Regional Governance Framework
Consultation January 2016
The LGA has been working to develop options to amend the Local Government Act to enable the creation of flexible structures for regional collaboration between councils.
Investigations are underway through four regional pilot projects and LGA funded expert advisors on a number of matters including:
o existing forms of regional collaboration including how 'regions' are defined;
o legislative and cultural barriers to regional collaboration;
o options for new regional structures; and
o opportunities for non-traditional service delivery.
The LGA Secretariat is working to integrate the outcomes and learnings of previous work and practical on the ground examples of successful collaboration. Work is focussed on the four areas listed below.
1 Options for Regional Governance Models
The LGA commissioned a report, ‘Governance models for Regional Collaboration and Partnerships Projects’ which summarises previous research on regional collaboration. It has been noted by the LGA Board and provided to the State Government and Regional LGAs.
In summary:
o There are a number of models that may provide, fully or in part, a solution to achieving flexible regional collaboration and partnerships.
o These include the potential to adapt or replicate provisions for regional boards in the Planning, Development & Infrastructure Bill 2015 currently before Parliament, in the Local Government Act.
o Different models have merit in particular circumstances, and a combination may be appropriate to deliver on a broad 'regionalisation' agenda.
o There are vital non-legislative elements to a successful regional collaboration model, requiring a shift in culture and/or practice at the council level.
2 Review of the Regional Subsidiary Provisions in the LG Act
Two reviews of the Local Government Act provisions relating to regionalisation were commissioned as part of the Local Excellence Expert Panel's work, which set out the benefits and limitations of the current provisions and address many of the questions about establishing more flexible structures for regional collaboration.
3 Engagement with the State Government
State Government agencies have expressed a strong interest in facilitating stronger state/local government collaboration at the regional level and engagement is continuing with them.
4 Regional Governance Framework
Based on work to date the LGA has prepared a Regional Governance Framework that identifies a range of considerations that may be required to progress more flexible regional structures.
Subject to agreement with the State on resourcing, it is anticipated that provisions to enable flexible regional structures will form part of a Local Government Act Amendment Bill in 2016.
The framework is attached for consultation purposes. Feedback is being sought until Friday 4 March 2016.
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Regional Governance Framework
There is a long history of regional collaboration in local government in South Australia, with many existing formal and informal structures in place for councils to work collaboratively and provide shared services.
Formal bodies established under the Local Government Act’s regional subsidiary provisions currently undertake a broad range of functions and services. Examples include representation and advocacy, waste collection and disposal, collective purchasing and regulatory functions.
Councils can also achieve collaboration without the need for a formal governance structure. There are numerous examples of Councils working together on a temporary or ongoing basis to plan for and progress important issues such as stormwater management, public health, land use planning, economic development and climate change
As identified in the Local Excellence Expert Panel’s ‘Council of the Future’ report, local government in South Australia faces a number of demographic, financial, political and environmental challenges in the years ahead. These challenges will inevitably place additional pressure on councils to expand their service offering and become more innovative and contemporary in their business practices.
The Panel considered that strengthening regional collaboration and partnerships is an important and necessary response to present and future challenges.
The local government sector has been giving serious consideration to the Panel’s recommendations and the LGA has provided funding and technical support to four pilot projects that are exploring opportunities for regional collaboration partnerships. These investigations have confirmed the appetite and potential for regional structures to undertake a broad range of functions.
It is evident that a ‘one size fits all’ solution to regional governance will not satisfy the diverse objectives of different councils and regions. Rather, local government requires a broader suite of flexible governance options that can be tailored to the needs of different regions, councils and communities.
This draft Regional Governance Framework proposes some key objectives to underpin more flexible and comprehensive regional collaboration arrangements and outlines the range of further policy and legislative considerations that are required if these objectives were to be met. . While this framework focusses on the regional subsidiary provisions under the Local Government Act as a primary tool for enabling regional collaboration, this is not to the exclusion of other models being pursued.
In several regards the draft framework proposes a substantial departure from the existing structure and operation of regional models. Consultation is required with Councils, state government and other stakeholders to test these proposals and ensure that policy, legal and practical considerations are fully explored.
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Regionalisation Objective / Discussion / Legislative and Practical Considerations for responseCommitment & Purpose / Research on regional collaboration and shared services models highlight that the success of any regional governance model is dependent on a number of factors, including:
· commitment and passion to a regional approach;
· political and community will to pursue a regional approach;
· equity across councils;
· the need for a robust business case including a clear value proposition;
· selecting the right governance model;
· alignment of culture and common purpose between Councils; and
· avoiding excessive start-up costs that result in a negative value proposition over the long term.
To ensure that the right governance model is selected at the outset, it is critical that there is a strong degree of upfront engagement between the parties to ensure there is agreement on a common purpose and a clear commitment to a regional approach, including clarity around the role of individual councils in decision making / Legislative change is not necessarily required to guide matters of culture and practice.
However, would it be appropriate for the Local Government Act to outline the objects and principles of regional collaboration and partnerships?
The LGA and Office for Local Government should continue to work together to provide advice and tools to councils to strengthen regional collaboration and partnerships.
What types of advice and tools would be of benefit to councils seeking to strengthen their involvement in regional collaboration?
Regionalisation Objective / Discussion / Legislative and Practical Considerations for response
Flexibility / Councils and regions across South Australia have identified a broad range of functions that may be more effectively and efficiently undertaken through regional collaboration and partnerships.
The types of functions that are considered by different councils and regions vary depending on range of factors including size, location, environment, demographics, workforce, etc.
Given the diversity of needs between councils and regions, flexibility must be a central objective of a regional governance framework.
There are a range of governance models currently available, which all have merit in particular circumstances. Local government does not favour the consolidation of existing options into a single ‘one size fits all’ framework.
To promote flexibility, it is important to maintain and enhance a suite of options and provide greater clarity around the particular circumstances that are best suited to each governance model. / Whilst there are a range of governance options currently available, the most widely used formal governance model is the regional subsidiary provided for in the Local Government Act.
These bodies enjoy a reasonable level of flexibility because they are primarily governed by a charter rather than legislation, enabling (in theory) a more nimble response to changes in their structure.
However, research and previous consultation suggests that regional subsidiaries are subject to several limitations which impact on the level of flexibility provided. Some of the key issues are summarised below:
· The regional subsidiary model in South Australia offers a ‘one size fits all’ approach and does not distinguish between representative and advocacy entities and truly commercial entities, which operate in competition with the private sector.
· Section 43(2) of the Act provides that a regional subsidiary which is established to perform a regulatory activity on behalf of its constituent councils cannot also perform a significant and related service activity.
· While there is a clear policy intent to this, it is considered by some to be a statutory hindrance in establishing a single vehicle to undertake both traditional service offerings of local government and at the same time performing a regulatory function.
· To clarify the extent of this issue, clear examples are required from the local government sector of any activities that have been (or would be) hindered by Section 43(2) of the Local Government Act.
Regionalisation Objective / Discussion / Legislative and Practical Considerations for response
Autonomy / To achieve a genuine regional approach to planning and service delivery, it may be appropriate that a regional body operate autonomously and should be able to make decisions that are binding on constituent councils.
This would be an appropriate measure to address concerns that the broader interests of the region often make way for local interests, potentially limiting the effectiveness and purpose of the regional body.
Greater autonomy would also lead to more certainty about long-term resourcing requirements of a regional body. / The principle of autonomy would challenge the current establishment of regional subsidiaries.
Despite having operational autonomy, currently the constituent councils are ultimately responsible for the liabilities of the regional subsidiary and are able to direct the regional subsidiary.
As a challenging concept, the views of the local government sector are being sought about whether regional bodies should be able to be created that can operate with more autonomy and make decisions that bind constituent councils.
If the local government sector more broadly supports the principle of autonomy, legislative change would be required.
The level of autonomy provided to a regional body may be linked to its functions.
Examples from councils are required about the type of functions and decision making they would confer upon a regional body.
Regionalisation Objective / Discussion / Legislative and Practical Considerations for response
Commercialisation and Profitability / Councils are increasingly being required, through community expectations and changes in state legislation, to take on more responsibilities and deliver a broader range of services.
To support this expanding role and ensure long term financial sustainability, it has become necessary for councils to consider more commercial activity and innovative businesses practices.
Subject to more rigorous feasibility studies, the long term potential for a regional body to provide services to constituent councils, other public sector bodies and the private sector has been recognised.
Therefore, a regional governance framework must incorporate the principles of commercialisation and profitability.
To provide a positive value proposition, there should be capacity for a regional body to retain profits for the purposes it was established for and return a dividend to the member councils. / The commercial competitiveness of regional subsidiaries is perceived to be constrained by the legal obligations imposed upon them and the level of prescription provided about how they must operate.
A review of relevant Local Government Act provisions must consider how appropriate levels of transparency and accountability can be maintained, without unfairly hindering the ability to provide a competitive service.
The current regional subsidiary framework is unclear as to the circumstances in which a subsidiary can act outside its defined area, possibly limiting the provision of services to third parties (public or private) that are not a constituent council.
There is currently a legislative test that must be applied to determine whether the acting outside of the area of constituent councils is necessary or expedient to the performance of its functions.
Prior to progressing any particular service model that provides services to third parties on a commercial basis, consideration must be given the level of insurance cover that is appropriate for the nature of the services provided.
Consideration must also be given to any requirements to comply with competitive neutrality obligations when a ‘significant business activity’ is being contemplated.
Further investigations are required about the feasibility of establishing an incorporated association, joint venture, trust or similar body to undertake commercial functions.
Consideration should be given to the opportunities and challenges that would be created by following the Commonwealth’s Government Business Enterprise model.
Further investigation is also required about the policy and practical issues that would arise from removing the restrictions for Councils or subsidiaries to participate in the formation of a company.
Regionalisation Objective / Discussion / Legislative and Practical Considerations for response
Efficiency and Continuous Improvement / A central principle of establishing a regional body to provide services and undertake regulatory functions is the potential for more efficient service delivery.
The ACELG report ‘Consolidation in Local Government - A fresh look’ concluded that as a general rule benefits of some sort do accrue when Councils adopt mechanisms to collaborate or consolidate with other local authorities. However,
disbenefits can arise when Councils and State Governments do not adequately examine all of the options available to them before determining the most appropriate course of action.
Where there has been a robust business case developed which demonstrates financial and/or strategic capacity benefits, councils should be considering a regional approach. / There is no legislative requirement for any council to contemplate entering into a regional subsidiary or other similar body for any purpose.
While the imposition of a mandatory model is not supported, there is some suggestion that councils should be required to consider and assess the option of regional collaboration and shared services as part of their long term planning for service efficiency and financial sustainability.
Previous consultation suggests that the effective operation of a board of a regional subsidiary is impeded by the unnecessary imposition of reporting and procedural requirements within the charter. As an example, a charter will often unnecessarily follow Part 2 of the Meeting Regulations, which heavily prescribe and restrict the activities of the board.
Each charter should be developed individually based on the purpose and agreed operation of the regional body, and should not follow a formulaic approach. As this is an issue of practice, legislative amendment is not necessarily required.
Regionalisation Objective / Discussion / Legislative and Practical Considerations for response
Professionalisation / The membership of regional governing bodies should reflect the purpose and functions to be undertaken.
It is most likely that different membership structures are needed for representation/advocacy purposes and those regional bodies that have a commercial focus.
In principle, the operation of commercial or service based regional bodies is likely to be strengthened by the inclusion of independent skills-based members. / The existing regional subsidiary provisions provide for external and independent members to be appointed to a regional subsidiary board of management.
However, practice suggests a reluctance to appoint skills- based boards in favour of representatives from constituent councils.
This creates a perceived or actual conflict of interest where the best interests of the subsidiary are seen as secondary to the interests of individual councils, which are both members and customers of the subsidiary.
While this is a matter of practice, it may be appropriate for legislation to require independent skills-based members to be included on the board or governing body of a regional structure that undertakes commercial or highly technical functions.
Regionalisation Objective / Discussion / Legislative and Practical Considerations for response
Non-Traditional Service Delivery / Both the Local Excellence Expert Panel and Expert Panel on Planning Reform independently identified that regional collaboration and partnerships provide a mechanism for state and local government to work together more closely in planning and service delivery.
Regionalisation pilot projects have identified that, subject to adequate resources being provided by other spheres of government, that there may be some services and functions that are currently provided or funded by state or federal government that would be more appropriately provided by local government at a regional level.
Examples include, but are not limited to, strategic planning, zoning, economic development and certain NRM, EPA and Native vegetation roles.
The ability to collaborate with state government agencies and other third parties is limited through existing regional subsidiary provisions. / A regional subsidiary cannot undertake an activity or provide a service that councils would not have statutory power to themselves undertake or provide. This provides a barrier to non-traditional service delivery at a regional level.
The Planning, Development and Infrastructure Bill 2015 includes provisions that would allow councils to enter into a 10 year planning agreement with the Minister for Planning to undertake strategic and regulatory planning functions. These agreements may also be extended to include another Minister to enable functions or powers under another Act to be delegated (where applicable).
Should similar provisions that are proposed within the Planning, Development and Infrastructure Bill to enable state and local government to cooperate regionally to plan for and provide services under any Act of Parliament (as agreed), be included in the Local Government Act?.
Further information is required from Councils about the specific activities that they are contemplating as consequential amendments to other Acts may be required to allow applicable services to be conferred or delegated to a regional body.
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