It’s the big question that will have a huge effect on the structure of transport agencies throughout Auckland in the future – should the future Auckland Transport Agency be an “arms-length” council-controlled-organisation (CCO) or should it simply be part of the council? I haven’t formed a position on the matter yet, although originally I was a fan of the CCO idea. To be honest, I really don’t know which option is best – I’ve heard pretty good argments on both sides of the debate and I think it’s a debate that we need to have more of.

A couple of articles in today’s Herald delve a bit deeper into the issue. Firstly, a relatively short one in the main section:

Super City agencies upset leaders
4:00AM Saturday Sep 26, 2009
By Geoff Cumming

Auckland civic leaders are rebelling against plans to have core Super City functions, including transport, run by non-elected agencies.

They say the new-look city council could be straitjacketed in attempts to beat traffic congestion and other big-ticket items.

Auckland City mayor John Banks has accused the Government of micromanaging the council’s creation, and regional council leader Mike Lee says it risks creating powerful bureaucracies which may not act cohesively.

“In effect the Auckland council will not be as super as has been painted, and it won’t have the control over events that Auckland has been led to expect,” says Mr Lee.

Manukau mayor Len Brown, rival to Mr Banks for the Super City mayoralty, says plans to put transport in the hands of a non-elected board go too far.

“They’ve powered up the mayor’s role, they’ve put us all together on the basis that we need to be united on infrastructural delivery, and then basically de-powered the council to deliver its vision,” says Mr Brown.

“I just worry whether this is again Wellington dictating to us through the back door.”

The row is over the establishment of council-controlled organisations – agencies run by appointed boards of directors rather than under direct control of elected councillors.

The Government has confirmed plans to have transport and water services run at arms length by such boards, while agencies are being considered for services ranging from economic and waterfront development to social services and arts and entertainment.

The transport agency of six to eight members will be appointed by the council but will have no more than two elected councillors. An additional Government appointee will sit on the board in an advisory role, but without voting powers.

The structural arrangements are to be included in a third piece of legislation to form the Super City, due to reach Parliament in November.

Arms-length agencies were always expected for commercially driven services such as water and wastewater and the port, but control of transport is fiercely opposed.

“If people are looking for one thing it is the delivery of a vision in transportation,” says Mr Brown.

“My preference is not to be in a situation where I’m constantly in a head-to-head discussion with independent directors on it.”

Local Government Minister Rodney Hide says agencies will be required to follow the council’s strategic and funding policies.

There’s a much longer article (well, effectively two articles) on the matter in the Review section – which I won’t fully quote but link to here. I have to say that reading those articles does make me suspicious of the CCO option, although I’m still not fully convinced either way.

I will write a bit of a more detailed post on the matter in the next few days, but for now I’m quite keen to get some feedback, particularly from those who might know a bit more about how well (or otherwise) the current ARTA/ARC split has worked. From my perspective it has worked relatively well, but then I don’t really have much knowledge on the matter.

Share this


  1. I want the best options based on the facts combined with accountability… I think this is how you’ll get it… A body that is independent but accountable to people who want results for their re-election…

    I’m always a little suspicious when I hear politicans moaning about losing power…

  2. “Mike Lee says it risks creating powerful bureaucracies which may not act cohesively”.

    “They’ve powered up the mayor’s role, they’ve put us all together on the basis that we need to be united on infrastructural delivery, and then basically de-powered the council to deliver its vision,” says Mr Brown.

    “I just worry whether this is again Wellington dictating to us through the back door.”

    Both statements are potentialy correct

    However simply put – holistically the Govt does not believe that Auckland can deliver an effective transport policy that will add real regional and national value.
    The significant tax payer investment stays central….

  3. The council won’t be instituted for twelve months and already you are seeing the signs of a Wellington-Auckland power struggle. Not a good sign for the future.

  4. Do you get the feeling that Wellington is just starting to realise the super-powerful agency they have created and are pretty freaked out by the power it might have? We can look forward to a lot more of these battles… there’s a reason Wellington has avoided creating an Auckland super city in the past.

  5. I think our current government liked the idea because they thought they were likely to get a Citrat mayor (Specifically Banks) which would mean they would have someone who would pretty much go along with whatever they wanted for Auckland.

  6. It’s been an interesting process to watch the whole super-city issue develop. I don’t think the government quite realise the hornets nest that they stirred up when hammering out their response to the Royal Commission’s report so quickly. Since then they’ve back-tracked on a heck of a lot of matters, they really really don’t know what they’re doing about areas like Rodney and Franklin and just seem to be running around like headless chicken on the whole matter.

    Bringing it back to transport, from memory the Royal Commission wanted the “Regional Transport Agency” (as they called it) to operate similar to how ARTA does currently, but have much more of a say when it comes to state highways and railway lines. It was also proposed that the local boards would be in charge of local roads – freeing up the RTA to focus on public transport, arterial routes, railways and motorways. Now I don’t really have a problem with the transport agency also managing local roads (the fewer agencies involved the better remember), although I find it a lost opportunity that they won’t have much of a say in NZTA/KiwiRail matters.

    In terms of the main issue – CCO vs council department – perhaps I’m leaning towards council department because I can’t imagine the government getting something right and the ARC getting something wrong when it comes to transport.

  7. We should push really hard in our submissions on the 3rd bill to have ALL transport funding for ALL modes based on their planning and decisions, a tough sell I know but hey National likes bulk funding…

  8. Yeah there are a couple of big issues to submit on in the next few months. This bill and the Regional Land Transport Strategy (when it is finally notified).

  9. The more arms length the better. Although I’d put roads in a commercial oriented company and public transport in two CCOs (purchaser and infrastructure provider). The company would be like that envisaged in Better Transport Better Roads, and public transport purchasing would be oriented towards improving mobility, dealing with the absence of pricing through second best subsidies of public transport.

    Politicians have a tendency towards embracing grand projects and ignoring operations and small scale improvements that can make a big difference. The worst examples of urban transport management are in the US, which has swung from road building to over expensive mass transit schemes whilst all the time grossly underinvesting and poorly managing the bus services. The result is badly maintained roads, with more than 1 example of bridges collapsing, while the likes of LA gets an expensive underused metro to serve the downtown (where 1% of people work) and the buses are ignored because the main users are black and latino, and they’ll always vote Democrat anyway.

    However, by no means should the Auckland transport CCO have any decision making powers over Kiwirail or the state highways, they are too important to leave to local government. When you recognise one reason the Crown bought the Auckland rail network (instead of allowing ARTNL to do so) was to protect freight access to the Port, and that Auckland City’s attempts at motorway building include the el cheapo disaster that is the south eastern arterial, it is clear that until Auckland local government can sort out its own networks, it can’t be trusted to manage the centrally government owned ones.

  10. Liberty, I have no problem with NZTA and KiwiRail continuing to own and manage the state highway and rail system. However, what I think Auckland needs is one funding/policy/planning agency when it comes to transport. Auckland also needs on pool of funds.

    Interestingly, I was reading through the Hansard debates on the Local Government (Auckland) Amendment Act 2004 today, and came across Maurice Williamson deriding the act for not creating the very same model that I have outlined above (ie. one single agency for transport). Maybe he wouldn’t have made such a bad transport minister after all…

  11. Council Controlled Organisations (CCOs) are the local government version of State Owned Enterprises (SOEs); they are both public services placed into a company structure.

    As companies, CCOs and SOEs have ‘independent’ Boards of Directors appointed by their (100%) shareholders – the council or government respectively. Corporate law prevails, so once appointed, the CCO Boards are free to implement Council plans as they see fit, and the CCO chief executive answers to the Board, not councillors. Theoretically, a council can sack CCO Directors (or the whole Board) if they feel a CCO Director is radically ignoring council policy & plans, but this is very rare, as it’s a vast, expensive exercise to make a watertight case for Director dismissal.

    So, what are the pros and cons of CCOs? Here are the key CCO issues, with reasons for and against.

    1) CCOs can be eligible for NGO funding that councils are not. This is usually in the recreation/arts/music areas. e.g. ASB Trust will give millions to a CCO like Manukau’s Pacific Arena Trust to build its indoor arena, but would not have given that to Manukau City Council, which appoints the Trust’s Board.

    2) CCOs can dodge tax! No really; council policy staff argued that CCOs would bring tax advantages, but I have not heard if these advantages have been realised. IIRC, the argument was roughly that big chunks of council income and expenditure would now go to CCOs, which pretend to be charitable, cutting council’s tax burden, which CCOs would not pick up due to their ‘charitable’ nature. Frankly, it sounded dangerously close to tax evasion, and was mostly aimed at land investment CCOs.

    3) CCOs can bring in ‘expert’ Directors, who are better able to run specific council operations than councilors are. This seems true at first glance, until you realise we are paying councilors for that oversight, and they are supposed to have expert council staff to provide specialised advice in each CCO’s area (water, transport, recreation, etc). If all council operations go into CCOs, we are paying for a council that just contracts all it’s operations out, so does nothing but run tenders…

    4) CCOs limit council liability (because they are legally structured as 100% owned subsidiary companies of council, and the CCO companies are all limited liability). This was again aimed at property developing land CCOs. This ignores political reality though – imagine the outcry if a council refused to pay for its subsidiary CCO’s debts… even though it’s theoretically allowed (think asbestos or leaky home liability on a building consent CCO), the public would lynch any councilors or mayor trying it. Plus the courts may rule it out anyway.

    5) Democracy is weaker in CCOs. Information flows in CCOs are more convoluted. CCO income & expenditure, and assets & liabilities vanish off council annual plans, so you have to get separate plans and cross-tabulate council subsidies to their CCOs, etc. Pain in the butt, and suppresses public awareness of CCO operations. CCO Board meetings are also not strictly ‘public’ meetings, so we have even less ability to go listen and question/put up ideas at CCO Board meetings than at council meetings. ARTA has been good at this though, with a friendly attitude to (pro-PT) people wanting to talk to their Board.

    So, on transport, we see that 1) is irrelevant, as there are no NGOs funding major transport projects. Ditto 4) – imagine ARC refusing to pay the rail building or operational debts that ARTA clocked up; no contractor would work for ARC in case they didn’t get paid! The tax benefit of CCOs in 2) is pretty dubious – a transport CCO could not easily pass itself off as charitable.

    That leaves 3) – getting expert Directors. This is actually most relevant for transport, but when you look at ARTA (which is a CCO of ARC), most Directors have not had transport expertise. They have had legal, accountancy and politics backgrounds (including Labour ex-Party President, Mike Williams). There are engineers, but of course they aren’t specialists in the specific areas that ARTA may be dealing with in any 3-5 year term (like rail signalling, say).

    5) is specifically negative – CCOs impose another layer of unaccountability. Public have to get councilors to get CCO Boards to get CCO ceo’s to get their CCO staff to do the job the public want. Quite a chain of command, and if any one step fails, we the public have little ability to make it work… This is why ARC is opposed – the ARC Transport committee would set policy that ARGA were supposed to implement, but the ARTA Board generally re-interpreted the ARC policy before implementing – frustrating duplication! 🙁

    Overall, CCOs corporatise council operations, and a generally considered a half-way house to privatisation. Their pros have been oversold and only the cons have delivered so far. My view anyway.

  12. Thanks for that excellent analysis Bob. I have also heard that the arms length relationship is useful to avoid pork barrell politics although I dont really know if it makes much of a difference as councils and governments still hold the purse strings.

  13. As someone who was involved with the Local Government Act 2002, I should correct some of Bob’s comments.

    CCOs are a step away from the previous concept, which was Local Authority Trading Enterprises. LATEs were abolished and replaced with CCOs, which can be non commercial. They are NOT necessarily the local government equivalent of SOEs. Don’t believe me, then ask why Sandra Lee, the then Alliance Minister of Local Government, made the change. It was for that very reason, to allow arms length non commercial organisations to be established.

    Some on the left rail against them because they like political interference in day to day operations of local authorities, but there is no reason why a CCO can’t be set up, with a clear constitution and mandate to deliver, and get a board appointed and be left to deliver services, unless you wanted to make non transparent decisions based on personal preferences.

    Sandra Lee was happy with the concept, so unless your in the lunatic fringe like RAM, there really should be no issue. I’d naturally prefer to go back to LATEs, but that is unlikely in the current climate.

  14. No worries 🙂

    Why LibertyScott sir, I am surprised! No, I’m not a member of Resident’s Action Movement (RAM), but it seems that a libertarian (liberal right wing) calling RAM (marxist left wing) the “lunatic fringe” is kinda pot calling kettle black 😉 hehe

    I appreciate the history lesson on LATEs, but you don’t explain what you see as the differences between LATEs and CCOs and SOEs. Nor do you explain why anything option other than a CCO, is Joe Public wanting “to make non transparent decisions based on personal preferences.” My point 5) about CCOs was to highlight the greater difficulty in chasing down info about their performance and public accountability. Joe Public generally feel left out a bit from council decision-making, let alone from often poorly known and unadvertised CCOs meetings & documents (ARTA is one of the best for publicly held meetings & documents).

    I didn’t perhaps explain the mixed bag of CCO performance we have seen so far. Auckland City Council has one of the oldest and most notorious LATE/CCOs; Metrowater runs ACC water & wastewater services. It has water prices roughly twice those of Manukau & Papakura’s (though this is part explained by far older pipes, and consequent maintenance costs), even though their water comes from the same ARC supplier, Watercare! Metrowater was also exposed as making $6m in ‘charitable’ payments to ACC to help pay ACC stormwater costs, which let councilors claim they were keeping rates low (while jacking water costs to the same residents). These payments are of dubious legality (even the Local Government select committee criticised them), and are the kind of pork barrel politics ya get with LATEs/CCOs ;(

    ARTA is a stranger customer. Like I said before, they are tasked by ARC to implement the policies created by the ARC Transport Committee, but the extra layer of the ARTA Board seem to revisit the ARCTC decisions to tweak them for the ARTA budget. Rather than project manage ARTA projects themselves, ARTA staff seem to concentrate mostly on tender processes & long-term plans.

    ARTA staff seem to have close & friendly relations with several key transport planning/PM/engineering firms (which have offices in the ARC building or nearby), so ARTA have informal chats to roughly scope projects, then issue a tender, and get the firms to project manage, engineer, and build the projects (such as rail station upgrades). Nothing wrong per se, but…

    …it does raise the question – why couldn’t ARC just do this themselves? LibertyScott, feel free to chip in with some answers here 😉

    P.S. Jarbury, the ‘arms length relationship’ CCOs provide between councils and their projects is mostly mythical, as councilors appoint the CCO Directors; if they wanted to rort an upcoming project, they could just appoint Directors amenable to that – transport projects operate on such a long timeframe that it is easy to appoint a Director before a 5-10yr rail project occurs. That said, I haven’t heard of such direct corruption, and councils are supposed to have registers of pecuniary interests (like govt) to expose dodgy relationships to contractors. This seems more effective & transparent than adding another layer of CCO Directors.

  15. Aaack! I forgot to mention – one of the key issues given for the Royal Commission that led to the Supercity was the supposed ‘lack of cohesion’ on Auckland regional transport. But ARTA was always hamstrung on this, as they have responsibility for:
    * planning implementation of regional roads and PT
    * liasing with councils to align council plans affecting above regional roads & PT
    * providing PT subsidised services (ie pay cash to bus, rail & ferry companies for unprofitable routes)

    Spot the gap? ARTA were never given responsibility for providing regional roads (ie motorways and arterial roads) – this is still with Transit/NZTA.

    Given that motorways are an urban beast, they are intrinsically regional in nature. State Highways are national roads, but are not motorways (motorways have ‘flyover’ junctions, State Highways have ‘at grade’ junctions, such as the Waikato Expressway section of SH1). And of course, NZTA just do for roads what ARTA do for PT – plan & pay for it. The actual builders are private contractors to NZTA.

    So there really is no reason why govt couldn’t give ARTA the funds & power to provide regional roads, and leave councils strictly providing local roads. That is, if a council thinks their local road (say Great North Rd) is functioning as an arterial road, they ask ARTA to pay for upgrades from local to arterial standards. And ARTA provides Auckland motorways, and ties them into NZTA state highways at the MUL.

    This would allow a genuine level-playing field of cost-benefit analysis between motorways, arterial roads, rail, buslanes/ways, and ferry routes (and trams). Some road projects would still be funded (converting Te Irirangi Dr in Manukau East to full 80km/hr arterial road, say), but SH20(Waterview) and SH1(Puhoi-Wellsford) would struggle against Airport rail or the CBD rail tunnel, or a SH16 busway.

    Ironically, if ARTA had regional road funding, it would be damn near impossible for Transport Minister Steven Joyce to have ‘pork barreled’ his favored SH1(Puhoi-Wellsford) motorway into the top priority list! He would have had to come to an ARTA meeting and make his case based on facts, not chicken entrails.

    All this is very topical, given the 3rd Supercity Bill is supposed to write such ‘structure & powers’ into the Supercity. National-Act have identified that they want a ‘transport CCO’ called RTA (really a rebadged ARTA), but it’s powers & funding are open….

  16. Bob: Well I had enough phone calls from RAM nutters claiming multinational conspiracy theories within government regarding the Northern Gateway toll road for me to put them on the same level as the “birthers” who claim Obama isn’t American.

    SOEs and LATEs were, to all intents and purposes, identical.
    CCOs are of two varieties. Commercial CCOs are watered down LATEs which can have more specific directions around meeting the objectives of the LGA 2002. Non-commercial CCOs are of course only similar to LATEs in that they are arms length, but with no goal for profitability or a return on capital.

    I prefer a CCO because “public input” inevitably means whoever shouts the loudest gets heard. It ignores the fact that most people most of the time are too busy working, raising families and getting on with life than to lobby on every possible decision on allocating resources that utility operators may make. Public input is most valuable on grassroots issues like regulatory changes or detailed design of new infrastructure, it is least useful in weighing up how to spend money, as inevitability people support their own vested interests. Those without the time or means to lobby may lose out. There shouldn’t be consultation on whether a road maintenance programme is appropriate, for example, as long as it meets objectively defined transparent criteria, and gets independently assessed.

    Yes water/wastewater is an issue, but you’d expect my answer to that. I think, by and large, water privatisation in England has been a success, but needs to be undertaken with substantial safeguards to avoid monopoly rents over the short to medium term.

    ARTA to be fair is a bastardisation of what it should be. It was meant to integrate all local transport planning across Auckland, but failed because the territorial authorities didn’t want to give up their patches, and the ARC frankly was happy to let them look after local roads. There were some officials at the time who argued for a single entity to run all local roads and public transport, but the government of the day didn’t want to confront territorial authorities, then.

    Of course one change the LTMA introduced (not the LGA 2002) was it got rid of the provision of the LGA 1974 that required transport CCOs to have no councillors appointed to boards and for far stricter independence compared to other council ones. The ARC strongly endorsed this. Take from that as you wish.

    Bob, there are plenty of state highways that are not at grade and are not motorways, the Waikato Expressway south of Bombay is grade separated to Long Swamp, and then from Rangiriri to South of Ohinewai, and then again the section at Tamahere. Several state highways in Tauranga are grade separated. There are two grade separated intersections on the Hawke’s Bay Expressway, and there is plenty of grade separation now on SH2 from Ngauranga to Melling, and SH1 from Ngauranga to Johnsonville, again not motorway. Stoke Bypass in Nelson as well. Most people don’t know whether they are on motorway or not in many of these cases.

    Bob your idea to “allow a genuine level-playing field of cost-benefit analysis between motorways, arterial roads, rail, buslanes/ways, and ferry routes (and trams)” is exactly how it was before 2002. Transfund NZ weighed up all projects on the same benefit cost threshold, whether roads or public transport, and because it didn’t have any interest in any outcomes, could weigh up bids. Sadly Labour put Transfund back with Transit (with the LTNZ intermediate step of abolishing the LTSA), so now NZTA has a vested interest in funding state highways, despite the scrutiny principle which can only go so far. However, I severely doubt that if the past regime still existed that any CBD rail or airport rail would get funded. Wellington’s rail renewal had a BCR of 1.2.

    Of course, Waterview wouldn’t proceed at the moment either, neither would Transmission Gully. Both outcomes I wouldn’t be sad about.

    However, the main problem with “giving” ARTA such responsibility is it doesn’t raise the revenue spent on land transport. So it should still have to bid to a new Transfund for road tax generated revenue.

  17. No he doesn’t put forward a strong argument, he wants the US style politically based decision making on transport. He wouldn’t be accountable, councillors never are. They do not make decisions based on objectively defined criteria that are transparent, but on a mixture of ideology, interests and assessment of short term political gain. The debacles on local transport in Auckland go back decades. Politicians ran the ARA buses for years, and Auckland got the nonsense of exact fares policies, ad hoc ordering of new vehicles, and letting vested interests either in the unions on the left, or property developers on the right, influence decisions that should be about transport. The run down of public transport in Auckland was while it was all under very direct local political decision making. Take the debacle of ordering an entirely new trolley bus system to run downtown and to Herne Bay and Parnell, then cancelling it and having to sell it all dirt cheap to Wellington.

    Central government at one time did not let the Minister of Transport have any say on whether a project got funded or got refused funding, for the very same reason. When Tony Friedlander was Minister for Works, he ensured Taranaki got a pork load of road projects. Winston Peters more recently demanded the very tollable Tauranga Harbourlink project be untolled. In the US maintenance budgets get ignored (and often bus projects) while high profile new roads and rail projects get attention. LA’s dismal bus system compared to the fortune spent on rail is a testimony to that.

    A professional appointed board, with a clear mandate, clearly defined strategies and processes for judicial review of decisions is a far better model for ratepayers, that the whims of councillors.

Leave a Reply

Your email address will not be published. Required fields are marked *