Securities (Local Authority Exemption) Amendment Bill — First Reading 
Securities (Local Authority Exemption) Amendment Bill — First Reading 
[Volume:642;Page:11799] 
Securities (Local Authority Exemption) Amendment Bill 
First Reading 
Hon LIANNE DALZIEL (Minister of Commerce) 
: 
 I move  
That the Securities (Local Authority Exemption) Amendment Bill be now read a first time. 
 I intend that this bill be referred to the Commerce Committee at the appropriate time. The bill provides for the inclusion of an exemption for local authorities from section 5 of the Securities Act 1978. The exemption will again allow local authorities to meet reduced disclosure requirements when offering debt securities to the public. Local authorities will have to produce an investment statement with a certificate of compliance signed by two councillors rather than an investment statement and a prospectus signed off by all councillors of the local authority. Regulation 17 of the Securities Regulations provides assurance that the information disclosed in an investment statement is an adequate and accurate account of the specific issue on offer. However full accountability for the funding decision and associated process involved with making an offer to the public rests with the local authority as a whole. A similar disclosure exemption for local authorities was repealed in 1996 with effect from 1998—who was in Government then? I cannot remember—in order to make local authorities subject to the same obligations as companies and other corporate entities. 
This theoretical level playing field did not take into account differences in the respective legal frameworks of the organisations and that had the effect of seeing local authorities withdraw from the public debt securities market. Only one local authority—Auckland City Council—has issued debt securities to the public since that time. That has occurred because the costs associated with preparing a prospectus can be disproportionate to the amount being sought and therefore prohibitive and because the signature and liabilities provisions do not suit the legal framework of a local authority where an elected member is not liable at law for decisions and actions he or she does not support. 
The principle of collective responsibility under which company directors tend to operate simply does not exist within local government. Nor did the theoretical level playing field approach take into account the significant differences in the reporting regimes of local authorities and corporate entities. Consideration of the level of disclosure that local authorities currently operate under with regard to their finances plans and prospects shows that the issuer-related information required in the prospectus is readily available in the public arena. The reality is that the status quo imposes unnecessary compliance costs on local government—I am sure the Opposition will want to remove unnecessary compliance costs on local government—and effectively prevents it from capital raising in a cost-effective manner. 
The broad policy objective of the Securities Act is to promote investor confidence in the capital markets. The information disclosure regime in the Act seeks to achieve that policy objective by ensuring that investors receive from issuers full accurate and timely disclosure of information material to their investment decisions. The disclosure should include information covering the specific securities product being offered the current position and future prospects of the provider and relevant information relating to the industry involved. This allows investors to make an informed decision on the potential risks and returns of their investment choices and to take responsibility for their investment decisions. 
I recognise that the disclosure regime imposes costs on issuers. I want to ensure that these costs are imposed only if they are outweighed by the benefits the disclosure regime provides to investors. The significant disclosure currently required under the Local Government Act means that concurrent compliance with the full disclosure regime of the Securities Act produces duplication of information and added costs. Local authorities through their statutory obligations under the Local Government Act effectively operate in a manner that achieves the policy objectives of the Securities Act as stated above. They are public bodies that cannot be wound up for default and have a discretionary power to support their financial commitments through a rates-as-security provision. An issuing authority has the discretionary power to charge a rate or rates revenue as security for an issue of securities to the public or to allow market forces to determine the risk premium applicable to the particular offer. The availability of local authorities debt securities on the retail market will provide a viable alternative for funding infrastructure assets and for investors to diversify their portfolios—a pretty compelling reason I would think at this moment in time. 
Local authority long-term plans show that local authorities are undertaking some $30.8 billion in capital works—network or community infrastructure—in the 10 years to June 2016 and that due to potential front-loading 50 percent of this amount could be required by 2009. Infrastructure assets which are the primary recipient of local authorities funding are long-term investments and borrowing helps spread the cost over the life of the asset. Financial decisions by local authorities raise important issues of equity including intergenerational equity and affordability. This is particularly the case when they are making funding decisions. This bill will provide a further dimension to those funding decisions. It will reduce compliance costs by easing the process for local authorities to offer securities to the public while expanding and diversifying the investment options available to retail investors. 
Local Government New Zealand welcomed the announcement of the Government’s intention to introduce this bill. Its president Basil Morrison said: “We are pleased that the proposed change will make it easier for councils to raise some funds from the public for major projects and will hopefully take some of the pressure off rates by allowing us to better match our borrowing strategies with the life of our assets.” He went on to say: “Given the size of the capital works programme outlined in councils’ 10-year financial plans the ability to once again issue debt securities will save councils millions of dollars in interest costs.” 
The bill clearly has the support of the local government sector. I am very pleased that it is also supported by a number of parties in this House. I commend the bill to the House. 
SIMON POWER (National—Rangitikei) 
: 
 National supports the Securities (Local Authority Exemption) Amendment Bill at its first reading and looks forward to the submission process at the Commerce Committee. There are some unanswered questions that go with the bill but the Minister Lianne Dalziel has done a thorough job of outlining the provisions in almost a clause by clause way of what would be the purpose and effect of this legislation. 
It is worth recalling that the bill amends the Securities Act 1978 to provide an exemption from the full disclosure requirements of that Act. The Minister is quite right when she says that there was concern around the number of signatures that have to be collected from local councillors and also around councillors’ exemption at law in the event of non-execution of that documentation which provides in the corporate sense an added political hurdle that most businesses looking for the issuing of debt securities do not have to face. This is a very fair point. 
Also I believe that it is worth emphasising the point the Minister made that the reporting that local bodies are required to do at present—particularly through annual planning and report documentation as well as in the long-term council community plan process which includes 10-year projections for financial performance for that territorial authority—does provide quite a strict framework for financial reporting for those particular territorial authorities. 
It was worthwhile listening to the Minister’s comments on those matters. I could not help but note a slight political snipe there at one point when she recalled the fact that a similar disclosure was repealed in 1996 in order to make these types of securities subject to the same obligations as companies and other corporate entities. This brings to bear what is probably the only outstanding issue in relation to the proposed exemption—that is we want to make sure using a corporate governance and financial reporting model for debt issuing as opposed to a territorial authority that whilst we provide a legislative mechanism for convenience we in no way reduce the level of standards that have to be met before the debt security is issued. I think that is probably the one outstanding question National has. 
National wants to reassure itself during the submission process that whilst we create this framework of convenience for local government—and I will come back to why that is so important—we do not in any way suggest that it is the model of governance that determines the reporting requirements and the financial reporting stringency around the issuing of debt securities. I think that is a point that no doubt the committee will— 
Hon Lianne Dalziel 
: It will be good to have the product in the market. 
SIMON POWER 
: I am sure it will I say to the Minister but it is an important point to make because the committee needs to be reassured that we are not creating two standards that come about only because of the nature of the governing body that is making the decision to issue the debt security to the public. 
The example that leapt out—that the Minister outlined in her speech and is contained in the explanatory note—is the issue of political considerations cramming or preventing the execution of documentation relating to the issuing of debt securities when companies operate under a board collective-responsibility model but at law it is not the same for territorial authority councillors and that is a very valid point. 
I think the issue of issuing debt securities for the funding of infrastructure is really the driving point behind this legislation and making available to local bodies the opportunity to fund infrastructure in a way that is outside the current rates-based framework is an important step and one that National supports. In order to achieve long-term assets borrowing is an option because it spreads as the explanatory note says the cost over the life of the asset—it makes some sense. There will be more about that later. 
It is interesting to note too that not only does it make financial sense but the argument about community ownership is an important one as well. Of course we know that if families purchase a home or an asset in a particular community they tend to be woven into that community in a deeper way than they otherwise would have been by way of that ownership. Likewise purchasing debt securities for funding of infrastructure and the like is an important point. 
As I said we will be supporting this bill at first reading. I put on notification as I said earlier that National will need some reassurance around any reductions in standards to make sure that we are not creating a lower standard for local government than for companies. This exemption makes sense. It makes sense from a practical point of view when it comes to execution of documentation. It makes sense because the reporting regimes are also fair and of a high standard for local government outside of the frameworks of the financial reporting legislation. And it makes sense for the funding of infrastructure in the medium to long term. We await further discussion on the bill but at this point the Government can be assured that National will support the first reading of this bill. 
STEVE CHADWICK (Labour—Rotorua) 
: 
 The Securities (Local Authority Exemption) Amendment Bill as submitted today is a welcome relief for the local government sector. It is interesting how members in the Opposition forget what this has done to the ability of local government to raise cash for major infrastructure assets ever since 1996 simply because of the compliance cost. This bill is everything the Opposition argues for about the reduction of compliance costs yet when they brought in this in 1996— 
Simon Power 
: Steve we’re voting for it! 
STEVE CHADWICK 
: I know National is voting for it but in 1996 my golly what an imposition it was on to the local government sector when it could not even start to look at how it was going to raise funds for major infrastructure assets. 
I have attended the local government forum which Ministers attend and where it was said: “Thank goodness for this Government. Ministers are prepared to engage with us as chairs of local government and regional councils. We will share opportunities share some challenges directly at the table and there will also be sharing of information.” The Local Government New Zealand sector raised this issue to Lianne Dalziel as the Minister of Commerce. She took it seriously and took it on board and this bill with its introduction today is the result. 
In the 1990s under National no Ministers bothered to engage as a collective with the local government sector. I was on council at the time. We had one visit about a roading policy and that was the only one in the entire time I was on the district council. This is now a quarterly forum. It raises issues and if they are serious issues that impede the functioning of the local government sector they are taken on board. 
This bill will amend the Securities Act to exempt local authorities from the full disclosure requirements of the Act when issuing debt securities. For that reason it will go to the Commerce Committee. Local government has said as a sector that it has suffered with this disclosure exemption since 1996. It was introduced to try to establish a level playing field with private companies but they are different beasts—they are entirely different beasts. The exemption did not take into account any differences in the legal frameworks between companies and local authorities. They have been very constrained. Disclosure is just too costly. As the Minister said only one local authority since 1996 has picked up the opportunity here and that was Auckland which was able to meet the disclosure requirements. It would have been for a major capital infrastructure asset that they bothered even to meet that threshold. All councillors had to unanimously agree to sign off a prospectus to issue debt and to fund any project. All councillors—when has any local authority ever been able to get all councillors to agree on anything in a unanimous vote? 
Local authorities’ long-term council community plans show that the authorities are undertaking some $30.8 billion investment in the next 10 years on capital works whether it is network or community infrastructure up until June 2016. Due to potential front loading of those investments 50 percent of this amount could be required by 2009. So it is no wonder the local authority sector is really keen for this to happen. 
The Department of Internal Affairs is currently reviewing the recommendations of the rates inquiry that was led by David Shand. It is looking at rates pressures in the local authority sector—and they are definitely evident especially with the level of capital works that local authorities want to undertake. The report recommends that a 50 percent of rates ratio to operating costs is when the level is about right; at the moment it is currently sitting around 56 percent. So this recommendation is something very very welcome to the sector. I am sure the Department of Internal Affairs will be looking at other recommendations too that will help the rates pressure on local authorities. 
In Rotorua we are looking at over $100 million investment in infrastructure assets so that we can reticulate sewage screens to increase the water quality. There is no ability of local authorities to raise that funding without this exemption. The president of Local Government New Zealand Sir Basil Morrison said: “We are pleased that proposed change will make it easier for councils to raise funds from the public for major projects”—they are very diverse all over the country—“and will hopefully take some of the pressure off rates by allowing us to better match our borrowing strategies with the life of our assets.” He then went on to say: “Given the size of the capital works programme outlined in councils ten year financial plans the ability to once again issue debt securities will save councils millions of dollars of interest costs.” 
To end my little speech today I just want to say that this again shows that the Labour-led Government is really showing its commitment to strengthening the way in which councils can operate and serve their communities. This is a Government that listens to the local authority sector and responds to its demands. I commend this bill to the House and I know the Commerce Committee will do a great job with it. 
LINDSAY TISCH (National—Piako) 
: 
 As National’s spokesperson on commerce Simon Power has said we will be supporting this Securities (Local Authority Exemption) Amendment Bill’s first reading and referral to the select committee. 
I guess the broad goal of the bill is to provide investor confidence in the market. It will allow the councils to have the flexibility that they have not had to borrow money to invest in the infrastructural challenges they face. The explanatory note states: “Local authority long-term plans show that local authorities are undertaking some $30.8 billion in capital works … in the 10 years to June 2016 …”. That is a significant development a significant investment which needs to occur within the regions if we are to get the infrastructure right. There are challenges there particularly in roading and water supply. There are other areas like telecommunications but local authorities are not necessarily involved in those particular areas. 
The point that Simon Power made which I think is important is that the select committee will be wanting to see exactly what the structures are and how this will work. This document talks about regulatory impact statements. One of the concerns I have is that this Government does not have a good record of actually complying with its own legislation in terms of regulatory impact statements. Page 5 of the explanatory note under the heading “Adequacy Statement” states that “The Ministry of Economic Development (MED) confirms that the Code of Good Regulatory Practice and the regulatory impact analysis (RIA) requirements including the consultation RIA requirements have been complied with.” and that the Ministry of Economic Development has no difficulty with them. Well the Ministry of Economic Development is in fact a Government agency and I would say that over the years legislation has got through without any regulatory impact statement. A classic example of that was KiwiSaver. No regulatory impact statement accompanied KiwiSaver—absolutely none whatsoever. So although we have a statement here that the Ministry of Economic Development considers the regulatory impact statement and the regulatory impact analysis undertaken to be adequate one of the questions I want to ask at the select committee is about robustness and transparency. Where is the robustness and the transparency that show that compliance costs will actually be controlled by this legislation? I do not have confidence at the moment that this is as straightforward as it may seem. I hope to be proved wrong because I think this bill is a move in the right direction and National is supporting it. 
If people want to buy a home or a business or whatever they will go to the market—usually a bank—to borrow money. People do not wait until they have the money in their pockets before they make those investments. The same applies to local authorities. This bill allows two councillors to sign up to a project rather than the whole council having to sign up to it—we would never get the agreement of a whole council—so that we can see some progress. This is what differentiates local authorities from a company operation. Company directors tend to operate under the principle of collective responsibility but no such obligation exists within local government. So this is certainly a move in the right direction. 
I am particularly concerned about the whole area of compliance. Although the regulatory impact statement says it is adequate and the Ministry of Economic Development is satisfied with that we must remember that the ministry is a Government agency. It is the one that is actually scrutinising Government policy. I am looking for robustness and transparency and I suggest that there needs to be an independent body to do this work. We need a watchdog agency as opposed to a Government agency which will be telling the select committee and this Parliament that everything is kosher and that there will not be regulatory creep as I call it or increased compliance costs associated with this. If there are we need to know that a cost-benefit analysis has been done that shows that the benefits will outweigh any additional costs associated with it. 
As Simon Power indicated—and I am sure other speakers will as well—the reinstatement of the exemption for local authorities will provide them with a reduced disclosure regime due in part of course to those disclosure regimes and requirements that are already in the Local Government Act 2002. They are already met under that Act. This is a move in the right direction but I flag to this House that there will be significant scrutiny as to exactly what the regulatory impact statement and the regulatory impact analysis have to say about compliance costs. 
Hon BRIAN DONNELLY (NZ First) 
: 
 Astute members of the House may have picked up last week on the fact that New Zealand First was just slightly irked by the Minister of Local Government over the public release of the rates inquiry. But I have to inform the House that we have kissed and made up and everything is fine and we will be working constructively into the future. The point I make is that while National was planning to vote for Rodney Hide’s dumb bill—I have to say that—New Zealand First used that situation to be able to single-handedly force the inquiry into local government. There are some serious issues around the revenue raising of local government. We recognise that. But we also recognise that a simplistic bill like Rodney Hide’s bill was not going to resolve those issues. We held out in fact for a high-level and independent inquiry such as we got even though we came under an enormous amount of pressure largely from our own party members. I have to give great credit to the New Zealand First caucus for steadfastly showing such resolution and sticking to its guns and finally getting this local government report. 
I have to say that the report which is commonly referred to as the Shand report will be seen as a watershed. It will stand out as the equivalent of the Royal Commission on Genetic Modification and it is against the suggestions contained in the report that decisions will be made I believe over the next two decades or more. 
I take the opportunity—because this bill and the report do dovetail together—to congratulate the chair David Shand and Christine Cheyne and Graeme Horsley on the quality of the report and the depth of their analysis. The panel has certainly served New Zealand very well and this will become increasingly obvious as time goes on— 
Hone Harawira 
: Increasingly obvious. 
Hon BRIAN DONNELLY 
: —yes it will—and as people suddenly realise. First of all they have to actually read the report. Once they have read the report and digested it they will see the wisdom that underpins it. 
One of the key recommendations made in the report is that in order to spread cost over generations councils should make greater use of borrowing for long-term capital projects—the very point that Simon Power was making. I would like to read from the relevant sections. The report states on page 156: “The panel considers that there are very good reasons for local authorities to make greater use of debt to finance long-life investments. Doing so may advance the date at which the infrastructure can be provided and spreads the capital cost more equitably across the generations that benefit from that service. Moreover central and local authorities are generally low-risk debtors so they enjoy low interest rates in debt markets.” 
Recommendation No. 19 specifically states that local government should look favourably at making more use of debt to finance long-term assets and that this should include the issuance of bonds including infrastructure bonds on the capital market not just shorter-term borrowing from commercial banks. This is where the two things dovetail together. Because as the report points out under a 1998 amendment—it was a 1996 amendment but it came into force in 1998—to the Securities Act 1998 local authorities are no longer exempt from obligations on bond issuers including the publication of a prospectus that all elected members must sign. This amendment made the issuing of bonds more costly and politically difficult for local authorities. One councillor could therefore prevent borrowing on the market regardless of the majority view. However the Government has recently announced that it will seek to amend the Act to remove the requirement for a prospectus for local authorities. So one can say this is the first legislation that has partially flowed from that particular I think extremely important report. 
I just want to talk about our own local district council. During the present term one councillor there has taken a position of opposition to literally everything that the council has proposed. He has placed himself as a matter of principle in an absolutely adversarial position in relation to the majority of the council members and his stance is not dictated by the merits of the case but simply by his political position. Herein lies the problem we have at the moment which this bill we believe will overcome. As has been stated in the report one councillor can actually hold up a decision by the council to fund capital projects through debt and through taking on debt—the very thing the report recommends councils should be making greater use of. 
If we think about it councils are created through a democratic process involving the whole of the adult population within their areas and that whole adult population has a multiplicity of different agendas that they are running and that they are voting on whereas a company and its shareholders have the common purpose of maximising profit. Therefore even if the vast majority of the population actually votes for councillors who support the raising of debt for capital projects it is easy in the democratic process for voters in one particular area to elect a councillor who has proposed not to do so and they can hold the whole process up. In other words the present situation leads to an undemocratic process. 
The rule that requires all council members to sign off on a prospectus when issuing debt securities to the public puts all of the power into any individual member’s hands. We do not believe that that is the best situation. In fact it runs contrary to the very suggestions that are coming from the advisers to the Government and also from completely independent and autonomous members of the inquiry team—and I can assure members that this went through a totally autonomous process. 
Therefore New Zealand First will be supporting the bill. We think it is a sensible bill. I think it rectifies some problems that have been observed. It certainly will encourage councils to take on board recommendation 19 of the Local Government Rates Inquiry and we think that it is going in the right direction. In fact we think it is an absolutely critical step to take so New Zealand First will be supporting this bill. 
METIRIA TUREI (Green) 
: 
 I want to take just a short call on the Securities (Local Authority Exemption) Amendment Bill in order to advise the House that the Greens will be supporting the legislation. It is a fairly small bill in the sense of not being particularly controversial but it will be very helpful for councils to be able to have a greater capacity to use this mechanism for getting funding presumably for their major capital works. 
This issue was raised in the rates inquiry as Mr Donnelly has discussed already so it makes sense to have this legislation as a tool. The Greens have been concerned though that by reducing the disclosure provisions for councils there will be ways they can use this process to subvert some of the democratic processes that are inherent in the Local Government Act. 
There is an element of protection in requiring councils to disclose as much information as everybody else is required to both for those who are looking to invest and for the ratepayers who are at the end of the process responsible for the health of that debt if you like. We asked for more information about the issue. We were told that because all of that information is already required under the Local Government Act—because councils have to provide it in their long-term council community plans and because the process for making those decisions is provided in the documents—there is that kind of disclosure anyway and that this process is just repeating it at quite a significant cost especially for smaller councils. 
That argument makes a lot of sense. We understand the argument but there is still the concern that was raised by the Office of the Auditor-General in its review of those long-term plans which came out a few months ago. The Office of the Auditor-General recognised that there were some real problems with some of those plans that they were often extremely large documents and that it was very difficult to tell what was important. Trying to find useful information in those documents could therefore be very very difficult. 
 That raises the concern that if the councils do not have to engage in the same disclosure practices for making decisions around issuing securities because they can rely on these large plans to include that information then investors and ratepayers who are looking for that information could find it extremely difficult to locate. The information might be there but it could be buried in 10000 pages. That is not disclosure. That is not enabling the information to be made available. 
We would like to see the investment statement issued providing more detail so that although councils give less disclosure than other companies they give a slightly higher level than is currently required in the bill. We would like councils to have to identify where the information is in the other documents they produce so that people can find it. It could be as simple as giving page numbers. How councils do it is up to them. It is also about how we structure those provisions in the bill. 
If we are prepared to rely just on these unwieldy huge documents with huge amounts of detail which are comparatively unstructured and difficult for lay people to find information in then there simply will not be disclosure and protection for either the investors or ratepayers who have to foot the bill at the end. We would like to see more information being required in the investment statements and to have them expanded slightly so that there is a cross-reference to information in other documents. 
We will have to work through that approach in the select committee as to how it might work. There may be other ideas from councils or others about how we could do it. But this approach would be a wise way of making sure that we meet the objectives and that councils would be able to engage in the process practically without costing them huge amounts of money in preparing their prospectuses and information. It would be a wise way of making sure that the plans they have to provide under the Local Government Act are already coherent and sound and that they contain all the necessary information. It will also make sure that investors can find the information they need in order to be able to make sensible decisions for themselves and that ratepayers can follow the decision-making process that has led from the consultation and engagement involved in making that decision through to using this tool. They can follow the process through to the long-term council community plans and other documents and then finally through to the investment statements. 
With that approach there is the maximum amount of transparency with a reasonable amount of control over the cost for councils. It could be a very sensible way of engaging with this method giving councils the best possible flexibility and giving investors and ratepayers the greatest amount of protection. Thank you. 
Dr PITA SHARPLES (Co-Leader—Maori Party) 
: 
 Tena koe Madam Assistant Speaker. This Securities (Local Authority Exemption) Amendment Bill seeks to restore an exemption for local authorities to the current Securities Act disclosure regime. In effect this action backtracks 10 years to 1998 when local authorities were withdrawn from the public debt securities market. But it goes even further to 20 years ago in 1978 when the original Securities Act granted local authorities a disclosure exemption in the first place. 
The rules around the issuing of securities were quite clear. Those that would be exempt included the Crown the National Provident Fund board the Reserve Bank of New Zealand and local authorities. But I want to suggest today that the real context for the bill goes back even further again for one of the primary purposes driving the bill has been the concern from local government that the onerous disclosure regime prevents them from being able to raise funds to fund capital works. Currently apart from the Auckland City Council councils are limited to raising funds by borrowing from financial institutions and also of course through hikes in rates. So there are two particular issues that I want to canvass in this first reading: the concept of capital works and that of local body rates. 
We are pleased that this bill proposes that councils not be burdened further than they already are by the onerous reporting requirements set out in the Local Government Act 2002 should they agree to issue debt securities. The neo-liberal drive towards submitting all transactions regardless of the context to business rules and compliance requirements has failed miserably to take into account the significant differences in the reporting regimes and legal frameworks of local authorities and corporate entities. But we in the Maori Party also suggest that particular communities have borne the brunt of the collapse of investment and resourcing options to fund capital works needs. 
This bill is being heralded as making it easier for an estimated $30 billion to be spent on infrastructure development—bridges footpaths sealing and resealing of roads street lights sewerage and stormwater services and all of the things that we understand as being part of capital spending. What we know is that the asset-rich infrastructure organisations such as local bodies require large amounts of annual capital expenditure to keep their assets operational. They depend on virtual cash cows to renew ageing assets and to acquire new assets in order to provide the services required by the changing needs of the community. In some areas it seems that they require virtually herds of cash cows to get them through the crisis conditions reflected in their capital works programme. 
For some areas it will be natural disasters that create the crisis. I ask members to think of the devastating rainfall and flooding that ravaged the coastal Bay of Plenty in May 2005 as a case in point. For others it may be the impact of economic decisions made in one sector that leaves behind a trail of destruction in another. One has only to think of the impact on roading by heavy commercial vehicles—particularly at high intensities as with logging trucks—to see evidence of capital works projects in the making all over the country. The wear and tear leading to much earlier road failure than otherwise expected comes about from decisions to shunt logging trucks into areas where roads have never been constructed for heavy traffic. 
The expectations of increased maintenance costs and the probability of major reconstruction or repair costs all bump up the road expenditure significantly. I have only to think of my own tribal rohe of Ngati Kahungunu where I have witnessed the impact of logging trucks weighing up to 40 tonnes and being over 22 metres long speeding up the Napier to Gisborne highway—and it is already a hazardous stretch of road. So although the Minister of Commerce Lianne Dalziel is quick to promote the possibility that this law change will help to achieve the Government’s economic transformation agenda we must not underestimate the decay and devastation that has brought about the demand for capital works in the first place and simply ask ourselves this question: how do we support the communities that most stand to be affected by these issues?  
It is here of course that we think back to the announcements made a fortnight ago by the independent panel conducting the Local Government Rates Inquiry. It does not take a rocket politician to know that the undue impact of and demand for capital expenditure hits hardest in the more vulnerable communities—locations populated by tangata whenua. The rates inquiry concluded that not only were the ratings valuation of Maori land inappropriate and “significantly overstated” but that there were far too many examples of “landlocked unproductive Maori land being valued at inexplicably high figures”.  
So we welcome the opportunity provided by this bill to be able to make much-needed decisions about the funding of capital works programmes without causing the massive rates hikes our people have experienced. We absolutely agree with the concept that infrastructure assets are long-term investments and that borrowing helps to spread the cost over the life of the asset. But we are also acutely aware of the very complex and strange relationship that often exists between Maori landowners and local government—a relationship that has suffered from deteriorating capital works and overinflated overrating of Maori land.  
We supported the recommendation from the independent panel to address the relationship between the Treaty of Waitangi and rating law. We believe it is a recommendation that could well be relevant to the legislative process introduced in the context of the Securities Act disclosure regime. We believe that decisions about infrastructure development need to be made in conjunction with mana whenua—literally the people who hold authority with the land. The Treaty relationship requires councils to have both adequate Maori representation and to undertake specific consultation with Maori. This is a huge challenge for central and local government as a recent research project describing Maori engagement with local government has confirmed. The project was entitled  
He wharemoa te rakau ka mahue 
— 
A hollow tree is left behind 
. The research concluded that participants felt there was little opportunity for Maori representation or consideration of Maori issues in local government and that where there was it was often tokenistic.  
Researchers Christine Cheyne and Veronica Tawhai suggest that efforts for structural change and greater power sharing in local government are considered by Maori as both a Treaty of Waitangi issue and an issue of democracy. They left three key messages for local government: improving the information flow—knowledge is power; enhancing Maori participation—diversity is the key; and increasing accountability to Maori—integrity is everything.  
The Maori Party believes these messages are significant challenges which councils must consider as they pursue their search of income for infrastructure development and they are messages that we will be looking to the select committee process for to learn how moves to ensure affordable local and regional development reflect the commitment to meaningful compliance with the Treaty of Waitangi. Thank you. 
Bill read a first time. 
Bill referred to the Commerce Committee.