Part 1: Engaging the community in the right debate

Matters arising from the 2009-19 long-term council community plans.

1.1
In this Part, we discuss how well local authorities consulted with their communities about the most important issues in the 2009-19 long-term council community plans (LTCCPs). We discuss:

1.2
This section includes examples of good consultation about major issues and our views on how local authorities need to improve consultation about their financial strategies.

Summary of our findings

1.3
An important role of LTCCPs is to provide information about significant issues facing a community so that the community can provide feedback on the choices facing it. The 2009-19 LTCCPs showed a significant improvement in the clarity with which local authorities presented major issues.

1.4
However, local authorities still need to improve how they present and explain their financial strategies. In our view, a local authority's financial strategy should be presented to the community as a major issue.

Importance of engaging the community in the right debate

1.5
Section 93(6)(f) of the Local Government Act 2002 (the Act) says that:

(6) The purpose of a long-term council community plan is to …

(f) provide an opportunity for participation by the public in decision-making processes on activities to be undertaken by the local authority.

1.6
The Act says that local authorities must use the "special consultative procedure" to provide that opportunity for participation. The special consultative procedure has its own detailed requirements and refers to a Statement of Proposal. For LTCCPs, the Statement of Proposal is effectively a draft version of the LTCCP. The Act also requires a Summary of the Statement of Proposal, because LTCCPs can be very long and detailed.

1.7
The LTCCP is finalised – adopted – after the local authority considers the feedback it gets from the community. Once an LTCCP is adopted, it is in place for up to three years.

1.8
For that time, it is the local authority's and the community's primary reference point. The local authority cannot significantly deviate from the direction established in the adopted LTCCP.2 Therefore, the local authority needs to clearly present the important issues facing the community because the effects of the consultation will last well beyond the consultation period.

1.9
For a Statement of Proposal or Summary to facilitate the community having the right debate, the local authority needs to identify and present the appropriate information to the community. An LTCCP is a large document containing a great deal of detail. Therefore, local authorities need to effectively communicate the strategic and other important issues, choices, and implications so that these are readily apparent to the community.

1.10
Focusing on the major issues facing the community when preparing the LTCCP also enables the community to participate in discussions on local authority direction with elected members.

Recommended hierarchy for presenting information

1.11
Local authorities need to present information in a way that draws a community's attention to the most important issues. We consider that a local authority should present its community with information about the major issues in the following order:

  • first, the strategic and other major issues;
  • secondly, the choices and options for addressing the issues; and
  • last, the implications (financial, levels of service, and also effect on well-beings) of each option.

1.12
In our view, it is hard to argue that the right debate can take place if all aspects of the hierarchy are not evident in the LTCCP. The community needs each element of the hierarchy to evaluate the local authority's strategies and proposals to address the major issues that the community faces.

1.13
Overall, the 2009-19 LTCCPs showed a significant improvement in the clarity with which local authorities presented the major issues they faced. Local authorities generally presented major issues near the start of the LTCCP. We also noted a significant move towards preparing the Summary in conjunction with the Statement of Proposal. This results in a more meaningful and accurate summary of the major issues that are in the main document.

1.14
That said, we encourage local authorities to use the hierarchy more effectively. The hierarchy is especially useful in reminding a local authority to communicate the implications of its proposed approach to resolving strategic and other major issues.

Time frame for engaging in the right debate

1.15
Local authorities' consultation with their communities about major issues often occurs over a long time. Therefore, for many LTCCPs, the right debate is the result of many years' work and of different types of consultation. For such LTCCPs, we expect local authorities to indicate in the LTCCP the choices and implications that they had already put to the community during previous consultation. We also expect local authorities to clearly explain the decisions required of their communities during the current LTCCP process.

1.16
We do not expect local authorities to apply the suggested hierarchy without considering their particular circumstances, including earlier consultation. However, local authorities must clearly communicate about any consultation that has already been completed.

1.17
Even when a local authority has already consulted a lot on major issues, it still needs to clearly communicate the major issues in its Statement of Proposal for those people in the community who have not been involved previously or who may be new to the district or region. Importantly, the Statement of Proposal is often the first time that the local authority brings together all the earlier consultation into one corporate view.

Major issues presented in the 2009-19 LTCCPs

1.18
The issues that local authorities presented for community consideration in the 2009-19 LTCCPs were clearly affected by the global recession. A dominant theme of the LTCCPs was the need for local authorities' decisions to be affordable for the community.

1.19
Local authorities also showed a cautious approach to financial management, because of the uncertainty created by the recessionary conditions. Although the level of a local authority's rates, and particularly rate increases, has always been of interest to the community, the extra focus on affordability was unprecedented but, in the circumstances, warranted.

1.20
Against this background, the specific issues raised by local authorities were wide ranging. They included:

  • proposals for large infrastructure asset development and upgrades;
  • proposals for community facilities, such as stadiums and events centres;
  • proposals for relocating and renewing libraries;
  • developing and amending the approach to providing community housing;
  • proposals to create and disestablish council-controlled organisations; and
  • preparing policies to guide the response to the effects of climate change.

1.21
The recession did not result in local authorities significantly reducing their activities. We noted that, in general, local authorities presented a strong argument to their communities about the importance of ongoing prudent management of core infrastructure and long-term, progressive development of other infrastructure and facilities. The 2009-19 LTCCPs showed that most local authorities are now strongly committed to the principle of long-term planning.

Examples of well-presented issues

1.22
We identified some examples of well-presented issues in various Statements of Proposal. We do not consider that these examples are the best, or only good, examples from the 2009-19 LTCCPs. They are a small sample that we hope will stimulate further improvements in how local authorities engage in the right debate with their communities.

Gisborne District Council

1.23
Gisborne District Council presented its major issues under three headings:

  • Committed projects;
  • Major projects with issues and options; and
  • Community-led and collaborative projects.

1.24
The Council presented "Committed projects" to the community in the context of its earlier consultation on these projects. The Statement of Proposal clearly stated that, in principle, the Council viewed the decision about the approach to these projects as having already been made. The Statement of Proposal also provided details of the Council's planned and forecast response. However, the Statement of Proposal still made it clear that the Council was open to feedback about the proposed response stated in the Statement of Proposal.

1.25
The Council used the "Major projects with issues and options" section of its Statement of Proposal to present issues on which it specifically wanted community feedback. Projects or issues were presented with at least two options. The Council clearly stated that the first option presented was the option that was built into the Statement of Proposal forecasts and signalled that this was the local authority's preferred option.

1.26
The Council usually presented the second option as "maintaining the status quo". The second option included a good explanation of the effects of not proceeding with the first option, including the financial effects and the effects on levels of service. For example, the Council's explanation of the effect of not building cycleways covered both the reduced capital expenditure associated with the project and the resulting loss of government subsidy for which the proposed project was eligible.

1.27
The Council's third type of issue – "Community-led and collaborative projects" – included an explanation of projects that the Council did not make a monetary contribution to but supported in other ways. This aspect of presenting community issues emphasised the Council's broader role in the community and its contribution to community organisations.

1.28
The Council's submission form was structured to align with the options presented in the "Major projects with issues and options" section. The submission form asked the submitter to answer "yes" or "no" to whether they agreed that option one (preferred by the Council) was the best option for the Council to pursue. The Summary also followed the same structure as the Statement of Proposal, made good use of colour and diagrams, and made clear the major questions on which the Council wanted feedback.

1.29
The Council completed the process of presenting the right issues for debate by using the same three-part structure (along with an additional section) in its final adopted LTCCP. The additional section set out the issues that had been presented to the community for consideration but had been removed from the final LTCCP as a result of the feedback. The Council also explained why a project had been removed.

1.30
In our view, this extra section provided a robust and transparent record of the consultation process.

Rotorua District Council

1.31
Rotorua District Council clearly presented its major issues and how it wanted the district to look in 2019. An overview set out the context and basis for the Council's LTCCP and the three major themes that underpinned the Statement of Proposal. These major themes were economic growth, sustainability, and affordability. The Council gave a clear message that it had tried, in preparing the LTCCP, to keep rate increases to a minimum while balancing the community's expectation that it provide "excellent facilities".

1.32
The Council presented major projects and issues on which it was seeking feedback within the context of the three key themes. Each issue was presented with background and contextual material titled "We're proposing". This was followed by a section titled "This means", which set out how the Council's proposals were dealt with in the Statement of Proposal – such as the funding provided in the financial forecasts and the planned timing of the project.

1.33
The Statement of Proposal then had a section that asked the reader specific questions. These were prompts for evaluating each project. The responses from the community were designed to help the Council to determine how to proceed with the projects. We note that the Summary included similar questions.

1.34
In our view, the Council was especially good at linking major issues to the overall context and to the direction that the Council was trying to take. The Council was also good at presenting background information on the specific issues and the implications. However, the Council's LTCCP would have been better if it had more clearly presented the options available to the community.

Matamata Piako District Council

1.35
Matamata Piako District Council carried out an extensive process of early consultation to help prepare its Statement of Proposal. In the Statement of Proposal, the Council set out its major issues under the heading "Decisions for the future". Each major issue was presented with background information on the issue and the list of options that had already been presented to the community through the earlier consultation processes. For most issues, four options had already been provided to the community.

1.36
For each issue, the Statement of Proposal then identified the position that the Council had taken as a result of the earlier consultation. For most issues, the Council invited the community to make further comment on the Council's planned approach to the issue, as signalled in the Statement of Proposal.

1.37
The Council's Statement of Proposal provided the community with less detail about the options than may be considered ideal. However, because the Council had already carried out a staged consultation process and had therefore provided details to the community in the earlier process, we consider that the Statement of Proposal had an appropriate (although probably minimum) level of detail.

Far North District Council

1.38
Far North District Council clearly presented its Statement of Proposal as a "back to basics" approach to the next 10 years. The introductory sections of the Statement of Proposal set this tone and described a number of specific strategies to achieve this overall goal. These strategies included:

  • continuing to challenge the cost base of the Council; and
  • evaluating the extent of future capital expenditure based on the related effect on operating costs.

1.39
Using this approach, the Council presented its Statement of Proposal as a document that would deliver to the community a rates rise of less than 1% in 2009/10. However, the community was clearly alerted to the fact that this approach would, in the long term, lead to decreasing levels of service. The Council then provided, in a simple table, seven independent options that, if all adopted, would add an additional 11% in total to the 2009/10 rates.

1.40
All seven options related to only operational expenditure (they did not relate to new capital projects). They reflected different ways in which the Council could deliver levels of service. Some options added to the current level of service and others maintained the current level of service by increasing funding to counteract the effect of inflation. The focus was on roading, district facilities, stormwater, and the Hokianga ferry – all major services that the Council provides.

1.41
We considered that the Council presented its options simply, yet very clearly and effectively. The table provided a good description of the available options and made a specific link to the effect on rates. The table also clearly stated that the options related only to operational expenditure and had no effect on capital expenditure or loan funding.

Financial strategies need to be better presented

1.42
In our view, a local authority's financial strategy should be presented to the community as a major issue. The financial strategy most significantly determines the future state, both for the financial and consequently service delivery ability, of the local authority.

1.43
The financial strategy also sets the parameters that a local authority uses to balance the community's current and future interests. The financial strategy also defines the local authority's approach to funding activities equitably between ratepayers. These are all matters that the local authority should be making clear to the community and on which it should seek the community's input.

1.44
The financial strategy also provides the foundation principles on which the rating requirement is established. This foundation is for the 10 years (and beyond) of the particular LTCCP.

1.45
Overall, we found that local authorities did not present and explain financial strategies clearly enough to help communities provide informed input. Very few local authorities produced an effective synthesis of their approach to managing their finances. Even fewer local authorities provided information to the community based on our recommended hierarchy for presenting the major issues that need to be debated (see paragraph 1.11).

1.46
Also, we considered that some local authorities did not appear to be fully aware of the long-term implications of the funding approaches that they were applying in their Statements of Proposal. A few local authorities described their financial strategy in the early drafts of the Statement of Proposal, but the description was not consistent with the approach actually applied in the financial forecasts.

1.47
We identified that local authorities had common and recurring weaknesses in presenting financial strategies:

  • no explanation of the assumptions made about the effect of the economic downturn on growth assumptions and consequently on the levels of funding expected to be generated from development and financial contributions;
  • poor understanding of the differences between financial performance in keeping with generally accepted accounting practice (GAAP) and funding needs;
  • poor or inaccurate use of the term "unfunded depreciation", often coupled with poor explanation of the consequential funding needs of assets for which depreciation is not funded in the period beyond the 2009-19 LTCCP;
  • misunderstanding that depreciation is not a cash item;
  • an over-emphasis on the first year's rating requirement and not enough detail about the funding needs of later years;
  • an over-emphasis on, or detailed explanation of, one aspect of the financial strategy and limited or no coverage of other major aspects;
  • unclear explanations about the use of reserves and internal borrowing, and how use of these funding sources affects the external borrowing requirements; and
  • a debt funding and debt repayment approach that is not consistently reflected throughout the LTCCP, with differences or inconsistencies between the various elements of the financial statements and the financial strategy explanation.

1.48
Local authorities need to improve how they present their financial strategies in their future LTCCPs.

Transparency, accountability, and financial management requirements for financial strategy disclosures

1.49
It is important to note that the Government's proposed changes to the Act, which arose from the Transparency, Accountability, and Financial Management (TAFM) review, include requirements for specific disclosures in the LTCCP about the financial strategy of each local authority.

1.50
The resulting Local Government Amendment (No 2) Bill 2010 has passed its first reading and is currently being considered by a parliamentary select committee. Although the details of the disclosures are yet to be finalised through further parliamentary scrutiny and debate, the changes are expected to help address some of the concerns discussed in paragraphs 1.45-1.48.

1.51
The proposals provide for a number of specific disclosures covering common components of a financial strategy. Whatever the outcome of the TAFM review, it will remain important for each local authority to work on making better disclosures about its financial strategy. If the amended legislation includes specific disclosure requirements, local authorities will still need to be careful to make disclosures that are appropriate to their own circumstances. If a local authority is taking a non-standard approach or has unique circumstances, it will need not only to comply with the requirements of the new legislation but also to be transparent about its unique circumstances.

Preparing for 2012

1.52
The financial strategy provides a framework on which all other decisions will be based. It is very important that the local authority, including elected members and management, is completely clear about the nature of its financial strategy. All elected members need to be clear about the immediate and long-term implications of the financial strategy on the local authority's financial position, and its assets and activities.

1.53
Once the local authority is clear about its financial strategy, it will be in a better position to clearly articulate its financial strategy to the community in its LTCCP (in a manner that is meaningful to the lay reader), including the implications of its proposed strategy.

2: When a local authority identifies a need to make a substantial change, it can go through a process to amend its LTCCP. The amendment requires consultation and audit, and the same principles should apply.

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