Michael Parkin interviews Local Government Minister Chris Tremain
Minister, thank you for joining us this morning. You've announced that you're going to rein in council development charges. They are now averaging around $14,000 per section. Have people been getting ripped off when building a home?
CHRIS TREMAIN - Local Government Minister
Look, I wouldn't say they've been ripped off, Michael, but we've been very focused as a government on housing affordability and making sure that citizens are getting good value for money. So that's involved a range of initiatives, most importantly land supply, of course, which the Prime Minister and Nick Smith have been dealing with. But development contributions are important. They're about anywhere between 3 and 5 per cent of the cost of developing a property. So we want to take a really focused position on each and every part of building a property. We're looking at development contributions and seeing how we can rein them in.
MICHAEL They're very important to many councils around the country. You know, they make up 30, 40 per cent of their infrastructure costs. Where is that money going to come from if it's not coming from the charges? It's going to be lumped to rates, isn't it?
CHRIS We're going to focus development contributions on the things that really contribute to the cost of building a home. I think that's really important.
MICHAEL But they need the money, don't they? Councils need that money.
CHRIS Well, that depends what they need it for. If they're going to be going in and building new libraries or municipal theatres, that sort of thing, then we'd argue that development contributions shouldn't be used for those sorts of facilities and that should come out of the general rates.
MICHAEL So we will see rates go up as a result of this?
CHRIS It comes down to the decisions of councils, Michael. Part of our reform programme has been to focus local government on what we believe are the core purposes. So-
MICHAEL You're favouring developers here, aren't you, over ratepayers. They're going to take a hit.
CHRIS No, we are favouring people… affordable housing. We want to make sure that Kiwis who are getting into the market have the best chance of buying a new property at good value.
MICHAEL What's the maximum those Kiwis will be paying in development fees under this new regime?
CHRIS Well, I can't give you a maximum. It will be different between each council. What we've said is we're going to confine what development contributions can be paid for, and we're going to provide a lot more transparency so that developers, citizens can see what actually they're being charged. And we're also going to provide an objection process whereby developers can go in and challenge those charges to make sure that they're getting value for money.
MICHAEL Is $14,000, that average - yes or no - is that acceptable?
CHRIS Well, again, it depends of the market that you're dealing in. In some markets, that may be acceptable, but it really depends. Auckland, obviously, the average price of building a home is a lot different to my own hometown of Napier. So, look, I think we've got to weigh those up as we go forward, but the aim is to make development contributions more transparent and more focused on the actual cost of building the home.
MICHAEL Sticking with building, you've had the report now from the Crown Manager at the Christchurch City Council. The problems there, when are they going to be sorted out?
CHRIS Well, Doug Martin's done an absolutely fantastic job down there in the four weeks that he's been there. In four weeks, he's delivered the action plan that we've asked him to, and he's said that he'll have the Christchurch Council back to accreditation by June of 2014. So he's done a good job.
MICHAEL He mentions in there the culture of the organisation and a lack of customer focus in the culture. Was it a toxic culture there?
CHRIS Well, I think it was a culture that needed to improve. He's recognised that, and he's put steps in place to make sure that that is addressed. So, you know, I think that, amongst a number of other recommendations - improving the forecasting, making sure that they've got the capacity and capability. You know, getting this right for Christchurch is critical.
MICHAEL You talk about the culture there, and that obviously comes from the top down. This report and the investigation into Tony Marryatt are now complete. Is it time for the council…can it now sever ties with Tony Marryatt?
CHRIS Look, I'm not going to make comments about Tony Marryatt. It's up to the council. What I'm interested in is making sure we have a fantastic consenting process for the people of Christchurch. You know, getting this, getting this-
MICHAEL But he's sitting there now. He's a $500,000-a-year CEO. He's sitting there on gardening leave. Isn't it time for him to either get back to work now this plan is in place or get out?
CHRIS That's a decision for the councillors, Michael. I'm not going to be making any comments today about Tony Marryatt.
MICHAEL Councils in general - are you happy with their performance? Because we've now got this other issue in Christchurch of these penalty rates that effectively seem to have been charged wrongly to the ratepayers. Have you had some indication of whether those ratepayers will be able to get the money back?
CHRIS Well, look, you asked me firstly about councils in general. Look, we have had concerns about some rates rises when we had, sort of, inflation at about, 2.7%. Rates were going up about 7% over the last 10 years. So we have introduced a reform programme to address that. Look, generally, you know, there are some excellent examples of councils out there doing a fantastic job. On the other side of the coin, there are councils that do need to pick their game up.
MICHAEL And so on that Christchurch issue, then, on those penalty rates, what's going to happen there? Will that money have to be handed back?
CHRIS No, it won't. We'll be going through a process to understand exactly what the technical breaches are.
MICHAEL Do you know how much it is? A ballpark figure?
CHRIS I don't have that number off the top of my head. But we'll be looking at the technical breaches. There is an ability in the current legislation to fix the situation.
MICHAEL So the ratepayers will be out of pocket on this? The law will be changed around and they just won't get their money back?
CHRIS No, no, they won't. We'll look to use the rating assessment process in the current act to revalidate the rates.
MICHAEL It will be millions of dollars, though, won't it? Because, I mean, this goes back to 2004, so we're not talking small amounts of money, are we?
CHRIS Oh, look, the money is significant-
MICHAEL Significant as in millions? Tens of millions?
CHRIS But the point I'm making is that be able to-
MICHAEL I'm going to get you to put some sort of figure on it.
CHRIS I don't have a figure for you, Michael.
MICHAEL You don't know or you're not prepared to share it?
CHRIS I don't have a figure for you. What we're going to do, though, is make sure that the rates are valid, make sure that they are payable and make sure that it's fine.
MICHAEL The general satisfaction or, I guess, the lack of stellar performances in some councils, is that a good enough reason to move towards more supercities, more amalgamations, as we've seen here in Auckland?
CHRIS Look, one of the parts of the reform that we have rolled out is more transparency around financial ratios. We've got a new prudential ratio system that will actually shine a light on how councils are performing. So we are looking to roll that out and use that as a way for councils to benchmark themselves.
MICHAEL The submissions for the Wellington region close on Friday, so when are we going to see some movement in that part of the country?
CHRIS Ok, so, coming back to reorganisations, look, the government's been clear that we are in favour of reorganisations, but we've made it very clear that it's a community-led objective. So in regard to Wellington, which you've just asked me about, the Local Government Commission is in the process of considering the options that are on the table, and there are a number of them, before it puts firstly a draft proposal back into the market and then a final proposal.
MICHAEL But when will we see a Wellington supercity? When do you want to have this idea pitched up?
CHRIS This is a clearly a community-led initiative-
MICHAEL But it gives them a lot of power to come to the government with their hand out and argue with the government, so when do you think-?
CHRIS I wouldn't say it comes with their hand out. It gives the community the option to come to government with a proposal for change. I think that's an exciting way to approach it. The Local Government Commission has the ability to shape that proposal and to make changes to it. Then the community has the ability to introduce a referendum to make a decision on it. So it's not a government decision; it's a community decision.
MICHAEL You talk about the community. Obviously the biggest part the community can play is turning out to vote. But they're at record low levels, really. Only half the voters seem to turn out for local body elections. Why is that, do you think?
CHRIS It got down to 44% in 2007, and it's picked up to about 47.5%. So I agree with you. It is low if you compare that to central government elections, which are around 75%. So, look, I think what I'm keen to do is bring in the youth votes, and I'm keen to look strongly at e-voting as an opportunity into the future. So I'm putting a working group together with the likes of the leadership of the likes of Nick Leggett of Porirua who are keen to make this happen. So I'm keen to see that definitely as a trial process by the next elections after these ones. Outside of that, it's really important that local communities ensure that their councillors or those who are standing for election put their hands up and it doesn't just become a personality contest, that each community knows what the local issues are and that they know where each councillor stands on those issues.
MICHAEL E-voting - something to look forward to. Local Government Minister Chris Tremain, thank you very much.
CHRIS Thank you, Michael.