Auckland council merger

Paul Walker and Eric Crampton are both concerned about the proposal to merge Auckland’s city councils to create a ‘supercity’. They fear that the loss of competition for residents among councils will decrease the quality of service and increase the rates. My initial thoughts were:

  1. How much of a problem is this? In any given city over 90% of residents report having the nation’s best quality of life. Given that, is there really much that a council can do to entice people away from where they are?
  2. What’s the marginal impact of rates on people’s decision about where to live? I imagine that it is one of the least important factors in deciding what area of a city to live in.
  3. Can the difference in rates be large enough to overcome the transaction cost of moving house?

Upon reading some of the links they provided I’m more persuaded that there could be an issue. Particularly among poor people who have few assets, there is an incentive to move to a place with lower rates and better ameneties. It’s a shame, as Eric points out, that the Royal Commission didnt’ consider the issue. He provides some interesting examples of lessened competition decreasing service delivery, but it would be nice to have some systematic analysis of how well that applies to the case of Auckland. I doubt that quantifying it and weighing it against potential benefits is a trivial matter that can be sorted out in a blog post!

  • 1. High levels of satisfaction with local government is an outcome of a process that involves local government competition.
    2. After Winnipeg’s Unicity Act, lots of folks moved just outside of the city’s territorial limits. It didn’t happen immediately, but over a couple of decades taxes crept up while service quality deteriorated. The commute into town started to look like a pretty good deal.
    3. Again, this isn’t a sudden shock kind of thing. It’s more that when folks are looking to sell a house to upsize or downscale, they’ll put some weight then on the bundles of amenities provided by the different councils and on the taxes charged for those amenities.

    Winnipeg perhaps doesn’t give the cleanest comparison to here: local body rates fund the schools, and the Winnipeg School Division #1 largely corresponds in borders to the city’s limits.

    I’m very disappointed to have heard nothing from Rodney Hide on local government competition. I’d totally expect him to know about Tiebout. A few years ago when he was going on about the need for Auckland to merge, I put comments up on his blog asking him about Tiebout; I don’t recall his ever saying anything about it.

    It’s possible that the gains from amalgamation outweigh the losses from reduced competition. I just don’t know that anybody’s weighed those losses. Or that they’ve considered that the efficiencies from amalgamation may be ephemeral (as was the case in Winnipeg).

  • Eric makes the point that you get high levels of satisfaction with local government competition. Why, if the Supercity is a monopoly, would you expect high levels of services? The whole thing about a monopoly is that they don’t have the competition to force them to provide value for money. Also the bundle of services offered by different councils will attract different groups of people, one size does not fit all. And with the Supercity you will get just one size.

    But as Eric also notes, the real question is, Has anyone even looked whether or not the gains from the Supercity outweigh the losses from the lessening of competition? If not, why not? If they have what are the results?

  • @ Eric

    Winnipeg does sound like an interesting example and it’s certainly a shame that this issue hasn’t been considered. Is it often considered in situations like this or do policy advisers usually see it as a non-issues?

    @ Paul

    I think the monopoly case is slightly overstated because it is an elected body. If you don’t like what the council does then you vote for someone else next time. Voting is also far less costly than moving house, although I suppose it also has a far lower impact on your welfare.

    As to the one-size-fits all argument, isn’t that pretty much the same as the concerns about community representation? They seem to have some airtime at the moment so hopefully they will be addressed in the structure of any new council body.

  • @rauparaha
    What is the effect of your vote? Zero. Voice can get you only so far, the threat of exit is a more meaningful check on local governments’ activities. But how do you exit when there is, basically, nowhere to go?

  • Penny Bright

    Public Meeting TONIGHT! Stop the ‘SUPERCITY – SUPER RIPOFF!
    8 April 2009



    Trades Hall Auditorium
    147 Great North Road
    Grey Lynn

    7.30 – 9.30pm

    The ‘SuperCity’ will downsize democracy and SUPERSIZE rates – especially water bills for the public majority.

    Local ‘councils’ will make decisions over dog control, graffiti and liquor licensing.


    Menawhile – existing Councils will be gutted of $28 billion worth of public assets, which will be placed under CCOs (Council Controlled Organisations).

    Hmmm…. seems no body has actually checked the obvious – where is the ‘cost-benefit’ analysis which PROVES the ‘cost-effectiveness’ of the CCO model for the public majority?

    The Royal Commission was tasked with finding ‘cost-effective’ solutions.
    They had the powers to investigate and initiate research.

    Don’t you think it might have been sensible and ‘scholarly’ to at least attempt to provide some facts and evidence to support the ‘cost-effectiveness’ of the CCO model which they are recommending for $28 billion of public assets?

    There is NO democracy for the public majority under the CCO model.

    The Board of Directors are business appointees – the public don’t elect them.

    Meetings of CCOs are not open to the public.

    The ‘Statement of Intent’ which governs the operation and management of CCOs has no direct public input.

    After 4 years and 22 arrests, Auckland City Council only now remove Metrowater matters from the ‘CONFIDENTIAL’ section of Finance and Strategy Committee meetings.

    But key Watercare matters are still kept under CONFIDENTIAL’!

    Under Metrowater CCO stood for ‘Ca$h Cow Organisation’.

    What is being proposed is a GIANT Metrowater with ‘user-charges’ for wastewater spread across the region.
    Families of 8 can expect water bills of over $2000 per year on top of rates based on the Metrowater model.
    That will REALLY help the social well-being of the large poorer families which NEED to use more water! (not).

    Disproportionately burdening poorer families for the cost of water services compared with richer families VIOLATES the basic human right to affordable water.

    Penny Bright
    Media Spokesperson
    Water Pressure Group

    Ph (09) 846 9825
    021 211 4 127

  • There can also be political pressure to lower rates if the council next door is providing the same services with lower rates. This can’t happen if there is no comparable council.