Tuesday, 9 August 2022

Three waters and revenue bonds

Will be up at Select Committee tomorrow, along with Nick Clark, to talk about three waters reforms.

The Initiative is a member of the Local Government Business Forum - a peak body of organisations that interface with local government. The Initiative didn't put in a submission on the Three Waters bill (there's just so much on) but the Forum did, and I helped a bit with that. Nick Clark is the Forum's secretary and did much of the drafting. 

The Forum's submission is here. As always, not all members of any peak body outfit will agree with every word on a consensus document - some will be part of organisations that have decided to stay out of the fray on 3 Waters. But it isn't far from my own views either.

We just don't see any of the proposed reforms as being necessary. 

There's a real problem that the legislation is trying to address, but it's gotten itself bogged down in piles of other issues. 

The real problems are water quality enforcement and monitoring, which is already being dealt to by a new regulator, and access to funding and financing tools to ensure that the pipes are up to spec and can be rolled out to support urban growth. 

That latter problem is serious, but seriously doesn't need forced amalgamation into four enormous water service entities. Just let councils issue long lived infrastructure bonds backed either by special rates on serviced properties, or by user fees, or by volumetric charges, or by connection charges, or any combination of all of them. How? The Local Bodies' Loans Act 1913 isn't a bad place to start. It's how councils used to be able to fund the building of stuff, back when it was possible to build stuff. 

Don't need complex new governance arrangements that open up piles of additional contentious issues. Just let councils issue ring-fenced debt. If solving water's what Parliament actually cares about. If they have some other agenda, they can just keep going as they are - but it won't work and it'll get overturned come a change in government. 

Monday, 8 August 2022

Poachers and gamekeepers

May 2020 seemed like the perfect time to start building on a hospital expansion. 

The Eden-Epsom Residential Protection Society disagreed. 

It's been tied up in the courts for the two years since then. 

Their successes in blocking a hospital expansion, during a pandemic, might seem surprising. Except that their President is sufficiently expert in Resource Management law that he's the guy that Labour asked to head up their review of the Resource Management system. 

Randerson's involvement with an organisation working to oppose a private plan change that would allow a hospital expansion was disclosed by Randerson before his appointment.

My column in the Stuff papers.

Auckland Council notified the proposed plan change on March 21, 2019.

The Eden-Epsom Residential Protection Society organised meetings to block it.

A spokesperson for the society, who did not want to be named, was quoted on March 31, 2019: “We are not opposed to hospitals per se and part of our case is there are suitably zoned areas of the city laid down under the Unitary Plan which could accommodate this activity.”

Hospitals are fine, you see, but Not In My Backyard – even if they are situated on a reasonably major thoroughfare.

Auckland Council approved the plan change in May 2020, with a few modifications.

Think back to May 2020.

New Zealand had just finished its first substantial lockdown.

Building more hospital capacity, so we would be ready if Covid got here, is the kind of thing that a sane place might do.

And May 2020 is exactly when the Government, and a lot of economists, were expecting unemployment to be heading toward double-digits. The Government planned a lot of make-work projects, some of rather dubious value, to ensure that construction workers would not flee overseas.

The hospital project could have been shovel-ready. It would have been a perfect project for May 2020.

Alas.

The Eden Epsom Residential Protection Society appealed the decision.

It has been working its way up through the courts. The High Court is scheduled to hear the case in September of this year – more than two years after Auckland Council had provided its initial stamp of approval.

In its submission of May 9, 2022 to the unitary plan team, the Eden Epsom Residential Protection Society highlighted the importance of the three affected properties to the designated special character area.

Later in that same submission, the society argued that “intensification is best directed to the CBD and metropolitan centres rather than the fragmentation and ultimate destruction of irreplaceable areas of special character”.

Allowing a hospital in the area would not just affect properties considered significant, it might also set a precedent of allowing people to build things.

It is an indictment of our resource management system that a hospital expansion can be tied up in the courts for two years during a pandemic.

Can a country that worries more about a special character designation than about hospital capacity in a pandemic really be considered sane?

The Government has wished to progress an ambitious urban growth agenda, including a National Policy Statement on Urban Development requiring councils to enable more housing, and the Enabling Housing Supply legislation requiring Tier 1 cities to allow far more intensification.

David Parker, the Minister for the Environment, launched a comprehensive review of the resource management system in July 2019.

Tony Randerson, QC, chaired that review, which was completed and has been reported back to the Government. He is eminently qualified. There will not be many who better understand the system.

His panel’s review forms the blueprint for the Government’s approach to resource management reform.

The Eden Epsom Residential Protection Society’s submission of May 2022 lists Tony Randerson, QC, as the society’s president.

In answer to a written Parliamentary question on any potential conflicts in Randerson’s appointment to chair the RMA review, Minister Parker stated that, “Hon Tony Randerson CNZM QC declared that he was the president of an incorporated society that was going to oppose a private plan change request by Southern Cross Hospitals. A management plan was put in place to address the potential conflict and the treatment was that Hon Tony Randerson will not be involved in any hearings.”

This ironic coincidence has not previously been reported, but has been open secret in some parts for at least a year. 

Funny old country, New Zealand.

Saturday, 6 August 2022

Rent controls and vacancies

In the latest edition of the Journal of Urban Economics, some evidence that easing rent controls reduces vacancies

One housing paradox in many markets is the simultaneous presence of high costs and high vacancy rates. India has expensive housing relative to incomes and an urban housing vacancy rate of 12.4%. We show how insecure property rights in India, as a result of rent control and weak contract enforcement, increases vacancy rates. Using a two-way linear fixed effects panel regression, we exploit changes in rent control laws in the states of West Bengal, Karnataka, Gujarat, and Maharashtra to find that pro-tenant laws are positively related to vacancy rates. A pro-landlord policy change liberalizing rent adjustments could potentially reduce vacancy rates by 2.8 to 3.1 percentage points. Contract enforcement measured by density of judges is negatively related to vacancy. We estimate that a policy change in rent control laws would have a net welfare benefit and could reduce India’s housing shortage by 7.5%.

If the risk of being expropriated by a tenant goes down, landlords are more likely to rent out a vacant spot. 

Friday, 5 August 2022

The Vogons Return

In 2015, New Zealand's Vogons killed iPredict.

Money laundering was implausible, but considered too great a risk.

Today, the CFTC announced its withdrawal of its no-action letter for PredictIt, the US-facing site that Vic Uni maintained after iPredict went down. They haven't noted which of the conditions of the no-action letter was violated. I don't trade on PredictIt; not straightforward for Kiwis to do so. So I've no insights.

It's just a shame. 

Around the traps

A few bits from me in these:

Tuesday, 2 August 2022

Stadium co-governance

Oliver Lewis over at BusinessDesk had a look through Treasury documents on the Christchurch Stadium.

Treasury suggested a Council-led approach, both to reduce the fiscal risks to the Crown, and to avoid the challenges of a co-governance approach with Council.

As for a co-led approach (like the city rail link project in Auckland, with the council and the crown both holding shares of City Rail Link Ltd), the Treasury recommended against it, especially if the council had a majority shareholding in the jointly held special purpose vehicle.  

The crown would be assuming risk, officials said, but may not have sufficient influence. 

"Experience working with council to date indicates that a co-governance approach is likely to continue to be challenging and could result in time delays and cost overruns,” the briefing said. 

Later in the year, following meetings between Woods and council officials, the Treasury was tasked with providing advice on two options: a collaborative approach between the council and crown delivered via an autonomous vehicle, or a locally-led option. 

In an October 2019 briefing, the Treasury again affirmed its preference for local leadership on the project and referred obliquely to potential relationship issues should ministers opt for the co-led approach.

There may be some parallels to water.

Under the Three Waters proposal, the Crown takes on enormous backstop risk. They're effectively guaranteeing debt issued by the new entities. 

Treasury warned that Crown-Council co-governance over a stadium may be fraught. 

“For this approach to succeed, crown and council would need to reach alignment on the investment objectives, prioritisation of time, cost and quality, and the best path forward for the project,” officials said. 

“This has not been achieved to date and has proved challenging.”

I'm not sure why co-governance in waters would prove simpler. 

Afternoon roundup

Another long-overdue closing of the browser tabs: