Proposals for major reforms to the funding of the so-called ‘three waters’ – drinking, waste, and stormwater  – are on a timetable to go to Cabinet for discussion in June next year, with final decisions by the end of 2019, Local Government Minister Nanaia Mahuta announced today.

Cabinet papers released with the announcement strongly suggest the outcome will see central government pay a far larger chunk than at present of the multi-billion cost of upgrading the country’s water reticulation, sewerage and drainage systems than at present, reflecting the growing inability of many councils to fund projects that, in some areas, are becoming urgent or are overdue.

The papers show that by mid-2019, the government intends to be in a position to draft legislation on: system-wide regulation of drinking water, along with a new risk management regime for sources of drinking water; targeted change to environmental regulation of wastewater to lift environmental performance into the existing framework of the Resource Management Act; greater transparency about the operation of wastewater and stormwater systems in order to promote better practice; and creation of new regulatory institutions to oversee those outcomes.

By late 2019, Cabinet would be facing decisions on new service delivery arrangements for all three of the water types.

The downside for local councils may be some loss of control over their current form and funding arrangements, although Mahuta acknowledged ” there remains anxiety about ‘three waters’ service delivery” and promised that the policy development “will not be done in a vacuum.

“We will engage with the sector,” she said.

Mahuta’s Cabinet paper on the Three Waters Policy, discussed by ministers before public release this week, stresses that “New Zealand’s current system of local government is an outlier compared to other OECD countries”.

“Unlike many other countries, local authorities in New Zealand play a more significant role in infrastructure provision than other countries. I wish to consider how our two levels of government may work together to deliver intergenerational wellbeing,” she said.  “Our issues and our challenges are the same, and we need local government to be a critical partner in addressing them.”

The Productivity Commission investigation into new ways of funding local infrastructure, other than rates, is also a key input. Its recently published issues paper canvassed a variety of funding models, including infrastructure bonds, targeted rates, and public-private partnerships, although “continued public ownership of water assets is our bottom line”, Mahuta said.

On three waters policy the Cabinet says “the scale of the challenges indicates that the status quo is not sustainable in the long term”.

“There is, moreover, an opportunity to do things differently. Both domestic and international models demonstrate that better quality services can be delivered to consumers more efficiently.”

In anticipation of today’s release, councils’ peak body, Local Government New Zealand, last week issued a position paper urging the government to make safe drinking water its top priority among the Three Waters, allowing existing and relatively recently imposed freshwater regulation to be implemented. It also opposed any enforced amalgamation of water services among small local bodies that are struggling to afford upgrades.

In some regions, small and shrinking local populations are combining with ageing infrastructure and the tourism boom to create potentially unsustainable financial pressures on ratepayers.

Mahuta says in the Cabinet paper she will “share some initial thinking with key relevant ministers in December 2018 and report back in April 2019 with a set of guiding principles anchored in the goal of intergenerational wellbeing” before taking final policy recommendations to Cabinet.

The policy programme will “develop high-level service delivery options for further consideration”, said Mahuta. 

Weak regulation across the water sector was an issue.

“There is no formal system of economic regulation in place to ensure that consumers’ long-term interests are protected, or that services are value for money,” the water policy Cabinet paper says.

The paper also identifies low voter turnout and “questions around how truly representative and reflective of their diverse communities local governors are”, along with “capability and capacity issues throughout the sector”. 

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