Local government is struggling with two major reforms being imposed by central government, both too big and too important to get wrong

By Shane Martin

• The country has gone into Covid alert level 4 lockdown again, which completely changes the way we live our lives. And even though lockdown is a massive interruption, all the normal functions of government are still at work.

• There are currently two major central government policies that directly impact local government.

• The National Policy Statement on Urban Development (NPS-UD) and the Three Waters Reform propose two massive changes to the way local governments operate.

• The impact from these reforms is going to be in the billions of dollars and across multiple generations. Therefore, it’s absolutely necessary we get this right.

• While it is still somewhat early days, both central and local government are working hard to determine how the proposed reforms will work in practice and what the costs and benefits are likely to be.

The lowdown on the lockdown

While it’s too early to say how this outbreak will shake out, we do have insights from the last time around. Estimates from the first 2020 lockdown suggest that Covid alert level 4 decreases economic activity by 25- 30%, in the range of $100 million of GDP per day. That said, it’s important to remember, that number compares to business as usual and business as usual isn’t a possibility right now. Rather, the choice is between lockdown and uncontrolled spread of covid in Aotearoa, something nobody wants. Since we all hope that we can return to business as usual as quickly and safely as possible, let’s do our part in the meantime – be good to each other, support local business where we can, and keep safe.

Life and legislation go on

Despite the latest covid outbreak and the associated covid alert level 4 restrictions, life and government move on in other ways. From a local government standpoint, some of the biggest challenges we have faced over the past year or so have been in addressing policies handed down from central government.

The two biggest policies we’re dealing with right now are the National Policy Statement on Urban Development (NPS-UD) and Three Waters Reform. At their heart, each of these has the goal of addressing long-standing issues facing New Zealand – housing unaffordability and water quality/management. And while these are commendable goals, they represent a massive undertaking, reimagining where and how infrastructure is provided, who pays for it and how, and determining the best way to accommodate massive population growth while improving social and environmental outcomes.

A lot of ink has been spilt on these initiatives, but much of the discussion in the press has been opinion-driven. Of course, this generates clicks and gets people thinking about the policies, but it does not always give readers a clear view of the facts surrounding the debate. For instance, an article that anecdotally describes one person’s negative view of apartments does little to inform the greater public about the benefits and costs of increased density for the city.

Every single decision we make has costs and benefits. It’s our job as a council and a society to make the best decisions so that the overall benefits outweigh the costs. And it’s also on us to help the public understand those decisions.

NPS-UD? G-L-A-D to meet you

So, what does this mean for the NPS-UD? First, it is useful to outline what the NPS-UD is and what its goals are. According to the Ministry of Housing and Urban Development, the policy “aims to ensure that New Zealand’s towns and cities are well-functioning urban environments that meet the changing needs of our diverse communities.”

It does this primarily by directing planning authorities to enable an increase in housing supply and ensure that planning responds to changes in demand. It also requires the removal of overly restrictive rules that affect urban development outcomes.

For Auckland, the NPS-UD will likely result in massively increased density around our city centre, our metropolitan centres (for example, Albany, Henderson, Manukau), and the walkable catchments around our rapid transit network. At a base level, this makes sense – we should be enabling as many people as possible to have easy, walkable access to the places they are most likely to need to go. That is jobs, public transport, restaurants, and grocery/retail stores.

In theory, this achieves a couple of goals. First, it lessens the pressure for outward sprawl by allowing more people to live in already developed areas.

It also increases the viability of public transport and active modes of transport, as people are much more likely to walk to a store if it is less than a ten-minute walk from home or to take a bus if there is high-frequency service to many destinations.

Of course, increased density isn’t free. From a financial standpoint, there is always a question about whether the existing infrastructure (roads, water pipes, etc.) can cope with increased load. Upgrading infrastructure is very expensive and much more complicated when compared with laying new infrastructure in greenfields areas.

Other costs are more difficult to identify. While NIMBYs often get criticised for their views, their concerns can be legitimate. Although it brings benefits, changing the character of a neighbourhood can also impose real costs on those who will be less happy living in the reenvisioned area. This is just further evidence that every decision that gets made involves a trade-off.

As Auckland Council and other councils around the country grapple with how best to implement the goals of the NPS-UD, we need to keep a couple of things front of mind. First, and most important, is to remember that all changes have costs and benefits. To make the best choice we must evaluate these rigorously and dispassionately. Second, we cannot be too precious about the decisions we have made in the past. There is always room for improvement, and we should welcome the opportunity to make things better whenever we can.

3 waters 2 be 1 big change

Three Waters Reform is a bit of a different animal. Unlike the NPS-UD, which is a policy directive, this reform proposes a full overhaul of the system that manages and delivers drinking water, stormwater, and wastewater (three waters) services to the residents of New Zealand.

The current system sees these services mainly provided by 67 different local authorities. According to the DIA, local government faces many challenges with the provision of these services – especially “funding infrastructure deficits, complying with safety standards and environmental expectations, building resilience to natural hazards and climate change into three waters networks, and supporting growth.”

It is estimated that meeting these challenges will cost the country between $120 and $185 billion, causing household water bills to be 7 to 13 times higher in the future.

As a solution, the government has proposed a complete restructuring of how three waters are delivered. Instead of 67 entities, only 4 entities would manage the country’s water systems. Their balance sheets would be separate from councils, freeing them up to borrow enough money for infrastructure improvements. In addition, there would be a government regulator aimed at driving efficiency gains and holding the three waters providers accountable to consumers.

While all of this sounds good in theory (doesn’t it always?) it is again imperative that we fully weigh the costs and benefits. For Auckland, it is unlikely that the proposed amalgamation with Northland will deliver efficiency gains on its own. Benefits will have to come instead from the increased borrowing capability and economic regulation.

On the other hand, the joining of Auckland and Northland will result in a push to extend service to more rural customers, which is likely to be incredibly costly. A robust analysis of these impacts is needed before we can confidently say what’s best for Auckland.

What next for Auckland?

Each of these proposals has councils around the country in a mad dash to determine how, and to what extent, their regions will be impacted. Auckland is no different, and we are working hard to get those answers. Further, we are always focused on determining what costs will be imposed and what benefits are likely to be realised.

The good intention behind these policies can’t be denied. However, it is necessary for both central and local governments – and the public – to be fully aware of the impact, beyond interviews with local special-interest groups. These decisions are too big and too important to get wrong.

*Shane Martin is the Chief Economist (Acting) at Auckland Council. This article was first published here. It is here with permission.