Collaboration or Amalgamation?

Speech to New Zealand Council for Infrastructure Development at its Building Nations Symposium in Auckland by Lawrence Yule, LGNZ President.

Good Morning Ladies and Gentlemen

Local Government New Zealand represents 78 councils across the whole of New Zealand. As the peak body representing local government, our vision for the sector is: “Local democracy powering community and national success.” We advocate on behalf of our members to achieve this vision.

Recent changes in Auckland have resulted in a merged council delivering a range of services through Council Controlled Organisations, or CCOs. And, there will be other changes to the shape of local government and in its service delivery in the near future.

Even if there are no further reorganisation applications to the Local Government Commission this year, we may still see a quite differently organised sector in the near future, with several new authorities established.

There are a range of challenges facing our country in the delivery of local services. We have recently seen significant transport investment in Auckland, to meet the demand of our largest city’s growing population. The impact of a large and growing Auckland will continue to have an effect on other areas of New Zealand.

We have heard already about the shift in demographics and the need to realise that some areas will become less and less populated, while others grow.

At our recent conference, Professor Natalie Jackson, from the University of Waikato, shared some demographic projections with us. Our aging population has increased from 8.6 per cent of people in the 65 years old and older cohort in 1961, to 13.8 per cent in 2012.

Professor Jackson told us there will be more people aged 65 and over than children within the next 13 years. Facing up to these challenges is about looking at what we can afford to deliver at a local level, based on our projected future populations. And it’s about being honest regarding what we cannot afford to deliver on our own.

In some circumstances, bulk purchasing or shared services will be the answer for certain councils. There are already many examples, such as the Bay of Plenty/Gisborne shared services company BOPLASS. In situations like these councils have found that “bigger is better” to purchase a service at the most competitive price.

However, the opposite can also be true. When a large outsourced service is analysed in detail, it is sometimes found that a more local, bespoke delivery option is more cost effective. There’s the example of Queenstown. They are bringing some services back in house including their regulatory CCO. Savings of $300,000 have been identified.

There's no rule or guideline which can be applied universally. That’s the challenge facing each and every council. What’s vital is making decisions based on the best information and engaging the community along the way.

The recent Better Local Government reforms will also continue to be a challenge for the sector. We will have more and more scrutiny of our performance coming from various quarters and we will be required to benchmark our progress in a number of core service areas. This will be accompanied by a strong focus on fiscal responsibility and increased scrutiny of the sustainability of council finances.

Just recently, a report from the Office of the Auditor-General stated the need for a review of our asset management processes. A review will happen this year.

So yes, we will all have to ask ourselves the question, “collaboration or amalgamation?” And the answer will be different around the country.

The Productivity Commission recently reported on how well local government delivered on regulation. The report clearly stated that the increased demand for regulations was driven by central government. And, local government was burdened by the weight of the regulation it had to implement and trying to recover the costs it incurred in the process. The report also strongly criticised central government for not being concerned about the problems it caused local government, nor paying enough attention to how regulation was to be delivered.

It also stated that local government had to consider ways of delivering its regulatory services more efficiently. Whether it’s resource consents for land use, licensing premises for alcohol or food, or controlling the environment, local councils are expected to deliver the service.

It’s certainly one of the areas where different models of delivery may require testing to meet expectations of higher standards of performance. The example of savings made in the delivery of services by the CCOs of Auckland may serve as a good example.

Sharing very expensive resources – in skilled personnel, for example – will save councils having to recruit solely from their own budgets. This is already evident where a number of councils are “buddying up” to afford skilled personnel in their Building Control Authority work or their inspection and assessment work for earthquake prone buildings.

Other councils have made real savings sharing their finance and rating teams, and call centres have also been ran as shared services in many instances.

Central government has championed all-of-government procurement and the local government sector is already seeing this as a good opportunity to collaborate for procurement purposes. If we can aggregate our demand in the sector, there are real savings to be made.

Councils will be looking for innovative solutions to offset the increased costs of service. We at LGNZ are already involved in providing these services through our new Business Solutions service. We are working with the Local Government Association of Queensland in a joint venture to deliver practical interventions which will make a real difference to our services in local government. These are all areas that councils will be seriously investigating, even if they are not even considering a merger.

So one thing is for sure, we’re not going to just stay the same. There will be major changes in the structure of local government and in its service delivery. LGNZ will actively engage in delivering practical solutions to our sector and being a champion for change.

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