Mapping the evolution of local government in NZ

This local government focus day brought together senior leaders and practitioners from across the motu to explore how councils are responding in practical, grounded ways to shared challenges. Discussions ranged from financial sustainability through to the sensible use of AI.

A consistent theme throughout the day was how councils are operating in an environment of increasing pressure and shifting obligations in the face of a ‘tsunami of reform’.

What stood out overall

Across the day, several consistent observations emerged:

01

Financial pressure is driving structural change

02

Service prioritisation is increasingly a core leadership responsibility

03

Digital capability is becoming core to service delivery

04

AI adoption is increasing and being harnessed for complex tasks such as operating model redesign

05

Data quality and integration remain ongoing challenges

Top priorities for the next 12 months

Delegates raised two key focus areas for the months ahead. 41% stated continuing to deliver great services to New Zealand communities as a number one priority, whilst 22% conceded that redesigning the future operating model of local government (post-water reform) should take short-term precedence.

There was clear tension between the desire to deliver great service and preparing for the future throughout the day.

Navigating shared challenges with clarity

Participants described a common set of challenges affecting the sector. Whilst each challenge was familiar, addressing them at the same time requires councils to prioritise choices about resource allocation and service trade‑offs. Discussions consistently reflected a sector responding to sustained financial constraints, with reform, shared services and consolidation increasingly seen as the likely path to maintaining service delivery and long-term sustainability.

41% of participants identified budget constraints and financial sustainability as the most pressing current challenge, followed by 26% who raised meeting new obligations under a wave of reform. 61% of participants viewed the Government’s proposed ‘Head Start pathway’ as an exciting prospect, but practically hard to pull off in the allocated time.

The discussion focused on how councils respond to pressure. This included:

difficult choices around service provision
renewed attention to cost to serve, and
strengthening organisational capability to support robust decision making.

What does financial sustainability look like?

Councils face unprecedented financial pressure and many share the same concerns of how that will manifest. 36% of participants identified the ongoing management and maintenance of assets as the greatest concern, with 15% indicating that critical infrastructure was nearing end-of-life and the replacement cost of these assets felt unachievable.

Councils continue to manage large and ageing asset bases, often with uneven visibility over asset condition, performance, and risk. Implementing New Zealand’s National Infrastructure Plan and Local Water Done Well (LWDW) requirements, councils must make well-informed infrastructure and investment decisions as a key to improving asset management capability.

Making service decisions more deliberate

As financial constraints continue, attendees discussed service design and prioritisation as practical mechanisms to support stronger decision making.

Some councils shared examples of using service design to better understand demand drivers, clarify service intent and align limited resources to outcomes. Others acknowledged they are earlier in building this capability, often constrained by data quality, legacy systems or fragmented processes.

Participants consistently mentioned that service design is most effective when directly connected to financial discussions, rather than operating as a standalone discipline.

Successful transformation is being shaped by leadership alignment, workforce capability and organisational culture, particularly the ability to prioritise services, build trust and support staff through ongoing change.

Building the foundations for a digital future

As expectations increase around transparency, reporting, and evidence‑based decision‑making, councils are under growing pressure to modernise systems and enable more integrated, digital‑ready ways of working.

Fragmented systems and inconsistent data were identified as key constraints, reinforcing the need to prioritise integration, data quality and unified views of citizens.

AI was one of the most discussed topics of the day, with a pragmatic and grounded tone. 100% of councils are adopting AI in some way.

There is strong momentum around AI, however adoption remains measured and use case-led, with outcomes dependent on data quality, process clarity and governance being in place.

Polling showed:

18% of councils are actively using AI in core services or operations,
35% are piloting AI use cases within defined governance frameworks.

Rather than broad transformation ambitions, discussion focused on specific and problem-led applications.

What enables progress with AI ?

Councils further along in their journeys described several common enablers:

Clearly defined use cases linked to operational needs.
Early investment in staff understanding and confidence.
Governance, risk and cyber considerations established from the outset.

Case study: Auckland Council

Auckland Council is advancing its digital transformation by moving from a traditional project-based approach to a product-led operating model. Instead of one-off initiatives, the organisation is building persistent, cross-functional teams that own services end-to-end, focusing on continuous improvement and long-term value. This shift is helping to address longstanding challenges such as fragmented systems, duplicated data, and inconsistent citizen experiences. Through initiatives such as ‘Ask Auckland Council’, and shared data platforms, the council is also exploring how digital tools and AI can streamline service delivery. However, the experience has highlighted that technology alone is not enough, with data quality and integration remaining key barriers to delivering seamless, citizen-centric services.

Case Study: Palmerston North City Council (PNCC)

PNCC is embedding AI through a culture-led approach rather than a purely technical rollout. The organisation introduced AI through an open pilot programme, inviting staff to participate, learn, and experiment in a controlled environment. By providing foundational training, access to tools, and clear guidance on responsible use, employees were encouraged to explore how AI could support their own work. This approach led to widespread engagement across the organisation, with staff identifying practical use cases and achieving significant time savings in everyday processes. The initiative demonstrates that successful AI adoption is driven by people and culture, with empowerment, education, and experimentation playing a critical role.