Three Waters: Decisions announced by Local Government Minister Nanaia Mahuta

The Government is set to force through its Three Waters reforms, u-turning on a previous position to make it voluntary for councils to join up to the amalgamation plan.

Local Government Minister Nanaia Mahuta confirmed this morning that the Government will push ahead with its preferred water services plan.

That will amalgamate billions of dollars worth of council-owned drinking, waste and stormwater infrastructure and services assets into four regional bodies.

Mahuta has been at war with councils over the proposals. Councils are frustrated that some of their most valuable assets will be amalgamated into entities they have little or no control over. Auckland mayor Phil Goff was one of the strongest critics of the reform.

Councils had previously been given the right to opt out of the reforms. But that has been withdrawn.

The entities will be operational by July 1, 2024, and look after freshwater, stormwater and wastewater services.

The Government now faces a protracted war with councils, which will play out against the backdrop of other crucial decisions such as whether water charges familiar to Aucklanders will be rolled out across the rest of the country.

National and Act oppose the reforms and have promised to repeal the changes if they win the next election.

National Party local government spokesman Christopher Luxon said forcing the Three Waters reforms onto reluctant councils makes a mockery of Mahuta's initial position that councils could opt out.

It would erode trust and goodwill and set back government–council relations for years.

"This move is tantamount to state-sanctioned theft of assets that ratepayers have paid for decades to own."

He said National would repeal the reforms and return the assets to councils if it got into Government.

The complicated model was "broken".

"It will create needless bureaucracy, strip away local control, and put distance between communities and decision-makers. Water services will be controlled by a complex smorgasbord of unelected appointees and officials.

"Ratepayer-owned water assets will be bundled into these mega entities with virtually no accountability. The governance structure will be messy and confused."

Mahuta reiterated the Government's reason for launching the three waters reform programme in the first place.

Decades of underinvestment has left councils with decaying, dysfunctional pipes.

In some cases, such as the Havelock North campylobacter outbreak of 2016, council mismanagement of water assets is suspected of leading to illness and possibly death. The outbreak spurred the Government into its three waters reforms.

Modelling from Scotland's water provider shows councils will need to invest as much as $185 billion in water services in the next three decades just to stand still.

Mahuta believes councils cannot afford that on their own and need new entities that will be able to raise debt and levy charges to invest in those improvements.

"Local councils are trying to deal with the upkeep of ageing infrastructure, which is literally crumbling in some of our biggest cities. They face the additional strains of growing population, climate change resilience and extreme weather events, as well as competing for a limited number of skilled workers to do the job," Mahuta said.

"It would be irresponsible to pour taxpayers' money into propping up a broken system, or let households face unprecedented rises in water costs. Currently 43 of the 67 councils do not have the revenue to cover their water services operating expenditures at the moment, let alone once the infrastructure starts failing."

Mahuta has modelling to show that around the country, household water bills will be lower under the reforms, potentially saving thousands of dollars a year.

Before the end of the year, technical working groups will meet to establish details.

Over the next three years, three bills will be introduced to Parliament establishing how the entities will operate.

The Water Services Entities Bill will be introduced at the end of this year, and be passed next year, an implementation bill will be introduced next year, and an economic regulation bill will be introduced in early 2023.

Councils will have an ownership stake in the new water entities, although just how this will work is unclear.

A previous proposal had a "regional representative group", made up of local authority members and mana whenua, that would vote on appointing an independent panel, and that panel would appoint board members to govern the local three waters entity.

Councils raised concerns with this model because it gave them almost no control over the assets they had once owned.

It appears Mahuta has listened to these concerns. She has decided to establish a working group of local government, iwi and water industry experts to work through the design of the new water entities - including their particular governance arrangements.

Councils wanting a greater say over how the entities are run, however, will likely be disappointed.

The Government has received advice that the entities must be distinct from local control to be able to borrow money to invest in water. That means any changes to the proposed structures are unlikely to result in greater council control.

Local Government NZ backs the plan but does not support it being mandatory.

Although councils will still own the water assets, it will be by way of having an ownership stake in one of the four water entities.

The newly established regulator – Taumata Arowai – will enforce existing water standards.

An economic regulator will also be created to ensure investment goes ahead and monitor consumer charges and service.

Some have questioned whether the modelling of the investment costs needed are over-exaggerated, and whether the efficiencies the new model is expected to deliver are optimistic.

Councils are also concered that the regional bodies will result in some areas subsidising others or some regions losing representation to larger centres.

There is also strong public disquiet about the proposal. A recent Taxpayers' Union Curia poll showed 56 per cent opposed the reforms, while 19 per cent supported them and 24 per cent were unsure.

The Government was warned in April it was progressing too quickly with its water reform by Treasury and Te Waihanga - the Infrastructure Commission - saying the speed of the changes "means there will be a high level of uncertainty around the implementation of the reforms".