‘Urban Deals’ are coming to New Zealand: let’s make sure they’re not ‘behind the scenes city deals’

As local and regional councils face inadequate infrastructure and unsustainable costs, New Zealand will hear more and more about the potential solution offered by so-called “city deals”.

These agreements are relatively long-term agreements between different levels of government (and sometimes other parties) regarding the decision, implementation and financing of economic development and infrastructure initiatives in a defined local area.

Wellington and Auckland city councils are already working on regional agreements with central government to give them more options when it comes to financing and managing their affairs. The country-led coalition is expected to announce a framework for deals with cities later this year.

National announced plans to implement agreements with cities before last year’s election. Since then, think tanks, international and local consultancies, Infrastructure NZ and Local Government NZ have all given their say on how these systems could work.

At a recent meeting of New Zealand mayors and local government leaders, Greater Manchester Mayor Andy Burnham spoke about the first municipal deal in the UK more than a decade ago. He extolled the virtues of a “place first” approach that involves and engages citizens more in the future of their cities.

Manchester Mayor Andy Burnham: ‘Put yourself first’
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In the UK, city deals marked a move away from the conventional single regional development model. Each transaction is tailor-made, reflecting local priorities. Since Greater Manchester in 2011, there are now over 30 city deals in the UK.

Australia has concluded ten city deals since 2016.

Their experiences suggest that there are two general types of urban agreements. One concerns infrastructure financing mechanisms. The other goes further and involves the delegation of budgets and responsibilities from central government to newly created regional or municipal authorities.

Urban deals offer potential circuit breakers in cases of stalled and stagnant urban and regional progress, but New Zealand must learn lessons learned elsewhere.

Infrastructure agreements

Infrastructure agreements provide a cooperative mechanism to address local infrastructure deficits. It’s a problem most rich countries face after decades of underinvestment.

Closing the financing gap has been hampered by a variety of factors: the central government’s reluctance to borrow or tax more, short-term thinking based on election cycles, and different priorities within levels of government.

All of this has prompted politicians to favorably consider cooperative, seemingly longer-term, methods of approaching infrastructure development.

Australia has opted for infrastructure agreements between federal and local governments. These have been praised for providing local governments with formal participation channels and additional funding from the federal government.

But these deals have also been criticized for trade secrecy and a lack of consistent national leadership. Eight years later, it is still difficult to say whether the agreements reached with Australian cities have actually improved infrastructure problems.

Decentralization agreements

Deals with UK cities involved transferring limited budgets and responsibilities from central government to new subnational governments, called combined authorities.

At the national level, right-wing political parties have tended to embrace the decentralization agenda. But at the local level, politicians of all stripes want more autonomy in this highly centralized country.

Greater Manchester is the epitome of devolution arrangements, with its combined municipal authority seen as a model for others. It retains 100% of tax revenues from its business taxes, has developed an active travel strategy, re-municipalized the regional bus system and improved health care and social services.

This “pioneering” agreement was extended into 2023. But the “devo agreements”, as they are called, have been criticized for their lack of transparency (they are negotiated in private, without public consultation) and the absence of any statutory powers attached. .

For example, Greater Manchester has yet to gain approval for a Spatial Plan, which is essential in setting the context and tone for the economic and social development of ten local authorities. As a result, housing construction in the region has stalled.

Manchester City Centre: Its combined municipal authority is seen as a model for other municipal arrangements.
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The art of the transaction

Urban agreements have become popular, in part for politically symbolic reasons. Simply put, making a deal sounds sexier than “making a long-term intergovernmental agreement.”

Perhaps unsurprisingly, governments favoring city deals are on the right of the political spectrum, with strong affinities with business. Former Australian Prime Minister Malcolm Turnbull and current New Zealand Prime Minister Christopher Luxon also entered politics after careers in business. Municipal agreements perfectly match their public image.

Beyond the symbolism, the experiences of Australia and the United Kingdom suggest that such agreements are not in themselves a silver bullet for governing cities.

Negotiations often involve little or no reference to an overall strategy, which can worsen social inequalities and lead to a patchwork of uncoordinated projects. Governance also tends to be opaque, risking giving the impression that these are actually “backroom city deals”.

They also call for strengthening the capacities of local communities, which requires time and resources. The UK’s central government demanded the creation of a new level of administration – the Mayor’s Combined Authority – to oversee the execution of the deals.

This involves significant bureaucratic and political maneuvering. Yet even the largest and best-resourced local governments in Australia and New Zealand struggle to mobilize the bureaucratic power and expertise they need, routinely outsourcing it to the private sector.

None of these challenges are impossible to overcome. But with the expansion of urban deals in New Zealand, there is an opportunity to refine the art of the deal itself.