BUSINESSDESK: Reforms to roll back to expansion of local government activities and to encourage amalgamations like the Auckland “super-city” aim to end 10 years of high annual rates increases and wind back expanding local government debt levels.

The reforms, dubbed “Better Local Government” effectively remove what has been widely known as the “power of general competence” granted to local councils in the 2002 reform of the Local Government Act, which made them responsible for “social, economic, environmental and cultural well-being.”

Instead, councils will be given legal responsibility to provide “good quality local infrastructure, public services and regulatory functions at the least possible cost to households and business.”

For councils in trouble, there will be a new escalating scale of central government intervention available, ranging from “providing information” to appointment of Crown review teams, observers, and managers. For the most serious situations, commissioners will be able to be appointed, and early elections called, with thresholds linked to the new fiscal responsibility requirements.

After the 2013 local body elections, the reforms will also give mayors far greater powers to appoint deputy mayors, establish council committees and approve their chairs. They will also restore the ability of elected councils to set policies on staff and salaries, rather than the current hands-off approach that gives that responsibility to council chief executives.

The reforms will also make it easier for citizens to propose amalgamations.

While the government was not seeking to impose outcomes on communities, Local Government Minister Nick Smith said there was a clear preference for “unitary authorities” in areas where efficiencies could be gained by scrapping multiple local councils overseen by regional councils in favour of a single body, such as had occurred in Auckland.

Savings from the Auckland super-city merger are estimated by the government to be worth around $140 million a year.

“The reforms will help keep rates affordable and debt at prudent levels by focusing councils on their core roles, setting clear fiscal responsibility requirements and giving councils more tool to better manage costs,” said Smith.

The package aimed to rebalance the 2002 reforms, which he blamed for an average annual increase in rates of 7 percent a year and a quadrupling in council debt to $8 billion in the last decade.

However, Smith made it clear the change to councils’ statutory role would not necessarily mean an end to such council-backed ventures as local arts festivals, fireworks displays, and business development agencies.

Rather, the reforms were intended to sharpen councils’ focus on what they provide, rather than the catch-all responsibilities of the 2002 legislation.

Councils’ environmental responsibilities were also clear through the provisions of the Resource Management Act.

Other amendments will seek to align councils’ fiscal responsibilities with the intention to restrict increases in central government spending to no more than was justified by the rate of inflation and population growth, except in extraordinary situations such as disaster recovery.

The necessary law changes will follow consultations with Local Government New Zealand, the central body representing councils’ interests, and a Productivity Commission report on the appropriate split between local and central government regulation would inform further decisions. The report is due in April next year.

Also among the eight main initiatives announced today is establishment of a local government efficiency taskforce, an investigation into the efficiency of local government infrastructure provision, and a review of the use of development contributions.

“A balance is needed between ensuring developments do not unfairly impose costs on the rest of the community and ensuring that new jobs and investments are not discouraged,” the policy document says.

Annual development contribution levies had risen from around $100 million to as high as $300 million before the heat went out of the property market from 2008 onwards.