The Shand Inquiry - The Devil's in the Detail

"The Shand Inquiry has produced a comprehensive report that needs close consideration”  SOLGM President Steve Parry says.  “The devil’s in the detail, just reading the recommendations will not give you a full understanding of what it means.”

The report offers some additional funding, and several small-moderate sized revenue raising tools.  But the additional funding is targeted, not every local authority is likely to benefit from the package.  This includes:

• a new Contestable Infrastructure Equalisation Fund for ‘three water’ infrastructure (to come from GST)
• changes to the financial assistance regime by reviewing the level of funding for ‘urban arterials’ – but it is not clear whether this will come from new funding or a reprioritisation of existing funds.

While the report concludes property taxation should remain the main funding source for local government it then goes on to recommend the most fundamental changes to the rating mechanism since the 1970s.  This includes:

• the phased abolition of differentials on the general rate
• the removal of uniform annual general charges, and
• ‘promotion’ for a single valuation system (capital value) and
• volumetric charging for town water and wastewater.

Initially it appears that the main ‘winner’ from these recommendations will be the business sector and low valued properties, at the expense of the rural sector and owners of moderate-high value properties.  ‘I strongly recommend that your local authority model the impacts of these changes as part of your evaluation of the report’, says Steve.

The proposed changes to rating system appear to promote a ‘cleaner’, more transparent rating system. But this comes with some loss of flexibility to design local funding solutions and with significant adjustment and transitional issues.

But the real issue for the sector comes in the recommendations around accountability and decision-making.  Some of these represent a fundamental shift in our constitutional arrangements that contradicts the thrust of changes made in 2002.  In particular the report recommends the establishment of an independent review agency that will have the jurisdiction to hear complaints on funding decisions (including the reasonableness of decisions such as targeted rates, and charges) and make recommendations.  The independent review agency will be able to place itself in the shoes of elected members.  While local authorities will be able to deal with recommendations from an independent review body as they see fit, those recommendations will carry enormous ‘moral value’ to the public.

It also appears that the Inquiry wants to remove some of the discretion that local authorities have to design consultation processes that work for communities, while seeking to replace what it refers to as “mass undifferentiated consultation” with ‘targeted focused consultation’.

“The real issue for the sector, are the additional funding and funding tools sufficient to compensate for the apparent loss of accountability to your local community and flexibility to resolve local needs” Steve says.

The Minister’s reported comments that there will be no ‘cherry-picking’ seem to suggest that there will be a robust policy process to assess the recommendations.  SOLGM and Local Government New Zealand will be involved in the process. 

Copies of Did the Inquiry ‘Get Real’? – the SOLGM/Local Government New Zealand initial commentary on the report can be found in the Good Practice Toolkits section on SOLGM’s website.