on council-owned land, either via:

– a long-term ground lease interest in the land, to allow the partner to either hold the asset as an investment, sell the leasehold interest back into the investment market (for some development margin) and a commercial lease for the building facility on a market rental or open book return on cost (this type of arrangement could extend to allowing the partner to further develop the balance of the land as well – if feasible – to create additional investment opportunity); or

– a finance lease or concession-type arrangement (which is a form of public private partnership) whereby council retains the land but enters into a long-term structured commercial arrangement for the development and potentially operation of the facility for an agreed return on cost, generally with the asset returning to council at the end of the period, which may be extraordinary longer compared to a commercial lease depending on the specialist nature of the facilities

  • Lease the facility from the market on a long-term commercial lease with ideally multiple rights of renewal, with a market or return on cost rental formula

These options provide a range of alternative choices to be considered at the time investment is needed. All three options may be valid. Developing a clear brief, robust evaluation criteria and transparent process is important to drive best value and the optimal solution. Increasingly, we are seeing long-term leasing solutions for councils’ own civic and office facilities being considered (including partnering with Iwi) when traditionally local authorities would have been restricted to funding, developing, owning and managing these types of assets themselves. As ever, each project requires a tailored approach.

This highlights the added complexity of public perception when navigating through alternative options and decisions. As with any public entity, there is an obligation to act responsibly, prudently, fairly and with long-term interests in mind. There is always a risk that when alternative solutions are implemented, the short-term ‘optics’ may not readily appeal to the electorate which may impact electability, and therefore bold decision making. This is particularly so in local government and with community-elected governance. To offset this risk, maintaining a series of “principles” is important – well-developed communication, clear strategy, robust consultation and genuine Iwi engagement and jointly explored opportunities in the spirit of Te Tiriti o Waitangi.

In many ways, local authorities should be agnostic to the investment route depending on the nature of the facility or service needed. However, this change in thinking will take time. As noted, not only has local government traditionally had an “own and manage” view because of their long-term horizon, but because the ownership of loca-funded assets is seen as a core principle of local democracy – “we’ve paid for it so we own it… would be a long-held community view.”

Increasingly, we are seeing long-term leasing solutions for councils’ own civic and office facilities being considered (including partnering with Iwi) when traditionally local authorities would have been restricted to funding, developing, owning and managing these types of assets themselves. As ever, each project requires a tailored approach.

TwentyTwo’s mahi

We work with a wide range of local authorities across the country. Recent examples include Tauranga City (various civic/workplace urban renewal and infrastructure projects), Taupō District (community, civic/workplace and airport), Tasman District (civic/workplace), Porirua City (social housing in partnership with Tregaskis Brown), Auckland Council (civic/workplace and community) and Hutt City (community), for example.

...

About the author

Loves anything blue. Avoids routine and making plans. Dreams of playing golf on the senior tour. Should have been a chef or writer. Fond of chardonnay and food (any kind).

Dean is one of NZ's leading property advisers with 30 years of consulting experience acting for major tenants and owner-occupiers. He specialises in property strategy, tenant representation, project leadership and major transactions. He also continues to provide peer review advice across all major projects.

Other posts by this author...

10 August 2021

Why are our ‘high streets’ in decline? Cars are neither the problem nor the answer!

What’s wrong with our high streets? Everywhere you look, our traditional ‘high streets’ are in decline – from Queen Street to our local suburban centres and even across parts of provincial New Zealand.

Read more...

04 May 2021

The Auckland office market – what you need to know and where you might be going wrong

Our latest report on the Auckland Office Market puts an occupier/tenant lens on the clutter of property data that the industry loses itself in.

Read more...

27 April 2021

New Hub for Porirua Police

Earlier this year, Porirua Police opened the doors of their new Hub in Heriot Drive replacing their old station in Hagley Street.

Read more...

16 December 2020

Our Christmas message to you all...

As we come to the end of a difficult and challenging year, we pause to reflect on some of the positive outcomes, not least the support New Zealanders have provided to each other and their...

Read more...

08 December 2020

2020 Hui signs off in the sun

The Auckland and Wellington teams (minus a couple of people) enjoyed a long, late lunch and plenty of sun at Mudbrick Vineyard, Waiheke Island on Friday, as part of our 2020 Hui held in our...

Read more...

20 November 2020

Don’t be an Option Chaser

We often see businesses and senior leaders ‘chasing their tail’ when leasing office space, as they haphazardly chase one option after the other.This often results in wasted time, energy and cost.

Read more...

30 September 2020

Project initiates new partnership for NZ Police in Cambridge

TwentyTwo recently assisted NZ Police negotiate a Development Agreement and Lease with Waikato-Tainui for a new Policing Hub to be built in Cambridge.

Read more...

05 June 2020

What's next for offices and workspaces post-COVID-19? Our research says...

Last month, we undertook market research to gauge the state of organisations’ thinking on their office requirements and workspace post-COVID-19 to give us a better understanding of how businesses are reacting to the crisis from...

Read more...

07 April 2020

Part 2: Talking COVID-19 and rental abatement

Businesses’ response to COVID-19 has been rapid as many face significant revenue falls and need to put contingency measures in place immediately to mitigate as much cost as possible.

Read more...

29 March 2020

COVID-19: Talking with your landlord? Getting rental abatement. That’s what we do

As businesses put emergency measures in place to cope with the rapid economic impact COVID-19 is having on all sectors, one of the areas of focus will be reviewing large fixed overhead costs such as...

Read more...

22 March 2020

Adjusting to new ways of working? That’s what we do

I’ve been following a lot of the online comms in the last few days – emails from various clients and service providers and social media chat.

Read more...

05 March 2020

How to assess if your property ‘function’ can effectively govern and manage your property, workspace or specialist facilities

Most larger organisations have either an in-house property/facilities team and/or outsourced providers managing a portfolio of owned and leased property.

Read more...

09 December 2019

Planning for 2020: Making the most of the last two weeks

Before the year runs away completely TwentyTwo's Managing Director, Dean Croucher wanted to share his quick tips on how you can prepare for next year!While many of you will still be in Q3 from a...

Read more...

01 October 2019

The Wellington CBD office market is heading towards a “perfect storm”. Tenants need to develop a savvy approach to avoid being left high and dry.

 Commercial property expert Dean Croucher shares his insights on the buoyant Wellington CBD office market and the best ways for tenants to tackle their next property move using “strategic sourcing principles” rather than being...

Read more...

07 August 2019

Auckland office market: tenants always have options

 Recent research by Colliers highlights increasing risk that Auckland CBD office tenants will have fewer options to choose from in the future as vacancy levels sit at the lowest level seen (since records began in the mid-1990s).

Read more...

10 February 2019

NZ Police’s Digital Transformation

NZ Police’s new Digital Communications Centre was formally opened by the Minister of Police (Hon Stuart Nash) and Police Commissioner (Mike Bush) late last year.

Read more...

31 January 2019

TwentyTwo supports NZ Police to establish new Auckland headquarters

As part of our ongoing partnership with NZ Police, TwentyTwo (Dean Croucher and Rob Campbell) were engaged by Annabel Bayes (Strategic Property Adviser with NZ Police) to the lead the procurement of a new workplace for Auckland Police in Auckland City to replace the current Auckland Central Police Station at Cook Street/Vincent Street.

Read more...

11 November 2018

Why you need a Chief Property Officer at your top table

In the C-Suite of most large organisations you’ll typically find the roles of CEO, CFO, COO and even a CIO, CTO or CDO (Chief Information, Chief Technology or Chief Digital Officer).

Read more...

11 September 2018

Save money and reduce risk – understanding commercial property, the multiplier effect

New Zealanders often pride themselves on our DIY culture.

Read more...

18 June 2018

ESG: What is it? The latest hot issue traversing into the commercial property market

Sustainability, ethical impact, social responsibility – these are all terms, as business leaders, we’re very familiar with.

Read more...

04 June 2018

What the devil is hot-desking?

'Senior' correspondent Kitty Flanagan from Australia's comedy show, The Weekly, offers her insights into the workplace hot-desk offering.

Read more...

06 May 2018

The Workplace of the Future: The Impact of Artificial Intelligence on Commercial Property and Workplace Design

I recently saw an article online (from a friend of mine (Glenn Blumenfeld) who runs a similar independent property advisory practice in Philadelphia) talking about the impact of Artificial Intelligence (AI) on the property markets – pointing out that the uptake of AI will replace many of the traditional processing/research roles in professional services firms (legal/accounting) – who have been the largest occupiers of CBD office space in the past.

Read more...

01 March 2018

The Commercial Real Estate Revolution – how Co-Working is Disrupting the Market

The demands on commercial property in New Zealand are changing, a real estate revolution is happening.

Read more...

25 February 2018

TwentyTwo Tribe - come & meet Rob our Auckland Lead

Introducing the newest member of the TwentyTwo Tribe, Rob Campbell. Rob calls Auckland home and will be heading-up TwentyTwo’s Auckland office.

Read more...

10 December 2017

Changing markets, new ideas, increasing diversity...what about 2018?

With 2017 coming to a close, here’s my take on some key markets, our diversifying client base, the corporatisation of the co-working space, the shift in corporate capital away from bricks and mortar and our...

Read more...

02 December 2017

TwentyTwo’s Tribe - meet the Newbies

2017 has been another busy year for TwentyTwo, our team continues to grow and I thought it was a good time to share the exciting new people, and their skills that have recently joined...

Read more...

12 September 2017

We are hiring a Marketing Communications Coordinator

Marketing Communications Coordinator (Part Time/Wellington or Auckland based). TwentyTwo is a leading professional services practice providing strategic property advice to government and corporate clients, from offices in Auckland and Wellington.

Read more...

07 April 2017

TwentyTwo appointed to five categories of Government Property Panel

TwentyTwo has recently been appointed to the Government Property Panel, an appointment that recognises our deep understanding and experience of working for the main Crown/Government agencies over the last 27 years.

Read more...

21 December 2016

Advocating for the Tenant at PINZ Government Property Event

At the recent Property Institute Government Property event in Wellington, TwentyTwo’s Dean Croucher joined David White from Government Property Group, Peter Dow (deputising for an unwell Maurice Clark) and Steve Maitland from Colliers to discuss...

Read more...

07 December 2016

Team TwentyTwo's Xmas parade

Team TwentyTwo celebrated the end of another fantastic year last weekend by heading up to Auckland to see Coldplay live at Mt Smart Stadium! The previous night, our team got together for a few quiet red...

Read more...

21 November 2016

Auckland CBD transformation takes shape

Major transformation of the Auckland CBD continues at pace with the demolition of the former Downtown Shopping Centre now complete (above left).

Read more...

02 November 2016

We're hiring! Full-time Property Consultant in Auckland

We are seeking outstanding professionals to join a growing team, making a difference to businesses around the country.

Read more...

08 September 2016

TwentyTwo's Paul Mautz is Property Advisor of the Year

Paul Mautz, Associate Principal at TwentyTwo, is the inaugural winner of the Property Institute of New Zealand's Property Advisor of the Year award.

Read more...

14 August 2016

Creative thinking delivers value for Commerce Commission

Faced with a rapidly growing Auckland team and a new strategic focus on Auckland, the Commerce Commission had to make a choice about exiting early from a lease and relocating within the CBD.

Read more...

09 May 2016

Procurement solution fuels major step towards biodiesel in NZ

Z Energy’s customers in Auckland, Waikato and the Bay of Plenty will soon be able to fill their tanks with ‘Z Bio D’ – a sustainable diesel which will be manufactured at its new bio-fuel...

Read more...

31 March 2016

Wellington Airport runway extension – unleashing potential

We're passionate about the success of Wellington and its contribution to the economy. Our business contributes to that success by helping organisations make better property decisions that help them unleash their potential.

Read more...

21 January 2016

Rise of the independent – why independence is better

Independence was a founding principle for TwentyTwo because we believed it was a critical differentiator that mattered to clients.Today, in our sector, we think it matters even more.

Read more...

18 December 2015

After a big year, a big day out

It's been fantastic year for TwentyTwo thanks to our hard working and talented team.So we decided to celebrate and reflect with a big day out.It was a cracker.

Read more...

15 December 2015

22 = 25

As 2015 comes to an end, it’s time for some reflection.It’s been a year of positive change and big progress for TwentyTwo.

Read more...

28 September 2015

Part 3: A journey from greenwash to best practice

In Part 3 of a series of blogs on the New Zealand Green Building Council, we review the future of NZGBC and what it offers organisations, particularly tenants and owner-occupiers…The NZGBC is 10 years...

Read more...

22 September 2015

Part 2: NZGBC builds on firm foundations

Following Part 1 published last week where we introduced the NZGBC and outlined our early involvement and renewed commitment to the Council, Part 2 gives a brief history, along with our experience of tenant/end...

Read more...

14 September 2015

Part 1: NZGBC gets the green light

TwentyTwo has recently renewed its commitment as a member of the New Zealand Green Building Council (NZGBC).And since World Green Building Week is all set for 21-27 September, we’re marking the occasion with a series of three blogs over three weeks to highlight NZGBC’s role in working to improve the quality and sustainability of NZ properties, as well as our involvement over the years.

Read more...

24 August 2015

Wellington projects make progress

Great to see some real progress on site last week with two of our projects… Cuba Central On Monday morning, I attended the ‘ground breaking’ ceremony for Cuba Central – the new Creative Technologies and Arts Centre being developed by Willis Bond for WelTec and Whitireia.

Read more...

18 August 2015

TwentyFive years of disruption for TwentyTwo

‘Disruption’ is a buzzword in the business world at present and, here at TwentyTwo, we also talk about being disruptive.About being a challenger brand.Challenging convention.

Read more...

12 August 2015

David Lambie joins TwentyTwo

Well-known and respected property adviser David Lambie has joined TwentyTwo as a Principal and Director.

Read more...

29 July 2015

Take it from the top

A recent issue of boardroom, the IOD’s bi-monthly magazine that keeps members informed of relevant governance and business issues, includes a feature written by Managing Partner Dean Croucher.

Read more...

16 June 2015

New Tenant Briefs page outlines client requirements

A key part of our unique end-to-end process is to intimately understand each property market and ensure our clients have visibility on the the widest range of accommodation and property options.

Read more...

15 June 2015

Independent advisers vs leasing brokers: Who gets you a better deal?

As a tenant thinking about leasing new premises, you have an important decision to make.Do you:.

Read more...

15 June 2015

People aren't your biggest cost – premises are!

A few months ago, I was taken back by a statement made by an industry insider – "people aren't your biggest cost – premises are".

Read more...

04 June 2015

Corenet Auckland Symposium 4

This is the last of my four blogs about the Corenet Auckland Symposium - Location, Location, Location that I attended in June.

Read more...

04 June 2015

Another great new signing!

TwentyTwo is delighted to announce our new 2014-15 season player partnership with Andrew Durante, Captain and No.

Read more...

04 June 2015

TwentyTwo appointed to advise Callaghan Innovation

TwentyTwo has been appointed to undertake a National Property Strategy for Callaghan Innovation.This work will involve some more detailed planning for their Gracefield Site.

Read more...

04 June 2015

TwentyTwo appointed to advise NZQA

TwentyTwo has also been appointed to help NZ Qualifications Authority make better use of their premises in Wellington.

Read more...

04 June 2015

TwentyTwo's workplace makeover

Following our re-brand in 2012, we decided to take some of our own medicine! To align with our strategic intent and values, Duncan and Dean developed a 'brief' in the same way we do with clients.

Read more...

04 June 2015

Phoenix Sponsorship Launch

On 24 September a number of clients joined us to celebrate the start of our sponsorship for the 2014/2015 season with Andrew Durante, Captain of the world famous Wellington Phoenix! Andrew was a real hit and...

Read more...

04 June 2015

Shaping our city skylines: Part One – Wellington

There’s a lot of positive news and activity at the moment across our three major cities, particularly in the commercial property space.

Read more...

04 June 2015

National Property Strategies: Observations from the frontline

We've completed quite a bit of work over the last 18 months helping Government Agencies with their Property Strategies.Together, we've learnt some good things which we've outlined here.

Read more...

04 June 2015

Thanks for your support this year – have a great Christmas

It's been another great year for TwentyTwo with fantastic projects and the start of a promising relationship with Exis Global Tenant Representation.

Read more...

04 June 2015

Office moves for the better

Office moves for the better is an interesting article by the UK's Royal Institute of British Architects (RIBA) on the roles and responsibilities around workplace procurement and design.

Read more...

04 June 2015

Conflicts of interest – a “spreading cancer in corporate real estate”

A robust, well-researched white paper released by Gail Corder Fischer of US tenant representation business Fischer explains how corporate tenants might be “leaving more money than they realise on the table when they place their property portfolios in the hands of large real estate brokerages that serve multiple stakeholders”.

Read more...

04 June 2015

Workplace design and productivity: are they inextricably linked?

In a recent rummage through some old research papers, we unearthed a brilliant paper from the RICS Property in the Economy Series entitled 'Workplace Design and Productivity: Are They Inextricably Linked?'.

Read more...