Wide-ranging inquiry focuses on council funding

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The Productivity Commission has pointed to variable performance between councils when it comes to efficiency.

Speaking in Hamilton, commissioner Murray Sherwin said driving efficiency in the use of resources in local government is a challenge.

The commission was in Waikato as part of its inquiry into funding and financing of local authorities.

“It’s pretty clear as we look across local government that there’s quite a wide range of performance, if you like, on efficiency ground,” Sherwin told an audience of about 30 at an engagement meeting organised in February by Waikato Chamber of Commerce.

“You get the councils with highly efficient and competent mayor and chief executive particularly and they can do some pretty interesting stuff and do it well, and others which on the face of it look to be rather better resourced are much less functional in terms of their performance.”

He said he thought mechanisms such as the CouncilMARK scheme are “pretty effective” as a way of measuring performance.

The scheme, set up by Local Government NZ, rates councils against key performance indicators.

But few Waikato councils have signed up to the CouncilMARKscheme, which is voluntary and rates councils on categories including investing money well and leading locally.

Waikato Regional Council, Matamata-Piako and Hauraki are among those who are on board, with the regional council heading the field with an A rating. Also on board are Ruapehu and Taupō.

That leaves Hamilton City Council, Waipā and Waikato as notable absentees, along with other smaller councils from the region.

Sherwin also referred to long term and district plans as opportunities for local communities to get involved in telling councils what they want. “But they tend to be pretty unwieldy and actually very expensive and for all sorts of reasons don’t necessarily draw in the widest range of citizens,” he said. “It tends to be heavily biased towards male, pale and stale participation.”

The commission is set to take a year to 15 months to complete its inquiry, which will look at  what is driving the cost of services provided by local government, whether the funding and financing arrangements are adequate, and, if not, what could be changed.

“The cost of providing services runs ahead of CPI consistently,” Sherwin said. “Is that coming out of increased compliance from central government, is it coming from the cost of providing infrastructure, is it because councils are extending their mandates?”

The commission will look at current funding frameworks, most of which are “heavily dependent” on rates, but under its terms of reference will not look at local body boundaries, at rating Crown or iwi land and has also been told it should not recommend significant privatisation.

As well as looking at the challenges that come with growth, the commission will also look at those areas with stagnating populations.

Sherwin said about half to two thirds of New Zealand’s 72 local authorities have flat to declining populations, often with ageing populations. In many cases they face replacing or upgrading expensive infrastructure, while struggling to find a rating base to do it.

“Capability and capacity definitely in a lot of the smaller rural councils is a real battle,” Sherwin said. “Provision of those sorts of services to the standards that are safe for the community is increasingly problematic. We hear stories of communities with two or three hundred people and there’s half a million tourists going through.

“We’ve been asked to look at these slower-growing, smaller and more challenged communities as well – what sort of options and possibilities do we have have to get them into a better place?”

Sherwin referred to the model of Wellington and Hutt Valley, where the councils retain ownership of their water infrastructure but share their management.

“There’s some pretty serious technical issues with how you deal with water and getting it right matters a lot, and there are opportunities clearly to do that in more professional ways.”

Sherwin said the commission would probably comment on the coordination and leadership that could be provided in large, complex areas, particularly those that cross multiple borders.

He also said they would look at the distribution of rates, where they fall and how they are allocated between residential, commercial and rural, and the basis on which that occurs.

The deadline for submissions has closed but Sherwin said in response to a question from the audience that the commission has never yet turned down a late submission.

Its issues paper, published in November last year, can be found at here: https://www.productivity.govt.nz/current-inquiries

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