The “City Deal” model: A new way to address our infrastructure deficit in Aotearoa

Patrick McVeigh, our People and Places Lead, discusses key lessons for bringing the City and Regional Deal approach and its benefits to New Zealand.

As we get closer to the 2023 election there’s an understandable focus on what government has delivered and what the parties are promising to deliver. Battle lines are being drawn, with all the parties shaping up proposed solutions to address New Zealand’s acknowledged infrastructure deficit.

Enter the “City Deal” model, which in Aotearoa is also being considered at a regional level. It’s an innovative place-based approach to identifying, prioritising, and funding future infrastructure needs. The model is seen as a credible option for organising and accelerating delivery in our current environment of tight public funding.

The potential to apply this model here has been suggested more than once, including by me back in 2017. There are a number of successful examples from overseas, most notably in the UK.

CITY DEALS IN THE UK AND AUSTRALIA

Over the last decade, the City Deal approach has been rolled out across several metro areas and city-regions in the United Kingdom.

As I wrote in the New Zealand Herald back in 2017:

“The first city deal was signed with the Greater Manchester city-region and included innovative new financial arrangements, such as the ‘earn back’ arrangement whereby the city’s investment in growth earned it a share of the national tax take.”

There are now more than 30 City Deals operating across the UK, supporting projects to provide new homes, roads, and business land. Several have included a strong focus on local employment outcomes and sustainable development.

Closer to home, Australia has been pursuing the City Deal approach since 2016, most recently for South East Queensland. The “SEQ City Deal”, confirmed in 2022, provides a welcome boost to the building of key infrastructure in advance of the 2032 Summer Olympics in Brisbane.

CITY DEALS IN AOTEAROA? ATTENDING TO THE FOUR D'S

As with many policy initiatives, we first need to absorb the lessons from overseas, and then carefully consider how transferable the City and Regional Deal approach is to our New Zealand context.

We need to understand how to get the foundations right for successfully adopting the model across our core metro areas and regions. This is essential, not just for local government but also for central government, regardless of who wins the October election.

At MartinJenkins, helped by talking to colleagues with experience with City Deals in the UK, we’ve identified four key dimensions that need to be considered. We call them “the Four D’s” – devolution, delivery, durability, and dealmaking.

“Devolution”: A new way of shaping places in response to local priorities

The introduction of City and Regional Deals in Aotearoa is a potentially significant step towards the real devolution of powers and resources from central to local government.

This was a key issue for the recent Future for Local Government Review, as we currently have one of the most centralised political systems in the OECD. City and Regional Deals, if implemented with purpose, could begin a shift in how we shape places in response to local priorities and interests. This includes recognising the rights and interests of mana whenua.

We need to revisit our local government funding arrangements to make them work successfully. Government needs to approach City and Regional Deals as part of a devolution agenda and not seek to retain decision making in Wellington. Oversight is necessary, but this should be something negotiated and agreed in the body of any deal.

Similarly, it’s important that local government doesn’t approach City and Regional Deals as an opportunity to grab their fair share of a new national funding programme. Councils should get themselves in a position to demonstrate value, performance, and superb execution.

Councils need to have all the right elements in place to give effect to any Deal: a mandate from their communities, and the right capabilities and capacity, including necessary partnerships with other players.

“Delivery”: It’s about doing, not planning

The purpose of a City or Regional Deal is to speed up the delivery of specific infrastructure projects, as agreed between central and local government.

The new approach should not spur another phase of plan making – nationally and regionally we have no shortage of relevant plans and strategies, largely unfunded. The opportunity now is to critically review initiatives that have already been identified, and prioritise those that might best fit within a City Deal framework.

Central government will be looking for measurable progress against national policy priorities. Local government will similarly want to show how the Deal responds to local concerns and opportunities to improve local economies and increase the wellbeing of local communities. Māori will have interests and objectives, including commercial objectives, that are highly relevant, and will most likely focus strongly on intergenerational benefits.

“Durability”: Long-term investments for lasting rewards

City and Regional Deals should not be seen as short-term investments with quick rewards but rather as long-term programmes of investment and delivery that will transform local economies. A long-term approach is critical, as Deals require ongoing programme management, engagement, and funding.

Deals need to be investable. There needs to be a clear understanding of the full whole-of-life costs of proposed infrastructure, including ongoing operating and maintenance costs, and of the full delivery costs and benefits – including how future financial returns from supported infrastructure might be captured and reinvested to offset the cost to the public purse.

In the UK most Deals are for at least 10 years. The recent South East Queensland Deal represents a 20‑year investment programme, which in New Zealand would cover more than six election cycles.

For that kind of durability a partnership approach is essential. In Aotearoa, mana whenua would need to have a central role in designing and delivering Deals – both because their interests under the Treaty need to be recognised, and because in most parts of the country they are major economic players. Private-sector experience, expertise, and investment should also be part of the equation.

“Dealmaking” – Negotiations based on trust

City and Regional Deals shouldn’t be seen as a nationally led grant scheme where local government applies for funding from central government and central government makes all the decisions.

City and Regional Deals are the product of negotiations, and negotiations need to be based on trust and mutual respect. Trust hasn’t always been a strong feature of local–central relations in New Zealand.

The City Deal model offers an opportunity to reset local–central government relationships within a framework of shared mutual interests for communities.

SO WHAT NEXT?

City and Regional Deals present a significant opportunity for the next phase of New Zealand’s economic and regional development. But developing and implementing these Deals will require a big shift from the approaches used in the recent past. Partnership and collaboration will be essential, and the costs and benefits of delivering the work programmes encapsulated within any Deal need to be shared.

Although rapid progress is possible given the work that has already been done across all regions, Deals should not be rushed. There needs to be certainty around whole-of-life costs, clarity about the barriers to and enablers of implementation, and a clear and defensible approach to planning and realising benefits.

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