Part 4: The right debate

Local government: Results of the 2006/07 audits.

A common challenge for local authorities when they prepared their 2006-16 Long- Term Council Community Plans (LTCCPs) was disclosing the right debate.

The right debate is about providing information that is relevant to the stakeholder, and being transparent. This requires a local authority to assess what the important issues are, what options – including the option adopted in the consultation document – are open to the community, and what all the implications associated with the issues are.

In our report to Parliament on matters arising from the 2006-16 LTCCPs,1 we highlighted poor disclosure of the right debate as one of the disappointing features. This is a matter that our auditors will focus on as local authorities start to prepare their 2009-19 LTCCPs.

Until the LTCCP reflects these matters transparently and plainly for the reader, it is arguable that the statutory principles on which the LTCCP is based are not being met.

Since 2006, there has been much discussion and clarification about the concept of the right debate in the sector. We look forward to improved disclosures from all councils, because communities need to have confidence that the information they are consulted about is complete and relevant.

An example – Metrowater charges

In its 2006-16 LTCCP, the Auckland City Council (the Council) set out its plans for achieving its vision for the city to develop on an internationally competitive scale. The LTCCP outlined a significant capital expenditure programme as part of those plans. To fund the capital expenditure programme, the Council referred to, among different sources of funding, an increasing level of charitable payments from its subsidiary – Metro Water Limited (trading as Metrowater).

Metrowater provides retail water and waste services to Auckland consumers. It charges for its services and has made several charitable payments to its shareholder, the Council. In the five years before the 2006-16 LTCCP was published, those payments ranged from $5 million to $12 million a year.

The 2006-16 LTCCP anticipated that the charitable payments would increase and total $324 million during the 10 years covered by the plan. This equates to an average of $32 million each year.

Inquiry by the Local Government and Environment Committee

The Local Government and Environment Committee (the Committee) received a petition asking for an inquiry into the “charging and other practices of Metrowater”.2 The petitioners expressed concern that the increasing demand for charitable payments from the Council was increasing the charges associated with providing Metrowater's services.

The Committee carried out an inquiry and its resulting report to the House of Representatives was strongly critical of the Council. The Committee considered that the Council had “misled” the Auckland community about the effect of the increased demand for charitable payments to help fund the Council's capital expenditure programme.

In highlighting its development intentions for the city, the Council specifically disclosed the increasing level of charitable payments needed to fund the capital expenditure programme. The LTCCP also provided some comments on the effect this would have on Metrowater's charges. It described that effect as “modest”.

The Council and Metrowater assessed that the projected increase in water charges would range from an initial nominal 6.5% in 2006/07 to an annual increase in water charges of 3-4%. However, it did not disclose this range in the LTCCP. The Committee was highly critical of this lack of disclosure, implying that the ratepayer and water consumer should have been shown the range of annual increases and that it was for ratepayers and consumers to determine if these increases were modest.

Issues raised by the Metrowater example

The Metrowater example raises some important issues about preparing an LTCCP and the consultation processes that local authorities should observe. It highlights the importance of the LTCCP:

  • in setting the direction of a local authority, clearly describing that direction and associated plans, and the local authority's approach to funding those plans – including the effect on the ratepayer or other funder;
  • in clearly describing the implications of the proposed direction and associated plans;
  • reflecting its pivotal role in a local authority's consultation with its community to enable effective and complete feedback on that direction and funding; and
  • being written from a ratepayer-centred, rather than council-centred, perspective. The information disclosed not only needs to be complete but must also be capable of being understood by those being consulted.

We recognise that what is adequate for one reader may not be for another. Local authorities must exercise judgement in what information they disclose and how they disclose it. In the Metrowater case, the Council genuinely considered that it had adequately disclosed its intentions to the community to enable effective consultation and, as auditors, we had assessed the disclosures as consistent with reasonable practice. That the Committee took a different view shows just how important the judgement about disclosure can be.

Since the audit of the 2006-16 LTCCPs, we have continued to express the view that one of the important dimensions of an LTCCP is that it focuses on the important issues, options, and implications of the future focus of a local authority – setting out “the right debate”.

We note the work of the Society of Local Government Managers in developing and recording good practice in this area.3 In its advice to the sector, it notes that the right debate is one of “four cardinal virtues” in preparing and delivering an LTCCP.

Disclosing the right debate will remain an important part of the 2009-19 LTCCPs and their usefulness. In our view, local authorities need to give significant attention to setting out those key issues with regard to the completeness of the information and its relevance to the community.

1: Matters arising from the 2006-16 Long-Term Council Community Plans, June 2007.

2: Petition 2005/106 of Penelope Bright and 40 others, presented to the House of Representatives in September 2007.

3: See the Society's website ( There is a range of good practice manuals about the LTCCP, produced in association with Local Government New Zealand. The volume entitled Piecing it Together deals specifically with the right debate (see pages 8-10).

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