The recent LGNZ Conference in Ōtautahi Christchurch was a great opportunity for local government leaders to share their challenges and explore new ideas and opportunities, with the thought-provoking programme of local and international speakers creating an overwhelming sense of energy and optimism.
David Lambie and Dean Croucher were among 750+ delegates who heard more about the challenges facing the sector and future thinking and planning. They also compared this with our own experience of working with local authorities.
A few key themes resonated in particular, such as the role local government plays in wellbeing (of communities) beyond central government services, how the needs of future generations are embedded into policy and planning (e.g. the lessons from Wales and Sophie Howe’s role as Wales’ first Future Generations Commissioner), as well as the call for more localism (local decision making) by LGNZ through their localism.nz campaign.
While these insights and initiatives are all very valuable in helping shape local government in the future (alongside The Review into the Future for Local Government), the underlying issue is the lack of funding for local government, the inadequacy of the rating system as the primary revenue source and the growing deficit in infrastructure investment (past, present and future). ‘Infrastructure’ in this context is a catch-all for all civic and communities facilities, as well as typical infrastructure.
While both major political parties (whose leaders spoke at the conference) acknowledge this challenge, there is much more to be done to solve the problem. The idea of ‘city deals’ as seen in other jurisdictions like Manchester in the UK and the Gold Coast in Australia (where central government partners more broadly with local regions), was seen as a potential solution and we understand some initial discussions are already underway in some regions.
Local government challenges
It’s clear that local government faces challenges on all fronts at present.
As populations increase, not only is infrastructure under stress, but there is an increased expectation from communities for better services and amenities. At the same time, communities want costs reduced and rates capped in the face of a growing unaffordability gap for many households and small businesses. The two simply don’t balance. Significant natural disasters, climate change and the need, in many cases, to relocate towns to higher ground (to prevent future problems) all puts added strain on funding.
To help with this problem, we’ve taken a look at how local government could unlock value and potentially free up capital and operating costs by reviewing their own property portfolios and assets.
Local government property (‘infrastructure’)
Traditionally, local authorities have owned and leased a diverse range of property assets in addition to their core infrastructure assets like water, roading and the like. These often fall into:
- Community facilities used to provide public services and amenities (community halls, libraries, community hubs, toilets etc), putting aside parks and recreational assets
- Civic facilities including offices, meeting and function spaces used to govern, administer and engage with communities
- Operational facilities used to run the operations of council (including depots, workshops, warehousing etc)
- Housing (elderly and social housing)
- Commercial/investment properties (including historical tenure arrangements such as endowment land)
- Specialist assets often associated with regional economic development (including airports, ports, wharfs, CCO assets etc)
- Land and other assets held for future growth and initiatives or for historic reasons
These portfolios represent a large part of a local authority’s balance sheet and account for ongoing maintenance, renewal, depreciation and operating costs.
The patterns we see
In our work for a number of local authorities, we see similar patterns. While well-intentioned, typically local government does not have a strategic grasp on their property portfolios. Issues include:
- Poor data is held on the current portfolios and, if held, it is not captured or presented in a snapshot form that provides insights. This often hides the underlying cost, utilisation and fit-for-purpose of the assets. It also often hides the true investment return from so-called commercial and investment properties
- Many assets/properties require renewal and reinvestment. And many are no longer fit-for-purpose or meet the changing demands of communities. Increasingly, many assets have seismic or compliance issues requiring significant reinvestment or replacement
- Often, the investment in assets is spread too thinly across multiple sites, rather than consolidating and reinvesting in fewer, but more optimal assets
- Many assets have legacy land tenure, encumbrances or heritage status that limit use or disposal. Community resistance often also impedes the sale of assets (usually because of the lack of a grounded rationale) limiting potential opportunities
- Not all assets are centrally managed. Some are distributed across other business groups and service delivery teams meaning there is no holistic view
- Asset management plans are often in place but many lack the strategic linkage back to what the local authority and community are trying to achieve. It is not much point having an asset maintenance and renewal plan for a facility when you don’t understand its purpose, utilisation and future role in the wider network
This list is not exhaustive, but highlights the gap in how well many local authorities are planning and managing their portfolios and the lost opportunities.
In all cases, these questions need to be asked:
- How well is your property portfolio supporting the aspirations of your community?
- Where are the opportunities to release capital and reduce operating costs by redirecting investment and spending and developing a future-looking plan?
- How can you use your portfolio to initiate place-based change and economic development?
- How can you use your portfolio to collaborate with mana whenua, the private sector and community for better local and regional outcomes?
Linking long-term planning to property planning
Given councils will continue to require property assets to serve administrative and management functions, deliver community outcomes and generate commercial returns, to make better informed decisions regarding property assets, every local authority (big or small) must understand their objectives, purposes and the true costs associated with running and retaining these assets.
They also need to stand back and explore how their assets can be a catalyst for wider change, urban renewal and regional prosperity.
We’ve been fortunate to work with a range of local authorities and help them navigate some of these questions.
We’ve seen some use their portfolios to accelerate change and urban renewal, with our work alongside Tauranga City and their initial ‘heart of the city’ project a key example. These initiatives also provide opportunities to partner with the private sector and often resolve outstanding issues with mana whenua and local iwi and hapū.
In other cases, we’ve developed commercially-focused strategies and plans to help rationalise particular parts of a portfolio. The early work with did with Auckland Council to create a commercial strategy for their corporate and civic offices post-amalgamation gave them the roadmap to implement significant change. Even as they come under fiscal pressure and a new commercially-focused mayor, this programme of work is seen as a benchmark example.
Many have aging workplace and civic facilities and we’re increasing working with these Councils to develop options, funding and procurement roadmaps, through business cases, and implement new solutions. Our work with Taupō District and Tasman District are two examples.
More recently, we’ve adapted our typical ‘property strategy’ process to support local authorities develop strategic-led property plans that sit ahead of an asset management plan, including recent work with Waitaki District and Porirua City.
This process helps to:
- Build a top-down plan that is better linked to council and communities plans and aspirations
- Facilitate conversations between elected members and council staff to ensure there is alignment on priorities
- Identify the issues and opportunities across the portfolio, including opportunities to reduce cost, dispose of surplus assets and prioritise investment
- Create dashboard-type reporting that provides key insights beyond the mass of data
- Shift the current assets into clearer categories for easier decision making
- Develop a forward-looking plan that informs the LTP and downstream planning like asset management plans and financial budgeting
The shifting process is a vital element. Often, local authorities classify their portfolio for accounting or historic reasons. A more tailored categorisation is a sound way to test the need for assets and reallocate as appropriate.
The benefits arising
By adopting this type of approach, we have seen a number of wider benefits beyond the simple ‘plan’ output. This includes:
- A transformation in elected members attitudes as they gain insight into the true costs of their property portfolios. Understanding the financial burden and resource allocation required to manage these assets provides newfound perspective. By quantifying these costs, decision-makers are better equipped to evaluate the portfolio’s overall impact and make informed choices for the future
- Empowering leadership teams and elected members to make critical decisions, confidently and in unison. As well as being able to identify property assets that align with the council’s purpose and warrant continued investment or, alternatively, properties that fail to add value to community outcomes and may need to be repurposed or disposed of accordingly
When local authorities have confidence and clarity in their property planning and clear rationale, we see them then able to think even bigger and in more dynamic ways. Considering collaboration opportunities and how they might incentivise the market/public sector to be part of their plan, using their expertise and capital to bolster the vision and achieved desired community outcomes in better ways. This requires the confidence of elected members to engage with their communities in constructive and rational discussions. This confidence is supported by being clear about the rationale and drivers for positive change.
By understanding the purpose and costs associated with property assets, Councils can strategically allocate resources, maximise value for their communities and address the challenges they face. Embracing a new way of thinking paves the way for a more efficient and effective local government where property portfolios become catalysts for positive change.
TwentyTwo’s strategic consulting practice (Strategy22) has developed an extensive résumé working with diverse organisations across New Zealand for the last 20+ years, developing tailored strategies and plans for portfolios.
Often property planning and property decisions get disconnected with evolving strategic intent and strategic priorities – the ‘why’. This can result in property being in the wrong location, over/undersized, too expensive and not fit-for-purpose, for example.
Our processes and engagement helps to join up property/asset/infrastructure planning with the most relevant strategic drivers to ensure any portfolio and key investment decisions remain relevant and future-proofed.