Environmental / Resource Management

Local Government Act 2002 Amendment Bill (No 2)

In a press release dated 16 March 2016, the Minister of Local Government, Peseta Sam Lotu-liga announced a number of reforms for the local government sector to enable local authorities around the country to deliver better services for ratepayers as part of the "Better Local Services Package".

The Local Government Act 2002 Amendment Bill (No 2) (the Bill) was introduced to Parliament on 9 June 2016 and had its first reading on 15 June 2016.  The Explanatory Note to the Bill states that the "current legislation provides only limited support for shared and integrated services, which is insufficient to enhance the scale and capability for water, transport, economic development and other activities".  

The Bill proposes amendments to enable "improved service delivery and infrastructure arrangements at a local government level".  The three key themes are:

  • Enabling local authorities to take responsibility for developing, refining and consulting on reorganisation proposals.
  • Enhancing the powers of the Local Government Commission (Commission).
  • Providing for greater use of Council-controlled Organisations (CCOs), especially for water and transport services.

A copy of the Bill and further information can be found here.

Local Authority-Led Reorganisation

The Act currently does not allow local authorities to take responsibility for developing, refining, and consulting on reorganisation proposals.  The Bill amends Schedule 3 of the Act to empower local authorities to develop and publicly consult on reorganisation plans.  A local authority reorganisation proposal must be submitted to the Commission for approval and will be subject to the same statutory requirements as a Commission-led reorganisation proposal.

Consequently, section 24AA of the Act, which sets out the purpose for local government reorganisation proposals, is replaced to align with the increased powers of the Commission and local authorities.

Local Government Commission

The Act currently authorises the Commission to conduct investigations for a reorganisation proposal submitted by a local authority.  However, the Bill extends the power of the Commission to use its discretion to decide what investigations it will undertake.  This reform is expected to better enable the Commission to prioritise and deal with investigations on a case-by-case basis, optimising efficiency and productivity.

The increased power of the Commission is accompanied by a series of checks and balances.  Section 31A is replaced by a new section 31A specifying the matters that may be included in the Minister's notice of expectation to the Commission (such as identifying any problems, issues, objectives or geographic area(s) of high importance as it relates to an investigation for reorganisation).  The report may also specify any matters or geographic areas that must not be subject to an investigation by the Commission.

The Bill also introduces new sections 31B to 31H.  The Commission will be required to provide a statement of intent at least once every 3 years, adopt a work programme each financial year, provide annual reports to the Minister and set out the process that must be followed when disputes are referred to the Commission.

The Minister may issue directions to the Commission to have regard to certain government policy in exercising its functions, and review the Commission's operations and performance.

Council-controlled Organisations

The Bill replaces section 24 of the Act by increasing the scope of local government reorganisation to include the establishment and disestablishment of CCOs, enabling the exercise of statutory responsibilities, duties and powers by water services and transport CCOs, and the establishment of joint committees.  The Bill allows the establishment of a CCO through either a local authority or Commission-led reorganisation proposal.

The Bill introduces provisions to ensure an integrated approach between CCOs and local authority planning, the successful financial management of substantive CCOs, and expanded provisions for a CCO statement of intent.

New sections 56A to 56W relate to multiply owned and substantive CCOs.  In general the provisions provide the following:

  1. Local authorities proposing to become shareholders in multiply owned water and transport CCO's must obtain agreement from the Commission before commencing consultation.
  2. The specific content required in a CCO's service delivery and infrastructure management plans, which is to be approved by the CCO's shareholders.
  3. Separate sections that outline the requirements for water and transport services CCOs in respect of their service delivery and infrastructure management plans, their responsibilities and duties, and the establishment of a joint committee for shareholding of a multiply owned water services/transport CCO.
  4. A local authority that is a shareholder in a substantive or multiply owned substantive CCO must adopt and publish an accountability policy for the organisation, and establish a joint committee to collectively manage their interests in performing or exercising their responsibilities, duties and powers as a shareholder of the CCO.

Next Steps

The Bill has been referred to the Local Government & Environment Select Committee for consideration and public consultation, and is due to be reported back to the House on 28 October 2016.

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The contents of this publication are general in nature and are not intended to serve as a substitute for legal advice on a specific matter. In the absence of such advice no responsibility is accepted by Brookfields for reliance on any of the information provided in this publication.

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