Wellington has been disrupted by failures of its ageing sewerage system. Photo / Mark Mitchell
Wellington has been disrupted by failures of its ageing sewerage system.
Maybe Infrastructure New Zealand best summed up the debate over the Three Waters Reform: "When you boil it all down, there's plenty of misinformation being bandied around."
These were the words of Claire Edmondson, general manager of Infrastructure NZ, at the virtual Building Nations 2021 symposium.
She continued: "There doesn't seem to be any useful alternatives put forward. We think four standalone (water) entities owned by local government will be a better outcome for New Zealand.
"The government is committed to include safeguards that ensure communities will be the ultimate guardians of public ownership.
"As the reform progresses, Infrastructure NZ will be particularly interested in the entity design, especially the governance and accountability arrangements," Edmondson said.
The Government is pressing ahead with its plan to transfer the water services — drinking, waste and storm water — operated by 67 local councils to four regional entities, from July 1, 2024.
The work programme of the four publicly-owned, locally-managed entities would create up to 9000 new jobs and contribute as much as $20 billion to the economy over the next 30 years.
A water regulator will introduce an economic regime including mechanisms for pricing, consumer protection and performance information of the new water services entities.
They will be required to be transparent on how they engage with consumers and how they calculate prices.
One new water provider will cover the Auckland and Northland regions; the second Waikato, Bay of Plenty, Taranaki and upper parts of Manawatu-Whanganui; the third along the east coast of the North Island and including Wellington and Tasman, Nelson and Marlborough; and the fourth serving the remainder of the South Island.
The Government is determined to catch up with decades of under-investment in water services by creating a pipeline of up to $185 billion worth of development over the next 30 years — or about $5b of capital expenditure a year, without taking operating expenditure into account.
This is the amount required to replace and maintain pipes and plants, upgrade the assets to meet drinking water and environmental standards, and provide for future population growth.
At present, $1.5b a year has gone into capital expenditure for water services.
Back in 2017, the Auditor General reported that local authorities were not investing enough in three waters assets, indicating they could be deteriorating to an extent that they were unable to meet the levels of service their communities expect.
The aggregation of the water services will mean that the smaller centres or communities will benefit from the investment — where previously it was beyond them.
Minister of Local Government Nanaia Mahuta told the Building Nations symposium that for some reason local councils have not been able to lead a solution that can work for everyone.
"The reality has been trade-offs between investing in critical infrastructure and in other services central to the wellbeing of communities. In terms of public sentiment, this had led to compromises — funding projects above the ground being more attractive than pipes underground.
"It would be difficult to throw money at water infrastructure until something went wrong, and all too often it has. Unfortunately, these trade-offs have resulted in critical asset maintenance and upgrades being put off," she said.
"We are designing a model that suits the New Zealand context and ensures all New Zealanders benefit from the reform.
"We are taking decisive action to ensure access to high quality, affordable three waters services, clean and safe drinking water for all communities, and future proof households against the compounding impact of climate change and population growth.
"Further delay only pushes the problems on to our mokopuna and future generations and increases future household costs, putting livelihoods at risk.
"I don't want that," said Mahuta.
Some mayors and local councillors, worried about losing control, didn't quite see it that way, crying out: "The government is stealing our water assets." The growls were more about representation than investing for the future.
Auckland Mayor Phil Goff said the reform would provide little benefit to Aucklanders and the council would lose control of services that represented 28 per cent of the city's assets.
"We support the intent of the reform but what it means in practice is that Aucklanders would have imposed upon them a water services entity which has no democratic accountability to them through elected representatives," he said.
With Auckland being in a regional entity with Northland, Goff said Auckland would contribute 94 per cent of the assets of the entity but would only get a minority voice on an oversight committee which would have little power.
The Local Government New Zealand council came under fire for "getting in bed with the central government" and supposedly supporting the proposal, while securing a $2.5b transitional package under a heads of agreement.
Susan Freeman-Greene, chief executive of Local Government NZ, told the Building Nations symposium that the national council made a strategic shift to engage more constructively — in the face of a government with an outright parliamentary majority determined to carry out water reform.
"Previously, we lived and breathed primarily as an opposition group. It got us the attention but gave us little constructive influence.
"We were not seen as credible enough for government to invite us into the front end of policy development processes.
"And we tried to change policy once it got to select committee or the legislation was in draft form.
"The national council joined the central and local government steering group to work in partnership.
We would have more influence if we are at the table facing the issues and working on solutions that hold local democracy at the forefront — not just three waters but with all the reforms that are coming."
Freeman-Greene said into the mix the Government decided to mandate the Three Waters Reform.
"You've seen and heard the sector's justified anger over the government's about-face. To be clear, Local Government NZ never supported this reform to be mandated. What we did is create leverage for the sector. We will get more traction by staying in the tent."
She said most of the sector agrees there needs to be some change. "Seventy-five per cent of the sector opposes the reform in its current form.
"This figure is sometimes misconstrued that three quarters of local councils are opposed to reform.
"That's not the case — there is deep acknowledgement of the case for change.
"The eight-week consultation and feedback period amplified the concern about the settings of the current model.
"The governance and representation arrangements such as having a local voice, democratic accountability, integration with the planning system and rural water schemes are critical issues that are still on the table — and we are at the table.
"There are multiple layers of representation and there needs to be a link between governance and the water services entities.
"Leveraging the heads of agreement has ensured there are mechanisms in place to get changes the sector needs," said Freeman-Greene.
The Government has listened. Soon after announcing the decision to push ahead with the reform, the Government established a working group of local government and iwi representatives to recommend strengthened governance and accountability arrangements.
It will report back in March next year.
Mahuta said New Zealanders need water services that meet the diverse needs of communities — needs councils understand better than anyone — and the working group is the circuit breaker to get the model right.
"It's a bottom line for the government that water services entities continue to be publicly-owned, have operational and financial autonomy to make much-needed investment, and have oversight from local authorities and mana whenua.
"You can't lay a pipe in the regions from a desk in the city.
"It is essential that our water services allow for local influence and democratic accountability," she said.
The working group is independently chaired by MartinJenkins co-founder Doug Martin, an experienced advisor on public service organisational performance.
He is joined by mayors Phil Goff (Auckland), Dr Jason Smith (Kaipara), Garry Webber (Western Bay of Plenty), Neil Holdom (New Plymouth), Campbell Barry (Lower Hutt), Rachel Reese (Nelson), Lianne Dalziel (Christchurch), Tim Cadogan (Central Otago) and Lyn Patterson (Masterton).
The iwi representatives are Ngarimu Blair, Jamie Tuuta, Karen Vercoe, Ngahiwi Tomoana, Olivia Hall, Gabrielle Huria, Barry Bragg and John Bishara. RMA commissioner Brian Hanna, chair of the central-local government Three Waters steering committee is also at the table.
The government had proposed independent, professional boards for each entity, and regional representative groups made up equally of local authority owners and mana whenua to provide oversight.
The groups would issue Statements of Strategic and Performance Expectations for the entities, and appoint members to independent board selection panels. The governance and representation of Three Waters is up for review.
The OECD has said: "Effective governance is a key ingredient of water reform.
"Well-functioning institutions and a stable regulatory environment are critical to making the best use of available resources and to make sure all water users align with a set of social, economic and environmental objectives."
A national transition unit, within the Department of Internal Affairs, is now working to a tight timeline.
During the first quarter of next year external advisors will be brought in to work with councils and the unit to support engagement in the transition.
Four local establishment entities, with chief executives and boards, will be set up by June next year.
The boards will comprise three to six members appointed after consultation with councils and iwi.
In the following month the first tranche of 'better-off, no-worse' funding will be handed to councils. At the same time the Water Services Entities (Implementation) Bill is being introduced to Parliament.
The transition unit and the local establishment entities will work closely with existing water services staff at councils to make use of their local knowledge and expertise.
On July 1, 2024 the four entities take responsibility for the water services delivery, with staff from councils who have accepted an offer of transfer moving across.
Up to $2b of the remaining better-off funding will be released for councils.
Mahuta said "during this time we certainly have our work cut out for us to engage with local government, iwi and industry and ensure the entities are set up for success.
"The new arrangements will help empower and grow a highly-skilled and professional workforce to deliver the right services for our communities. Having a secure long-term pipeline of works will be a welcomed change for the industry.
"It will allow innovative procurement and enable long-term planning throughout the supply chain, encourage investment and help drive productivity and growth.
"I acknowledge that implementing the proposal in this timeframe will be highly complex and challenging, but together with collective strength we can build a world class (water services) system," she said.
Last year 40,000 people in New Zealand lived with "boil water" notices, and each year an estimated 34,000 become ill from drinking poor quality water. The Three Waters Reform ensures all New Zealanders will have safe, affordable drinking water and waste water and stormwater networks that protect the environment.
It's estimated that half of all sewage plants in the country may need to be upgraded in the next decade to meet public expectation and stricter environmental regulations.
The projected costs to maintain and upgrade water services infrastructure is $120-$185 billion over 30 years. The government has completed some modelling on costs.
● The average annual household water costs without reform by 2051 would be $1900-$9000; with reform $800-$1640.
● Projected gross domestic product growth with reform over 30 years would be $14-$23b with 6000-9000 jobs being created.
● At present, 4900 council staff support the delivery of services to 4.3 million customers, with water assets worth $54.6b.
● The current average household water cost in Auckland is $1060; without reform it would rise to $1910, with reform fall to $800. A total of 1200 new jobs would be created.
There would be significant savings for households in other regions, for example:
Far North: Current cost $1120; $8690 without reform; $800 with reform; 83 jobs.
Whangarei: Current cost $1860; $4060 without reform; $800 with reform; 67 jobs.
Thames-Coromandel: Current cost $2550; $5450 without reform;$1220 with reform; 9 jobs.
Western Bay of Plenty: Current cost $2150; $4050 without reform; $1220 with reform; 45 jobs.
Taupō: Current cost $1400; $7310 with reform; $1220 with reform; 86 jobs.
But savings vary depending on location and accessibility.
Hamilton: Current cost $1070; $2740 without reform; $1220 with reform; 183 jobs.
Tauranga: Current cost $1350; $3060 without reform; $1220 with reform; 146 jobs.
Gisborne: Current cost $990; $8690 without reform; $1260 with reform; 27 jobs.
Christchurch: Current cost $920; $2720 without reform; $1640 with reform; 526 jobs.
Buller: Current cost $1620; $8690 without reform; $1640 with reform; 9 jobs.
A potential low-system is set to form on the northeast coast of New Zealand.