4.1
In this Part, we discuss selected issues for local authorities to think about when applying the principles in the Act to the requirements of decision-making and consultation. Each section sets out the requirement, presents some discussion, and provides an example or examples from local authorities in New Zealand or overseas.

4.2
The topics we cover are:

• using the policy on significance;
• assessing options;
• dealing with significant changes that arise during formal consultation processes;
• linking financial decision-making to the current and future interests of the community; and
• maintaining consistency with local authority policies and managing an inconsistent decision.

Using the policy on significance

Issue

4.3
In our experience, local authorities find it difficult to determine whether decisions or proposals are significant. Although practice is evolving, we continue to receive requests to look at how local authorities have made significant decisions and how local authorities have decided whether a matter is significant. Local authorities need procedures for managing significant proposals and decisions.

Legislative requirement

4.4
Part of the decision-making framework of the Act is a “significance” threshold – the decision-making requirements in the Act are generally more onerous for “significant” decisions. This is reflected in the proportionality principle in section 79 – the extent to which a local authority must consider options and community views about a decision should be in proportion to the “significance” of the decision.

4.5
There are some cases where a proposal or a decision that a local authority recognises as “significant”, either because of its own policy or because the Act deems it so, triggers specific statutory decision-making processes. For example:

• A regional council can start a “significant new activity” only if the activity is included in its LTCCP (section 16).
• A local authority must use the special consultative procedure when proposing to change the mode of delivery of a “significant activity” (section 88).
• A local authority cannot decide to alter “significantly” the level of service for a “significant activity”, or transfer ownership or control of a strategic asset, unless the decision is explicitly provided for in the LTCCP (section 97).

4.6
The Act contains several references to “significant” and “significance”, and defines both of those terms (section 5). The definition of “significance” is the crucial one. It requires local authorities to consider the degree of importance of the issue, proposal, decision, or matter in terms of its likely effect on, and likely consequences for:

• the current and future social, economic, environmental, and cultural well-being of the district or region;
• any persons who are likely to be particularly affected by, or interested in, the issue, proposal, decision, or matter; and
• the capacity of the local authority to perform its role, and the financial and other costs of doing so.

4.7
The Act requires a local authority to have a policy on significance that sets out the local authority’s approach to determining whether a decision or proposal is significant and any thresholds, criteria, or procedures used to assess this. A policy on significance must also list a local authority’s strategic assets. This list should comprise assets considered by the local authority to be strategic, as well as assets that are strategic under the Act’s definition of that term (for example, shares held in port or energy companies).¹ A policy on significance must be adopted or amended using the special consultative procedure, and a summary must be included in the LTCCP.

Discussion

4.8
A policy on significance enables a local authority to:

• form its own approach and build from precedents and decisions taken over time to help it consider any particular matter; and
• set out its understanding of the matters the public sees as significant, so that information will be provided or consultation carried out where decisions affect these matters.

4.9
In 2003, we carried out a review of local authorities’ policies on significance.² In that review, the main findings were that better developed policies provided a mix of different types of criteria. However, thresholds and criteria merely provide a trigger for identifying whether a matter is likely to be significant but are not the only determinants. In any particular instance, local authorities still need to weigh up the considerations set out in the definition of significance in section 5 and the requirements of the Act for assessing significance.

4.10
Our expectation is that local authorities will use an approach that will allow them to ensure that similar issues are treated consistently over time.

4.11
We are aware that some policies tend to focus on financial thresholds and assets rather than contain a detailed explanation of the broader aspects of significance – that is, the local authority’s approach to determining significance with regard to current and future community well-being, the views of those affected, and the local authority’s capacity to perform its role.

4.12
We have noted that, in some cases, matters that local authorities think are important to the community may not be “significant” under the definition in the Act or the local authority’s policy on significance, but the local authority wishes to consult on them in any case to ensure that its decision-making is well informed. The community generally welcomes this approach of “Do we want to consult?”, as opposed to “Do we have to consult?”. Many local authorities begin from the question “Would the community want to be consulted?” when making a decision on consultation approaches.

4.13
However, in other cases, we have received complaints that local authorities have redefined aspects of their policies on significance to help reach a particular decision – for example, to remove an asset from the list of strategic assets to make it easier to dispose of without consultation.³

4.14
There is also some uncertainty about the scope of section 97(1)(d), which refers to a decision that will significantly affect the capacity of the local authority or the cost to the local authority, for any activity identified in the LTCCP. The description of significant activities and levels of service in the LTCCP, the definition of significance, and the policy on significance should guide local authorities in making these assessments under section 97.

4.15
One area that local authorities have found difficult is determining whether a proposal represents a significant change to levels of service. If the change and the activity is significant, the decision must be in the LTCCP (section 97(1)(a)). The requirements for determining significance are included in the definition of significance in section 5 (see paragraph 4.6). It is clear that significance is assessed by more than simply applying financial thresholds in a policy on significance, and we would expect a local authority to have addressed each requirement in any assessment of significance.

Examples

4.16
One example is whether fluoridation of the water supply represents a significant change to levels of service. Local authorities have taken different views on this. They all considered that water supply is a significant activity but had different views as to the significance of fluoridation.

4.17
In making such judgements, local authorities must consider all of the requirements in the definition of “significance” noted in paragraph 4.6. In other words, the local authority must consider the effect of the proposal on the current and future well-being of the community, the consequences for those who are likely to be particularly affected, and whether the proposal includes a change to a level of service. This could be a complex assessment for a proposal such as fluoridation, and the local authority would need to consider the cultural, health, and financial implications.

4.18
An example of a misunderstanding of the definition of “strategic asset” is from a local authority that amended its policy on significance to exclude its port company shares from being strategic assets and then sold the shares. This was a breach of the Act, as port company shares are strategic assets by definition,⁴ and a local authority’s policy on significance cannot amend that statutory definition.

Assessing options

Issue

4.19
Complex decisions – for example, for transport or infrastructure – can take many years. During that time, many options will be assessed and deliberated on, often in an iterative process that takes into account community views and the financial effects of potential decisions. Some options and their assessment processes can be highly complex or technical, and difficult to understand.

Legislative requirement

4.20
Section 77 sets out a number of requirements for the decision-making process to ensure that decision-making:

• has taken account of all reasonably practicable options;
• will contribute to community outcomes and the four aspects of community well-being;
• the effect of each option on the local authority’s capacity to meet present and future needs in relation to any statutory responsibility of the local authority; and
• any other matter the local authority considers relevant.

4.21
Not all decisions will require a full options assessment. Section 79 states that it is the responsibility of the local authority as to how it will comply with the decision-making requirements of section 77 (consideration of reasonable options) and section 78 (consideration of community views at each stage of decision-making). In practice, many decisions will be made under delegation or policies of the local authority.

4.22
All work on identifying and assessing options as required by section 77 must be done in proportion to the significance of the matters affected by the decision (section 79(1)(a)). This is a matter of judgement for the local authority. The local authority’s committee and staff delegations, existing policies and plans, the policy on significance, and work done under other legislation should provide guidance on this.

4.23
Local authorities must identify and assess options not only at the policy or strategy level but also for all their decisions in proportion to the significance of the matter, and in accordance with existing policies and plans. This means that local authorities should be able to show that they have identified and assessed the options for operational decisions – for example, for asset management, contract, and procurement decisions – particularly where these decisions could affect community well-being.

Discussion

4.24
While the Act sets out a process to follow, complex decisions take time and the process does not necessarily follow the sequence of the “steps” in section 77. In practice, decision-making can be an iterative process, often done in a series of stages, and sometimes options emerge during the process. Depending on the stage of the process, options that emerge during the process may mean councils need to review the formal consultation that is required.

4.25
It is the role of a local authority to ensure that complex material is presented in such a way that elected members and the community can understand it. It is our observation that a focus on technical issues (such as engineering, legal, or financial matters) can obscure the main ideas and principles of importance to the community. In our view, it is better to discuss principles first with the community, so this can guide the assessment of the more detailed, complex, or technical options.

4.26
There needs to be a clear process for elected members to work through difficult issues with their community. Local authorities can develop the process for identifying and managing complex and multiple options in a number of ways – for example, through joint working parties, agreements with stakeholders, public discussion documents, or community forums. These examples are consistent with the principles for consultation in section 82. However, some local authorities call these processes “pre-consultation” – that is, they engage with the community and consider community views before they carry out formal consultation through the special consultative procedure.⁵

4.27
It can be difficult for staff to provide advice and to identify what are reasonable options for achieving an objective – particularly in the early stages of an issue arising or when some options are innovative and therefore untested. There can also be many different options to consider in the early stages, and these may be highly technical, contentious, and costly.

4.28
Sometimes the community itself provides the solution. Exploring options with and for the community can provide benefits in terms of appropriateness, cost, scale, and community acceptance of an option.⁶

4.29
Using creative problem-solving techniques can foster different ideas and help sort through different options. To do this, local authorities need to build their capacity to think about long-term, complex issues and to be able to approach both decision-making and consultation processes in a manner accessible to the community. Creative thinking is not necessarily generating new ideas – it can be using an existing idea in a different way.⁷

4.30
Decisions are also often affected by additional requirements – for example, commercial requirements, engineering standards, and other legislation. In addition, local authorities are often highly dependent on the advice of consultants in assessing technical or specialist options. In such cases, local authorities should be aware of the need to instruct consultants on the requirements of section 77.

4.31
We discuss the presentation of options in consultation material in paragraphs 5.9 to 5.16.

Example

4.32
Before 2002, Kapiti Coast District Council had been facing difficult issues regarding uncertain water supply. It had consulted on options based on continuing the supply from two local rivers. The options required engineering solutions that were controversial with local communities. The options were also controversial for Māori because they included transferring water from one catchment to another.

4.33
The commissioner for the Resource Management Act hearing had refused consent to take the water, and the Parliamentary Commissioner for the Environment had put out a report that was critical of the council’s options to date. From late 2002, the council prepared a strategic framework within which to make decisions and set up a Water Process Group (elected members and iwi) to manage the process and develop options. Discussion papers were prepared for workshops, which started from the sustainable development principle of demand management (that is, managing the demand by reducing usage). The Water Process Group agreed a structure for the decision-making process. It also agreed on the levels of service for consumption and supply, and the council formally adopted these. A preferred option, based on a demand management approach, was put out for consultation and was agreed to. If the demand management targets are met, water supply will be secure until 2030.

4.34
Kapiti Coast District Council has since adopted a set of sustainable development principles that it uses to assist with decision-making and considering options.

Dealing with significant changes after issuing a proposal

Issue

4.35
The process of consultation, a change in circumstances, or an unexpected opportunity can lead to changes to a proposal. If a proposal has been revised, it can be difficult to determine whether further consultation is needed.

Legislative requirement

4.36
The Act does not specifically address this circumstance, and there is no case law to date to provide guidance.

Discussion

4.37
The main point is whether the matter is entirely new or whether it is consistent with a local authority’s overall strategy. If the alteration changes the proposal to such an extent that the altered proposal would have attracted additional or different submissions to those received, the local authority should consider its consultation options and should consider not confirming the proposal immediately. The principles of consultation require that relevant information be provided for consultation. This requirement will not be met if a revised proposal includes relevant information not previously provided to the public.

4.38
In those cases where a revised proposal is consistent with existing adopted strategies or policies, but perhaps differs in timing or cost, some local authorities have decided not to do more consultation. It is a difficult matter that requires judgement that takes account of the particular situation. In our view, additional consultation is more likely to be required if the matter is completely new or has a significant effect on matters directly affecting the community, such as levels of service or rating levels.⁸

Example

4.39
We have provided information about changes in financial forecasts after local authorities consulted on the statement of proposal for the draft LTCCPs and final LTCCPs in our 2007 report Matters arising from the 2006-16 Long-Term Council Community Plans.

4.40
We are not aware of any local authority that has considered it necessary to consult further as a result of changes to a draft LTCCP.

Linking financial decision-making to the current and future needs of the community

Issue

4.41
Many local authorities find considering the effects of financial decision-making on current and future community well-beings a challenge. Certain financial decisions must be made in accordance with the relevant financial and funding policies, which are intended to provide certainty about sources and levels of funding. For example, decisions about borrowing or investment need to be made in accordance with applicable policies.

Legislative requirement

4.42
Section 101 sets out requirements for financial management. It states that a local authority must manage its finances prudently and in a manner that promotes the current and future interests of the community. It requires a local authority to make adequate and effective provision in its LTCCP and annual plan for its expenditure needs.

4.43
Section 101(3), which relates to financial management, is an important provision. Local authorities have several funding sources available and must, for each of their activities, make choices about the appropriate funding source or sources.

4.44
Section 101(3) sets out five principles that local authorities must apply to each decision about how to fund an activity. These include the community outcomes the activity contributes to, whether the whole community benefits or only a part, the period during which benefits will occur, the extent to which actions of particular people contribute to the need for the activity, and the costs and benefits of funding the activity separately from other activities. A local authority must also consider the overall effect of its funding decisions on current and future community well-being from social, economic, environmental, and cultural perspectives.⁹

4.45
A local authority’s revenue and financing policy must show how the local authority has, for the sources of funding for operating and capital expenditure, considered the principles in section 101(3).

Discussion

4.46
The Act sets out that financial management is a strategic activity. It links financial management to promoting the current and future needs of the community and the financial sustainability of the local authority. Financial stability and viability of activity is a crucial part of making effective and adequate provision for the local community.

4.47
Local authorities should address funding issues early on in options assessment. Finance staff are sometimes involved too late in strategic decisions to determine the full financial effects of decisions or to provide information that can be used in early consultation on options.

4.48
There can be gaps in the financial analysis that informs decision-making. There can be a tendency to focus on short-term, in-house costs – not long-term, extended life cycle costs. Large infrastructure decisions require decision-making that considers social, economic, environmental, and cultural well-being, but immediate financial concerns can override longer-term issues and effects.

4.49
In addition, financial decision-making can be focused on legal and economic analysis, which may mean that community input and analysis of effects on community well-being, particularly long-term effects, receive less attention. On the other hand, local authority analysis can be disputed by special interest or vocal groups. While it is important that a local authority considers the views of those affected by a decision, community input is one factor among many to be taken into account by decision-makers.

4.50
While a local authority must consider the views of the community now, it must also consider future generations. Financial issues – for example, the issue of affordability in the short term as against long-term benefits – affect both short-and long-term decisions. It is likely that local authorities will find better outcomes if they set up a process for elected members to work through these issues with their community, preferably advised by staff from both policy and finance areas.

4.51
A lot of financial planning is done before the draft LTCCP or annual plan budgets are published. This means it is done without direct community consultation. Where necessary, staff must remain alert to the need to consider community views in such preparatory decision-making.

Example

4.52
Many local authorities find that cross-organisational policy and project teams can ensure that decision-making includes financial and non-financial matters.

Maintaining consistency with policies, and managing an inconsistent decision

Issue

4.53
Local authorities must ensure that the many decisions they make every day are consistent with their policies.

4.54
In addition, at times, a local authority will want or need to make decisions inconsistent with its policy or plan.

Legislative requirements

4.55
Section 96 states that the LTCCP and annual plan are not binding on local authorities but are statements of intention. It also recognises that local authorities may make decisions that are inconsistent with their LTCCP or annual plan or policy (unless the decision is one that may be made only if provided for in the plan - see section 97). Where a decision is significantly inconsistent with a plan or a policy, section 80 applies.

4.56
Section 80 sets out a process for inconsistent decisions. The main requirement is that this inconsistency and its reasons must be clearly identified at the time of making the decision, and the local authority must state any intention to amend the policy or plan to accommodate the decision. Section 80 requires local authorities to identify inconsistent decisions. It is not a mechanism for avoiding other requirements in the Act, such as sections 88 and 97.¹⁰ In other words, a local authority cannot use section 80 to justify a decision that it can make only if provided for in the LTCCP or if the local authority uses the special consultative procedure.

4.57
Local authorities should also consider financial policies during decision-making. Part of the decision-making framework of the Act is the requirement for local authorities to adopt a suite of financial management policies (sections 102 to 110), such as a revenue and financing policy, an investment policy, and a liability management policy. Local authorities must include the policies in their LTCCPs and may amend them only as an amendment to their LTCCPs. The policies form part of the context for funding and financial decisions, which not only must comply with the decision-making provisions in the Act but also must be made having regard to the relevant policy.

Discussion

4.58
Many decisions will be made against a policy or legislative framework. The requirement for decisions to be consistent with existing frameworks applies to all decisions, whether they are strategic, regulatory, or routine, and includes all decisions delegated to staff.¹¹

4.59
If a local authority intends to make a decision that is inconsistent with its policy on the matter, the local authority should document the decision and what it intends to do about the inconsistency in the reports accompanying the matter and also in the resolution adopted by the local authority.

4.60
It is the responsibility of the local authority to make judgements about the level of disclosure of its decision-making, in proportion to the significance of the matters affected by the decision.¹²

Examples

4.61
A local authority had a significant shareholding in an energy company. The local authority had an opportunity to sell its shareholding, and received legal advice that it could do so without carrying out any particular form of consultation. The local authority sold its shares without consulting. We inquired into the local authority’s decision-making process and found that, although it had complied with the decision-making requirements in the Act, it had breached its own investment policy (which stated that the shares were a long-term investment and that the community would be consulted if the shares were to be sold other than in an emergency). The local authority had not recognised the inconsistency with its investment policy during its decision-making process.

4.62
Another example would be when a local authority has a policy on the provision and design of cycleways but needs to put a cycleway in a place that is not consistent with its policy. In such an instance, the local authority may either amend its policy or make an inconsistent decision. If the latter, section 80 applies.

1: Sections 5 and 90.

2: Local Government: Results of the 2002-03 Audits, www.oag.govt.nz/local-govt/2002-03.

3: Under section 97(1)(b), a local authority can transfer the ownership or control of a strategic asset only if the decision is provided for in the LTCCP.

4: Section 5.

5: The requirements for the special consultative procedure are set out in section 83 to 88.

6: The Public Administration Review: Collaborative Public Management special issue, November 2006, provides many examples, with participatory budgeting or participatory policing of particular interest for New Zealand (see page 73).

7: This and other skills to support strategy and decision-making processes are discussed in more detail in the United Kingdom’s Strategy Survival Guide, produced by the Cabinet Office, Prime Minister’s Strategy Unit, July 2004.

8: In some cases, section 88 would apply – that is, that changes in delivery of a significant activity must be consulted on through the special consultative procedure. In other cases, section 97 would apply – that is, some decisions can be taken only if they are provided for in an LTCCP.

9: The High Court discussed the considerations required under section 101(3) in the context of development contributions in Neil Construction Limited & Others v The North Shore City Council Potter J HC AK Unreported CIV 2005-404-4690 [21 March 2007].

10: Section 80(2).

11: We would expect that such delegations of authority be written down and approved by the elected representatives or senior managers.

12: Sections 79 and 80.