The Prime Minister has signalled a Government back down over its controversial Local Government reforms.

The reforms have sparked a widespread revolt among Councils, particularly provincial and rural ones.

The proposals would allow the Local Government Commission to impose Auckland-style Council Controlled Organisations on Councils in anywhere in New Zealand.

Many Councillors who oppose the reforms are National Party supporters or members.

But faced with the long list of Councils opposing the reforms and growing public debate about the Bill which would implement them, John Key told his weekly post-Cabinet press conference yesterday that the Government would not die in the ditch on the issue.

“We’re not trying to deal to local government and force them to do things, but we do think it’s sensible for them to do these amalgamations when there is logic in doing so.”

Most Councils would not disagree with that.

Currently, the legislation makes it difficult to set up separate organisations to undertake activities among some Councils like Auckland’s Council Controlled Organisations such as Watercare or Auckland Transport which were set up under the Auckland Council legislation.

So the Bill provides for a broader range of functions to be transferred to local authorities, joint governance arrangements for areas of common or shared interest, and greater use of joint council-controlled organisations (CCOs) for providing services.

New models introduced in the Bill include water services CCOs with statutory powers and two pre-approved models for transport CCOs, as well as bespoke transport CCOs subject to approval from the Minister of Transport.


But what is inciting the revolt in the provinces is a provision in the Bill which would allow the Local Government Commission to enable it to decide what investigations it would l undertake.

“This will be either on its own initiative or in response to a request from the Minister of Local Government, local authorities, or members of the public,” says notes attached to the Bill (Local Government Act 2002 Amendment (Number Two) Bill)

In his opening address to the NZ First conference at the weekend, Dunedin Mayor, David Cull, set out local government’s objection to the provision.

He said it would allow the transfer of ratepayers’ assets from local authorities without consultation.

“It would be called theft if it was privately held property,” he said.

He said an unintended consequence of the Bill could be to devastate the effectiveness and even relevance of local Government.

This was a reference to a point made by several submitters to the Local Government and Environment Committee last week, that if a local authority, particularly a small rural one, were to lose control of water and transport then not only would its base revenue decline but it would see its overall staff numbers dramatically reduced.

There is a fear that this would then force the small rural authorities into amalgamations.

“The principles of local democracy are clear,” he said.

“Local issues are most effectively addressed at a local level.”

He conceded that the purpose of the legislation was to bring more efficiency to local Government, but he said it was easy to know the cost of things without thinking about their value.

There is a strong element of “localism” in many of the submissions that oppose the legislation.

The MCKenzie District Council said it was concerned that The funding mechanisms of multiply-owned CCOs would require councils to raise property taxes for levels of expenditure over which they would have little control.

“The proposed changes in the Bill will, in practice, make it difficult for an individual council to exercise judgement and discretion over what may be a large part of its income, particularly in smaller councils,” it said.

“Individual councils will have limited opportunities to influence levels of service within their districts, as these decisions must be agreed by all shareholders and, in practice, will be determined by the joint committee.

“The Bill lacks detail on how a shareholding council would require a multiply-owned CCO to apply specific levels of service or policies within its jurisdiction, for example, the implementation of a ‘buy local’ procurement policy to strengthen local businesses.”

The problem the Government faces is summed up in a report produced last year for the Hamilton  Waikato and Waipa Councils who face $764 million of capital investment over the next ten years to replace ageing water, stormwater and sewage infrastructure in the Waikato region.

The report said that the Councils could save $107 million if they combined their “three waters’ infrastructure in Council Controlled Organisation.

The CCO would have a board of professional directors and would be set up as a limited liability company though it would not pay dividends.

Because it would be economically stronger it would enhance environmental protection and be able to attract top quality staff, the report said.

The three Councils have now agreed to proceed but will require a final review when the new Councils are elected in October.

But the situation in the Waikato is on a much bigger scale than  many other parts of New Zealand, and therefore the potential savings are much larger.

Labour, which originally supported the Bill, has now withdrawn its support.

The Bill is due out of the Select Committee on October 27.

The Prime Minister, clearly believing the Committee will make substantial changes, cautioned journalists to wait and see what its recommendations would ultimately be.

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