What are city deals and how could they transform local governments?

Published Jun 27, 2024, 5:00 PM

As councils struggle with rising rates, failing infrastructure and blown out budgets, one of the solutions proposed to keep these institutions afloat has been city deals to improve the relationship between central and local government.

To explain how these could work and what progress is being made on them, Georgina this week talks with Local Government NZ President Sam Broughton. 

Kyoda and welcome to On the Tiles, the Herald's politics podcast. I'm your host, Georgina Campbell and this is a local edition episode. Today we are going to talk about city deals. The government is keen on them, but what exactly are they and how can central government reset its relationship with local government to make them work. Local Government New Zealand has released a proposal for what it says moves decision making away from Wellington and back into the hands of local communities. The organization's president, Sam Broughton joins me to discuss how the government can play its part in a long term solution for our cities and regions. Thanks so much for joining us, Sam, and welcome, Yeah, Cuta. How do you define a city deal? Let's start with the basics.

You'll I mean city and regional deals is language that can mean a lot of different things. Has been used in the Britain and the UK, It's been used in the Netherlands, it's been used in Australia. So when we say sit in region or deals for New Zealand, we do want to make sure we're taking a New Zealand approach. But the context is how do we get central government and local government, local businesses NGOs to all think about what a city or region needs to be and who's best to provide for those needs. And at the moment, local government is required to think about thirty years ahead with our infrastructure strategies. But we often see decisions from central government change over a three or a six year election cycle, and our communities deserve better than that, and actually is much cheaper if we could think about a better spend of tax around long term deals with some certainty and outcomes for cities and regions.

So this is like having an agreement that will withstand changes in either a council level or central government level.

Right. Yeah, we're going to see long term commitment, so beyond election cycles, which gets us away from just because someone news elected. All these things change because the projects we're talking about, you know, there's tens of billions of dollars worth of investment. So sure there's going to be some shaping and maybe prioritization of things that might you know, be in year five rather than year seven and that sort of thing. But generally we want acceptance about the type of big infrastructure required for communities by all parties involved.

What sort of projects. Would we likely see the first agreements kind of made on like what sort of projects would be the subject of a city jail.

Yeah, I think projects is probably where it will start, but they sat in regional deals really needs to be about long term partnership and not just about one or two projects that get done and then you tick them off. They need to be about building trust between central and local government. New Zealanders the most over centralized country in the OECD. You know, central government spends ten times and collects ten times the amount of revenue than local government does and the imbalance. You know, the New Zealand Initiative is shown that the more decentralized you get actually the greater GDP growth you can have for communities. So we do need to think about weird decisions are made in New Zealand. That feels far, far, far too much like it's all in Wellington at the moment. So when we think about the projects that might be come across the line early, I think that's going to be in water and transport. Those are the big needs at the moment. They're obviously getting a whole lot of conversations with councils needing to lift rates sort of between six and twenty six percent this year with an average of sixteen percent. You know, there's big issues with the way that we fund infrastructure, and so the key projects in the beginning I think will be around transport and water.

And would they be sort of like quite meaty projects considering the kind of timeline of these deals, like are we talking about like really big stuff as opposed to small stuff.

I think we've seen internationally that city and regional deals change over time. So we're going to need to begin somewhere and that will be around a few projects. But in Greater Manchester they've gone through a process over the last decade where there was over one hundred and fifty different streams of funding and accountability for all that funding and reporting for all that funding, and just earlier this year they have signed one deal, which so you've got a narrative all those one hundred and fifty bureaucratic ways of trying to deal with things and come down to one space. And that's because they've built trust in a relationship over time. So in New Zealand, we need to go through that same process project based to begin with, prove the concept and move into a partnership model long term.

Okay, so are you saying that initially like there would be a series of smaller deals if you light struck over specific projects, rather than having a deal to start with that was more like a package.

I think the package will involve each of those little pieces, but I don't think that we can expect that we're going to have mature ten year old deals in year one. So we've got to be responsive to the needs of communities at the moment. That is particularly around water, waste, water and transport. So let's focus on deals that start solving those problems around housing for New Zealanders.

And you've talked about Manchester. Can you speak about some other overseas examples, because as you've said, they don't all work the same way, do they.

No, that's right. So the Netherlands, the City Deals an agreement between some selected cities and the national government, and they've also included the private sector in some of those spaces. It's not explicitly about the redistribution of central government resources for them, whereas in the UK it was particularly focused on devolution, but in the Netherlands it was around food security and room for walking and health hubs. And other things, and the UK we've seen education and policing and safety within communities be a part of their conversation because the roles and responsibilities for local government there looks slightly different than they do here in Australia, being very infrastructure focused around transport solutions for.

Places, and considering Australia is quite infrastructure focused, which I think, what that's what our city deals will look like at least to begin with. You know, you said transport would be a big priority. Is that where we're mainly looking for inspiration across the ditch considering that alignment, Yeah, I.

Think there are nearest neighbors, aren't they, So we like to look across the ditch and see what they've been up to. Their government situation is a bit different than ours because they've got both state and federal governments as well as the local government, so that the funding for local government looks quite different in Australia than it does in New Zealand. But I think it's very natural that we'd look across the ditch and see how they've made them work and then build it from there.

Of Course, the whole reason that we're sort of talking about city deals is because the government has indicated it's keen on them. What have ministers said about city detail city deals so far so other than in saying that it's a way they'd like to work, we're very light on detail from the government so far about what that's.

Going to look like. So that's why we've come up with from local government with a way of saying, this is the framework discussion that we need to have. Any city origional deal needs to have an alignment of outcome between local communities and central government's desires. It's got to provide access to new funding and financing tools for local government. The current financing way for local government around rates as a broken system. It served us well up till now, but actually we need some new tools and a toolbox for local government. I've already talked you about that sort of long term commitment beyond election cycles and trust and authentic partnership, and I think particul we want them to be efficient to administer. We don't want to set up a whole system that's going to become really difficult in time consuming and costly to administer. So that's sort of the basis of our framework, and we think that the government should look to that adopt it. They might want to add a few other things, and that's going to be really important to them. And let's get on with the first few city and regional deals and we can understand what they look like in out here's context.

Yeah, who do you think would be first in line? Is that likely Auckland?

Yeah? I mean Auckland is different than the rest of local government in the New Zealand context. We often talk about Auckland as a city, but Auckland's actually a region. You know, They've gone through a bigger amalgamation, they cover a large area and they have a number of ways of working together now as one that the rest of New Zealand doesn't have. So I think it's natural that Auckland's going to be part of that conversation really early on. And if we look around the rest of the country, there's a number of regions Hawk's Bay for example, around its water and conversation around water infrastructure as in a more mature based then some other regions. I've been working on it for a while. Cycling gabriels meant that they've worked together in different ways, and so I think there's cases to say that it's not going to just be the big cities to begin with. We need to also look a bit broader than that.

Yeah, and in your proposal, you know, you specifically say all cities or regions should have the opportunity to propose a deal. Are you worried about smaller towns maybe missing out on the likes against the likes of Wellington and Auckland.

Yeah, I think, particularly if there's going to be leavers, that the government users to incentivize particular outcomes and they're only made available through city and regional deals and then some regions or cities are excluded from that. You know, that's not going to serve the purposes of making things work across the country. So we're really saying the framework needs to be broad enough that all New Zealand can benefit from this new way of working.

Okay, and so you've written to Prime Minister Christopher Luxon and Ministers Chris Bishop and Sami and Brown about your proposal. I think you might have met with some ministers about this as well. What kind of response have you had from them in terms of what you've had to say?

Yeah, that thanked us for what we've put forward through our framework. And they've said they're currently working on their own framework themselves, and we now wait to hear back from them, but excited that they're working on a framework. We definitely think there's a much better way of working than coming to the table already thinking that there's one or two deals that they've got signed and sealed ahead of actually understanding how these are going to work.

And you know, one of the things you've said is that there needs to be increased trust between local government and central government. Firstly, why is there a lack of trust between the two.

I think it's because we've seen there's a big power and balance when you've got ninety percent of the funds and decision making held in Wellington and ten percent in other places, and so so many of the decisions that New Zealand makes at the moment are very Wellington centric and don't have necessarily the input for local government ahead of time and ahead of those decisions. And there's I mean, there's so much knowledge and experience in local government. Actually, we could contribute to better outcomes for our ti Iowa if we're involved in the formulation of legislation as opposed to submitting at the end of the process, and so yeah, I think successive governments when there have been an opposition before they've come into power, have talked about localism, have talked about working with local communities and regions. But our system is set up that once you get into once you're in power, and you hold the reins around where those budgets dispense and the decisions that you want to make, and you're informed by the ministries that sit around and with all the knowledge around how Wellington should function has tended to be that it's been lead out of Wellington rather than partnered with local government. But on the other side of that, you've got local government knowing its place, knowing its people, knowing where its resources are, knowing where help can come from, knowing with the areas of greatest leaders, knowing the businesses to partner with and the NGOs that already working in that sector. And it doesn't feel like so much of that knowledge and resource is used and trying to deal with the things that we all want New Zealand to be an awesome place and to continue to be better than it is now for generations to come. Local government's got to keep part to plan that, and it doesn't feel at the moment, like that level of voice has been heard by not just this government, but previous governments beforehand. There's a system issue that we've got in New Zealand, and city and regional deals are part of trying to deal with that.

System, and I think there's sort of a sense of almost entrenched frustration around things like unfunded mandates like that comes up a lot when I talk to council leaders and as you say, like this, it's been this way over successive governments, so it seems to me like it's quite a steep hell to climb. Although the city deal proposal has come up at a time when I would argue local government is facing a crisis in terms of trying to fund everything that it needs to so that might be helpful in terms of resetting this relationship. But how do you reset that relationship when it's sort of been on this path for so long.

Well, I think all relationships require, you know, both parties to want to improve the relationship. It means that we both need to take steps in the right direction. They might be smaller steps than you know, you don't start running on day one, but we take steps towards each other that builds that trust and then continue dialogue and talking together, and like interpersonal relationship, sometimes having third parties in the room and being able to learn from others' experiences rather than just coming from your own knowledge basis important in that turm and I think that's where looking at overseas models around how city and regional deals have worked can show us that you know, in the UK after ten years has actually massively increased the level of trust between central and local governments to point now where Westminster's paying single deals out to combined authorities to manage the affairs within the local area. I think that's a great story and hopefully in ten years time we'll be able to talk about similar things in.

Local government. New Zealand has said it's unlikely councils will agree to a city deal unless there's additional funding and financing put on the table. You have mentioned some of this earlier on, but can we maybe just dig down into a bit more detail. What is the problem with trying to fund everything by rates and is there a sort of top alternative or a low hanging fruit alternative that you'd like to peck first.

Yeah, so local government looks after it owns twenty five percent of the infrastructure in New Zealand, and we receive less than ten percent of the funding to run ourselves in our communities needs. And so just even on in that space alone, we need to think about what's the provision like and how sustainable as that model going forward. Central local government sorry across the country about over fifty percent of our income is from rates. That isn't about ability to pay. It's purely on either property or the capital property plus whatever's built on top of the land as a mechanism for pain. On top of that, there's use of debt and some councils, to varying degrees, have taken on small or large amounts of debt or that debt needs to be repaid in the future. Debt is a great way to pay for interogenerational infrastructure and we need to change some of that thinking within count source and that and that has been good to see, but debt you can only take on the debt that you can afford to repay, so that needs to be thought through as well. Councils also have the ability to have fees and charges, and whether that's for resource consents or swimming pool entries, or parking fines, those sorts of things. It's a small portion, and some councils have some investments, but many don't. So we were heavily on rates, and when the cost for running communities goes up, then our rates go up, and that doesn't necessarily take account of those that use the particular facilities that councils provide. Roads, you know, get used by everyone, regardless of how much they're pain and here from councils all the time that the road user charges and fees that come out of a particular area and never seem to come back to their area when the co investment with Wakokutahi comes along board. So it's like the system at the moment isn't set up to work in a way that's transparent and sustainable. And there's a number of things that we've put to the government to request further conversation on funding for local government that includes the government paying rates on their land and their facilities within the community, whether that's dockland or schools and hospitals or defense spaces. We've talked to them and it was raised by the government about the GST on new builds. Coming back to councils a share of GST in general, I think is a conversation that needs to be head to the GST on rates coming back to councils, it would be a fifteen percent left straight away, so people are paying their rates and then having to pay GST on top of that. Mineral extraction royalties out of areas, increased in fuel taxes, tourism levies, beards taxes. There's been a number of things that we've raised because we need a number of things because not every council is going to benefit from each of those tools in the same way, and some will be appropriate and some will be inappropriate for some areas. So we need a range of tools that councils can fund themselves through picking the ones that are going to suit them at any one time. We've raised those with the government, we continue to hear those on those things, and that doesn't deal with the issue. So through this city and regional deal piece, there needs to be the ability for new funding and financing tools for councils, incentives to work together, and the ability to bring bring new revenue into the local government system.

Out of that long list, is there anything that you feel optimistic about that the government might agree to or is potentially more open to than something else, or you know, one of those things that you really want to see as a priority.

Yeah, I mean the GST on new builds is something that the government has raised, so that's come from them rather than from us, so that, you know, if we're going to start somewhere, let's start with that one. But that doesn't help every council equally, so that's not going to solve the problem. It's not a silver bullet for anyone. But that's the sort of thing that I think we need to develop. Let's look at that tool and see how that's going to work. One of the keys in trying to create the funding is that Treasury has already accounted for certain streams of income into the future, and government's making decisions on the budget based on those future streams. So we really need to look at new ways of generating income, and I guess the GST on new builds is that new revenue that could happen. So, yes, it would be great to get some of the GST back in general, particularly the GST that's paid on rates. It would be a fifteen percent hit, as I said before, and really help local government, but that's not what the government's talking about currently. So if we can work with the new builds piece, that would be helpful to begin with.

Okay, cool, And as you mentioned, and I have covered this in a previous episode on the podcast, we did a episode on the future of Local Government review if anybody wants to draw back and find that. But one of the recommendations or things identified in that report was you know that the Crown does not pay council rates on its proper, which I just think personally is kind of wild. And I want to talk about that report. It's a nice segue actually into some other issues that I wanted to discuss with you while i've got you, But just versusly on that report. You know that that was commissioned under labor. It came out last year, a few months before the election. It kind of hasn't gone anywhere. What's your view on that, Like, is that kind of disappointing because it was a really meaty report with lots of recommendations like can we bring that back to life at all?

Yeah? Well, so local government's done a lot with that report. So instead of just picking it up and saying this is all implementable. Now. We ran a couple of sessions over a number of days with two hundred participants at each looking at what of these things can we find consensus on, because there's a number of things that are the controversial and controversial issues still needs to be addressed. But sometimes if you can find some early consensus, then you can start implementing things a little bit earlier. And so we ran those events out of that, Things like mandatory STV voting or the voting age dropped away because we just you know, there were people passionate about making that stuff happen and people equally passionate about never making it happen, So they dropped away. But funding and financing changes for local government remained. The thinking about the shape and size and structures within local government, you know, that's a matter we need to address, and that remained. Local government commitment to MANAFENAA partnership, you know, was discussed and that remained. Those types of things are still there and are still very live for local government at the moment.

And one thing that is very live is electoral system reforms. There's a new group focused on this, cheered by Nick Smith, and can you tell me about that and the four key areas of electric reform that this group will be looking at.

Yeah, so I'm really really keen that this group has been formed. It's been about twelve months in the making to get to where we are now. A four year term for New Zealand is just one of the key things that would make the biggest difference to the efficiency of both central and local government. We should make that change tomorrow. I know that the government and as part of their coalition agreement, wants to see it happen. I haven't actually talked to a politician in Wellington who doesn't want it to happen because they see the needs to improve the system that they're currently working within. The Government could actually change local government to a four year term next week if they wanted to, because it's just a piece of legislation, whereas the conversation for central government as a much broader conversation and they want to run through and understand a bit more about what New Zealanders want in that space, and the Prime Minister's keen to work both central and local government changes in the same conversation. So we're hugely in behind that. That's kind of the key area to see change in electoral form, but we need to increase VHOTO turnout. We need to change the way that people can vote, and we should think about who administers local elections because at the moment, each council kind of picks a contractor to run an election, which means is quite a lot of variance across the country at the way people engage in not necessarily the same level of either information available or voting spaces to be able. Sorry, the way that things that do not even email, the way things post it out to people. We need to think about moving beyond just relying on the postal system when it comes to local government election. So NeXT's going to lead that work, and ye're really excited for the others that are involved and dept with him as well.

And so this was one of the things that the Future for Local Government Review considered. Why do we need another group to look at it when there's kind of a clear appetite to do this.

I think this group will look at it and then look at how we implement it. Has been identified that it needs to happen again, New Zealand's a real outlier and the OECD and so much of what we do in the local central government space. We're one of the few countries that has a three year term. Most countries have realized that they're actually better off having councils and central government on a four, five or six year term because the types of projects and dollars that we're dealing with four communities run into the billions of dollars and things changing every three years. You get a year of settling after an election, you get a year of doing some great work on councils, and next year the report is going to call in January and ask if you're standing for election in October, and that changes the whole type of conversation that the council will have over that next year. So a four year term is going to mean twice as many productive years in the middle between elections. And we're all outlier compared to the people that we measure ourselves against. So you're right. I think some of this stuff and the need for it has been well canvassed. We need to get on with it. But actually creating the pathways to make that happen is going to be a keep up for this new groups to sort out.

Interesting and when does that group have to report back is there a timeline for when we might see you some change.

We agree the terms of reference today Steve, National Counsel for Local Government, New Zealand. So that group's underway and going and happen as quickly as the team can bring the work together. I don't have a date for that report back.

Sorry, no, that's all right. Oh well, we'll have to watch that space. Thanks so much for joining us, Sam, it's been a real pleasure.

Thank you very much.

Thanks for listening to this episode of On the Tiles Local edition. For more local politics, news and opinion, head to enziperold dot co dot NZED. You can follow this podcast on iHeartRadio or wherever you get your podcasts. Thanks to my producer Ethan Sills. This episode was edited by Enzibne Sound Engineers and you can catch us again next Friday for more on the Tiles