Don't be a player hater

A column from me in the Local Government Business Forum's newsletter:

Rapper Ice-T isn’t a conventional source of policy advice. But he was right about one big thing: don’t hate the player, hate the game.

Local government too often makes it hard for business to get things done. And as far as much of central government is concerned, local government can barely be trusted to get the mayor’s shoes tied, never mind run anything else.

Relations between central and local government have been strained for a while. Local government often makes decisions that are hardly in the national interest. Auckland’s housing crisis stems from decades of planning and consenting decisions made by local councils that stymied growth. The consequences matter for the whole country, from macroeconomic monetary policy to dismal productivity statistics.

And, from central government’s perspective, local government too often comes cap-in-hand for funding that should be covered by rates.

But look to the incentives facing local councils: the game.

Don’t hate da playa

A council that facilitates growth, runs superb consenting processes, and lays out infrastructure for new development may see little reward for its efforts. Rates from new ratepayers will largely be eaten up by the costs of new infrastructure. And the council budget process makes the remaining contributions of those new ratepayers a bit harder to see: councils decide what to spend, then divvy it up across their ratings base.

Outcomes are then not particularly surprising. If councils bear most of the costs of growth, and central government sees most of the revenue boost when councils facilitate growth, the game will automatically lead to conflict.

But it gets worse. Central government mandates often require local councils to bear costs, without an accompanying revenue stream. This blurs lines of accountability for councils: poorly performing councils can blame central government for its cost impositions – and be at least partially right. And strong performers can be punished when voters see rates increases for which their council really is not to blame. 

You can find the whole thing here (pdf). Note that it was written about a month ago, so doesn't capture the effects of this weekend's announced infrastructure funding changes. I covered similar housing themes on Nights last night with Bryan Crump.