The wholesale merger of New Zealand’s many local water providers is one outcome of the Government’s long-awaited “conversation” with local government about who manages our water, and how. 

But local government isn’t keen on the idea. LGNZ, which represents councils, told journalists in a briefing last week that it was opposed to “mandatory aggregation”, which could see regional utilities providers merged into larger organisations. 

The “conversation” with local government follows a wholesale review of water in New Zealand following the Havelock North water scandal, where poor drinking water caused 5000 residents to fall ill and at least four people to die. 

Local governments own the utilities providers that look after what are known as the “three waters”: drinking water, waste water, and storm water.  And they are keen to keep it that way. 

LGNZ told media it wanted mandatory aggregation taken “off the table”.

“This is because New Zealand’s three waters assets are owned by their respective communities, not central government,” it said.

“It is these communities who are best placed to make decisions about how they structure their assets, and community buy-in is a vital and necessary part of any form of local government restructure”. 

But the Government has ignored that advice and put aggregation on the table, as one of three likely solutions that “provide the best fit for the New Zealand context”. 

A cabinet paper released by local government Minister Nanaia Mahuta listed three options for addressing the growing water crisis: proceeding with regulatory reform only without forcing councils to meet those reforms; establishing a three waters fund to help councils finance improvements; or, finally, establishing an aggregated system of publicly-owned fresh and wastewater providers. 

The last option comes with the added heft of having been recommended by the inquiry into the Havelock North water scandal. It has been successful in Scotland, where one state-owned company looks after water for the entire country.

But the Government could opt for the path of least resistance and allow councils additional funding to improve their own infrastructure. 

The second outcome, establishing a “three waters fund”, is likely to be popular with local governments, which currently face multiple pressures on their finances. 

Large councils, like Auckland Council, are up against their debt limits, having spent up large absorbing the effects of the recent population shock. 

Smaller councils face similar pressures, but for the opposite reasons. LGNZ noted in its briefings that migration to cities was eroding the ratepayer base in some small towns. The hefty cost of maintaining water infrastructure is therefore shared by fewer and fewer ratepayers. 

Other local government funding options like value capture, which is currently being trialled in Auckland, are not able to be rolled out in shrinking communities which nevertheless need running water. That means the three waters fund is likely to be funded directly by central government, rather than through new means of raising revenue. 

Whatever changes are made, we’re not going to hear about them any time soon. Mahuta, alongside Commerce and Consumer Affairs Minister Kris Faafoi, will only report back to Cabinet with concrete policy in late 2019.

This means any legislation resulting from the review will be introduced in 2020.

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