Mission impossible for local government

Local councils are facing a string of daunting challenges, ranging from sea level rise to massive infrastructure bills. Shane Cowlishaw explores how their relationship with the new Government will be integral to how they handle those challenges.

Local government has warned it faces “sky-high” costs in dealing with issues such as climate change and ballooning infrastructure bills that it won’t be able to pay for itself.

At its downtown Wellington headquarters on Wednesday, Local Government New Zealand (LGNZ) held a briefing outlining the work and challenges ahead of its members.

It was a long list.

Regulating freedom campers. Climate change. Skyrocketing infrastructure costs. Ensuring drinking water is clean. 

To tackle such tasks it wants a closer relationship with its big brother in the Beehive, and it appears it may just get it.

The new Government has introduced a billion-dollar regional growth fund that will invite pitches for local projects.

It’s an initiative that was welcomed by LGNZ president Dave Cull at the briefing but received a more lukewarm response from chief executive Mark Butcher.

“It’s still a ministerial allocation, isn’t it?" Butcher said. "It’s not driven by local needs … It’s still slow, clunky and doesn’t capture the kind of systems which enable incentives to drive behaviour. It’s very old world.”

Of more interest to LGNZ is the possibility of alternative revenue streams for councils.

The Labour/New Zealand First coalition agreement contains a public inquiry, “A decade after Shand”, to investigate local government costs and revenue base.

The title of the inquiry refers to the 2007 rates inquiry led by David Shand that recommended a share of GST be channelled into a contestable infrastructure fund and councils be given more power to impose user-pays fees.

This prospect will have councils champing at the bit as they deal with the difficult prospect of funding a multitude of expensive problems.

Local government minister Nanaia Mahuta wants to reset the relationship with local government. Photo: Lynn Grieveson

Cull said he was pleased with the response from the new Government, saying its positions “lined up with our priorities”.

The minister he will have to sweet talk, Nanaia Mahuta, was unavailable for an interview but in a written statement said she was interested in “resetting the relationship” between central and local government.

Cull is also interested in pushing for a shift of more powers from central to local government but may have to wait until the serious cash flow problems are solved.

“The first issue that needs to be addressed is the funding pressures that local government is already facing in regard to its existing powers and functions," Mahuta said.

“Only after this is addressed should we look at any further changes that might be proposed to the role of local government.”

So, what are the most pressing problems?

Guidance needed on sea level

Arguably one of the most daunting tasks facing councils is how to deal with rising sea levels.

While climate change is now almost universally accepted, the extent of its impact and its timeline is unknown.

This leaves councils in a tricky spot. Should new developments near the coastline be allowed? When should preparations for issues such as groundwater inundation into towns and cities begin?

Help answering these questions has been lacking.

Confusion over delayed official guidance was highlighted in a Newsroom investigation into the impact of sea level rise, which found coastal councils grappling with the complex issue.

“The other options are we’re given the opportunity for other funding streams, whether it’s local taxes or whatever it is, or central government makes a donation.”

Under the previous government, a long and tortuous struggle by officials to publish the guidance to assist local bodies in granting consents left many councils confused and several developments granted approval that could soon be underwater.

Cull said initial data from 16 councils put the “conservative” estimate for a 1.5 metre sea level rise replacement cost at $300 million. This meant a bill of around $1.5 billion across the country.

“Clearly councils don’t have those resources at the moment and that’s a question for local and central government to be talking about, how do we fund that?

“We’ve been seeking for some time, particularly from central government, some more clarity around liability, responsibilities, that sort of thing. For instance, in the event of severe coastal erosion or the need for retreat in any area, who is responsible, who is legally liable? It’s not clear. It might be central government, it might local government or there might be no provisions at all.”

This legal liability has councils worried.

Kapiti District Council was locked in a legal battle for years after updating coastal properties’ LIMs with hazard lines.

Cull said he believed updating the LIMs was the right thing to do, but even if the Council had not done this future residents could have also taken legal action arguing the Council had known about the risk but done nothing.

Courageous decisions would need to be made and work done to get up to speed with such issues, he said.

“Our understanding is that there’s much greater interest on the part of the legal profession in these issues than there was five years ago.”

Mahuta said climate change was a complex area that both local and central government needed to work together on.

Who pays for the water works?

The Havelock North water scandal changed the landscape for councils across the country.

After more than 5000 people fell ill because of a contaminated bore, a subsequent inquiry estimated it was likely that at least 700,000 New Zealanders were drinking water that could not be proven safe.

It suggested a worrying complacency around water management and a lack of action by the Ministry of Health.

Cull said that in the wake of the report there was no doubt a huge overhaul would be coming for water infrastructure, one that was overdue.

This would take in not only drinking water but also wastewater and clean, swimmable rivers and lakes.

But combined with increasing infrastructure demand due to population increases the costs would be “sky high” and there had been little recognition of the money needed.

“It would be fair to say that the costs across the country, if we’re dealing with drinking water quality, storm water quality, and wastewater, the cost across the country will be billions.”

Improving New Zealand's drinking water quality will not come cheap. Photo: Lynn Grieveson

Again, it’s a question of where the money comes from.

Apprehensive councils are desperate for alternative revenue options other than rates to pay for the urgent work, but things are not that simple.

As Newsroom’s Bernard Hickey wrote last year, major changes to how taxes are raised and shared would be needed to pay for the work.

Many councils are at their debt ceilings but the Government is also hamstrung after agreeing to a capped debt reduction track that stops it from dipping into its enormous balance sheet.

Alternative suggestions have been made.

Auckland Council will introduce a fuel tax to help with transport costs while a value capture rate that would target capital gains made on properties near new infrastructure has also been floated.

Cull said it was imperative these options were explored if progress was to be made.

“The other options are we’re given the opportunity for other funding streams, whether it’s local taxes or whatever it is, or central government makes a donation.”

Such a generous gift seems unlikely, but levers to raise more capital could be coming.

Mahuta said a funding inquiry into local government pressures would soon be launched that would investigate how infrastructure improvements could be paid for.

A final response to the Havelock North inquiry from the Government would also arrive soon, she said.

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