LOCAL GOVERNMENT’S ROLE IN THE DEVELOPMENT & MANAGEMENT
OF INFRASTRUCTURE
Joel Cayford
- 23rd October 2003
Chair Works & Environment Committee North Shore
City Council
Prepared for Conferenz Utilities & Infrastructure
Conference
Deregulation, the pressure to deregulate further, the need to
re-regulate, and the drive for economic efficiency - are all drivers for change
to the environment in which Local Councils operate and carry out their
statutory duties in respect to local infrastructure services including: the
3-waters, transport, electricity, and communications.
Conflicting regulatory pressures create uncertainty as to which issues
or outcomes should be prioritised by Councils when carrying out their duties.
The absence of regulation leads to public uncertainty and risks in the quality
of service provision.
Choices in service delivery mechanism range between totally public, to
totally private and a range of hybrid models in between – each with their own
revenue and funding drivers, each with their own perception as to the meaning
of triple bottom line accounting, and each with their own idea as to which of
those bottom lines should take priority, add to the uncertainty.
Councils are deeply pragmatic organisations which have to deal with
development issues and proposals on a daily basis, and have to respond and make
decisions in a timely manner - based on their best understanding of the
regulatory framework that is in place at the time. These decisions are sometimes taken in the light of a longer term
vision or plan, but that is often not the case, and such guidance cannot be
assumed. North Shore City Council’s experience in relation to infrastructure
over the last couple of years strongly suggests aspects of the current
legislative & regulatory framework have many holes which need review.
This paper refers to a number of case studies in the North Shore City
part of the Auckland Region. The presentation will contain relevant video,
further illustrations, and succinct
tabulations of the issues and discussion set out in this preliminary paper.
Auckland, utility, infrastructure, funding, 3 waters, electricity, telecommunications, roads, transport, appropriate regulation
North Shore City is a typical urban receiving environment for utility infrastructure. On most days some or all of the following activities are happening:
- streets are being opened to make way for sewer pipes that don’t leak; stormwater pipes that prevent flooding; and water mains to provide drinking water
- footpaths are being opened to make way for power cables as electricity retailers undergound their cables – but only when it is economically efficient
- street light and power poles are adorned with cellsite antennae which enable high speed data access and cheaper cellphone services
- street trees are pruned to create tunnels for power cables in streets where power takes priority over street amenity
- roads are built and resealed for cars, trucks, buses and bikes
- footpaths are maintained for pedestrians competing for priority against cars needing to cross the footpath to gain access to private property or the street
All of these activities are to enable the public and commercial enterprise to access the services and facilities these different infrastructures provide. During a typical year other more significant infrastructure development activities may be happening in the city or are in the process of being permitted by the appropriate authorities – including the TLA:
- road space is being re-allocated from cars to buses or bikes
- new high tension power cable routes are being planned
- new telecommunications technologies are being rolled out
- undergrounding budgets and initiatives are being applied to overhead wires
- bulk supply infrastructure for water, sewage, electricity and transport is planned
When engaging with these matters, a TLA is bound by both the RMA (Resource Management) and now the LGA (Local Government Act 2002) to consider them according to triple bottom line principles.
TLA objectives in such considerations include:
- sustainability
- avoidance, mitigation or remedying of adverse effects
- balanced allocation of natural resources to meet competing demands
- affordability, equity and the question of who pays
The 1980s and early 1990s witnessed an
increasing trend around the world in favour of the withdrawal of government
from involvement in the running of industries hitherto under its direct
control. The UK and New Zealand governments were at the front of this trend. It
was accepted that government should withdraw from industries in which it had
been involved (typically through state ownership) in the past, in order to
encourage enterprise, efficiency and innovation.
Inevitably, this led to other issues: how to
deal with the exercise of possible monopoly power by enterprises now free to
operate in a market environment freer of government control; how to promote
competition in industries where one or more enterprises dominated the sector
after the withdrawal of state control; how to ensure public interest concerns
relating to sustainability and equity are addressed; and how to ensure an
appropriate balance between efficiency and innovation, insofar as these
different goals of public policy conflict.
In looking back on the experience of the last
decade or so of deregulation around the world. what is interesting is the
different ways in which countries have tackled these issues. One model has been
to put in place regulators with widespread statutory powers: in effect, direct
government control of a nationalised industry is replaced by agency regulation
of a privatised industry on behalf of government, with extensive delegated
powers. UK and Australian regulation conform to this model. With a regulator
appointed for each industry (telecoms, electricity, gas, water and sewerage,
and airports in the UK), this arrangement has the advantage that the
regulator can acquire very considerable expertise in, and knowledge of, the
sector for which he or she is responsible.
Within this arrangement, the regulator
typically has two main roles. The first is to regulate prices to avoid monopoly
profits. The second is to prevent anti-competitive behaviour by the dominant
incumbent in general, and in particular to ensure fair access by new entrants
to essential facilities and networks. Thus, for example, new entrants to the
telecoms business need access to the network of connections controlled by the
incumbent, if they are to compete effectively. Regulation of this
interconnection arrangement in a fair and efficient manner has become a key
issue in telecoms and other network industries around the world. Recently NZ’s
Commerce Commission has issued a draft ruling that Telecom should unbundle its
local loop and provide competitors access.
New Zealand is in the throes of working out
how to re-regulate telecommunications and electricity – but primarily at the
supply end of the chain with little attention yet being given to what happens
in the street at the retailer end of the wire. The question of regulation of
access to transport infrastructure is a key issue in the new Land Transport
legislation. While aspects of Auckland’s water industry remain almost
regulation free.
The absence of a regulator has the great
advantage that it minimises government intervention in industry and provides a
guarantee against arbitrary regulatory actions, leaving market forces free to
operate. But it also has disadvantages. The legal system works slowly and
expensively. Another question about the New Zealand model is how it addresses
the problem of monopoly power. Many regulated industries have strong elements
of natural monopoly, arising from the network element (the gas, water and
sewerage pipelines, the electricity and telecom networks), usually in the
control of one company. If unregulated, it pays this company to raise prices
in order to extract monopoly profits. In the absence of competition, the
company may also he slow to introduce technical improvements. It may also be
reluctant to clean up its act in terms of environmental effects and
neighbourhood amenity.
From a British and Australian
perspective, this failure to address the issue of monopoly rents is a weakness
of the New Zealand model, as is the reluctance to see a role for a regulator
actively to foster new entrants and thereby promote competition and innovation.
Despite the current aversion to the idea of a regulator, the problems that are emerging may require acceptance of a regulator in different service sectors with strictly delimited powers.
3. THE ROAD AS STREET PARK
Many new subdivisions have mushroomed in North Shore City as the city has grown, especially in Albany’s greenfield areas in the North. The country’s newspapers have been full of images of badly designed housing developments associated with poor provision of local community services, shopping etc. What these images have often not shown are the poorly designed street corridors which link the homes in these developments and connect them to the city’s street network.
These streets are among the worst new streets in urban New Zealand. The kerb to kerb width is very narrow. In many cases when cars are parked on both sides there is only room for one car to move. This might have been alright if there had been compensating provision of wide and generous berms and footpaths. However the opposite is the case. These new streets are characterised by very narrow footpaths, slivers of grass berms, and no room for significant street tree planting.
The planning decisions that led to these streets being built was the responsibility of council staff and councillors acting as commissioners. Of course the developers responsible got what they wanted – more land for housing, more sections, more revenue from sales. When these new developments are for sale, fresh from construction and nice with new paint, they look great to the vendor. But it is only when the cars are in the streets, the bikes are on the footpaths, and the people want to walk anywhere on the footpaths – that the poor design becomes evident. And then it is too late.
In my
experience, RMA processes have led to
very poor road infrastructure decisions in North Shore City.
4. THE ROAD CORRIDOR
Most utilities require access to the road corridor as their primary access to provide services to customers. However most TLA’s and their ratepayers regard the street out the front gate as an extension of their property, almost akin to being their local park. There is considerable public support for tree planting and grass berms and well constructed footpaths for disability scooters, skateboards, bicycles and baby-filled-buggies. In addition footpaths are used for the delivery of other services such as the post, newspaper deliveries and so on.
These low impact but high local amenity uses are conflicted by power and telecommunication poles; sewer and water services inspection hatches and manhole covers; road side cabinets containing telecommunications, metering and remote control equipment; and so on.
In the past all network services which came along, under or above the footpath, were publicly owned utilities in existence only to deliver a service. There was general acceptance of the adverse effects associated with the infrastructure. Another factor contributing to this acceptance was the fact that the infrastructure hadn’t changed much in a generation. All that has changed with privatisation and new technology.
The public in general, and TLAs in particular, are not especially keen to permit private utility developments in public road reserves which are designed to minimise cost, and which do not adequately compensate or address issues arising in the receiving environment. These sorts of conflicts can lead to considerable delays and frustrations in the construction of new infrastructure. Utilities experience uncertainty. The public doesn’t get access to new services at reasonable cost. The public get grumpy. And TLA officials are piggies in the middle. Privately owned utilities in New Zealand are working together on a common code of practice. I have obtained the following details from the web (selection shown here):
Desired Framework for Utilities
Operating Within the Roading Corridor
The desired framework will be fair, equitable and
have a high level of national consistency while recognising the impracticality
of designing a ‘one size fits all’ regime. The desired framework will
build on work already undertaken cooperatively by local authorities and utilities in the Auckland region, and
on similar work undertaken in Christchurch and certain smaller centres, and
will recognise the legislation, regulations and national codes that already
exist for roads and utilities.
Key Issues to be Addressed
The priority issues to be
discussed by the New Zealand Utilities
Advisory Group include:
§
managing constraints in
road corridors where these exist, including the availability of (limited) road
corridor space
§
notification of works and
the availability of records on locations and currency of utilities in the road corridor
§
disruption to road users,
service consumers, adjacent occupiers and other utilities
§
quality of the road asset
§
funding and costs
§
rights, responsibilities
and accountabilities
§
safety issues and
emergency procedures
§
workforce competency and
skills criteria
§
measurable performance
criteria and continuous improvement.
Outcomes
The outcomes sought by the New Zealand Utility Advisory Group
include:
§
clarification of the
rights and responsibilities of all parties using the road corridor
§
recognition of the
transport, amenity and public space value of the roading corridor and the
importance of providing optimal community access to utility services
§
minimisation of the costs
for end use consumers (utility consumers, rate payers, tax payers and road
users), and minimisation of the costs of compliance (administration and
transaction) of utility operators
§
optimal levels of
coordination of utilities when
undertaking network construction and maintenance
§
full identification and
fair allocation of costs
§
optimal levels of
consistency across all road controlling authorities and utility operators
§
optimal levels of self-regulation, performance based
legislation, quality service delivery, and equity for and by utility operators.
Initial Activities
The New Zealand Utilities Advisory Group will initially focus on
various projects including:
§
development of a Code of
Practice for site construction and restoration within the roading corridor
§
development of best
practice models that reflect the interests of utility operators and assist
local authorities in their application of the Resource Management Act
§
exploration of the
strengths and weaknesses of current legislative provisions which impact upon
utility use of the roading corridor and the development of recommendations for
amendment, with a view to achieving greater consistency and higher levels of
co-ordination
§
consideration of the
methods through which better access may be provided to records about the
location of utilities
in the roading corridor and recommendations about the potential of an integrated
GIS based system
§
development and
application of a communication strategy designed to promote a better
understanding of costs and benefits of efficient and co-operative use of the
roading corridor
***
In essence this framework and code of practice is an effort at self-regulation. This is laudable and appropriate, but it does not address some of the fundamental problems that are only now starting to become evident in urban environments and which relate especially to the lines networks – telecommunications and electricity.
Key among these is the ability of TLA’s to either regulate against “adverse visual effects”, or to charge for “occupation of air space or berm footprint”. Further, when undergrounding is to take place, or might be considered desirable, the line operator will indicate how much economic value is left in the assets above ground, and expect to be compensated for that loss of value. A TLA might be prepared to pay, but would prefer total disclosure and audit of these economic assessments. To act without such independent advice would not be fiscally prudent and could risk ratepayer funds, while permitting the operator to profit from undergrounding activities.
Existing use right arguments are also prevalent among wireless telecoms infrastructure operators. The establishment of a cabinet in the road reserve – often with substantial amounts of free capacity – can become an asset for resale or reuse by another wireless activity. This may seem sensible in terms of co-location arguments, but risks becoming a business in its own right. Miniaturisation benefits should be shared with the community. If equipment gets smaller, the box should get smaller, and visual clutter should reduce. It should not be seen as an opportunity to extract revenue from other activities which can then be accommodated in the cabinet. Similar issues apply to antennae. Permits may be obtained for longer wavelength technologies, or low power applications which are consented on that basis. But later, new technologies emerge and the consented volume envelope is treated as a licence to operate systems with different effects.
These are typical of the issues that cannot easily be resolved by the use of the above code and framework.
Triple bottom line approaches need to move beyond simple RMA type management of effects, and instead consider a more holistic outcome.
5. THE THREE WATERS
The people of
Greater Auckland expect that reticulation of water, and drainage of
wastewater and stormwater, will be
provided in a way that meets high standards for public health and the
environment, is cost-efficient and reliable, and is sustainable over the long
term. In 1999 the councils of the Auckland region began reviewing the region’s
water, wastewater and stormwater services, to ensure good integration
between service planning and regional
population growth, to improve environmental standards and to keep costs as low
as possible. The primary drivers for
this review included the 1994 water shortage and concerns over the need for,
and scale of WSL’s proposed capital works program. Auckland, Manukau,
Waitakere, North Shore, Papakura and Rodney councils participated in the The
Auckland Region Water, Wastewater & Stormwater Services Review (ARWWSR). At
the time the government supported the idea that Auckland’s councils would –
together – come up with either a self-regulatory environment, or legislative
change proposals.
It was notable
that councils decided at an early stage that the review needed to address the
3-waters in an integrated way. That stormwater management needed to be
integrated with water and wastewater management. This was a significant step.
In the past the region’s councils have tended to deal with each of the “waters”
in its own administrative “silo”.
During the early
stages of the review the councils (and operators) all agreed that key issues
needed to be addressed. ARWWSR reports state:
·
“…There is
insufficient integration between councils’ regional growth strategies, and
related infrastructure planning;
·
Network
performance needs to be better measured and monitored, and reported to
councils, and the public expects improvement;
·
Consumers in
general are not meeting the costs they impose on the system due to cross
subsidies arising from rates funding for wastewater (in some cases) and
stormwater;
·
Current
charges and tariffs for water, wastewater and stormwater do not provide clear
signals to consumers on the impact of their consumption decisions;
·
Improved
decision-making processes are needed for the development and application of
regionally-consistent environmental standards for water and wastewater;
·
Cultural
change is required in parts of the industry, councils and regulatory agencies
in order to fully recognise and provide for tangata whenua involvement…”
The introduction to the ARWWSR report dated 5th March 2002 produced by officers representing all of Auckland’s councils, and brought before councils at the culmination of the review process stated:
“….A number of inter-related matters must be considered together when taking decisions about water, wastewater and stormwater services. These include governance, structure, pricing, demand management, regulation and legislation…..”
The recommendations of the review covered each of the above matters. Specifically there were several governance and regulation recommendations, including:
The review
traversed various structural change options including vertical integration and
the modified status quo, and possible regulatory frameworks for each structure.
The review recommended that some form of regional regulation was needed. The
review also suggested significant regional savings would be possible through
vertical integration. Despite this advice the review opposed vertical
integration. However, now, Manukau City
Council is independently considering possible vertical integration options
between themselves and Watercare. The regional regulator initiative was not implemented
because the review’s regulator recommendations were not accepted by MCC or
Waitakere City Council. Waitakere City Council (WCC) has achieved a degree of
independence through its agreement with Watercare that WCC will only be
provided water sourced from the Waitakere Mountains. In achieving this, WCC has
effectively insulated itself from the rest of the region. It has also recently
conducted an in depth independent audit of its internal 3-water operations.
These are among the reasons why WCC backed away from supporting the
establishment of an informal regional water regulator.
The ARWWSR recognised that implementation of the vertical integration option would mean that stormwater had to be separated out from integrated management, and only water and wastewater would be managed together by an enhanced regional entity. Stormwater would stay in a council silo.
In the past
twelve months Watercare and Manukau City Council have sought changes to
legislation which will permit a closer working relationship through enabling
Watercare to engage in water retail operations thereby extending its existing
bulk water business. Auckland City Council is also considering structural
options.
I believe some form of regulatory oversight to provide independent monitoring and measurement and to ensure compliance, is critical to achieve the purposes of the ARWWSR as originally agreed. While this initiative may be on ice for the moment, the emerging Greater Auckland Water Services Management Plan needs independent oversight to ensure all parties effectively implement its recommendations. And clearly, the need for a regulator is only heightened by the prospect of an increase in monopoly power that would be consequent upon any structural vertical integration.
There is considerable scope for review of the regulatory institutions relating to the provision of water services in Greater Auckland. Present arrangements are often in conflict: Ministry of Health; RMA, LGA, Tangata Whenua, and MfE all have different things to say about water, different areas of interest and concern, but there is no overarching compliance assessor, and no entity advising which regulation takes priority. This is not a satisfactory state of affairs.
6. CONCLUSION
The above text points to some of the issues now confronting TLAs when involved in the development and management of infrastructure. In my presentation I shall provide video sequences graphically illustrating some of the specific case studies on the North Shore. The role of the RMA and its implementation in delivering optimal outcomes – especially in terms of roading corridors – is of considerable concern. I shall also tease out some of the regulatory aspects for further consideration, and discuss how the present regulatory conflicts – even where there seems to be an uneasy balance -cannot be described as delivering an optimal outcome. In my view there is a requirement for legislation which provides TLAs with greater powers at local urban level to deal with line and wireless infrastructure, so that long term public interests are better protected, while at the same time enabling a speedy rollout of telecommunications services. There is also a strong need for some form of regulatory oversight of Auckland’s water and wastewater industry.
ENDS