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Local government is struggling with two major reforms being imposed by central government, both too big and too important to get wrong

Local government is struggling with two major reforms being imposed by central government, both too big and too important to get wrong
Parnell Rise, Auckland

By Shane Martin

• The country has gone into Covid alert level 4 lockdown again, which completely changes the way we live our lives. And even though lockdown is a massive interruption, all the normal functions of government are still at work.

• There are currently two major central government policies that directly impact local government.

• The National Policy Statement on Urban Development (NPS-UD) and the Three Waters Reform propose two massive changes to the way local governments operate.

• The impact from these reforms is going to be in the billions of dollars and across multiple generations. Therefore, it’s absolutely necessary we get this right.

• While it is still somewhat early days, both central and local government are working hard to determine how the proposed reforms will work in practice and what the costs and benefits are likely to be.

The lowdown on the lockdown

While it’s too early to say how this outbreak will shake out, we do have insights from the last time around. Estimates from the first 2020 lockdown suggest that Covid alert level 4 decreases economic activity by 25- 30%, in the range of $100 million of GDP per day. That said, it’s important to remember, that number compares to business as usual and business as usual isn’t a possibility right now. Rather, the choice is between lockdown and uncontrolled spread of covid in Aotearoa, something nobody wants. Since we all hope that we can return to business as usual as quickly and safely as possible, let’s do our part in the meantime – be good to each other, support local business where we can, and keep safe.

Life and legislation go on

Despite the latest covid outbreak and the associated covid alert level 4 restrictions, life and government move on in other ways. From a local government standpoint, some of the biggest challenges we have faced over the past year or so have been in addressing policies handed down from central government.

The two biggest policies we’re dealing with right now are the National Policy Statement on Urban Development (NPS-UD) and Three Waters Reform. At their heart, each of these has the goal of addressing long-standing issues facing New Zealand – housing unaffordability and water quality/management. And while these are commendable goals, they represent a massive undertaking, reimagining where and how infrastructure is provided, who pays for it and how, and determining the best way to accommodate massive population growth while improving social and environmental outcomes.

A lot of ink has been spilt on these initiatives, but much of the discussion in the press has been opinion-driven. Of course, this generates clicks and gets people thinking about the policies, but it does not always give readers a clear view of the facts surrounding the debate. For instance, an article that anecdotally describes one person’s negative view of apartments does little to inform the greater public about the benefits and costs of increased density for the city.

Every single decision we make has costs and benefits. It’s our job as a council and a society to make the best decisions so that the overall benefits outweigh the costs. And it’s also on us to help the public understand those decisions.

NPS-UD? G-L-A-D to meet you

So, what does this mean for the NPS-UD? First, it is useful to outline what the NPS-UD is and what its goals are. According to the Ministry of Housing and Urban Development, the policy “aims to ensure that New Zealand’s towns and cities are well-functioning urban environments that meet the changing needs of our diverse communities.”

It does this primarily by directing planning authorities to enable an increase in housing supply and ensure that planning responds to changes in demand. It also requires the removal of overly restrictive rules that affect urban development outcomes.

For Auckland, the NPS-UD will likely result in massively increased density around our city centre, our metropolitan centres (for example, Albany, Henderson, Manukau), and the walkable catchments around our rapid transit network. At a base level, this makes sense – we should be enabling as many people as possible to have easy, walkable access to the places they are most likely to need to go. That is jobs, public transport, restaurants, and grocery/retail stores.

In theory, this achieves a couple of goals. First, it lessens the pressure for outward sprawl by allowing more people to live in already developed areas.

It also increases the viability of public transport and active modes of transport, as people are much more likely to walk to a store if it is less than a ten-minute walk from home or to take a bus if there is high-frequency service to many destinations.

Of course, increased density isn’t free. From a financial standpoint, there is always a question about whether the existing infrastructure (roads, water pipes, etc.) can cope with increased load. Upgrading infrastructure is very expensive and much more complicated when compared with laying new infrastructure in greenfields areas.

Other costs are more difficult to identify. While NIMBYs often get criticised for their views, their concerns can be legitimate. Although it brings benefits, changing the character of a neighbourhood can also impose real costs on those who will be less happy living in the reenvisioned area. This is just further evidence that every decision that gets made involves a trade-off.

As Auckland Council and other councils around the country grapple with how best to implement the goals of the NPS-UD, we need to keep a couple of things front of mind. First, and most important, is to remember that all changes have costs and benefits. To make the best choice we must evaluate these rigorously and dispassionately. Second, we cannot be too precious about the decisions we have made in the past. There is always room for improvement, and we should welcome the opportunity to make things better whenever we can.

3 waters 2 be 1 big change

Three Waters Reform is a bit of a different animal. Unlike the NPS-UD, which is a policy directive, this reform proposes a full overhaul of the system that manages and delivers drinking water, stormwater, and wastewater (three waters) services to the residents of New Zealand.

The current system sees these services mainly provided by 67 different local authorities. According to the DIA, local government faces many challenges with the provision of these services – especially “funding infrastructure deficits, complying with safety standards and environmental expectations, building resilience to natural hazards and climate change into three waters networks, and supporting growth.”

It is estimated that meeting these challenges will cost the country between $120 and $185 billion, causing household water bills to be 7 to 13 times higher in the future.

As a solution, the government has proposed a complete restructuring of how three waters are delivered. Instead of 67 entities, only 4 entities would manage the country’s water systems. Their balance sheets would be separate from councils, freeing them up to borrow enough money for infrastructure improvements. In addition, there would be a government regulator aimed at driving efficiency gains and holding the three waters providers accountable to consumers.

While all of this sounds good in theory (doesn’t it always?) it is again imperative that we fully weigh the costs and benefits. For Auckland, it is unlikely that the proposed amalgamation with Northland will deliver efficiency gains on its own. Benefits will have to come instead from the increased borrowing capability and economic regulation.

On the other hand, the joining of Auckland and Northland will result in a push to extend service to more rural customers, which is likely to be incredibly costly. A robust analysis of these impacts is needed before we can confidently say what’s best for Auckland.

What next for Auckland?

Each of these proposals has councils around the country in a mad dash to determine how, and to what extent, their regions will be impacted. Auckland is no different, and we are working hard to get those answers. Further, we are always focused on determining what costs will be imposed and what benefits are likely to be realised.

The good intention behind these policies can’t be denied. However, it is necessary for both central and local governments – and the public – to be fully aware of the impact, beyond interviews with local special-interest groups. These decisions are too big and too important to get wrong.


*Shane Martin is the Chief Economist (Acting) at Auckland Council. This article was first published here. It is here with permission.

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29 Comments

I agree Shane that it's too important to get wrong. Rather than reinventing the wheel, can I suggest that you purchase a copy of Rosslyn Noonan's history of the Ministry of Works 'In Design'. It's old but it demonstrates that they did far more than just lean on shovels. I'm not advocating a re-boot, but there is still a group of people from that era out there providing consultancy services to companies like Fletchers etc with practical skills on board about how to do this. The CE of Naylor Love is an ex-Works man. Put a group of those people in a room, give them an objective and let them do something we haven't done for decades in this country. Plan. Direct access to cabinet for a group like this wouldn't hurt either, like the science advisor.

The loss of professional skills and consequently oversight of durability and quality control issues at the procurement level is costing us billions. Just my 5 cents.

 

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The 3 waters programme is an attempted heist , a theft of ratepayers assets , by Jacinda Ardern ... councils are being offered pennies in the dollar for their valuable water infrastructure ...

... I pray that every local council throughout the land gives her the middle finger !

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I would welcome a 'public interest' approach to managing our assets, rather than a competitive model that does not prioritise maintenance or quality controls. 

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... where I live , the water's fine  .... a plentiful supply of succulent delicious moistness .... no problem here      .... the last thing I want is Jacinda Ardern getting her sticky socialist big central government fingers on our water and stuffing it all up .... this is the era of her & her cronies stuffing everything up ...

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GBH, I agree.

The water is good where I am also.

I don't understand why the gov don't just fix the problem areas individually and keep away from other districts that have no issues.

Everything they touch turns to custard, I have no trust in them at all.

Also the third big policy that has been forgotten is the SNA's (significant natural areas), which imposes restrictions on privately owned land and something I am completely against. If they want the land, print some money and buy it then, thieves.

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So your ownership isn't via prior theft?

tui ad

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Idiotic snarky comment, I thought you were better than that.

How far back do you want to go for grievances?

And where do you live then Mr high horse?

Wasn't my ancestors who stole land.

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..  agreed ... the least harm they could do would be to assist individual councils where there are water problems .... particularly Orc Land itself  ... 

As for SNA's , OMG , dont get me started .... what a complete fiasco our governance has become since 2017 ....

 

 

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2017? I'm amused. Bill English landed us with Transmission Gully at 3x the cost of the works because he wanted it off the government books to look good at Budget time. Fact is we haven't had any "governance" or policy worth a damn since 1988, just managers with no practical skills. 

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Well GBH the only thing more important than water is oxygen. Where does that list on the tax agenda one wonders? 

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  .... yes  ... so , we have an ETS to disincentivize CO2 production  ... 'cos CO2 is bad  , OK ...

Cos , O2 is good ... unless , you're a plant ... plants hate 02 , in concentrated levels its toxic to them ... and , ironically , to us too ... so we gotta ... ummm.... shag ... I'm lost , Mr F .... 

... what was the question , again ?

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At least  one government minister has come out and said something like “ you have nothing to fear.” Given that particular identity’s form and character,  I believe the majority of New Zealanders have in fact, everything to fear.

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The National Policy Statement on Urban Development provides half of the national direction that should have be provided - an Urban Design National Policy Statement is missing.

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"It is estimated that meeting these challenges will cost the country between $120 and $185 billion, causing household water bills to be 7 to 13 times higher in the future."

Water infrastructure is a basic necessity - like schools, roads, flood defences, a police force, etc. Basic necessities should be funded by the state without this myopic hypothecation approach.

The idea of setting up an entity that borrows money to do the work at interest rates higher than the zero per cent that Govt currently pays on the $56bn it 'owes' to the 100% Govt owned RBNZ is also madness. How have we forgotten how to finance critical public infrastructure? Why does the building of public infrastructure now have to involve companies and financiers making easy money?  

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David Graeber answers your question in The Utopia of Rules. You, I suspect, would enjoy the read.

Otherwise, GBH has it right and wrong (again, the book is a good reference). Yes, this is an asset-grab. But no, it is not by our PM.

What has happened, these last 4 decades, is an increase in technocracy. I include the writer of the article in this, 100%. The comment: "The impact from these reforms is going to be in the billions of dollars" tells us as much; he's an economist. It's not billions of dollars, it's x tons of fossil-fuel-derived plastic, y tons of fossil fuel burnt, z tons of facilitating machinery (requiring fossil-fuelled mining.......) Yet he measures in free-floating, keystroke-issued tokens??????????????????????   Madness. Challenged by? Not the media, for sure.

The asset grab is by those who already hold assets - and associatedly, also hold power. They do that with rules which disenfranchise the already-disenfranchised, more. Those rules are backed up, as Graeber points out, by people in uniform prepared to hit other people with sticks (or worse). JA probably has no idea she's a pawn in such a process, but that's all she is. As are the current Govt, for all the rhetoric.

Assets should be as locally-owned as possible, to ensure the technocrats (including the writer of the article, who, I suggest, does nothing real) don't skim. Which they've been doing exponentially more of, for 40 years.

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""...people in uniform prepared to hit other people with sticks.."" - so these people have no moral agency. Jacinda, whether you love her or hate her, almost certainly does have an idea of the limits on her ability to achieve her ends.  Your asset grab and disenfranchisement is my parable of the talents.  Attaining more assets means risking the assets already owned. Two deductions: 1. those without talents can't enter the game which is sad and a welfare state attempts to correct it 2. Many who take risks end up losing whether with leaky homes or worthless holdings in bankrupt NZ finance companies.   

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I am against over-intensification.

Covid has changed the game, with remote working there is no longer a need to cram more and more people into the cities.

We need to stop 'growing', there are enough people here already and we shouldn't destroy our cities to house new migrants, especially when each new person contributes to carbon emissions.

Our polititians want to slash emissions and still add people. Nuts.

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Yes, lockdowns and technology are upsetting the compact city ideology. The idea of which is to make housing even more unaffordable, so you can only afford smaller sized housing than you would normally choose, with higher density, can't afford the car, or the space to park it, so are increasingly reliant on public transit which needs high volume to look busy and cover some of the money used to subsidize it.

Around the globe, people are moving from denser cities to lower-density communities. And in those jurisdictions with affordable housing, they get getting what we use to call the NZ dream. 

 

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Central and local government are sleep-walking into bankruptcy. The costs of maintaining the status quo let alone vast new areas of inefficient greenfield growth, with no employment are insurmountable.

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It always amazes me that I can put up the point that 'money isn't worth counting in'; but energy and resources are (see upthread). Then - no rebuttal - we get yet another money-related post. One can see how society got itself into such a mess.....

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If you believe that NZ Govt is going to go bankrupt, it is relatively easy to put money on that position. You will find yourself alone and broke.    

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In return for their assets, councils would receive no shareholding in the new water authority, only shared representation in half of a 12-member governance group. With only six members representing the councils that provide the assets, and the other six members representing local iwi, the influence of small councils will be virtually non-existent. As if that’s not bad enough, a requirement for a 75 percent majority to pass any board resolution, will result in Maori gaining control of water services in New Zealand. 

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You have not allowed for the simple fact that many Maori are into politics and that includes local politics. The six council reps could well be Maori. I have no idea how someone becomes a representative of a local iwi so until it is explained to me I will be naturally suspicious of the way they rise to the top and who gets included and excluded for example by gender, age and % Maori DNA.  If Maori have found a way of rejecting those with big egos, those who are looking merely for the perks and status and those who are simply nutters then us non-Maori should use the same method of selection.  In ancient Greece they just used a lottery to select their representatives who then held their post for a short fixed period.  maybe that is the best way. Politics is highly attractive to exactly those people who should never be in charge.

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Good to see the NPS-UD get a bit of coverage.

It's another thing that will push property prices higher.

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I don't expect it'll have a high impact either direction. It only removed a couple of hurdles and, due to seismological considerations, New Zealand won't build upwards much.

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Spike 2 is onto it. The three waters programme is a stalking horse for the eventual commercialisation of water by government. David Parker has made no secret of his intention to charge commercial users for the water they use, To do this the government has to assert ownership of water, which they cannot do without buying a fight with Maori.. What better way is there  of getting Maori on side than to offer them a half share? The next phase will be to charge all users for their water.

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The writer says that it would be costly for the Auckland provider to extend their services to rural customers in Northland, but I'm more interested in understanding why the Auckland / Northland board running the Northern entity are promised to be made up solely of Aucklanders when Auckland council has mortgaged their water assets into oblivion and if they don't receive this government bail out are screwed, and at least one, possibly two of the Northland councils have the best managed water assets in the country with zero debt. I feel like it is more a case of Northland beware than Auckland!

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I do-not recall voting for any "massive" increase in our population let alone any population growth in any of our recent past elections.

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I've said this several times now!

Get off your butts and bombard your local council with submissions, phone calls , whatever, but make it known that  central government MUST NOT get there grubby mitts on our local water assets! EVER!!!

Wee Willie is right on the money!

 

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