Thank you for the opportunity to join you here today for your 2009 New Zealand Society of Local Government Managers'  annual conference.  It is great to be here. 

As we all know, these are challenging economic times.  Such times demand more than ever that legislation, regulation, processes and expenditure are not unduly hindering productive economic growth and unnecessarily burdening citizens and businesses.

We are making good progress on a programme of work to improve the effectiveness of legislation and to review and reduce the burden of regulation imposed by previous governments on the sector.

This programme includes:
- work to improve the transparency, accountability and financial management of local government through a review of aspects of the Local Government Act 2002;
- reform of Auckland governance;
- reform of the Resource Management Act 1991;
- reform of the Building Act 2004;
- investigating a local government bond bank;
- deferring and reviewing drinking water and air quality standards; and
- a regulatory responsibility bill aimed at reducing red tape.

Over the past ten months, I've been pleased to see greater awareness of an interest in local government issues.  I think you will agree that given the importance of local government in the lives of New Zealanders this heightened interest can only lead to more robust and responsive local governance.

I have been pleased to learn about councils responding to the economic challenges we all face, including some interesting local initiatives.  I know that many councils have taken steps to streamline their procedures, minimise bureaucracy and look to an even greater level of cooperation across the sector. 

I would like to warmly congratulate the winners of the 2009 New Zealand Post Group Local Government Excellence Awards announced last night. 

Overall Winner, and Winner of the Council-Community Relationships Category 
- Porirua City Council for the 'Villages Planning Programme'

Winner of the Building Organisational Capability Category
- Manukau City Council for the 'Managing Manukau City's growth and development - the Enterprise Asset View project'

Winner of the Joined Up Local Government Category
- New Plymouth District Council for the 'New Plymouth District Alcohol Strategy'

Winner of the Improved Local Regulation Category
- North Shore City Council for 'A new approach to erosion and sediment control on small development sites'
  
As local government managers you can look to build on these and other examples of good practice, because I know good practice is something that SOLGM promotes.  Maybe next year you could consider an 'improved productivity' category in your awards.

Analysis of the available data from 2009 to 2019 long term council community plans indicates that rates income will continue to rise faster than council input costs. 

The cumulative increase in rates per household over the next 10 years is 48 per cent.  The rates funded proportion of your operating receipts is forecast to increase also.

At the same time, public debt for the sector is forecast to increase by 97 per cent, and interest expenses by 89 per cent. In my view these forecast figures highlight:

- the importance of looking at how overall council costs can be controlled;
- areas for improvement; and
- issues for councils and their communities to focus on. 

Many ratepayers are concerned by, and in many cases are already struggling to pay, their increasing rates bills.  It is important that local government costs, expenditure, debt and local rates are set at a level that local communities can afford to ensure overall long-term financial sustainability.

I recognise that factors such as population growth, costly infrastructure renewals, central government regulation and community expectations play a part in these forecasts. 

However, it is important to also recognise that there is a limit to what communities can afford in the long-term.  

As you know, one of my key priorities in the local government portfolio is the work I have underway to improve the transparency, accountability and financial management of local government through a review of aspects of the Local Government Act 2002.

These improvements will help you, as local government managers, to deliver cost effective services and facilities that your communities need and want.  These improvements will also help you to provide for more robust and effective local democracy, citizen engagement, consultation and planning processes.

Officials are looking at transparency and accountability mechanisms, aimed to ensure that ratepayers have greater confidence in their councils and have access to better, more easily understood information about the spending and performance of their councils.

I want to talk in more depth today about this work and update you on its progress. 

I have valued SOLGM's input and expertise during the development of this work.  My officials are considering how your organisation's suggestions might be incorporated into this work and your concerns addressed.

We are working on the following matters:
- simplifying long-term council community plans;
- developing 'plain English' financial disclosures;
- the effectiveness of the community outcomes process;
- developing a less costly service performance reporting system; and
- identifying circumstances in which polls or referenda could be required for decisions, for example testing support for three alternative fiscal strategies for future council spending.

As part of the review officials are considering mechanisms for 'plain English' financial disclosures, and for developing comparisons between councils.  This could include standardised financial reporting, with an equal emphasis on disclosures of both funding and accounting information, so that ratepayers can more easily compare councils' performance.

Even something as simple as rates income is reported in at least three different ways in council plans and reports. 

Some report all charges including metered water charges as rates, while others exclude metered water charges.  A few councils report only general rates as 'rates'  and include targeted rates within a broader group, often labelled 'activity charges'. 

Good quality comparative data is essential for accountable and transparent local government, particularly for stimulating local engagement and debate. 

A good example of comparative data currently available is the Ministry for the Environment's Resource Management Act 1991 Two Yearly Survey of Local Authorities.  This is a great way to identify good practice, and provides a clear signal about which councils are performing well.

Officials are also examining the merits of councils preparing clear financial strategies to enable councils to better manage issues like rates, debt and expenditure levels, and identify priority expenditure.  Under this approach councils look to identify and outline clear strategies on rates, expenditure and debt levels, and then set expenditure priorities within the financial strategy.

A good financial strategy will help councils, in consultation with ratepayers and citizens, make better decisions about trade-offs.  It will provide a basis to measure a council's financial management record and help to identify future financial management issues.

The review includes consideration of pre-election financial reports.  These would give an account of activities over the previous three years, and identify proposed spending over the next three years.  Pre-election financial reports would provide timely information about the performance of the outgoing council and remind the community of the issues the incoming council will need to consider.

Pre-election financial reports should aim to improve local debate about expenditure priorities by giving candidates and electors a clear picture of the status of the books.  This would enable electors the knowledge they need to put hard questions to candidates about past and proposed expenditure.  

It is important to remember that timeliness is an important part of transparency.  In the run up to an election it makes sense to have clear information on the types of issues facing a council and the types of decisions that need to be made.  This is a time when voters, businesses, organisation and the media need to have accurate information.

There has been a lot of publicity recently about core services - what is the business of local government. 

I want to be very clear that I am not proposing that central government prohibit local councils from doing things.  Rather, this part of the review is about enabling councils, in consultation with ratepayers and citizens, to better prioritise expenditure, particularly at a time when many ratepayers are struggling with an increasing rates burden. Councils need more guidance on what is expected of them.

I know that your councils provide a wide range of services and facilities to local citizens, which people have come to expect, and for which your councils have broad ratepayer support.  Officials are looking at how ratepayers can have a greater and more direct say in councils' spending decisions, particularly decisions to become involved in novel or financially risky activities and investments. 

I am concerned about councils exposing their ratepayers to financial risk through imprudent ventures into non-core activities.  I know that many of you believe that the present system is sufficient, but I don't believe there is compelling evidence to support this belief.  I think that ratepayers are often not made aware of the full extent of financial risk involved in some ventures.  

For example, in the last three years we have seen:
- the liquidation of Environment Canterbury's Council Controlled Organisation, Target Pest Enterprises, with a $2.2 million Council write-off and up to $7 million owed to creditors;

- the injection of $6 million by the Hamilton City Council into Hamilton Airport because the airport has failed to meet its projected targets; and

- the loss of $300,000 by Wairarapa councils in an attempt to lure a cuisine school to their district.  The Auditor-General said that 'comments from the three councils suggest the structure of the funding arrangements administered by Go Wairarapa (their economic development agency) was not clear to them'.

I think you will agree that citizens and ratepayers around the country have some common expectations of their councils.  There are services that people expect all councils to provide, and I would like to see councils ensuring that these types of activities are properly identified and funded before money is spent on more discretionary activities. 

As part of the review of the Local Government Act 2002, the Department of Internal Affairs will be considering the circumstances in which referenda and polls can be used as decision-making tools. 

Referenda have already been successfully used to gain a mandate for council spending:
- Hastings District Council used a referendum to gauge support for building the Hawke's Bay Regional Sports Park; and
- Tasman District Council used a referendum to gauge the views of Motueka citizens on a proposal to build a swimming pool in the town.

The costs of referenda will vary according to the size of the population and method adopted.  For example, referenda held at election time will be less costly.
 
Officials at the Department of Internal Affairs are examining options to simplify long-term council community plans (LTCCPs) and focus them on strategic issues.  The costs and benefits of different options for the audit requirement for LTCCPs are being considered, as are SOLGM's suggested legislative changes.

In my view, the consultation processes undertaken by councils are unnecessarily onerous, often complex and not meaningful to the average ratepayer.  We are looking into simplifying the long-term council community plan process and improving the effectiveness of consultation.

I acknowledge Assistant Auditor General Bruce Robertson's comments to SOLGM's recent Community Plan Conference that overall planning practices have improved since the 2006-2016 planning round.  But concerns exists around the compliance costs associated with long-term council community plans and the requirements of the Local Government Act 2002, which are being addressed in the review.  These concerns include:
- the size and content of LTCCPs;
- the cost of auditing LTCCPs, and of auditing LTCCP amendments; and
- whether the scope and size of LTCCPs can be scaled to match the size, resources and needs of councils.

Most LTCCPs are bulky documents, running to hundreds of pages.  It can be hard for citizens to identify the things that really matter, and deter them from participating in decision-making processes.  It may be possible to remove from LTCCPs a lot of the more descriptive, technical and non-strategic material which has little relevance to most ratepayers.

As part of the transparency, accountability and financial management work, officials will be looking at minor amendments to the Local Government Act 2002 to reduce compliance costs.  Officials are considering how SOLGM's suggestions might be included as part of this work.

Better and less regulation is essential to boost New Zealand's productivity growth, international competitiveness and living standards.  The Government has rolled back a number of regulatory measures, and has committed to carefully considering the impacts of proposed future regulation.

After ten months in office, there is much that this Government is delivering to ratepayers and to the local government sector to reduce costs, to reduce the burden of regulation imposed by previous governments, and to provide for the future needs and prosperity of the country.

With Finance Minister Bill English I recently announced the Government's commitments to cutting red tape to create a better, smarter economy.  For a long time previous governments have placed significant additional regulatory requirements and compliance costs on local government, and ratepayers have paid the price.

I want to talk about some of the specific initiatives and regulatory roll-backs that will benefit your sector.

Environment Minister Dr Nick Smith and I recognise that the uncertainty and delays created by the current requirements of the Resource Management Act 1991 are affecting New Zealand's economic growth and productivity, and frustrating applicants.  Current RMA processes also frustrate councils, and can be costly both to administer and in terms of council resources.

The first phase of our RMA reform is focused on improving process, resource consent costs and delays through the Resource Management (Simplifying & Streamlining) Amendment Bill.

Phase two of the RMA reform will include looking at issues like aligning legislation, aquaculture legislation reform, urban development, and water allocation

The Building Amendment Bill (No 2) 2009, which introduces multiple-use building approvals, will speed-up the building consent process and reduce costs.  It will reduce duplication and fast-track the consent process for group home builders who build homes across the country using the same, or similar, designs. 

The Amendment Act also defines a new streamlined process to manage minor variations to building plans after the consent is issued, saving time for applicants and councils, and makes project information memorandums voluntary. 

I know that you in local government sector were concerned about the previous government's proposed drinking-water standards.  There have been suggestions that complying with the proposed standards would have cost councils and ratepayers up to a staggering $800 million.

I was pleased to announce with Health Minister Tony Ryall the Government's decision to delay requirements for communities to meet new drinking-water legislation by three years, and to review the costs, benefits and administrative burden of the standards.

Local government also had concerns about air quality standards, which are also under review.  Compliance with the air quality standards has been deferred and officials will be carefully considering the efficiency and cost of meeting these standards. 

The Government is working with Local Government New Zealand to investigate setting up a bond bank to help councils finance up to $30 billion of planned infrastructure over the next decade. 

A scoping study is looking at whether combining councils' borrowing needs could result in lower interest rates and transaction costs, and ratepayers getting more for their dollar.

Recently Building and Construction Minister Maurice Williamson met with the Mayors of the six territorial authorities most affected by the leaky homes issue. 

The Government is working closely with them to find appropriate solutions, with a focus on fixing damaged homes.  I expect that there will also be some clarification about where future risks and liabilities lie, which I am sure will be welcome news for local government.

A lot of my time this year has been focussed on Auckland, where great progress is being made towards overhauling governance structures.  Last Friday the special Auckland Select Committee reported back with its proposals for the Local Government (Auckland Council) bill, following widespread consultation with individuals and organisations across the greater Auckland region.

The Auckland Council, as a Unitary Authority governing the region, will represent the interests of the entire Auckland region and foster a common identity and purpose. 

The Bill proposes two levels of political decision making within the one Unitary Authority - the Auckland Council, and local boards.  

The Bill, as reported from the Select Committee, gives local boards real decision-making powers, with the Auckland mayor and councillors concentrating on regional matters.
The 20 to 30 local boards will have control of funding for community initiatives, local decision-making power over local services and facilities, and the power to propose by-laws.

The Select Committee has recommended that all councillors should be elected from wards. The Government believes that Aucklanders will elect candidates who also have the interests of the whole region at heart.

Importantly, the Select Committee report demonstrates substantial agreement on the main points: one council, one mayor, one plan, strong local boards and elections from wards.

Having a unified Auckland Council will consolidate and streamline services such as administration and office systems, finance, human resources, information technology and delivery of services, and bring efficiencies in service delivery. 

I'm hoping that the 2nd reading of the Bill will begin later this week, with enactment soon after, so that the Local Government Commission can begin its important work of determining the final boundaries for the new Auckland wards, and local board areas.

Later this year a third Bill will be introduced to provide for the ongoing governance structure, functions, roles and powers of councils and local boards, and detailed legislative framework for governance arrangements.

So you can see with all this that I'm keeping myself busy.  What I would like now is to hear any questions or comments you have about the issues I've talked about this morning.