Explanatory memorandum

Note: The following explanatory memorandum should be read in conjunction with the explanatory memorandum(s) appended to the:

• Local Government Elected Members (2009/10) (Except Auckland) Amendment Determination 2010

• Local Government Elected Members (2009/10) (Except Auckland) Amendment Determination 2009.

This memorandum is not part of the determination, but is intended to indicate its general effect.

This determination, which is deemed to have come into force on 1 July 2009, sets the remuneration, allowances, and expenses of elected local government representatives except for those in the Auckland region.

The Local Government Act 2002 requires the Remuneration Authority, in setting remuneration, to have regard to the need to—

• minimise the potential for types of remuneration to distort the behaviour of the elected members:

• achieve and maintain fair relativity with levels of remuneration received elsewhere:

• be fair both to the elected members and ratepayers:

• attract and retain competent persons.

In order to meet its statutory obligations, and in particular to achieve transparency, fairness, and consistency in remuneration-setting across diverse local authorities, the Authority established a model to assist in determining the cost of governance and representation for each local and regional authority. The model incorporates 4 criteria that are transparent and readily verifiable from published data, namely—

• population:

• operational expenditure:

• net assets controlled:

• rate of population change.

This provides the Authority with a ranking order of the relative size of the governance and representation responsibility of each local and regional authority.

The model also allows for the incorporation of a general movement in remuneration to help ensure that adjustments to the salaries of elected representatives reflect not only the size of their roles, but also any market movement in remuneration that the Authority considers should be applied to their salaries.

The application of these factors results in a sum of money (the indicative pool) notionally attributable to each local and regional authority, and from which the remuneration of each elected member will be met.

This determination uses indicative pool totals derived from audited annual accounts for the year ended 30 June 2008 and population figures as at the same date.

The Authority calculated the indicative pool in late 2008, at which stage the economy was slowing, but the seriousness and impact of the external financial crisis was not as apparent as it is currently. The Authority applied a general remuneration movement of 3%, slightly less than the movement in remuneration from 2007 to 2008 that survey and other data were showing.

The incorporation of this general adjustment and the other 4 factors into our model generated changes in the indicative remuneration pools for each local and regional authority ranging from an increase of over 8% (atypically for a high-growth council) to negative adjustments in some cases. Where there was a negative movement, the pool was held at the 2008 level.

Councils were then invited to recommend the distribution of the pool for the 2009/10 financial year.

Subsequent to this notification to councils, the Treasury released its post-election financial update. The Government's response to the update emphasised the need for a sustained period of strict control over government expenditure. Part of that response was a call for restraint on movement in remuneration generally, and for senior state sector employees and office-holders. Parliament itself resolved unanimously not to seek any increase in remuneration in 2009/10.

In this context, some councils expressed concerns about increasing the salaries of elected representatives when they also were facing difficult funding choices. The Authority therefore advised all councils in late January that, where there was valid reason and unanimous agreement within a council not to increase salaries of elected members, the Authority would consider a recommendation to defer any increases that would otherwise have applied from 1 July 2009.

Councils have taken a variety of approaches to recommending the allocation of this year's pool. The overwhelming majority have proposed accepting the increase, some have proposed fully utilising the pool by increasing the proportion of community board funding accessed from the pool (and held salaries at the 2008 level), and others have requested that salaries not be increased, and the pool held at the 2008 level.

Where decisions were unanimous or near unanimous, the Authority has accepted them as being a fair balance between the interests of the ratepayers and the elected members.

It has been the long held position of the Authority that neither mayors nor councils can influence the level of mayoral remuneration. However, given the approach taken in responding to councils' recommendations, the Authority accepted recommendations from individual mayors to defer increases in their remuneration this year. In cases where mayors had initially expressed concern, either directly to the Authority or in public statements, at being required to accept an increase, the Authority offered them the opportunity to hold their remuneration. In some cases this opportunity has been accepted.

It is fair to say that in some areas reaching agreement on these issues within a council has been both openly political and fraught; it has also led to delays in releasing this determination.

During the consultation period, the Royal Commission on Auckland Governance issued its report and recommendations, and the Government subsequently announced that a new governance arrangement would be in place from November 2010 onwards. To smooth the process of fixing remuneration in 2010/11, the 8 authorities subject to restructuring have been omitted from this determination, and a separate determination will be issued after discussions with those councils have been concluded.

Vehicle mileage allowance

The Authority has made no change to the level set for this allowance.

Note: The preceding explanatory memorandum should be read in conjunction with the explanatory memorandum(s) appended to the:

• Local Government Elected Members (2009/10) (Except Auckland) Amendment Determination 2010

• Local Government Elected Members (2009/10) (Except Auckland) Amendment Determination 2009.