The Local Government (System Improvements) Amendment Act 2026 (the Act) received Royal Assent over the weekend, amending the Local Government Act 2002 (LGA) and making consequential amendments to several other Acts, including the Local Government Water Services Act 2025 (LGWSA).

We previously provided our thoughts on the System Improvements Bill when it was introduced in July last year (linked here), and later when the Select Committee reported back in November 2025 (linked here). As a reminder, the Bill proposed to:

• refocus the statutory purpose of local government back to cost-effective infrastructure, public services and regulatory functions (moving away from the "four well-beings"), with a new focus on supporting local growth;

• define a set of "core services" that councils must have particular regard to;

• improve measurement and public reporting of council performance;

• strengthen council transparency and accountability, including standardised codes of conduct and members' information rights; and

• reduce some regulatory requirements on councils, including removing the mandatory requirement to consider tikanga Māori knowledge when appointing council-controlled organisation directors, and tightening rules on third-party growth funding to prevent double-charging on development contributions.

There were several late changes to the Bill made by amendment papers, which meant there was no opportunity for public input into those changes. This includes changes to development contributions for Fast-track projects which we have outlined in a separate article.

This article discusses key aspects of the Act and its implications for the local authority operating environment, including the removal of voting rights for non-elected members.

Changes to the statutory purpose for local authorities, inclusion of core services, and adjustments to financial management considerations

The combined effect of these amendments is to support a narrowing of the scope of local authority activity, in line with the Government’s intention that local authorities should be focused on the “basics”.

The amended purpose statement removes the broadly cast “four well-beings” and replaces them with a narrower set of activities that local authorities are tasked with delivering to meet the current and future needs of communities. These activities are described as “good-quality, cost-effective and local” infrastructure and public services (with regulatory functions another described activity). In addition, a new purpose is included which is to support local economic growth and development.

While there are some differences, the amended purpose statement is generally taken from the version that existed through 2012-2019, which did not result in any marked difference to the activities councils undertook, and did not generate any notable increase in judicial review challenges.

In terms of responding to these amendments, councils will need to review their decision-making processes and templates to ensure the purpose is captured (where relevant), reconsider how they approach the assessment of options (shifting away from well-beings), and ensure that they consider the list of core services through decision-making.

A key part of both option analysis and decision-making will be satisfying the requirement to make “cost-effective” decisions (or deliver in a cost-effective way). This is also relevant in a water services context where, for certain wastewater decisions (providing infrastructure or treating), section 254 of the LGWSA requires the “most cost-effective” option to be selected. While there is clearly a financially driven component to “cost-effectiveness”, considering overall value (including over the life of the asset) remains relevant. Taking a narrow approach that is limited to immediate cost risks overlooking wider relevant factors eg lower cost infrastructure may fail sooner, or carry higher maintenance costs.

Local authorities will be required to respond to these amendments through all decisions, but importantly through their upcoming 2027/2037 long-term plans. On that, we note that the essential framework within which local authorities make decisions about activities and the manner in which they undertake them (in section 3(b)) remains unchanged, as does the overarching accountability to communities (in section 3(c)). However, the consultation document for the LTP should include explicit reference to the statutory context in which the Council is now operating, particularly where significant changes are proposed to activities or services (or levels), so the community can appropriately understand and respond to the options presented, and the trade-offs that exist.

Elected members access to information

There are no significant changes to the Bill as introduced or the version reported back from the Select Committee. One minor change introduced is the right to request / have access to "information" instead of “documents”.

However, this change does not appear particularly significant; as we noted in our earlier articles, this requirement essentially codifies the “need to know” principle, and using the term information instead of documents aligns with the ability to request “official information” under other regimes.

The other change strips out some of the procedural detail introduced by the Select Committee, leaving councils more discretion over how to structure internal processes for managing requests for information from elected members. This addresses an inherent problem that we identified in our November update, with elected members potentially needing to determine their own ‘need to know’, undermining the common law principle, and potentially resulting in an unworkable situation in many cases/

Reporting changes

Amendment paper 755 plugged a gap for water services annual reporting by including a new transitional provision that requires councils to keep including water services information in their ordinary LGA annual reports for the 2025/26 and 2026/27 years - unless that period is already covered by their first water services annual report under the LGWSA.

Otherwise, the changes to reporting previously proposed have been enacted including new mandatory reporting of council spending on consultants and contractors in their annual reports, standardising activity reporting for all councils, potential changes to performance measures, and the need for future local governance statements to explain how a local authority is acting in accordance with the new governance principles. This includes: to foster the free exchange of information between, and expressions of opinion by, elected members; and the responsibility of its elected members to work collaboratively to set and deliver the local authority’s policy agenda, determine its policies and budgets, and make decisions on behalf of its communities.

Standard code of conduct and standing orders

No substantive changes have been made to the proposed standardisation of the code of conduct and standing orders for local authorities. The Secretary of Local Government will now need to approve and issue a standard code of conduct for members of local authorities, after consultation with local authorities.

Consultation on a new code of conduct was carried out last year by the Local Government Commission^[1], but whether there will be further consultation, given the time elapsed, remains to be seen.

Once a new (or amended) code is issued, the chief executive must explain it at a public meeting of the local authority as soon as practicable. Until a new code is issued, existing adopted codes continue to apply.

Similar provisions apply to the new standardised standing orders but there is greater flexibility for councils. This is because clause 27(4) of Schedule 7 remains in place, which allows a local authority to suspend the standardised standing orders in particular circumstances, subject to the statutory requirements for doing so.

Non-elected members can no longer vote or count towards quorum

This was one of the last-minute amendments to the Bill and deserves more detailed analysis.

A "non-elected member" (broadly, anyone on a committee who is not an elected member or community/local board member) appointed to a “specified committee” can no longer vote at meetings of that committee, and will not count towards the quorum. Councils have six months after commencement (by 19 March 2027) to adjust their arrangements so that they comply with these new changes.

Specified committees include standing, special and joint committees, and subcommittees appointed by a council under Schedules 3 and 7 of the LGA. There are carve-outs for committees set up under other legislation (which in our view will include the Spatial Plan Committee under the Planning Bill (soon to be Act) or a Treaty settlement, and for a handful of specifically named committees. A notable omission from the listed exemptions, which the Mayor of Auckland was not pleased about,^[2], is the Houkura members sitting on Auckland Council committees.

The Minister has the power to grant exceptions by Order in Council, after consulting the relevant council, and only if satisfied the exception is “necessary or desirable”.

While there was opposition to this amendment, there has been no commitment to reverse it if there is a change of Government.

Additional decisions that cannot be delegated

Another late change is the addition of two new categories of decision to the list in clause 32 of Schedule 7 of the LGA (decisions that can only be made by the Governing Body and cannot be delegated to a committee, or made at officer level). The additions to the list in clause 32 are:

(i) the power to adopt a strategy, policy, or a management plan under the Reserves Act 1977, or a district plan, district plan change, or variation to a district plan under the Resource Management Act 1991; or

(j) the power to approve a public consultation process for any of the items listed in paragraph (i).

What these additions mean is that the Governing Body will not be able to delegate the power to initiate consultation (and presumably any consultation document or material, given they are often considered together), or delegate decision-making for any plan change or reserve matter.

As there are no transitional provisions, this new restriction applies now, and so all councils will need to ensure that they are the final substantive decision-maker on all matters captured in clause 32(1)(i) (with any delegated committees or appointed panels now only able to make recommendations).

Our thoughts

Had there been the opportunity for feedback from the sector, we anticipate that many councils would have pointed out that non-elected members are only appointed to committees and sub-committees where “in the opinion of the local authority, that person has the skills, attributes, or knowledge that will assist the work of the committee or subcommittee” - being the legal requirement in clause 31(3) of Schedule 7 of the LGA. Skilled non-elected members contribute to decisions made by councils, as a means of delivering local decision-making on behalf of communities.

The implications of this amendment may prove to be a double-edged sword: certain skilled persons may no longer want to participate if they cannot directly contribute to decision-making (as advisors only), whereas others may see it as even more important that they continue to advise and seek to influence decision-making, even if they are no longer directly accountable.

During the six-month lead in period, councils will need to identify all relevant committees affected by this change and consider whether exemptions should or could be sought. We note that the following common types of committee/ sub-committee often include non-elected members, and may be valid candidates for review:

• Audit and risk committees, which ensure the robustness of internal frameworks of a council and the integrity of reporting and risk management systems, and commonly provide for independent members (based on Audit guidance) and/ or an independent chair sitting alongside elected members.

• Joint committees established to provide a vehicle for collective shareholder decision-making, including where jointly owned water organisations have been established under the Local Water Done Well policy.

• Regional partnership committees (different from the new regional spatial planning committees), which may include members from other government organisations in addition to iwi representatives, making decisions or recommendations relating to the region as a whole.

• Specialist bodies which investigate and vote on recommendations to their council, where the council retains the final decision-making power. (There seems little point in not allowing non-elected members of these bodies to be able to vote on the recommendation to go to council.)

• Officer subcommittees. Some councils have subcommittees comprised of staff and with no elected membership all eg where there is a need for detailed technical decision-making such as transport restrictions under a bylaw.

• Reserves and hall subcommittees, which are generally made up by members of, often rural, communities. When the Local Government Commission reported back on the new draft Code of Conduct^[3] it identified that a number of councils appointed these bodies which “….typically comprise voluntary, unpaid members representing and doing work on behalf of their communities.” The Commission recommended that the new code of conduct not apply to such committees/ subcommittees to avoid discouraging community participation. If the entire subcommittee is made up of non-elected members (or, often, only one elected member on the committee) these bodies will no longer be able to operate in the same way. This has the potential to alienate the very communities they are designed to serve and require councils to spend more on staff performing the committee functions instead.

The sector may want to consider exemptions for some or all of these types of committees, but there may be other committees for which specific councils may want to seek an Order in Council.

If Orders in Council are not sought or not considered appropriate, then councils will need to review the composition, quorum and voting arrangements of any committee which has any non-elected members, as well as its terms of reference. This task may become more complex where there are multiple parties involved (eg joint committees) and/or where the committee arrangements are set out in other documents, such as shareholder agreements which include terms of reference for shareholder committees that comprise non-elected members.

Get in touch

If you would like to discuss the implications of these changes for your council with our experts, please get in touch.

Special thanks to Payge Swanson for her assistance in writing this article.