What's the deal with City Deals?

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For local government spotters there was a fair bit to digest in the National-led Coalition Government’s third quarter action plan. From progressing Local Water Done Well, continuing to reform and then commence a work programme to replace the Resource Management Act, changes to National Police Statements and Farm Freshwater Plans, and the launch of the Regional Infrastructure Fund, there’s plenty for local government to chew over. However it was the second action point that caught my attention: “Take Cabinet decisions on a framework for city and regional deals.”

For context, National campaigned in the lead up to the 2023 election with city and regional deals being part of their solution for helping local government deliver local infrastructure projects. In a speech to Infrastructure New Zealand’s Building Nations Conference in June 2023, Christopher Luxon gave some indication of what they had in mind, specifically referencing similar deals that were in use in Australia and the United Kingdom.

While he said each deal will be “bespoke”, Luxon broadly outlined the framework that’s likely to be in place. National sees city and regional deals as involving “long-term funding commitments by both central and local government to enable certainty of planning, and a portfolio approach encompassing road, rail,  public transport, housing (including public housing) and environmental resilience investments.”

So how do you go about doing this? At a simple level, these deals could just be central and local government (most likely to be collective groupings of councils with the exception of Auckland and possibly Christchurch) listing out their infrastructure priorities, agreeing what is going to happen and when, deciding on a funding split, and central government giving councils some new revenue or debt tools (such as value capture tax or lifting debt limits) to help them pay their share of the costs.

If that sounds a lot like the now defunct Let’s Get Wellington Moving, it’s because that’s basically what it is. LGWM was very much focused on transport, but it was fundamentally a city deal with some regional linkages. This type of deal, with some additional stuff around economic development and the like, is pretty typical of what the experience has been in Australia and would be relatively easy to roll out in New Zealand. Local government lists out what needs to be funded, central government decides what it agrees with, and the two levels of government negotiate over what, who, and when these things will be funded and delivered by.

At a more complex level, these deals could entail all of the above plus involve the creation of new combined entities that sit above existing local and regional authorities, or the amalgamation of existing entities. The argument here is that such an entity would provide better coordination and delivery of planning, infrastructure, and associated services across interconnected areas, while still retaining local influence if the constituent councils still exist.

The Greater Manchester Combined Authority (GMCA) has, unsurprisingly, been the template everyone looks to in this regard. Unlike the Auckland Super City, where the local and regional councils were amalgamated together, the GMCA saw the existing councils retained, but the GMCA created to sit above them in something of a hybrid of the super city model. The GMCA has 10 indirectly elected members appointed by the constituent councils (currently all but one of these members are the leader/mayor of their respective councils) and a single mayor of the GMCA which is elected at large across all of Greater Manchester.

The GMCA has a range of responsibilities ranging from transport, police and fire, economic development, strategy and planning, housing, waste, climate change, and skills development amongst others. Following its establishment, the GMCA then went on to negotiate the Greater Manchester Deal, with two of its big elements being the creation of a revolving infrastructure fund where the GMCA could “earn-back” some of the additional tax revenue generated by its infrastructure spending and a housing fund to pool central and local government funding.

What’s most notable about the GMCA example is the amount of devolution that’s gone on. While local governments in the United Kingdom already enjoyed a greater range of devolved responsibilities (e.g. policing) than their New Zealand counterparts do, since the Greater Manchester Deal was announced, the GMCA has gone further with the devolution of £6 billion in health and social care funding.

So how would a GMCA model work in New Zealand? Let’s take the Wellington region as an example, not least because regional amalgamation is once again in the news. Using a similar model as Greater Manchester, a Greater Wellington Combined Authority (GWCA) would see the Wellington City, Hutt City, Upper Hutt City, Porirua City, and possibly Kāpiti District councils still exist. Let’s also assume that Greater Wellington Regional Council would probably be amalgamated into the new entity, largely because several of its most important functions would be swallowed up (e.g. public transport) and it would be confusing as hell to have two separate entities broadly covering the same regional area (excluded Wairarapa).

Each of the five local councils would appoint at least one representative (most likely their Mayor) to the new GWCA. There would also be a single Mayor of Greater Wellington elected at large across the region. If you wanted to address a perceived issue around a lack of democratic accountability with the Greater Manchester model, you could also look to also directly elect, either at a regional level or from the constituent council areas, representatives onto the new combined authority.

The GWCA could then take over responsibility for roading, public transport, environmental and resource management, waste management, three waters, spatial planning, and housing. It would also be responsible for delivering the infrastructure pipeline agreed to in the regional deal, and it would fund its operations through a combination of property rates (as councils currently use), fees and charges, but most importantly the introduction of new value capture taxes and congestion charging. It would also see funding devolved from the likes of Kāinga Ora and polled with the funding from local authorities to work with community housing providers to provide public housing.

This Greater Manchester model is what Local Government New Zealand (LGNZ) has been keen to promote, even bringing the Mayor of Greater Manchester Andy Burnham out to New Zealand to share his perspective and experience on it. Even if new combined authorities or amalgamations might be a political step too far for many of LGNZ’s members to sell to their communities with local government elections little over a year away, the ideas of increased devolution and additional revenue tools will be appealing.

However, it remains to be seen whether this is what the National-led Coalition is keen on. It’s worth remembering that National, ACT, and New Zealand First have all positioned themselves as being staunchly opposed to the centralisation of services, especially around councils’ three waters infrastructure and services. Now while there’s undoubtedly been an element of political theatre in their claim to be the champions of localism, it does make the idea of regionalising big parts of local government - much like what the former Government’s Three Waters reform was proposing to do, appear to fly in the face of their previous opposition.

There’s also the element of timeframes. Negotiating the structures of, and then establishing new combined authorities, would take time and involve the spending of a significant amount of political capital given the easily leveraged political opportunities along the way. Doing that while concurrently negotiating a city or regional deal could see the timeframe for getting this done blow out far too much for the Government’s liking.

If nothing else, the National-led Coalition has made clear its determination to try and move quickly on things in order to avoid the perception of non-delivery that plagued their predecessors. Having decided on the framework for city and regional deals in the next quarter, it seems likely that they’ll be looking to move at pace to negotiate, agree, announce, and start implementing these deals as quickly as possible.

Given our structure and systems of local government are in dire need of an overhaul, it feels like this could be yet another lost opportunity to enact the type of wholesale reform that is desperately needed.

However, maybe one lesson that could be taken from the previous Government’s struggles, and looking even further back at the Fourth Labour Government, is that sometimes maybe you do need to be politically brave, enact big reforms that are implemented quickly, and leave it to the opposition to decide whether they want to risk upending everything all over again in the event they win the following election. After all, Rogernomics hasn’t been undone, and the sweeping local government reforms of 1989 largely persist to this day (with the exception of Auckland).

Sometimes you just have to get on with it when shaking things up. Or, as my Mum loves to say, “shit or get off the pot.”