Securities (local authority exemption)

Tena koe Madam Speaker

This Bill seeks to restore an exemption for local authorities to the current Securities Act disclosure regime.

In effect this action back-tracks ten years to 1998, when local authorities were withdrawn from the public debt securities market.

But it goes even further, to twenty years ago in 1978, when the original Securities Act granted local authorities a disclosure exemption in the first place.

The rules around issuing of securities were quite clear – those that would be exempt included the Crown, the National Provident Fund Board, the Reserve Bank of NZ, and local authorities.

But I want to suggest today, that the real context for this Bill, goes back even further again.

For one of the primary purposes driving this Bill, has been the concern from local government that the onerous disclosure regime prevents them from being able to raise funds to fund capital works. Currently, apart from Auckland City Council, councils are limited to raising funds by borrowing from financial institutions, and also of course, through hikes in rates.

So there are two particular issues that I want to canvas in this first reading – the concept of capital works; and that of local body rates.

We are pleased that this Bill proposes that Councils not be burdened further than by the already onerous reporting requirements set out in the Local Government Act 2002, should they agree to issue debt securities.

The neo-liberal drive towards submitting all transactions, regardless of the context, to business rules and compliance requirements, has failed miserably to take into account the significant differences in the reporting regimes and legal frameworks of local authorities and corporate entities.

But what we in the Maori Party also suggest, is that particular communities have borne the brunt of the collapse of investment and resourcing options to fund capital works needs.

Capital Works

This Bill is being heralded as making it easier for an estimated thirty billion dollars to be spent on infrastructure development – bridges, footpaths, sealing and resealing of roads, street lights, sewerage and storm-water services, and all the things we understand as part of capital spending.

What we know is that asset-rich infrastructure organisations, such as local bodies, require large amounts of annual capital expenditure to keep their assets operational.

They depend on virtual cash cows to renew ageing assets, and to acquire new assets to provide the services required by the changing needs of the community.

Some areas, it seems, require virtual herds of cash cows to get them through the crisis conditions reflected in their capital works programme.

For some areas it will be natural disasters that create the crisis – think of the devastating rainfall and flooding that ravaged the coastal Bay of Plenty in May 2005 as a case in point.

For others, it may be the impact of economic decisions made in one sector which leave behind a trail of destruction in another.

One has only to think of the impact on roading by heavy commercial vehicles, particularly at high intensities as with logging trucks, to see evidence of capital works projects in the making all over the country.

The wear and tear, leading to much earlier road failure than otherwise expected, comes about from decisions to shunt logging trucks into areas where the roads have never been constructed for heavy traffic.

The expectations of increased maintenance costs, and the probability of major reconstruction or repair costs all bump up the road expenditure significantly.

I only have to think about my tribal rohe of Ngati Kahungunu, where I have witnessed the impact of logging trucks – weighing up to forty tonnes and over 22 metres along – speeding up the Napier-Gisborne Highway – which is already a hazardous stretch of road.

So while the Commerce Minister is quick to promote the possibility that this law change will help to achieve the Government’s economic transformation agenda, we must not under-estimate the decay and devastation that has brought about the demand for capital works in the first place, and simply ask ourselves the question – how do we support the communities who most stand to be affected by these issues?

Rating

And it is here, of course, that we think back to the announcements a fortnight ago, of the independent Panel conducting the Local Government Rates Inquiry.

Because it doesn’t take a rocket politician, to know that the undue impact and demand for capital expenditure hits hardest in the more vulnerable communities, locations populated by tangata whenua.

The Rates Inquiry concluded that not only were the ratings valuation of Maori land inappropriate and “significantly over-stated”; but that there were far too many examples of, and I quote, “landlocked, unproductive Maori land being valued at inexplicably high figures”.

And so we welcome the opportunity provided by this Bill to be able to make much needed decisions about the funding of capital works programmes – without causing the massive rates hikes our people have experienced.

We absolutely agree with the concept that infrastructure assets are long-term investments and that borrowing helps to spread the cost over the life of the asset.

But we are also acutely aware of the very complex and strained relationship that often exists between Maori landowners and local government – a relationship which deteriorating capital works and over inflated over-rating of Maori land has suffered from.

We supported the recommendation from the independent Panel to address the relationship between the Treaty of Waitangi and rating law; and we believe it is a recommendation which could well be relevant to the legislative process introduced in the context of the Securities Act disclosure regime.

We believe that decisions about infrastructure development need to be made in conjunction with mana whenua - literally, the people who hold authority with the land.

The Treaty relationship requires councils to have both adequate Maori representation, and to undertake specific consultation with Maori.

This is a huge challenge for central and local government as a recent research project describing Maori engagement with local government confirms.

The project was entitled, He wharemoa te rakau, ka mahue –a hollow tree is left behind.

For what the research concluded was that participants felt there was little opportunity for Maori representation or consideration of Maori issues in local government, and where there was, it was often tokenistic.

Researchers, Christine Cheyne and Veronica Tawhai, suggest that efforts for structural change and greater power-sharing in local government are considered by Maori as both a Treaty of Waitangi issue and an issue of democracy.

They left three key messages for local government, namely:

Improving the information flow – ‘knowledge is power’
Enhancing Maori participation – ‘diversity is the key’; and
increasing accountability to Maori – ‘integrity is everything’.


The Maori Party believes these messages are significant challenges which councils must consider as they pursue their search of income for infrastructure development.

And they are messages which we will be looking to the select committee process for, to learn how moves to ensure affordable local and regional development reflect the commitment to meaningful compliance with Te Tiriti o Waitangi.