The Local Government Act 2002 Amendment Act 2014 (the "Act"), which came into force on 7 August 2014, implements the Government's second phase of legislative reform of the operation of local government. The Act contains some significant changes for local authorities in relation to development contributions, local boards, delivery and governance of services, consultation in decision making, and infrastructure strategies. We outline some of these changes below.
The Act introduces a new section that states the purpose of development contributions, which is to enable recovery of a fair and proportionate portion of the total costs of expenditure necessary to service long term growth. The Act also provides development contributions principles, which include:
development contributions should only be charged if the effects or cumulative effects of developments will create a requirement for the territorial authority to provide new or additional assets or assets of increased capacity;
development contributions should be determined in a manner that is generally consistent with the capacity life of the assets for which they are intended to be used and in a way that avoids over-recovery of costs allocated to development contribution funding.
The Act clarifies and narrows the range of infrastructure that can be financed by development contributions. Development contributions may still be required for the provision of community facilities (reserves, network infrastructure and community infrastructure). However, the broad definition of “community infrastructure” that allowed a local authority to charge development contributions for any land or asset owned or controlled by the territorial authority for public amenity purposes has been replaced by specific list of infrastructure. These are community centres/halls, public toilets, and play equipment. In addition, development contributions cannot be charged for reserves where a particular development does not involve the creation of additional housing or accommodation.
However, development contributions may now be triggered by certificates of acceptance under the Building Act and changes to resource consent conditions under the Resource Management Act.
Territorial authorities may require development contributions even when other income (e.g. rates, fees) is used to meet a portion of the capital costs. The Act also provides changes to what is required in development contributions policies. If the territorial authority has decided to seek funding for community facilities, its development contributions policy must include a schedule of assets, which sets out the proportion to be paid by development contributions.
A territorial authority and a developer may now come to a development agreement between themselves regarding the provision of infrastructure and/or payment towards infrastructure. A development agreement prevails over a development contributions policy and will be a legally enforceable contract.
Provisions allowing a developer to request that the territorial authority reconsiders the development contribution have been inserted, a reconsideration may be on the grounds that the contribution has been assessed incorrectly, the policy has been incorrectly applied, or the information used in the assessment was incomplete or erroneous. The procedure for reconsideration is to be set out in the development contributions policy.
A development contributions objection process has been reintroduced, with objections heard and decisions made by an independent development contributions commissioner appointed by the Minister. Once the commissioner has decided an objection, the territorial authority retains all its functions, duties, responsibilities, and powers in relation to the requirement for the development contribution as if the commissioner's decision had been made by the territorial authority. While this does not confer on a territorial authority the power to change, amend, or overturn a decision made by a development contributions commissioner, a territorial authority's right to apply for judicial review of a decision made by a development contributions commissioner is not affected.
The Act includes a process to provide for local boards. This only applies to unitary authorities for districts that include a local board area established by an Order in Council. The purpose of local boards, as set out in the Act, is to enable democratic decision making by communities within the local board area, and to better enable the purpose of local government to be given effect to within that area. A local board is an unincorporated body, and is not a local authority, a community board, or a committee of the governing body. It has no separate standing from the unitary authority and therefore cannot own property, employ staff, enter into contracts, or take part in legal proceedings. However, a local board can make decisions on behalf of the unitary authority about those matters.
Each local board is required to adopt a local board plan to, amongst other things, reflect the priorities and preferences of the communities in the area in respect of the local activities to be provided by the unitary authority. Each unitary authority with local boards must have a local board agreement, setting out how the unitary authority will reflect the priorities and preferences expressed in the local board plan.
A local board is responsible for:
making decisions for which responsibility is allocated to it under the Act (which includes identifying and developing bylaws, and decisions in respect of non-regulatory activities of the unitary authority that are allocated to the local board by the governing body);
monitoring and reporting on implementation of the local board agreement;
communicating with community organisations and special interest groups; and
reporting to the governing body on matters of interest or concern.
Local boards can be delegated many of the non-regulatory decision making powers of the unitary authority. A local board is also able to develop bylaws for its local board area. Members of local boards will be elected and/or appointed by the governing body, if permitted by the Order in Council establishing the local board. This local board model has many of the same features as are currently used in Auckland.
Delivery and Governance of Local Authority Services
The Act aims to encourage and facilitate shared services, joint delivery and other collaborative agreements between local authorities. The scope of triennial agreements has been broadened, by requiring local authorities to include processes and protocols for identifying, delivering, and funding facilities and services of regional significance, in addition to protocols for communication and co-ordination among the local authorities. The Act now allows local authorities within a region to constitute joint governance entities to better give effect to matters in the agreement. A local authority must notify the other local authorities in the region after making a decision that is, or that may have consequences that are, significantly inconsistent with the triennial agreement.
The Act provides that a local authority must review the cost-effectiveness of service delivery arrangements within its region or district. Such review is required in conjunction with consideration of any significant change in service levels; or, within two years before the expiry of a relevant contract; or at the council's discretion. A review is not required to the extent that delivery of services cannot reasonably be altered within the following two years (e.g. where it is governed by legislation) or if the local authority is satisfied that the potential benefits of the review do not justify the costs of undertaking the review. The maximum time permitted between reviews is six years.
These provisions aim to provide an accountability framework for the performance of local authority services and functions by council-controlled organisations, other local authorities or other persons or agencies.
Consultation and Decision Making
The use of the special consultative procedure under the LGA has been removed for a number of processes, including establishing council-controlled organisations, adopting an annual plan, policy reviews related to development contributions, rate remissions and postponement, and prescribing fees in bylaws. Instead, consultation must be in accordance with the six principles of consultation as set out in section 82 of the LGA. The Act inserts a new section which relates to information requirements for consultation required in accordance with section 82 of the LGA. This includes making specified information publicly available.
The LGA requirement for a policy of significance has been replaced with a requirement for a local authority to have a significance and engagement policy. The policy must set out the local authority's general approach to determining the significance of proposals and decisions in relation to issues, assets and other matters, including any criteria or procedures used in assessing significance. All strategic assets must be identified in the policy. The question of the significance of matters affected by a decision is to be determined in accordance with the significance and engagement policy.
The special consultative procedure can now accommodate new technology for communication and consultation, such as allowing people to present their views by way of audio visual link.
The majority of the fixed assets owned by local authorities relate to core infrastructure, with nearly one hundred billion dollars' worth of fixed assets in the hands of local authorities. The Act requires local authorities to prepare and adopt, as part of their long-term plan, an infrastructure strategy for at least a 30 year period. Prior to this requirement, there was no statutory requirement for local authorities to prepare asset management plans.
The infrastructure strategy must identify key infrastructure issues over the strategy's period and identify the options for managing those issues, plus the implications of the options. The strategy must cover assets in relation to water supply, sewerage, stormwater drainage, flood protection and control works, and roading/footpaths. The local authority may also include other assets. The infrastructure strategy must also outline how the local authority intends to manage its infrastructure assets, specify identified projected costs and identify any significant decisions about expenditure the local authority expects will be required.
The changes brought in by the Act will provide opportunities for Councils and constituents alike. They will also bring more accountability to Councils, and the assets they oversee, whilst providing greater focus on Councils core business.