Councils expected to foot a near $48 billion bill for Local Water Done Well

To date, 62 of 68 council water services delivery plans have been accepted by the Secretary for Local Government. Photo / Mark Mitchell

Councils are expecting to spend almost $48 billion on water infrastructure in the next decade under the Government’s Local Water Done Well reforms.

In recent presentations with stakeholders, the Department of Internal Affairs said that $47.9b is forecast to be spent on water services infrastructure in the 10 years to June 2034.

That includes $17b on drinking water infrastructure, $22.5b on wastewater infrastructure and $8b on stormwater infrastructure.

These figures are based on capital expenditure forecasts submitted in Water Service Delivery Plans that councils were required to submit under Local Water Done Well.

Local Government Minister Simon Watts said he was confident taxpayers and ratepayers will be better off under his plan than under the previous Government’s Three Waters plan.

To date, 62 of 68 council water services delivery plans have been assessed and accepted by the Secretary for Local Government.

Waitaki District Council needs to amend its plan and has until June 2026 to re-submit it.

More than 40 different water entities are expected to emerge from these reforms, with some councils leaving the doors open to join multi-council council-controlled organisations in the future.

S&P Warning – ‘In capital markets, off the books doesn’t always mean off the hook’

A report in late October from S&P has warned that moving water assets into separate joint or standalone entities may not ease underlying credit risk and ratings on some councils may continue to face downward pressure.

“In our view, water council-controlled organisations (WCCO) have the potential to leverage up quickly. If this occurs, it could have an eventual impact on the credit ratings on parent councils,” the report said.

Council-controlled water organisations formed under Local Water Done Well have been given the ability to borrow up to a level equivalent to 500% of operating revenues through the Local Government Funding Agency.

The agency also increased maximum borrowing amounts for high-growth councils from 280% of yearly revenue to 350% last year.

Earlier this month, the Government doubled its emergency backstop for the liquidity facility for the funding agency, from $1.5b to $3b, and extended it to 2037.

Asked about S&P’s warning, Watts said “we are regularly engaging with ratings agencies around ensuring that they have a clear understanding of the reforms that we’re undertaking”.

“I’m confident that the underlying financial position of local government entities in the water space is in a position which is sustainable,” he said.

‘Huge levels of duplication’ - Labour’s Concerns

Labour’s Local Government spokesman Tangi Utikere said the near $48b price tag was a significant amount of money, but pointed out that the expected cost of Three Waters was significant too.

The previous Government’s reforms were forecast to cost between $120 and $185b over a 30-year period.

“The point of difference, of course, is it’s [Local Water Done Well] going to cost more because they’re not going to be able to get the efficiencies that were proposed under the former model. The Government is basically setting communities up to fail when it comes to water infrastructure and meeting their community needs,” Utikere said.

Three Waters originally proposed the creation of four large multi-region publicly-owned water entities, later increased to 10. The coalition Government repealed those reforms, replacing them with Local Water Done Well.

“To have 42 separate water entities means huge levels of duplication across the board. But also, they’re not going to get the efficiencies that were encouraged [under Three Waters]. It’s going to actually cost councils much more,” Utikere said.

The minister’s response

During the 2023 election campaign, Watts claimed Local Water Done Well would be cheaper than Labour’s Three Waters reform.

He said, under his plan “rates wouldn’t increase” and it would supply “more affordable drinking water and wastewater for locals”.

When asked two years on whether Local Water Done Well has proved to be more affordable than the last Government’s reforms, he said it has.

“If you simplistically look at how much the last Government spent on Three Waters and you look at how much I have spent, that number would be a stark contrast. We have achieved [this] degree of consolidation and reform with very little central Government funding.

Local Government Minister Simon Watts said the Government was dealing with a "very unavoidable situation". Photo / NZME

“We have simply outlined the target destination and the target state and worked with councils to get there, and they have done that off their own backs. As a result, the broader taxpayer is better off and broader ratepayers are better off without, you know, money being spread around, which was a major reality of the last Government’s reforms.”

In regard to rising water costs, Watts said the Government was dealing with a “very unavoidable situation” – addressing years of under-investment in water infrastructure – that was always going to come at a cost to consumers.

“We need to have a sustainable basis going forward, and hence the reforms that we’re undertaking. And mechanisms that can help reduce the pressure of that investment, that is critical and necessary, on ratepayers, are very much front of mind for us,” he said.

Troy Matich is a political reporter with Newstalk ZB, working from Parliament’s press gallery. She joined NZME in 2025, previously working for RNZ as a producer for Morning Report.