You are subscribed as | Unsubscribe | View online version | Forward to a friend

Insights 10: 1 April 2021
NZ Herald: Roger Partridge on funding tourism infrastructures
Taxpayers' Union: Climate Change Commission Dr Rod Carr with NZ Initiative's Matt Burgess
Report: Emissions Trading Scheme FAQ by Matt Burgess

Funding councils
Dr Eric Crampton | Chief Economist |
Local government is fundamentally broken because of the way councils are financed, how the costs and benefits of urban growth are divvied up, and the incentives thus created.

Councils bear the costs of growth. Obstructive consenting and planning processes mitigate those costs.

Central government then sees councils as stymying the growth that benefits the whole country.

These incentives result in an endless cat-and-mouse game. Central government legislates against the most recent ways that councils have found to restrict growth. Local councils come up with new ones.

But that may finally be set to change.

Bernard Hickey’s newsletter this week suggested a coming review of councils and “sustainable funding streams”. He hints that may be code for building better incentive structures for local governments making growth a benefit rather than a cost.

We hope Hickey is right. It is critically important and timely.

Central government’s review of water infrastructure seems designed to force councils into handing their water pipes to amalgamated water authorities.

It would fundamentally change how many councils run.

For smaller councils, managing a water company means they can staff areas where they might not otherwise have the necessary economies of scope. The pipes also provide an asset that can be leveraged to pay for other things – unfortunately, often to the detriment of the maintenance of the pipes themselves.

If the ‘Three Waters’ review cleanly and strongly separates water infrastructure from council balance sheets, the funding necessary for water infrastructure improvement and growth will be much easier.

But the change could also precipitate a crisis in local government financing and structure. Having a plan in place for better council financing arrangements before the Three Waters review is completed would make a lot of sense.

Better council financing would also support better resource management outcomes.

The government wants to split the Resource Management Act into three parts, and have the legislation completed this term. Getting this complex job done will be a challenge. Parliament has only so many people who can draft legislation, and too many of them keep being pulled into dubious projects.

But changing resource management without changing the incentives that councils face would continue New Zealand’s sad tradition of pouring old wine into new bottles.

Better financing arrangements for councils would fundamentally change incentives and would do more to improve housing affordability than anything in last week’s housing announcements.

Proposed RMA Reform: Uncivil dispute resolution
Dr Bryce Wilkinson | Senior Fellow |
Currently, every house auction is a contest between competing bidders. The auction confronts each bidder with the last price bid. Beat that price or watch someone else win the auction.
Nor is the seller immune from this contest of valuations. The price might not meet the seller’s reservation price, but it is the best offer on the table. Hesitation is natural.
This is a civil system for resolving disputes over the future ownership and use of property. There are (usually) no fisticuffs, no machine guns and no police presence. No one is forced to do anything against their will. No one gets something for nothing.
Arrangements under the Resource Management Act 1991 are fundamentally different. Take the case of someone who wants to build, say, 20 houses on a property they own. Others oppose this. Some might want it kept as farmland, converted to a local park or planted in native trees. Some habitual objectors are strident and well resourced.
The RMA gives objectors an open slather chance to stop the development. It does not confront objectors with the lost value in the form of housing. Why offer to buy the property at market value when the RMA might give them what they want at no charge? Why be civil?
The RMA’s invidious system opened the floodgates to “not-in-my-backyard” objectors. It invites a dishonest contest of exaggerated valuations. It encourages opportunism, narrow self-interest, spite, and greed. It imposes no meaningful discipline on non-owners.
The Randerson Review Panel’s proposed changes to the RMA were presented at a Law and Economics Association seminar in Wellington this week. The Panel’s report largely overlooked the importance of property rights.
The Panel was, of course, aware of the glaring housing shortage. But it failed to diagnose it from a law and economics perspective. The community could pay a very high price for that deficiency.

Pie in the SkyPath
Roger Partridge | Chair |
According to Long’s Axiom, an elephant is a mouse built to government specifications. The saying is a corollary to the old gag about a camel being a horse designed by a committee.

Both quips are apt to describe Auckland’s ill-fated SkyPath.

The Auckland Harbour Bridge Shared Path (as it is now known) was to provide a cycleway and walkway between Westhaven and Northcote on Auckland’s harbour bridge.

When first mooted by the AHB Pathway Trust in 2011, the project was estimated to cost $40 million. A $2 toll would ensure the pathway came at no cost either to Auckland’s ratepayers or the taxpayer.

Fast forward to 2018 and that $40 million had ballooned to $67 million. And the user pays idea had been abandoned. Instead, then Transport Minister Phil Twyford announced that taxpayers would fully fund the “transformational” project. God bless them.

Just two years later the New Zealand Transport Agency announced SkyPath’s estimated costs had blown out to a staggering $360 million. And without so much as a blink of an eyelid, NZTA put the project forward as “shovel-ready,” to be fast-tracked by the Government to kick-start the post-Covid recovery. Lest anyone question SkyPath’s value for money at this elephantine price, NZTA’s cost-benefit analysis for the project concealed all its assumptions and calculations.

It’s been said that not even a shovel is shovel-ready these days. Fortunately for taxpayers, so it has proved with the SkyPath.

Despite claims by the Head of Auckland Council’s Planning Committee and SkyPath proponent Chris Darby that the project had “been put through the wringer like no other transport project has,” SkyPath turns out not even to be feasible. Just like Auckland’s commuters, the aging harbour bridge’s concrete pillars cannot bear the weight.

For the cost-conscious taxpayer, SkyPath’s belated engineering stumbling block might come as a relief. Who would bet against the SkyPath’s finished cost not breaching NZTA’s latest estimate  by another $100 million or two?

But if taxpayers think the SkyPath saga is over, they need to think again. NZTA is pondering a new way for cyclists and pedestrians (and buses) to cross the harbour. A purpose-built bridge. The Automobile Association estimates the costs at $2 billion.

Now that would be some elephant.

On The Record

Other Initiative activity:
  • Podcast: Dr David Law on the housing package and what it will mean for the housing market and rental market
  • Podcast: Bryce Wilkinson on the Government's Pharmac review
  • Report: The Emissions Trading Scheme FAQ
  • Podcast: Taxpayer Talk: Climate Change Commission chair Dr Rod Carr with NZ Initiative's Matt Burgess
All Things Considered
  • Graph of the week: Why good government matters: Public trust in politicians, low corruption vs. effective actions on emissions
  • The effects of immigration on wages explained
  • The effects of rent control expansion on tenants, landlords, and inequality: Evidence from San Francisco
  • April Fools! Some of the best: Otago University’s initiative to improve Castle Street; the One Million Electric Cars Initiative and, the Government deciding to go ahead with a giant minimum wage increase despite the year we’ve had and the uncertainty yet ahead
Copyright © 2024 The New Zealand Initiative, All Rights Reserved

Unsubscribe me please

Brought to you by outreachcrm