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2.3 Significance Policies

Local government: results of the 2002-03 audits.

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A constant question for local authorities is when and on what issues communities expect to be consulted and receive information. In Part 6 of the Local Government Act 2002 (the 2002 Act) this question is a matter of judgement for local authorities, to be made having regard to the significance of issues.

What is Meant by ‘Significance’ and ‘Significant’?

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The 2002 Act uses the terms ‘significance’ and ‘significant’ in relation to a range of decision-making responsibilities of local authorities. These terms also occurred in the Local Government Act 1974 (the 1974 Act), but were not defined. The 2002 Act, defines these terms to provide guidance and to help local authorities direct the appropriate level of attention, consideration, disclosure, and consultation to matters, based on their relative importance to the district or region.11

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‘Significance’ can be thought of as a continuum ranging from insignificance to a high degree of significance. Certain specific decisions are identified as significant by the 2002 Act, and require a statement of proposal to be prepared and the special consultative procedure to be undertaken, in addition to the general decision-making requirements, before a decision can be made.12

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Local authorities must ensure that their processes promote compliance with the decision-making provisions of the 2002 Act generally and, where a local authority regards a decision as significant, ensure that the decision-making procedures are appropriately observed.13

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Local authorities are also required, by section 90, to adopt a policy on significance (the policy) that sets out:

(a) that local authority’s general approach to determining the significance of proposals and decisions in relation to issues, assets, or other matters; and

(b) any thresholds, criteria, or procedures that are to be used by the local authority in assessing the extent to which issues, proposals, decisions, or other matters are significant.

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The policy must also list the assets considered by the local authority to be strategic assets, and must be adopted or amended using the special consultative procedure.

What Do the Requirements Mean for Local Authorities?

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The extent, nature, and degree of compliance with the decision-making provisions are for each local authority to determine, given the significance of the matter. A local authority’s assessment may affect:

  • the extent of the analysis of options undertaken;
  • the consultation with persons likely to be affected or interested in the decision or matter, where the local authority considers that it is not sufficient to rely on information already available; and
  • the disclosure of the matter by the local authority – including in advice to the council, consultation information or a statement of proposal for the adoption or amendment of the long-term council community plan (LTCCP), adoption of the annual plan, or alteration in the mode by which a significant activity is undertaken.14

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The development of a policy should not be seen as a substitute for a local authority considering the significance of a matter, as the 2002 Act requires. Rather, preparing a policy on significance should help each 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 sufficiently significant, such that information will be provided or consultation undertaken where decisions affect these matters.

We have a broad concern that some local authorities may not have considered with their communities the approach and understandings they are applying in significance policies developed to date.

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The use of the policy to record a local authority’s understanding of its communities’ expectations of what is significant makes it central to the purpose of local government –

… to enable democratic local decision-making and action by, and on behalf of, communities.15

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The Decision-Making Local Government KnowHow Guide16, produced after the introduction of the 2002 Act, provided useful information to support local authorities in addressing the requirements of the Act in respect of ‘significance’ and ‘significant’. However, we are aware from local authorities and enquiries from ratepayers that some local authorities are experiencing difficulty in applying their policy when assessing issues. We are also aware that local authorities are seeking to assess the effectiveness of their policies by discussing questions such as how frequently they might expect to identify issues as significant under their policies.

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We reviewed how local authorities have approached the development of their policies in order for us to identify areas for future improvement.

Findings of Our Review of Policies on Significance

General Approach

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Most local authorities state that assessments of significance will be made on a case-by-case basis using, in particular, considerations contained in the definition of ‘significance’ in section 5 of the 2002 Act of:

(a) the current and future social, economic, environmental, or cultural well-being of the district or region:

(b) any persons who are likely to be particularly affected by, or interested in, the issue, proposal, decision or matter.

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A third consideration of the section 5 definition is

(c) the capacity of the local authority to perform its role, and the financial and other costs of doing so. This consideration was less commonly referred to in local authorities’ policies.

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Other common features of general approaches in policies included that assessments would be based on the extent of effect or on the general public interest in the issue.

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Some local authorities did not discuss their general approach, referring instead directly to specified thresholds and criteria.

Thresholds and Criteria

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Many criteria for assessing significance refer to “effects that are substantial”, “not inconsequential” or “large”. This appears to be a circular approach that shifts the assessment required from the significance of the issue to the substantiality, consequence, or size of the issue. The reader is no better informed about how significance will be assessed and approached.

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As with the general approach section of the policy, more than half of all local authorities indicated that thresholds and criteria were identified based on the provisions of the 2002 Act, with section 97 relied on the most.

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About half of all local authorities used numeric, quantitative, or qualitative thresholds and criteria, with a fifth of all local authorities providing a mix of numeric, quantitative, and qualitative thresholds and criteria.

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Examples of numeric thresholds and criteria included in local authority policies included a set dollar amount or percentage of operational or capital expenditure, or a set dollar or percentage of rates revenue.

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While such thresholds are helpful because many decisions are specific to particular communities, services, expenses or sources of revenue, local authorities should consider the significance of a decision’s specific effects. The table below shows some possibilities.

Impact of decision Nature of threshold or criteria
Change proposed to be funded by general rates. An increase of x% of the general rate.
Change proposed to be funded by general/targeted rates. An increase of x% of the targeted rate.
Change proposed to be funded by user fees. An increase of x% of relevant fee.
Change proposed to the numbers of shares or other mechanisms of control of another entity. The change alters the status of the other entity under the 2002 Act, e.g. the entity is no longer a council-controlled organisation.
Population threshold. Change impacts on xx% or xx number of people in the affected area.

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Quantitative criteria did not contain a numeric threshold, but the consideration was to be made in numeric terms; for example, the extent of financial implications of the decision or that a large number of people would be affected by the decision.

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Qualitative criteria took into account considerations that could not easily be measured, and often included ideas such as:

  • Reversibility – The more irreversible the effects of a decision, the more significance it has.
  • Inclusion of the matter in the local authority’s LTCCP or annual plan – If decisions are made within the prioritising and budgeting systems of a local authority, there is a greater ability to ensure that proposals are assessed against each other for value and benefit. This leads to a lower level of significance being necessary for any individual item than in a situation where decisions are made outside the budgeting process.
  • Consistency with decisions already consulted on – Where there has been previous public consultation and a decision is consistent with the previous directions indicated by the local authority, an issue would be seen as having less significance than where there has not been consultation or the change is inconsistent with previous directions.
  • Practicality – The intention of the policy is to assist local authorities to make decisions that are well informed, in an effective and efficient manner. The cost of consultation, the urgency of the matter, and whether there might be compassionate or commercial considerations would therefore also be taken into account.
  • Precautionary – When the significance of a matter is unclear, the local authority will tend to treat the issue as having more significance rather than less.

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In our view, the better-developed policies provided a mix of different types of criteria – numeric, quantitative, and qualitative – to assist the reader to understand how the local authority assesses significance. Thresholds and criteria merely provide a trigger for identifying whether a matter is likely to be significant – they are not the only determinants. Local authorities still need to weigh up the considerations set out in the section 5 definition, and the requirements of the 2002 Act as it relates to assessing significance in any particular instance.

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Our expectation is that, where local authorities have not included thresholds and criteria as the 2002 Act suggests, they will maintain a “precedent” approach – for example, one local authority created a Register of Significant Decisions. Such an approach will allow local authorities to improve their understanding of what is significant for their districts or regions, and to ensure that like-issues are treated consistently over time.

Procedures

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Making an assessment of the significance of an issue requires judgements to be made, and such judgements inevitably involve an element of subjectivity. One local authority’s policy acknowledged this subjectivity and committed the authority to providing guidelines and ongoing training to assist officers to identify and assess ‘significance’ and ‘significant’. The local authority that created the Register of Significant Decisions has included use of the register as a procedure in its policy, and intends the register to provide a future point of reference in assessing significance.

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Many local authority policies did not set out procedures. We consider that the inclusion of procedures could be a useful enhancement, explaining to the public how issues are assessed and reported, and by whom. We also consider that policies on significance might in future be enhanced by inclusion of, or reference to, local authority delegations for decision-making authority, and consultation approaches or consultation policies.

Strategic Assets

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A strategic asset under the 2002 Act is an asset or group of assets that a local authority needs to retain to maintain the local authority’s capacity to achieve or promote any outcome that it considers important to the current or future well-being of the community.17 In addition to the categories set out in the definition in section 5 of the 2002 Act, the majority of local authority policies indicated that strategic assets were:

  • infrastructural assets such as road, water, wastewater, and solid waste assets; and
  • social service assets such as libraries, parks, community centres, art galleries, convention centres, public pools, gardens, and zoos.

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In general, Councils have taken a high-level “whole-of-asset” group approach, rather than identifying specific assets in their policies on significance. Typical of this type of approach are road networks, parks and reserves, and water and wastewater reticulation networks.

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Many Councils state that, in respect of such assets, a significant decision is one that affects the whole of the asset, and that decisions affecting parts of the asset or network are not significant unless the ability of the Council to deliver the service as a whole is substantially affected.

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We agree that local authorities need to identify strategic assets with care so as not to select too low a level of detail. Where local authorities have taken this approach, the effect of a decision about an individual asset should be assessed in terms of its effect on the operation of the network of which it forms part.

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The need for consideration of the network effect was highlighted during 2004 by an enquiry we received about the consultation required under a policy, which included a “network” approach to parks and reserves. The local authority was considering sale or lease of a park for retail on which a range of athletics and recreational facilities were located. It was intended that these facilities would be relocated if the sale or lease proceeded although, at the time the decision was being considered, relocation proposals and the associated costs had not been prepared.

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The question that was raised with us was whether the local authority was required to undertake the special consultative procedure in proposing to sell this particular park. Answering this question would in part have depended on whether the effect of the loss or relocation of these facilities – which were not available in other parks in the parks and reserves network – significantly affected the service provided within the network.

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In this instance, the local authority chose to undertake a special consultative procedure. However, the broader message is that an individual asset may be significant enough to affect networks of assets and services as a whole.

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We note the requirement of the 2002 Act in relation to asset information is:

  • for LTCCPs to contain forecast information about assets and groups of assets required for groups of activities; and
  • for the rationale for groups of activities to include the community outcomes to which the activity contributes.

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While there is no direct statutory relationship, there is an underlying logic that both strategic assets and information about assets required for activities or groups of activities are those that are needed to achieve a local authority’s outcomes. In our view, this suggests that strategic assets will also be the groups of assets required for groups of activities in LTCCPs.

Other Matters

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Almost all local authority policies focus on Part 6 of the 2002 Act, referring to decision-making requirements and strategic assets. However, section 90 also refers to policies including “other matters”, and the Act uses ‘significance’, ‘significant’ and ‘significantly’ in a range of circumstances. A number of examples are provided as an endnote on page 51.

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Our review found that most policies are unlikely to provide useful guidance to officers, elected members, or the public to assist with assessing significance in the range of instances in which this is required by local authorities under the 2002 Act. For example, it is questionable whether many current policies would assist an officer preparing financial or other forecasts to identify a significant forecasting assumption18.

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In our view, local authorities should consider the various contexts in which ‘significant’ and ‘significance’ are used in the 2002 Act. They should then assess whether their current policies provide sufficient guidance to assist elected members and officers in making particular decisions.

Conclusions

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In general, we conclude that policies on significance require improvement if they are to serve their purpose in enabling democratic local decision-making and action by, and on behalf of, communities.19 We expect such improvement will occur as local authorities become familiar with ‘significance’, ‘significant’, and the decision-making provisions of the 2002 Act, that require considering explicitly matters that have generally been considered implicitly in the past.

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Areas that, in our view, would benefit from further development within policies are:

  • the general approach taken to assessing the significance of matters;
  • selection of, and guidance on the application of, thresholds and criteria; and
  • inclusion of procedures used – both within the local authority, and in consulting with and informing the public.

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While such development is occurring, our advice is that local authorities should not assume that the absence of specific criteria, thresholds, or procedures in their policy relating to a particular matter implies that the matter has low significance. The purpose of the policy is to assist with directing the appropriate level of attention, consideration, disclosure, and consultation to matters based on their relative importance to the district or region – rather than to exclude any matter from consideration.

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In our view, local authorities should not, in general, find it onerous to meet the requirements for assessing significance where they are maintaining:

  • decision-making procedures that address the requirements of sections 76-82 of the 2002 Act, and assess the effect of a decision before it is made; and
  • active contact with their communities – consulting and providing information as changes occur and issues arise.

11: Section 5 of the Local Government Act 2002 defines ‘significance’ and ‘significant’ as:

– significance, in relation to any issue, proposal, decision, or other matter that concerns or is before a local authority, means the degree of importance of the issue, proposal, decision, or matter, as assessed by the local authority, in terms of its likely impact on, and likely consequences for, –
(a) the current and future social, economic, environmental, or cultural well-being of the district or region:
(b) any persons who are likely to be particularly affected by, or interested in, the issue, proposal, decision or matter:
(c) the capacity of the local authority to perform its role, and the financial and other costs of doing so
– significant, in relation to any issue, proposal, decision, or other matter, means that the issue, proposal, decision, or other matter has a high degree of significance.

12: For example, sections 88 and 97.

13: Section 76(3)(b).

14: Sections 77-80.

15: Section 10(a).

16: Produced collaboratively by Local Government New Zealand, the Society of Local Government Managers, and the Department of Internal Affairs.

17: Section 5. The definition in this section also includes the following assets as strategic:

  • any asset listed as a strategic asset in a local authority’s policy on significance;

  • any land or building owned by the local authority and required to maintain the local authority’s capacity to provide affordable housing as part of its social policy; and

  • any port company and airport company shares.

18: Schedule 10, clause 11.

19: Section 10.

Endnote: Instances where the term ‘significant’ occurs in the Local Government Act 2002 include:*

  • “significant decision” (sections 76 and 77);

  • “significant activity” (sections 88 and 97);

  • “significant new activity” (section 16);

  • “significant infrastructure” (section 130);

  • “significant assumptions” (section 201);

  • “significant assets” (schedule 10, clause 11(b));

  • “significant forecasting assumptions and risks” (schedule 10, clause 11(a));

  • “significant negative effects” (schedule 10, clause 2(1)(c));

  • “significant variation” (schedule 10, clauses 3 and 15);

  • “significant policies and objectives” (schedule 10, clauses 4 and 16); and

  • “significant part” of its region (section 12(5)).

Instances where the term ‘significantly’ occurs in the Local Government Act 2002 include:*

  • “significantly inconsistent with” (section 80);

  • “alter significantly” (section 97);

  • “significantly affect” (section 97);

  • “not being so significant” (section 112); and

  • “significant level of uncertainty” (section 201).

Instances where the term ‘significance’ occurs in the Local Government Act 2002 include:*

  • “significance of all relevant matters” (section 79);

  • “significance of the decision or matter” (section 82(4)(c));

  • “significance of proposals and decisions” (section 90); and

  • “determining significance” (sections 90 and 281, and schedule 10, clause 7).

* Note that these lists are indicative rather than exhaustive.

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Local government: Results of the 2002/03 audits

ISBN 0-478-18120-5