By the time you read this, the Local Government Act 2002 Amendment Bill will probably be law. It passed through the House's committee stage on 27 November, received its third reading on 29 November, and will come into force the day after the Governor-General assents to the Bill. At this stage we anticipate that assent might be given on 3 December, meaning the Bill (other than the enhanced Mayoral provisions, which come into force on 12 October 2013) would come into force the following day.

The Local Government Act 2002 Amendment Act 2012 derives from the Hon Dr Nick Smith's vision for Better Local Government, announced back in March. Despite the Hon David Carter taking on the local government portfolio for the entire passage of the legislation, there has been remarkably little change to Dr Smith's original concept. In fact Minister Carter took no part in the Parliamentary Debates apart from moving the first reading of the Bill.

Bidding farewell to the four well-beings

Despite vociferous and well-reasoned opposition, the purpose statement remains unaltered. The four well-beings and all statutory references to them (in the Local Government Act 2002 at least) are gone. No transitional provisions have been included for the new purpose statement, meaning it will apply to all existing activities, but only as they are carried out going forward from the day after the Bill receives Royal assent.

The implication of the new purpose statement is that local authorities' lawful roles, and how they perform them, are somehow reduced from what they have been. The difficulty, of course, is determining what that reduction entails. Ultimately, the courts will make that determination.

In the meantime, local authorities should at least ensure that their decision-making processes now include consideration about whether the matters they are dealing with "meet the current and future needs of communities for good-quality local infrastructure, local public services, and performance of regulatory functions". Probably more crucial, is that they ensure the way they are proposing to deal with a matter "is most cost-effective for households and businesses" (whatever that means). That term is new to New Zealand law (though "cost-effective" does appear in Weathertight Homes and ACC legislation). Expect judicial interpretation sooner rather than later.

Tinkering with Ministerial intervention

The Government's Supplementary Order Papers, introduced during the House's committee stage for the Bill, have made a number of changes to the Ministerial powers of intervention in local government democracy. Most of these are of little consequence, with just a few important changes.

The most significant change is that the Minister's powers are no longer directly linked to compliance with the financial parameters and benchmarks, which will be set through regulations. The Bill had previously provided that a failure to comply with such parameters and benchmarks constituted a "problem", which is the trigger for the Minister using his or her intervention powers. Now, however, a "problem" will more broadly include a failure by a local authority to demonstrate prudent management in its financial dealings.

Breaching the benchmarks and parameters might still lead to the Minister using his or her intervention powers, but it is not a given. Hopefully, the Minister will reserve his or her powers for breaches that show more endemic and long-term problems that warrant intervention.

Another notable change is the introduction of an obligation on the Minister to publish a list of matters that will be relevant to the use of the intervention powers on the Department of Internal Affairs' website. At a minimum, the list must include the guiding principles that the Minister is likely to adopt when making intervention decisions, matters or circumstances that the Minister considers are likely to give rise to intervention, and the types and sources of information that the Minister is likely to consider when making intervention decisions. Consultation with Local Government New Zealand on the list is mandatory.

Finally, it is interesting to see the introduction of a requirement that intervention must ensure, as far as practicable, that a local authority's existing organisational capability is not diminished. This requirement will apply to any Crown Review Team, Crown Observer, Crown Manager or Commissioner appointed by the Minister.

These changes are presumably in response to concerns raised about the very broad scope and significant effect of the Minister's powers.

Rejigging reorganisation

The largest number of changes introduced by the Government's Supplementary Order Papers have been to the reorganisation provisions. The changes generally refine the reorganisation process further, in line with Dr Smith's original intentions.

Some of the more notable changes include:

  • "Significant community support" has become "demonstrable community support" and, significantly, this support must exist in each district affected by the reorganisation proposal. Dr Smith's March 2012 release stated that there would need to be support in each of the affected territorial authorities, but this did not make it into the initial version of the Bill; it appears this omission has now been rectified.
  • Once the Local Government Commission decides that it will assess an application, it will call for any alternative proposals. Those wishing to do so will have just 20 working days to get alternative proposals to the Commission. After that point, the Commission will commence its process of assessing the application and any alternative proposals, and can refuse to assess any new applications concerning reorganisation in the affected area.
  • Petitions for polls can no longer be collected prior to the notification of a final proposal. Instead, there will be 60 working days (approximately 3 months) to collect a petition after notification. Rather than needing to obtain signatures from 10% of electors across the entire affected area as the Bill had originally provided, it will be sufficient to collect signatures from 10% of electors in just one of the affected districts.
  • The prohibition on local authorities advertising during a polling period has been clarified. In particular, local authorities are expressly permitted to publish balanced and factual material that assists electors considering promoting or signing a petition or voting in a poll to make a better-informed decision.

We will be providing a more extensive discussion of the new reorganisation process in an upcoming publication - look out for Part 4 in our Rise of Reorganisation series.

Conclusion

The first round of Better Local Government legislation is complete. Local authorities need to understand the changes quickly, and in particular, how they will ensure compliance with the new purpose statement. In areas where reorganisation is a real possibility, local authorities may wish to be ready to propose alternatives in the event that the reorganisation ball starts rolling.

Round two of Better Local Government now awaits. The Department of Internal Affairs is working on the parameters and benchmarks regulations. The Efficiency Taskforce, the Productivity Commission, and the Infrastructure Efficiency Expert Advisory Group are all due to report within the next six months. Local government reform is far from over.