Submission to Independent Panel on the Council-Controlled Organisations (CCO) Review

Introduction

Heart of the City (HOTC) is the business association for the city centre, which includes more than 4000 commercially rated properties and 12,000 businesses. We are committed to the growth and success of the city centre as a vibrant, accessible, safe and welcoming urban community.
Based on our experience of working with CCOs, we believe that adjustments are warranted, which will improve the machinery of Auckland’s local government model as a whole. Our key recommendations and points for consideration are outlined below.

Our Key Recommendations

• Greater clarity of CCO roles and how they align to implement over-arching plans
• Holistic and aligned planning across the Council group
• Collaboration to achieve the best outcomes for the city centre
• Early engagement and stronger accountability to stakeholders
• Explore other opportunities to improve efficiency

Our Specific Feedback

Greater clarity of CCO roles

These organisations tend to work in “silos”, which does not deliver the best outcomes for the city centre. Greater clarity is required at the strategic level to ensure it is clear how they align to deliver the Auckland Plan and CCMP.

Currently there are anomalies that adversely impact both strategic and operational matters. For example, several CCOs have responsibilities for Queen’s Wharf, which is hindering the development of a clear strategic vision and plan, as well as making it difficult to address operational issues. Similarly, we are unclear how Queen’s Plaza will function effectively with multiple parties involved.

Functional matters like Auckland Transport managing footpaths and maintenance, and Auckland Council managing cleaning services is also confusing for businesses when raising issues.

Better articulation by Auckland Council of CCO roles would help to improve alignment of the three-year Statement of Intents and avoid leaving CCOs to interpret the Council’s high-level expectations and objectives in their own individual ways.

Holistic and aligned planning across the Council group

HOTC has long advocated for a more aligned approach to planning to take account of the wider picture of city centre needs and avoid retrospectively addressing issues after decisions are made.
In particular, HOTC has advocated for the City Centre Master Plan and Waterfront Plan to become one plan and include the land occupied by the port to ensure a holistic, integrated plan that will guide investment and progress towards achieving the CCMP vision. The first part has been partly achieved and we urge the second part to follow for the longer-term benefit of the city centre.

Collaboration to achieve the best outcomes for the city centre

Functions and projects that require collaboration between CCOs and/or between CCOs and Auckland Council, need early engagement and this should have a formal accountability mechanism with performance measures.
Funding for such projects should also be assigned to a single lead CCO rather than be allocated in advance to each contributing CCO through the Annual Budget/LTP process. The relevant COO would then be responsible for scrutinising and allocating specific funding to the contributing CCOs in the course of the project. This would ensure a more holistic approach to the project.
To illustrate this point - HOTC identified the need to mitigate the impact of construction on the city centre and its businesses several years ago. However, it took a long and protracted period of advocacy to achieve agreement to allocate resource and funding for this. This could have been avoided with the requirement upfront for a collaborative approach to understand the issue and determine how it would best be managed and funded.
The concept of the former City Centre Integration Group to oversee and ensure co-ordination of projects could be reassessed to address this issue. However, if it was to be reinstated for this purpose, it would need to report at a senior level above the CCO level, to give authority and ensure neutrality (previously it reported to Auckland Transport).

Early engagement and stronger accountability to stakeholders

While there are some positive examples (refer table below), there needs to be a more consistent approach to early engagement across the CCOs, with much stronger acknowledgement of stakeholder needs. The process of CCO Board and Executive
recruitment must ensure adequate recognition of the need for CCO organisations to engage with stakeholders and report clearly on how they are responsive to stakeholder input.

Other opportunities to improve efficiency

The initiatives outlined above would improve outcomes for the city centre, improve decision making, resource efficiency and reduce wastage. There may also be opportunities to more fully align some functions that are currently rather grey areas between the CCOs. We also question if there are opportunities for increased use of shared services and procurement practice across the CCOs.

(2) Overall, how well do you think each of the CCOs is providing services?

Given the comments above, with some systemic issues that need addressing, we have made these assessments based on our experience of working with each organisation.

Note: We do not engage directly with Watercare Services but regular water supply has not been an issue in the city centre.

(2) Provide specific feedback to support your ratings

(3) Our Feedback in relation to your Specific Questions

CCO model, roles and responsibilities

The following issues and concerns are outlined for attention by the Panel:

Lack of integrated strategic direction to CCOs at governance and operational levels on Council objectives for CCOs.

At the governance level, there is a relatively weak level of transmission of Council strategies (i.e. the Auckland Plan, City Centre Master Plan etc.) into ‘what and how’ the Council parent expects CCOs to actually contribute to implementation. While the Statement of Intent process provides an opportunity for the Council to influence the direction of CCOs, it currently seems to leave the CCOs to do most of the planning of their activities and intentions without a ‘top-down’ spelling out of the council’s own objectives to which CCO activities will contribute.

There is poor clarity in the respective roles and effort required of CCOs to engage with the Council group and stakeholders in place making projects.

For example, RFA has developed plans for Aotea Square (which it manages) without seeking stakeholder input at an early stage, resulting in a proposal that shows little awareness of how Aotea Square currently works as a public space and its likely future needs.

In the instance of major projects where collaboration or joint efforts across multiple CCOs are critical to successful outcomes, there needs to be stronger accountability to achieving these, which could see a greater hierarchy led from Council, giving directive to CCOs to deliver on this (with the CCOs enabling council strategy).

Generally speaking, the disadvantages we have experienced of the CCOs we engage with include:

• lack of democratic accountability to the community for the services the CCO delivers;
• tensions between the objectives of pursuing commercial efficiency and delivering community outcomes;
• additional operating costs (for example, the costs of separate governance and management for each CCO as well as the transaction costs incurred by Auckland Council in monitoring the performance of each CCO, and the CCO’s own costs in demonstrating performance);¹ 
• reduced ability of the Governing Body and Local Board elected members to manage CCO activities and risk.²

We suggest that the purpose of each CCO should be refreshed to ensure they are clear and current. In addition, as the purpose of Auckland Council (or local government) itself has been amended by statute over time, consideration must be given to whether the purposes of the Auckland Council and its CCOs are aligned appropriately.³

CCO accountability

Although consideration should be given to whether all the current accountability mechanisms are effective and efficient, one key issue is that there is inadequate guidance about when a CCO should act in its best commercial interests and when it should act in the best interests of the community. Although even that is somewhat counterintuitive because the CCO model, in and of itself, requires a CCO to act first in its best commercial interests (or to act in the most efficient way in delivering a service). If an activity requires decisions about how to achieve an outcome in the best interests of the community, that is usually not a decision a CCO should be making. It is a decision the elected members of the Auckland Council should be making.

In that regard, another issue is that the accountability mechanisms presume the elected councillors to whom the CCOs are ultimately accountable have the capacity, skills and experience to oversee such large entities with such complex functions. In its Report, the Royal Commission on Auckland Governance suggested that the councillors would need to have support and extra capacity to oversee and monitor the CCOs effectively. The Commission made a number of recommendations in this regard (including developing a capacity building toolkit to assist councillors monitor the performance of large infrastructure CCOs).⁴ We also note that Local Boards and their members have a role in the accountability of CCOs and our concerns can equally be applied to the members of local boards.

Although we understand that there is an in-house monitoring unit within Auckland Council for the CCOs, we question how this currently works to ensure robust accounting of CCO activities. Indeed in this regard, the Royal Commission went as far as suggesting an independent Auckland Services Performance Auditor to provide assurance to the council and the public that the CCOs would be providing high-quality services in a cost-effective manner, including reviewing the adequacy and relevance of CCO targets and the accuracy of performance reported against those targets.⁵ We suggest the Independent Panel revisit this recommendation of the Royal Commission.
Finally, we note that there is a requirement for the Boards of all Auckland Council’s CCOs to hold two meetings in public each year. At one meeting, the Board of the CCO considers feedback from the public on its draft statement of intent for the forthcoming financial year and at the other, the Board of the CCO considers feedback on its performance in the previous financial year. We understand that the value of these meetings in terms of opportunities for the public to address the Board of each CCO is under-utilised. We suggest that the Boards of the CCOs make more of the opportunities that arise with the requirement for these meetings for direct engagement with the stakeholders and the community.

CCO culture

In terms of culture, this varies between CCOs and varies depending on the tone set by the leadership at both Board and Executive level. There are some good examples (eg Auckland Transport with new Chair and CEO which is starting in influence organisational culture; and ATEED as per earlier comments) and some that are not (eg RFA).
There is a need for CCOs generally to better identify and work with key local stakeholders, to involve these stakeholders early in the design and development of projects, and to place an emphasis on responding to local needs and business needs consistently.
Leadership and culture play a critical role. The recruitment, selection and performance targets of the CEO and leadership team is important. They need to address the requirement to respond to Auckland Council direction and work effectively with council executives. Projects requiring strong collaboration should be reflected in objectives for the Council parent CEO and the CCO CEOs (and their teams as appropriate for the project).
A further difficulty with the scale of the CCOs and Auckland Council is the culture that comes with large public sector organisations. Compared with the smaller organisations that existed prior to amalgamation, the larger scale has created some barriers for innovation and responsiveness. However, some CCOs are responding better in this regard than others. For example, ATEED has some good examples of innovation and responsiveness.

_{1 Although setting up the Auckland CCOs to manage services may have resulted in cost efficiencies, there were additional overhead costs associated with establishing them and continuing to oversee them. The CCOs also have their own overhead costs with governance, management and administration structures separate from Auckland Council. They incur costs in preparing statements of intent and in reporting against them, as well as audit fees. Some have additional accountability requirements under legislation, such as the Companies Act 1993.
2 Auditor-General, Governance and accountability of council-controlled organisations (2015), paras 3.6 to 3.9.
3 The purpose of local government was changed in 2012 to focus on the needs of the local authority’s own district or region for local infrastructure, local public services, and regulatory functions. The purpose of local government has now reverted to promoting the social, cultural, economic, and environmental well-being of communities, in the present and in the future. See Local Government (Community Well-being) Amendment Act 2019.
4 Royal Commission on Auckland Governance, p. 470.
5 Royal Commission on Auckland Governance, p. 469-470.}