A set of significant external system reforms comprising legislative, regulatory, and policy changes is affecting the operating environment in which councils plan, govern, fund, and deliver services.
Simplifying local government
The Government has asked councils to create unitary authorities comprising groups of current regional and local councils, via the Head Start pathway. Alongside implementing various other changes, the new entities will need to consider how their functions, responsibilities, and operating models will be shaped, in time for the next local government elections in 2028.
Local Water Done Well (LWDW)
Local Water Done Well represents a major structural shift for councils through the transition of water services to council-owned water services organisations. Beyond structural separation, councils must manage the effects of complex transitions, including shared services arrangements, workforce and role redesign, stranded cost management, and new governance and accountability interfaces. The emergence of a two‑entity operating environment is also reshaping councils’ internal systems, capability requirements, and long‑term financial and asset planning assumptions.
Resource Management Act (RMA)
The replacement of the RMA will drive significant change for local government, across regulatory services, land‑use planning and consenting, infrastructure sequencing, and resource management engineering activities. Councils will need to reconsider how they structure their planning and regulatory functions, how to connect infrastructure and investment decision‑making, and how to sustain capability through ongoing system change.
Local Government (System Improvements) Amendment Bill
The Government introduced the Local Government (System Improvements) Amendment Bill to refocus councils on the delivery of core services. Key changes focus on finances and rates, including financial performance and reporting, increased transparency, and regulatory relief. Councils need to assess how they prioritise, their financial discipline, and their decision‑making frameworks to manage affordability pressures and maintain public trust.
Wider operating and funding complexities are compounding the impact of these regulatory reforms on councils.
Funding and financial sustainability
Local authorities are facing unprecedented financial pressure. A combination of factors including lack of funding tools, deferred maintenance liabilities, cost increases and population growth has created something of a perfect storm for councils.
The effect is that significant rates rises and material increases in borrowing have put pressure on local authority balance sheets. Some recent reforms, such as the introduction of infrastructure levies, pending amendments to the Infrastructure Funding and Financing Act, and water have the potential to open up new revenue structures and borrowing capacity. However, many of the wider constraints still bite. Affordability and the potential for rates capping will limit the ability for councils to recover costs through rates rises.
The potential solutions are not easy, with a number of councils facing difficult decisions in their long-term planning. Some solutions involve deferral of capital expenditure, cost reductions, and unavoidable rate and fee increases. Councils may also consider new funding sources including asset sales and/or greater levels of collaboration with other councils.
Technology and data constraints
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. The sector recognises the need to upgrade legacy systems and maintain up-to-date technology (including AI) that is ‘fit for purpose’. But with tight fiscal constraints and many other priorities to solve, IT modernisation is consistently deprioritised. With so many shared requirements, councils should consider a shared services model and combining resources to upgrade legacy systems.
Asset management maturity
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 requirements under LWDW, councils must make well-informed infrastructure and investment decisions as a key to improving asset management capability.
Capability, capacity, and workforce pressures
Sustained reform, combined with tight labour markets and increasing complexity of council roles, is placing strain on organisational capability and capacity. Councils must balance day‑to‑day service delivery with the need to embed new operating models, and must carefully consider their investment in leadership and specialist capability.
Governance, assurance, and decision-making discipline
Strong governance and assurance systems are key to enabling councils to respond effectively to their new operating environments. Councils will need to adapt to new levels of governance sophistication under initiatives such as LWDW.
