Our cities need city-scale government – here's what it should look like

For residents of Australia’s cities, federalism means state governments have the right to assert what is in their best interests. Vertical fiscal imbalance has given the federal government licence to presume to know better than state governments what is in residents’ best interests. The possibility that they might themselves know what’s best is not a consideration.

The Greater Sydney Commission’s chief commissioner, Lucy Turnbull, might disagree. The commission values “citizen engagement”. However, it reports to the NSW planning minister.

A metropolitan planning agency that engages citizens, but is not representative of – and accountable to – those people, cannot be represented as promoting democratic governance. This is especially so when state and federal governments control the budget for metro-scale infrastructure and services.

The federal funding largely takes the form of infrastructure grants and other tied grants that limit decision-making at the metropolitan level.

What’s the problem?

I recently wrote about Australia’s democratic, planning and governance deficits, and the infrastructure gaps.

The role both state and federal governments play in urban regions is often incompatible with effective metropolitan governance, planning, accountability, productivity, service delivery and fairness.

To overcome these problems, Australia needs representative metropolitan governments that meet the following requirements:

• are accountable to a metropolitan constituency;

• undertake strategic planning;

• are responsible for metro-scale infrastructure projects and services;

• generate revenue; and

• are in large part fiscally autonomous.

Autonomy means that metropolitan governments are able to enter municipal infrastructure finance markets, issue municipal bonds and negotiate service-delivery agreements with the private sector and civil society. This enables them to distance themselves from state and federal governments when deciding metro-scale infrastructure and services priorities.

Top-down approach

Australian governments, both Coalition and Labor, have over the decades repeatedly promoted some or other urban initiative. Enthusiasm for these initiatives has never been matched by their success.

In 2011, many urban academics and professionals welcomed the Labor’s national urban policy. National urban or spatial policies were popular in the 1970s and 1980s. In 2015, they welcomed the short-lived Coalition ministerial portfolio for cities and the built environment.

In a country that is 90% urban, few policies are not de-facto urban. Policies with no urban intent, but with unintended urban outcomes, arguably exceed the impact of policies with urban intent. Instead of building unintended cities, far better that such matters are left to the cities concerned.

Internationally, the metropolitan “renaissance” since the early 1990s is based on enabling various forms of metropolitan government and governance to determine their own path in collaboration with higher tiers of government. This decentralisation does not have the prescriptive characteristics associated with the top-down creation of metropolitan governments in the 1960s and 1970s.

The “constitutive process” of metropolitan governments is central to their legitimacy and effectiveness. In Australia, this can take the form of constitutional change and the creation of a third level of government.

If the federal government were to conclude that metropolitan government is desirable – and that constitutional change is improbable – it has the option of creating an incentive framework for the creation of metropolitan governments.

This would involve tying access to federal grants to their use by metropolitan governments. That would create an incentive for state governments to legislate the creation of metropolitan governments.

The federal government has previously used incentives in this way. An example is the National Competition Policy that the Keating Labor government introduced in 1995 and Howard Coalition government carried forward.

By agreeing to share the productivity (tax) dividend from a more competitive economy, the Commonwealth was able to persuade the states and territories to undertake far-reaching reforms to infrastructure ownership, trade and professional licensing, other market access laws and utility pricing. All these matters lay outside the Commonwealth’s direct jurisdiction.

Independently of the federal government, the constitutive process can also take the form of negotiations among state and local governments. As Gabrielle Appleby has written:

Internationally understood, federalism … emphasis[es] the democratic importance of subsidiarity and localised, accessible governance that facilitates diversity, creativity, experimentation, competition and participation.

A possible way forward

What principles of metropolitan government would form the basis for negotiations?

The first is subsidiarity. Metropolitan government should provide the infrastructure and services that are best provided at a metro scale and reflect the priorities of metropolitan residents.

The second is that user charging and taxes should reflect responsibilities for the infrastructure and services expenditure. Higher levels of government devolve responsibilities far more willingly than they devolve resources. Unfunded mandates are to be avoided.

All this is more easily said than done. The services best provided at a metro scale can be debated – as can who should provide the service.

Debate is desirable when it occurs among providers and users of infrastructure and services. Undesirable outcomes are likely when those making decisions are not users who decide what they want and can afford.

A metropolitan government’s essential features should be:

• Democracy: the government should be representative of a metropolitan constituency and accountable to it for infrastructure and services, and adopt transparent decision-making and budgeting processes.

• Responsibility: the government should be responsible for ensuring the delivery of metro-scale public goods and services, and for strategic planning, integrating transport and land-use planning, city-shaping infrastructure investments and land-use guidelines for lower levels of government.

• Autonomy: metropolitan government should generate its own revenue, be fiscally sound and have access to municipal infrastructure finance markets.

Creating metropolitan governments and enfranchising a metropolitan constituency becomes substantive when the government is autonomous.