Debate about the benefits of corporatised or privatised water models has been simmering for several years. Recently, however, it has gained a higher profile thanks to the $58 million debt from the Mangawhai sewage treatment station, which crippled the Kaipara District Council. That case highlighted the inability of small councils to afford costly infrastructure. It has been suggested, therefore, that they should stop providing water services. Instead, a handful of water and wastewater companies would cater for the whole country, operating on commercial lines outside the normal council structure.
The blueprint for such a development is Watercare Services, the council-controlled organisation that provides water and wastecare services to 1.5 million Aucklanders. The experience and expertise of its executives should play an important role in any discussion on the pros and cons of extending that model. Mayor Len Brown has decided, however, that this will not occur. "Council expects that Watercare will not engage in these governance issues as it considers these matters to be the sole prerogative of the shareholder," he says in a letter to the Watercare board chairman, Ross Keenan.
Watercare seems to be not too put out. Mr Keenan says that while it gets involved in operational matters outside Auckland, such as helping with the Christchurch earthquakes, it has always stayed well away from consolidation, ownership and governance issues. It recognises that water is an extremely sensitive issue, with a great fear of privatisation, and the safe territory for Watercare is to stay away and let others take the initiative.
That diplomatic response ignores the insight and authority that Watercare could and should bring to any discussion. The Mangawhai experience has confirmed this is a debate that must be had. In that context, Mr Brown's muzzling of Watercare is totally wrong. It is also utterly unnecessary. The Mayor and the council may have views that differ from that of Watercare, but that matters little. The key point is to have all relevant voices heard.
As much was emphasised when Mr Keenan was asked if the Watercare model could work elsewhere in New Zealand. He said yes, and that he was astonished at the efficiencies and benefits gained through the consolidation under Watercare despite initial misgivings. Among these benefits has been bringing forward upgrades in places such as Helensville and Pukekohe.
It may well be that this model is not suitable for the rest of the country. Even with just four to six water and wastewater companies, there may not be the population numbers to support a corporate model. Issues around pricing and policy may also be magnified in smaller communities. Nonetheless, something is needed to avoid a repeat of the Mangawhai fiasco. Solutions will be recommended by an infrastructure expert advisory group, which was established as part of the Government's Better Local Government reforms.
The Watercare model is one of a number of options. Public-private partnerships remain another for small councils seeking investment funds for water and wastewater plants. If such partnerships are tailored astutely, private participation will bring cost efficiencies and financial discipline while councils retain the final say on policy and pricing. Privatisation is another alternative.
However, Watercare, in its brief tenure, has suggested the corporatised model can produce more efficient and effective services for most ratepayers. It has a tale to tell, whether or not that is applicable to the rest of New Zealand. It should not be stopped from relating it.