The Department of Internal Affairs

ngā kaunihera-a-rohe

Local Government in New Zealand - Local Councils


How councils should make decisions

Councils have broad powers under the Local Government Act 2002 to act on behalf of their communities. These general powers are balanced by requirements to take account of the principles set out in the Act, and to report back to their communities.

The Local Government Act 2002, section 14, requires all councils to take a consistent approach to their activities, by–

  • Conducting their business in a clear, transparent and democratically accountable way.
  • Operating in an efficient and effective manner.
  • Making themselves aware of and having regard to the views of all their communities.
  • Taking account of the diversity of their community’s interests, both current and future.
  • Providing opportunities for Māori to contribute to council decision-making processes.
  • Collaborating and co-operating with other councils and bodies appropriate to promoting or achieving the council’s priorities and desired outcomes.
  • Conducting commercial transactions according to sound business practice.
  • Periodically assessing the risks and expected returns from investments and commercial activities.
  • Ensuring prudent stewardship and the efficient and effective use of their resources, in the interests of the district or region the council represents.
  • Taking a sustainable development approach (thinking about the social, economic and cultural interests of people and communities, the need to maintain and enhance the quality of the environment, and the reasonably foreseeable needs of future generations).

These general principles are supported by more specific principles, which guide the decisions and actions of the council. These principles relate to –

  • Governance.
  • Decision-making.
  • Consultation.
  • Financial management.
  • Accountability and transparency/reporting.

The governance principles

These principles guide the act, process or power of governance by councils, enabling collective action in a society. There are five principles of governance under the Act. They are –

  • Clarity in governance roles - the governance role should be clearly understood by elected members and their communities.
  • Effective, open and transparent processes - processes must be open to the public and understandable by them.
  • Separation of regulatory and non-regulatory functions - councils should ensure that responsibility and decision-making processes for regulatory activities are separated from those for non-regulatory or operating activities.
  • Good employer – each council must operate a personnel policy containing conditions generally accepted as necessary for fair and proper treatment of employees.
  • Effective and clearly understood relationships exist between elected members and management.

The decision-making principles

The Local Government Act 2002, defines a 'decision' as an agreement to follow a particular course of action, including agreement not to take action on an issue.

Councils make dozens of decisions each day but are only expected to undertake full consultative and analytical processes for significant decisions. These are defined as highly important to community well-being, the people who are likely to be affected by the decision, or those that affect the ability of the council to perform its role and the costs of doing so. The compliance provision in section 79 of the Act sets out the extent to which councils must comply with decision-making requirements in any particular set of circumstances.

The degree of compliance required is essentially in proportion to the importance of the decision being made.

The definition of ‘significance’ is one of the most important concepts in the Act. The degree of significance of any decision is important because it determines –

  • The nature, extent and degree of compliance required.
  • Whether or not a separate round of consultation is required.
  • The extent and detail of information to be disclosed by the council when reporting to the district or region.

Councils must adopt a policy on significance that will allow them to identify, with their community, the more important decisions needed. Rules and guidelines in the Act include assessing impacts and identifying strategic assets.

The consultation principles

The prime purpose of consultation is to enable the effective participation of individuals and communities in the decision-making of councils. This will enable elected representatives to make better-informed decisions on behalf of those they represent.

The principles guiding consultation processes set out in the Local Government Act 2002 are designed to ensure individuals and their communities have information about decisions, the opportunity to engage with their councils and make their views known.

There are six guiding principles set out in the Act –

  • Councils must provide anyone who will or may be affected by the decision, or anyone who has an interest in the decision, with reasonable access to relevant information.
  • These people should also be encouraged to express their views to council.
  • People who are invited to present their views to council should be given clear information about the purpose of the consultation and the scope of the decisions being made.
  • People who wish to present their views must be given reasonable opportunity to present them.
  • Councils should receive these views with an open mind and give them due consideration when making a decision.
  • The council should provide people presenting their views with information relevant to decisions and the reasons for them.

The Act also sets out processes for discussing concerns about a council with the Office of the Ombudsmen, the Office of the Auditor General or the Parliamentary Commissioner for the Environment.

The financial management principles

Financial management is one of the most visible activities of councils. The Local Government Act 2002 sets out three obligations for councils:

  • A council must act prudently and in a manner that promotes the current and future interests of its community.
  • Adequate and effective provision for expenditure needs must be provided for in the LTPs and the annual plan.
  • Expenditure needs must be met from those mechanisms the council considers appropriate after considering the promotion of community outcomes, the user/beneficiary pays principle, the intergenerational equity principle, the exacerbator pays principle, the costs and benefits of the activity and the overall impact of the selection of the funding mechanism.

Development of revenue and financing policies should be based on a three-step approach. Firstly, current activities should be identified. Secondly, councils are obligated to consider the following when selecting funding mechanisms –

  • The distribution of benefits from each activity to the community as a whole.
  • The period over which the activity's benefits can be expected.
  • The extent to which particular individuals contribute to the need to undertake each activity.
  • The costs and benefits of separate funding.

Thirdly, consideration of the impact on communities must be considered. This recognises that revenue and funding decisions do not occur in a vacuum.

Local Government Act 2002 Amendment Act 2010

The 2010 amendments to the Local Government Act 2002 encourage councils to focus on core services by requiring councils to have particular regard to the contribution to their communities of:

  • network infrastructure;
  • public transport services;
  • solid waste collection and disposal;
  • the avoidance and mitigation of natural hazards; and
  • libraries, museums, reserves, recreational facilities, and other community infrastructure.

Councils and ratepayers are also assisted in prioritising existing and proposed expenditure, with the introduction of financial strategies to long term plans. Financial strategies aim to facilitate prudent financial management by making clear the effect of proposals on services, rates, debt and investments and by requiring councils to give limits on rates and debt, and targets for returns on investments.