Month: February 2017

Submission to the Auckland Council on allocation of Specific Parks to the Governing Body.

I was invited to a meeting at Council’s Parks Department on 5th March. An informative background on the above topic was presented by a senior officer and an interesting and constructive discussion took place among those present.

An invitation to make written comments was also issued, and I am therefore responding to that invitation.

The Issues:

  1. Whether there should be any distinction between what was originally the responsibility of the ARA/ARC (Regional Parks) and all other parks, the latter being previously the responsibility of the local authorities.
  1. Should all parks, both ‘regional’ and ‘local’ be treated the same and administered by local boards, or
  1. Should the former regional parks be administered by the central body (Governing Body), with all other parks being dealt with by the local boards?
  1. If the latter, what reasonable liaison system should be established to ensure that local boards can advise on any local problems relating to regional parks.

The Considerations:

  1. It seems that one of the difficulties presented derives solely from the deficient legislation. A review of the relevant section(s) of the Act should be requested at the earliest possible time.
  1. What are the pros and cons for treating all parks as an homogenous whole without any distinction between ‘local and regional’ as to purpose, history, function, catchment, management or management plans, etc – or for making a clear distinction between the two categories as to the elements described above and dealing with them accordingly?
  1. If some have a clear region-wide purpose, then it seems obvious that such a difference can only be dealt with at a central level, by the central body responsible for the region-wide views and policies, namely the Governing Body. Those having more of a local purpose and a narrower catchment should be dealt with by the local boards, and that is a very big responsibility covering considerable total area of parkland.
  1. Nevertheless, where there are major ‘local parks’ which previously may have been classified as ‘city-wide’ parks, indicating that in size, function, catchment and purpose, they have a significant role to play across larger areas of the region (ie well beyond the area administered by any local board) then perhaps consideration should be given to including some of those in the regional category as well.
  1. Despite the fact that the current legislation may not provide useful criteria to assist the distinction, I would like to suggest that there is no reason why a working party could not be established to work through this question to provide guidelines to assist in determining a workable list of considerations.
  1. While many parks have some individual characteristics, those of a regional nature have not only individual characteristics, but many have quite unique features. Furthermore, because their functions include region-wide purposes, they need a unity of approach which cannot be provided by the many variations and different needs and objectives of the numerous local boards. Incorporating them into local control would mean the regional parks would simply become ‘localised’ and region-wide purposes would be lost.
  1. Regional Parks need to be treated as a unified network Auckland residents which assists in identifying with these parks, giving a sense of ownership and pride in what these parks contribute to making Auckland an attractive and healthy city in which to live. Having the Regional Parks managed as a unified network under the control of the Governing Body also enhances both the perception and the reality of the enjoyment and value that visitors to Auckland place on their experience of the city and its environments.
  1. Another significant characteristic is that many of the regional parks are managed as regional farm parks, which needs to be continued, with good management of stock which need to be moved on occasions. This is managed on a regional basis, and needs to be continued as such, including the need to move stock on occasions.
  1. Therefore, it is my view that the regional parks should be under the control of the Governing Body which has the region-wide view and local boards should control those parks which basically serve their communities or those within close proximity.
  1. Further reasons for having the central body dealing with the spectrum of regional parks include very specialist professional knowledge required regarding many of the parks – eg forestry (Waitakeres); entomology; history; major usage (Long Bay); conservation; archaeology; registration of sites under the Historic Places Trust; special wild life areas; legal protections of various sorts requiring careful management.
  1. There are other reasons too, including consistency of approach, the power to purchase land for new regional parks or to add to current ones. This is both a financial and a legal one requirement.
  1. Some regional parks (and some which probably should be included as regional) have special aspects which are protected by other Acts of Parliament, or have standards requiring specialist attention, including international agreements. These include registrations under ICOMOS, Historic Places Act; World Heritage sites, and in some cases, legal agreements setting out certain performance and management controls with other entities. These may include such things as continued use and council maintenance of access roads; specialist attention to any ground works or maintenance to protect archaeological sites of iwi or pakeha significance, the banning of certain types of recreational or other activities, etc.

The specialist, legal and management aspects need to be in a dedicated central pool of the parks department focussed on the regional parks needs to ensure consistency and proper administration and management of these special parks.

Another matter is that regional parks need to be kept totally intact and available for the whole of the public from anywhere in the region. They must not be given over in any part to special interest groups as often happens with local parks where local special interest groups pressure local boards to give them areas of public land to the exclusion of the wider public.

There are a number of park areas which have never been included in the regional park system for various historical and other reasons, but which have a special status, purpose or significance which extends right across the region (e.g the Auckland Domain) or are completely unique nationally (e.g. Chelsea Estate Heritage Park) and should be encompassed within the regional parks.

  1. A review of the Open Space Plan and strategy needs to be produced urgently

to be integrated with the Unitary Plan and to provide with an increase in the per capita provision of open space and parkland to help offset the huge amount of densification and population envisaged by the Unitary Plan.

It is very disturbing that these matters of the governance and classification of parks have not been finalised in this term of Council and that it would appear that the critical need to have a new Open Space Plan to be integrated with the Unitary Plan has not been completed either.

It is my submission that the Unitary Plan should not be rushed through without such matters being part of it

Conclusions:

  1. All of those parks previously known as Regional Parks should be allocated to the Governing Body, supported by a centralised group of professional staff to provide the specialist management and policy advice for these parks.
  1. Former territorial authorities’ major “city-wide” parks which have a clear special regional significance or purpose should also be added to the Regional Parks group – for example, the Auckland Domain and the Chelsea Estate Regional Park. (It needs to be noted that the variety of funders for the purchase of this park did so on the premise that is could become a regional park.)
  1. Parks other than those outlined in 1 and 2 above should be under the jurisdiction of local boards whenever they are clearly serving a predominantly local, non-regional purpose.
  1. A new Open Space Plan needs to be created urgently to be integrated with the Unitary Plan and to help ameliorate the huge social pressures and need for additional open space which will result from a large increase in the region’s population and intensification.
  1. Finally, work should be undertaken to clarify and improve the current Auckland legislation as it refers to the administration and governance responsibility of park.

22.3.13

Posted on by Tony Holman

‘Weapons’ used to kill legitimate debate.

Dare to have a different point of view.

Frequent reaching for emotive, king hit labels to denigrate and demolish whatever the writer is on about, such as:

Racism: Belief in/advocacy of the theory that some races are superior to other races. – Prejudice, discrimination, or antagonism based on this.

Nationalism: Devotion to one’s nation. Advocacy of, or support for national independence. Socialist. Communist. Fascist. Right winger. Benefit bludger. Tree hugger. Xenophobic. Homophobic. Etc.

To take an example that has been occurring quite often in our history and has been in the news on numerous occasions in recent times and is likely to be seen with increasing frequency. That is the accusation that those who dare question ownership of our land or key assets being taken over by foreigners are somehow racists.

Could it not simply be that those being accused are devoted to their country and the efforts they make for their families, their community and their country and don’t want that taken away from them. Is it that (whether they articulate as such or not) they see such increasing foreign ownership as destroying their desire for continued national independence – in other words the erosion of their desire to have a country the way they want it, rather than having it changed into the way others might want to use it, even although they don’t live here.

So when some criticise, or express concern at the loss of NZ control over key aspects of things which they cherish and know are fundamental to having some independence and some control over their own resources, why should they be labelled and denigrated as “racist”?

Numerous countries have quite strict controls over purchase of land by foreigners. Is that racist or just good sense?

In recent years at different stages there have been concerns voiced about coastal land being purchased by US citizens, UK citizens and farmland and residential land being purchased by Chinese companies and individuals.

To take China, they have very strict rules preventing purchase of land by foreigners. I think that is very sensible, but is it racist” I believe not. And if not, why should any NZer be accused of racisim for wanting similar controls to prevent the alienation of their land and national assets?

To their cost, Maori know only to painfully what it means to lose sovereignty over one’s land.

Another weapon used against those promoting caution about foreign ownership is to stick the label Xenophobe on anyone brave enough, or foolish enough to raise their head above the parapets.

Such denigrating labelling comes from many directions: politicians, editors, columnists, commercial interests, etc. It is all intended to shut down any nascent opposition from taking hold. Shoot the opposers is the intention, and silence is the result from many who might be disturbed by the trend.

Sensible, important, reasonable examination of issues and healthy debate is annhilated before it can progress, Democratic rights of free speech are stifled by fear of being labelled racist, xenophobic, tree hugger or whatever other bullying name the bullies wish to use.

Some other examples include attempted discussions about the sustainable aspect of the size of NZ’s population – its distribution across the nation (eg should it all be centred on Auckland), its ethnic mix, immigration policies to achieve appropriate skills,, size and balance, the part to be played in achieving the latter through our education system, etc.

16.3.13

Posted on by Tony Holman

Regulation of PPPs from World Bank Report.

NOTE: This material is included here to show some of the requirements and arguments of the World Bank. I do not agree with most of them which are simply a rationale created to support the   policies of the Bank. It is not an independent assessment of pros and cons of their  policies, nor of the realities of what happens in practice.

Natural monopolies such as water utilities require economic regulation: a visible hand to substitute for the lack of market forces and ensure that the service provider does not abuse its monopolistic position. This approach is not easy to achieve in practice. Whether or not the government owns the utility, there is always a strong asymmetry of information between regula- tor and operator. Private operators can abuse their monopoly position to extract undue and excessive profits. Public water utilities can be captured by special interests, resulting in overstaffing, perks for political appointees, sloppy work and procurement practices, and lack of client orientation.

Water PPPs Are Not Necessarily More Difficult to Regulate
Than Public Utilities
Concerns about the difficulty of regulating private operators, in the chal- lenging context of developing countries, have been one of the major argu- ments against PPPs for urban water utilities. A regulator can, indeed, be captured by a private operator, which has strong financial interests at stake. Water PPPs are complex contracts and, in many cases, local governments with little experience in complex transactions face powerful multination- als. However, one might also observe that at least private operators operate under a framework that fosters accountability. A detailed contract spells out performance targets and mandates regular reporting. Methods for setting tariffs are stated in regulations and/or contracts, with usually much greater transparency than before. Private operators can be fined for noncompliance and can even have their contracts cancelled. Finally, PPPs tend to receive intense scrutiny from civil society—much more, in fact, than poorly per- forming public utilities.

Regulation of Water PPPs

Natural monopolies such as water utilities require economic regulation: a visible hand to substitute for the lack of market forces and ensure that the service provider does not abuse its monopolistic position. This approach is not easy to achieve in practice. Whether or not the government owns the utility, there is always a strong asymmetry of information between regula- tor and operator. Private operators can abuse their monopoly position to extract undue and excessive profits. Public water utilities can be captured by special interests, resulting in overstaffing, perks for political appointees, sloppy work and procurement practices, and lack of client orientation.

Water PPPs Are Not Necessarily More Difficult to Regulate
Than Public Utilities
Concerns about the difficulty of regulating private operators, in the chal- lenging context of developing countries, have been one of the major argu- ments against PPPs for urban water utilities. A regulator can, indeed, be captured by a private operator, which has strong financial interests at stake. Water PPPs are complex contracts and, in many cases, local governments with little experience in complex transactions face powerful multination- als. However, one might also observe that at least private operators operate under a framework that fosters accountability. A detailed contract spells out performance targets and mandates regular reporting. Methods for setting tariffs are stated in regulations and/or contracts, with usually much greater transparency than before. Private operators can be fined for noncompliance and can even have their contracts cancelled. Finally, PPPs tend to receive intense scrutiny from civil society—much more, in fact, than poorly per- forming public utilities.

Various Options Are Available for a Viable Regulatory System

The regulatory frameworks under which water PPPs operate in the develop- ing world fall into two broad categories. In some countries, the focus has been on regulation by contracts, with all elements detailed in the contract

Toward More Sustainable Water PPPs 131

132

Public-Private Partnerships for Urban Water Utilities

and a dedicated team assigned to supervise its execution on the govern- ment’s behalf. In others, the focus has been on the establishment of a broad legal and regulatory framework for the sector, usually accompanied by the creation of a regulatory agency with various degrees of discretionary power. In practice, the difference between these two approaches is not always obvi- ous, and assessing how well they have worked would go beyond the scope of this study. Nonetheless, this review of PPP performance highlights the following observations:

Clear and detailed contracts are important, whether they are at the core or just one element of regulation. The most recent literature (Ehrhardt and others 2007), as well as this review, shows that the use of contracts as the main point of reference for holding private operators accountable has worked well in places as diverse as Western Africa, Macao (China), Colom- bia, the Czech Republic, and Morocco.

Anchoring the regulation of water PPPs in a comprehensive regulatory framework, in which contracts are present but the main tools are the laws and regulations, has had more mixed results, especially where newly created regulatory agencies were granted significant discretionary power. In Chile, the regulatory arrangement has worked well, but the regulator had been in place for a long time before the transfer to the private sector and was, by then, a respected and credible player. In many other places, the establish- ment of credible regulatory agencies has proved challenging, which eventu- ally affected the implementation of many contracts.

The difficulties encountered with regulatory agencies are not themselves surprising: building a whole regulatory framework takes time and the pro- cess can be easily derailed. In this context, processing a single contract to address a well-identified problem may be simpler. Still, establishing a strong framework might be worth the effort, because once a framework is in place, it provides a clear and standardized point of reference that reduces the dis- cretion that can be exercised by parties negotiating individual contracts or their adjustments. Ultimately, the right choice of whether to focus on the contract or on the framework must depend on the specifics of the country, including, among other things, the type of legal and regulatory framework (if any) that governs its water supply and sanitation sector, the current level of institutional capacity within government, and the urgency of engaging in a given partnership at the time of the decision.

Transparency Must Be a Cornerstone of Regulation

PPPs are by nature incomplete contracts, and in the volatile environment of developing countries, it is natural that they be adjusted over time to changing conditions. However, the issue of contract renegotiation has been

controversial. In many cases, it has been conducted behind closed doors, without transparency. In a comprehensive study on renegotiation of infra- structure PPPs in Latin America, Guasch (2004) found that a high propor- tion of water PPPs ended up being renegotiated shortly after the start of the contract.67 All this activity fueled criticism that private operators could have been taking advantage ofcontractual adjustments to make financial gains, and it has undermined the credibility of the PPP approach as a valid option to improve the performance of urban water utilities in several countries.

Progress is clearly needed in this area. It is essential that the ongoing supervision and regulation of a PPP contract be carried out in a structured and fully transparent manner. All PPP contracts should be made available for public scrutiny as a standard policy. Performance monitoring and report- ing of obligations must be strictly enforced and the results made available to the public as a matter of routine. Governments also have an obligation to communicate to the public the rationale and justifications behind each regulatory decision. This is especially important for all that is related to tar- iff adjustments (even when based on existing contractual clauses) or other modifications that may affect the financial equilibrium of a PPP. Contractual adjustments are probably unavoidable in the volatile environment of devel- oping countries, but they cannot be expected to be accepted by the popula- tion and other stakeholders unless conducted in full transparency. This is an area where the involvement of international financial institutions during the implementation phase can be of much value, especially in countries with weak governance and institutional capacity.

Incorporation of Social Goals

Social issues have been controversial in many water PPPs. It is clear that more needs to be done to ensure that more PPP projects benefit the poor. To do this, designers of PPP projects must explicitly recognize and factor in the costs of social goals as well as consider the options of subsidizing the poor and unlinking customer tariffs from the remuneration of the private operator. Also, the wide-ranging impacts of PPPs on the workforce deserve further study in order to be better addressed.

  1. For the period 1985–2000, the study found that renegotiation in the water sector had occurred in 74 percent of cases, a much higher incidence than in other infrastructure sectors. Guasch also found that renegotiation had occurred sooner than in other sectors, taking place on average just 1.6 years after the award of the contract, and was (in most cases) instigated by the private operator. It must be noted that this study used widely defined criteria for renegotia- tion, and its sample included contractual arrangements that are not considered in the present study, including build, operate, and transfer (BOTs) and similar arrangements for new treatment plants.

 

(Dec. 2015)

Posted on by Tony Holman

Water and the “Stench of Exploitation.”

New Zealanders need to be vigilant about the potential for privatisation of our most important asset – water, especially in the context of the government’s frenzied sale of our remaining public assets. The lessons from privatised water in the UK provide more than enough warning. It’s a case of rob the public to enrich the company’s investors.

In an article in the ‘Guardian’ a month or so ago, columnist Nick Cohen, didn’t mince his words. “How long,” he asked, “will it be before the stench from the monopolistic exploitation of water – the very stuff of life – reaches the public’s nostrils?”

Thames Water, Britain’s largest water company, proposes to increase its water levies on the millions of households it supplies, to build a multi-billion pound “super sewer.” (Thames Water is basically controlled by a consortium led by the Australian bank, Macquarie.)

Clearly a new sewer is needed, but what is being criticised is that this company has paid out 1.2 billion pounds in dividends to its investors. It has not provided funding from its ongoing levies over the years, but has instead paid out maximum dividends, while ignoring infrastructural needs. It has been high prices, high dividends and low infrastructural investment.

The Lib-Dem deputy leader has described this as “totally unacceptable.” But more significant is the comment of Jonson Cox (a former CEO of other water companies), who is now head of Ofwat, the water regulatory body. His view is that former colleagues were using “morally questionable” practices.

Further weight was added by a former Ofwat boss (Sir Ian Byatt) who suggested that some 19th century style dividend controls be brought back to life to clamp down on water company practices.

A ‘Guardian’ editorial suggested that regulators “…are worried that the whole dubious edifice of public utilities being owned by private monopolies is in danger of being discredited by obscure company structures, opaque tax regimes and a widespread perception that the customer is being ripped off.”

More than one observer has railed against the water companies, noting among their practices: widespread tax avoidance, high levels of ‘commercial confidentiality,’ loaded their books with debt and provided massive returns to their shareholders.

What seems surprising is that anyone (especially an intellectual newspaper) should expect any different sort of outcome. To give over the precious public natural resource of water to a monopoly, is to give that monopoly a licence to rip off the public. What is even worse is that most of the shares in UK’s water companies are not held by the public, but by private equity. To add a final insult to injuries, many of these shares are foreign-owned, so the profits go off shore.

The public are captives to their suppliers, and either have to pay increasingly exorbitant prices, or reduce their consumption of this vital necessity of life, so that hygiene and other health factors are affected for an increasing number.

Whether by choice or poverty, one of the results of increasing water rates is that there are rising levels of bad debts for Thames Water, because some residents can’t pay, and others won’t pay. Sir Tony Redmond of the Consumer Council for Water said: “Our research shows that one in seven customers say they can’t afford their water bills.”

And “regulators” such as Ofwat are usually ineffective at keeping up with the games the big boys play. They suffer from legal constraints and difficulties with the accounting practices of the monopolies. Even when they unravel a situation and have some sort of solution there is inevitably a time lag which ensures continuing unreasonable profits for the company and suffering for the consumer.

But that’s the nub of the matter. Why should water, a necessity of life, be owned by a few profit-takers instead of the tried and true publicly owned, publicly controlled, non-profit making bodies which we have traditionally had in New Zealand.

There’s a story that one of the northern water companies rationed water to its own customers because it wanted to sell water to a neighbouring company at a higher price!

Don’t think it wont happen here. It is already happening with long-term contracts with firms such as United Water Limited, and the water companies controlling water supply to dairy farmers in Canterbury.

The price of water depends ultimately on the ownership of that water and its distribution. And the price of that that to a minimum is constant public vigilance to ensure that this vital asset remains publicly owned, with direct accountability through a publicly elected Board and with the traditional requirement that it be a non-profit organisation.

This is something that needs to be constantly hammered home to governments and councils by all of us.

 

(26.10.13)

Posted on by Tony Holman

TPPA and WATER OWNERSHIP

Chapter 15   –   Government Procurement:

There is a good deal of debate in New Zealand about the pros and cons of PPPs and its various forms. Such debate is little different from what has occurred in many other countries, other than that it has been taking place rather later than most other places, and in more of a vacuum.

Controversy centres around the effectiveness, complexity, value and many other aspects of this form of enterprise, particularly because it is, and is seen to be a form of privatisation. The fears and concerns are heightened because PPPs are normally focussed on large publicly-owned infrastructure, and it is the public who stand to lose control of vital assets, or eventually, the effective ownership of the assets.

This is most feared with respect to water, but other vital assets and services are also high up on the list of concerns such as schools, hospitals and many other social necessities.

Proponents argue that it leads to improved efficiency, service, quality and increased investment. In some cases some or all of these points are correct.

Opponents note that in many cases it leads to price increases, sometimes because of inefficiency and poor maintenance, but most of all because it is against the public interest to turn a public good into a private good. It is argued that privatisation is incompatible with ensuring human right to water.

Climatic changes, pollution, and burgeoning world population is making water a prize of increasing value and power which many international companies wish to acquire.

There is a good deal of controversy about PPPs, privatisation of water, even in relation to its advantages and disadvantages, and very mixed performance.

These factors make it all the more attractive to major companies as a certain source of increasing profit, with ownership a possible objective for many of them in the longer term.

 

Other influences attracting private consortia are:

  • Strong fiscal measures such as guaranteed, fixed incomes.
  • Aid schemes for developing countries from organisations such as the World Bank and IMF.

 

Currently the most usual type of ownership worldwide is public, through local government. In many countries (for example Japan, Scandinavia, Pakistan, Egypt) there are no private water companies. Uruguay, Netherlands, and Nicaragua have all banned water privatisation in any form.

 

In 2011 and Italian law favouring water privatisation was repealed following a referendum in which the overwhelming majority of Italians voted for repeal.

In developed countries particularly, full private ownership of water is fairly rare outside England and Wales chilly, and some US cities.

The maintenance of water in direct public ownership as a natural monopoly and a public good, may well be under threat in the near future, especially if pressure is brought to bear on governments and local government through mechanisms within the TPPA.

There are many special interest groups that wish to see ‘barriers’ to water infrastructure removed, whereas other groups (including a wide range of public groups) see these ‘barriers’ as ‘safeguards’ of the public interest.

 

Water industry PPPs in NZ have been made easier through the Local Government Act (2002) and subsequent amendments. Section 136 allows local authorities to contract out the provision of water services for a term of not longer than 15 years. That figure could be easily changed, as could any responsibilities of local government.

 

The Auckland Council Act also appears to have laid the groundwork for easier privatisation of major public assets, including water.

 

Governments or local governments seeking some form of PPP involvement, normally advertise internationally to seek competitive bidding and experienced companies. Therefore in New Zealand’s case international companies must win most such tenders by default, because there are virtually no New Zealand-owned international companies with relevant resources and expertise, and in any event, under TPP they would likely be challenged.

The former Papakura District Council was the first council to enter a franchise agreement with an overseas company for water. Rodney District Council entered into a PPP with a private company to provide a sewerage system in the Mangawhai area with major consequences for the Council, the ratepayers and the government.

Both of these contracts became the subject of reports by the Auditor-General.

  1. Provisions of the TPPA

Chapter 15 – Government Procurement

 This Chapter includes build-operate-transfer contracts and public works concession contracts. (15.1) This clearly involves PPPs.

Definition: (Art. 15.1)

“Build – operate – transfer contract and public works concession contract is to provide for the construction or rehabilitation of physical infrastructure, plants, buildings, facilities or other government owned works and under which, as consideration for a supplier’s execution of a contractual arrangement, a procuring entity grants to the supplier, for a specified period of time, temporary ownership or a right to control and operate, and demand payment for the use of those works for the duration of the contract;”

Scope: This applies to any measure regarding covered (government) procurement (15.2), by any contractual means, with or without an option to buy- build- operate- transfer contracts and public works concessions contracts. (PPPs).

Unless otherwise provided in a Party’s Schedule to Annex 15-A, this Chapter does not apply to acquisition of land, or immovable property; procurement or acquisition or services related to the sale, redemption and distribution of public debt including loans and government bonds.

B.2 Key Issues

Annex 15-A states unequivocally (Section B) that “sub-central government entities” (Local & Regional government) are NOT covered by Ch. 15.)

However, under Article 15.24 the ‘committee on government procurement’ is to review this Chapter and …“may decide to hold future negotiations with a view to (inter alia), improving market access coverage through enlargement of procuring entity lists and reduction of exclusions and exceptions as set out in Annex 15-A.” and 2. “No later than three years after the date of entry into force of this agreement the Parties shall commence negotiations with a view to achieving expanded coverage, including sub-central coverage. Parties may also agree to cover sub-central government procurement prior to or following the start of those negotiations.”

C.Likely impacts

Current implications for policy are likely to be:

  • Increased use of PPPs and derivatives for government contracts
  • Increased costs resulting from such contracts, some of which may arise from disputes with overseas entities and involvement of the disputes mechanism.
  • Resultant removal of dispute decision-making from NZ law and Courts to an unconstitutional (?) regime.
  • Sequestering of public assets by private companies for long periods, which has major impacts on any effective democratic control or policy changes which the electorate or their elected representatives may wish to see implemented as circumstances change, may have a number of consequences. Such impacts would greatly undermine public confidence in current Central and Local Government institutions, with unpredictable consequences for democratic institutions.
  • Clarity is needed about how the use of PPPs involving international participants will affect local authorities if they are partners in such contracts with the government (e.g. rail in Auckland, Ports, Watercare.)
  1. Future TPP trends and implications

The likelihood of extension of this Chapter to include sub-central government entities in the relatively near future seems strong. The effects of that prospect for the councils and the electors is something that will require much more in-depth study and informing and consulting the electorate.

Such contracts could have a major influence on how local government units need to behave in future, requiring them to consider the constraints placed on them by the TPP rules, while trying to meet the requirements of their voters.

Water:

Central to such changes in the future is the question of financing and contracting out work to do with water supply, reticulation, purification and quality, along with the matters relating to wastewater.

The vital need of water for human existence, including water for potable and sanitary uses has been a paramount requirement. It is something that has been considered to be a matter for direct public ownership in all nascent and developed civilisations throughout history.

As a common need, rights to water have been seen as a matter requiring public ownership to be dealt with by the local government for the common good. Consequently this is a theme that most civilisations have required and that water should always be supplied at the lowest possible cost. More precisely any profit margin has been taboo.

As well as being essential to sustain life, crops etc, whoever runs and controls water has control of the most important natural monopoly.

Researchers, (Postel and Wolf, in ‘Dehydrating Conflict’) note, “Water privatisation is … becoming an issue as water security threatens the global community.”

There are of course, various stages of acquisition, including a variety of PPP contracts. Because such contracts are generally for long terms (e.g. 25 to 50 years) and because PPPs traditionally complex, often lacking in transparency and difficult to monitor, effective control of water and wastewater is frequently in the hands of the company with a contract, effectively to do the Council’s work.

These factors make it all the more attractive to major companies is a certain source of increasing profit, with ownership possible objective for many of them in the longer term.

Other influences attracting private consortia are:

  • Strong fiscal measures such as guaranteed, fixed incomes.
  • Aid schemes for developing countries from organisations such as the World Bank and IMF.

Currently the most usual type of ownership worldwide is public, to local government and in many countries (for example Japan, Scandinavia, Pakistan, Egypt) there are no private water companies. Uruguay, Netherlands, and Nicaragua have all banned water privatisation in any form.

In 2011 and Italian law favouring water privatisation was repealed following a referendum in which the overwhelming majority of Italians voted for repeal.

In developed countries particularly full private ownership is fairly rare outside England and Wales chilly, and some US cities.

The maintenance of water in direct public ownership as a natural monopoly and a public good, may well be under threat in the near future, especially if pressure is brought to bear on governments and local government through mechanisms within the TPPA.

There are many special interest groups that wish to see ‘barriers’ to water infrastructure removed, whereas other groups (including a wide range of public groups) see these ‘barriers’ as ‘safeguards’ of the public interest.

Water industry PPPs in NZ have been made easier through the Local Government Act (2002) and subsequent amendments. Section 136 allows local authorities to contract out the provision of water services for a term of not longer than 15 years. That figure could be easily changed, as could any responsibilities of local government.

The Auckland Council Act also appears to have laid the groundwork for easier privatisation of major public assets, including water.

Governments or local governments seeking some form of PPP involvement, normally advertise internationally to seek competitive bidding and experienced companies. Therefore in New Zealand’s case international companies must win most such tenders by default, because there are virtually no New Zealand-owned international companies with relevant resources and expertise, and in any event, under TPP they would likely be challenged.

The former Papakura District Council was the first council to enter a franchise agreement with an overseas company for water. Rodney District Council entered into a PPP with a private company to provide a sewerage system in the Mangawhai area with major consequences for the Council, the ratepayers and the government.

Both of these contracts became the subject of reports by the Auditor-General.

In addition to the permissive section of the LGA referred to above, other influences make it likely that the Auckland Council area in particular is likely to be the main area which will see the advent of various PPP contracts.

Reasons for this include: the size and mass of infrastructure, population expansion and the new model, corporate structure of the Auckland Council. Furthermore the current mayor is in favour of public-private partnerships and he, and Council commissioned a major report (EY) about the use of PPPs.

It is also clear that together with the current government’s view and activities in the infrastructure field, its association with major transport proposals for Auckland, and it’s support of the TPPA, Auckland becomes a primary area for this type of contract.

Quite apart from the TPPA, there is neither a requirement, nor prohibition on any local authority entering into some type of PPP contract, although the reports of the Auditor-General, and experiences both in New Zealand and particularly overseas, should caution all local authorities to study at length the complexities of PPPs, their strengths and weaknesses.

Other factors

Matters set out in other Chapters (especially Investment, Finance, Health, Environment, and Economy) all have relevant implications connected with this Chapter.

Further analysis of the use and nature of PPPs is set out in a separate paper.

(2015)

Posted on by Tony Holman