Whether you're glass half empty or glass half full, there's trouble in our Three Waters. The numbers are huge, the opposition loud and the narrative increasingly murky. But it's clear our drinking, waste and stormwater is failing New Zealanders and our environment. Infrastructure New Zealand general manager Claire Edmondson puts the case for change.
There's more than $50 billion buried under our communities, invested in pipes bringing our drinking water, and removing waste and stormwater, and it could take four times that to bring it up to scratch.
Scotland's Water Industry Commission found $120b-$185b is needed over the next 30 years to meet drinking water and environmental standards, and upgrade it fit for the future. The range, based on numbers provided by local government, is considered an underestimate.
It's generally accepted that change is needed – there's not much option in the face of a failing status quo. The 2016 Havelock North water contamination event was a particular wake-up call. The Government has proposed that four entities manage Three Waters assets and operation, to be owned by the local councils covered by them.
At face value, it's a dead-set win for councils – overnight transferring debt, statutory responsibilities and issues caused by historical underinvestment to the Three Waters entities, then able to address any shortcomings with a superior economy of scale some councils can only dream of.
Drinking water, wastewater and stormwater is a massive part of any local council's operations and asset base – whatever state it's in – and for some it's less asset, more liability, which is exactly the point.
Yet recent months have seen opposition to the proposed reforms and many councils have openly expressed concerns.
There's the loss of local control. There's apparent concern the new system would not be up to scratch, and lack of compensation. There's also concern that ratepayers in areas with better infrastructure will end up subsidising significant work needed elsewhere in their region.
Loss of a significant asset may impact on debt ratios and ability to borrow, even after debt transfer to new entities. Some councils may be concerned about loss of revenue, used to fund or subsidise other activities. Some see it as leading to privatisation of three waters, even though entities would be council-owned and a referendum would be needed to change that. Independent boards would include council, iwi and water experts.
There are some matters where Infrastructure New Zealand is still keen to see clarity. One is how pricing will be set and how independent economic regulation would operate. Water entities will need to be able to raise debt on similar terms to councils, which can raise debt at superior rates through the Local Government Funding Agency than they would get individually.
Another critical discussion that needs to be had is how Three Waters will be managed in a resource management system that is set to move from an effects-based system to an outcomes-based approach where effects are to be minimised and outcomes enhanced. How those outcomes are monitored remains a question.
There is, of course the opportunity to learn from similar systems operating elsewhere, rather than completely reinventing the wheel.
The current system is broken and literally in need of significant repair. Change is needed – there are social, economic and environmental costs in not doing so. We need to clarify governance, transparency, accountability to ratepayers and how to keep costs as low as possible.
Councils on their own will be unable to do that without substantial rates or user charge increases and given local government's performance to date in addressing these challenges, it's unrealistic to expect councils to sort this out amongst themselves.
The Government now needs to engage directly with New Zealanders to hear what they think.
The need for Three Waters Reform has been discussed over many decades, and action is needed. The Three Waters Reform Programme represents a once-in-a-lifetime change that will affect future generations and a wide coverage of views is vital.
- Claire Edmondson was appointed Infrastructure New Zealand's general manager in July 2021. She has more than 18 years' experience as a consultant specialising in central and local government public policy advice, working on significant issues.