Councils will get over $750 million to upgrade their water systems, but they’ll have to opt in to a reform programme if they want more

The Government has announced it will give $761 million to councils and launch a programme to reorganise water assets under regional entities.

That block of funding will include $51m for Taumata Arowai – a new water services regulator that will enforce nationwide drinking water standards – and $30m to help rural water supplies meet safety standards.

Councils will have to opt in to a reform programme to get the money, and the Government has signalled a much larger pot of it will be available depending on how councils move to meet the goals of that programme.

Local Government Minister Nanaia Mahuta said the announcement would give the reform programme “real impetus” to get moving on a wider set of water reforms. 

The yet-to-be-decided reforms will likely focus on re-organising water assets and “service delivery” between a small number of regional entities with council shareholders. 

“There are massive looming costs across the Three Waters networks and the current service delivery arrangements, particularly for the smaller rural and provincial councils, are not well-placed to meet these,” Mahuta said.

Auckland’s Watercare and Wellington Water are examples of what those reforms could look like, but there are differences between the models.

The key one is that Watercare owns water assets like the region’s underground pipes and its stormwater system while Wellington Water is simply in charge of maintaining a water network whose assets remain in the ownership of councils like Wellington City and Porirua.

Moves to amalgamate water services owned by smaller councils along the lines of a Watercare-type model will likely attract fierce opposition from Mayors in smaller centres.

Waikato’s last attempt to amalgamate its water entities into a larger one started with the Stuff headline “Waikato pushes for water council-controlled organisation, waits for friends to join the party” and ended with Waipa District Council deciding not to join the party.

Wellington Water itself arose from the ashes, over resistance among the region’s councils to handing over the ownership of their water assets to an amalgamated entity. 

‘Our problems with drinking water aren’t limited to the Hawke’s Bay’

Prime Minister Jacinda Ardern made the announcement in Havelock North, the site of a major water safety crisis that resulted in the deaths of four people.   

“Investing in water infrastructure is about investing in the health of New Zealanders. Four years ago more than 5000 people got sick and up to four died in the Havelock North campylobacter outbreak and we don’t want to see that happen again,” Ardern said.

“Our problems with drinking water aren’t limited to the Hawkes Bay. At least 34,000 New Zealanders become ill from drinking tap water every year and many communities around the country cannot drink their water without first boiling it.”

It will cost between $309m and $574m to upgrade the nation’s water supplies to meet new safety standards that will be enforced by Taumata Arowai.

The much larger bill lies with fixing up the nation’s underground water infrastructure along with its wastewater and stormwater systems. 

The cost of upgrading wastewater treatment plants to meet environmental standards is estimated at up to $4 billion.

Government officials have signalled the cost of upgrading the country’s underground water infrastructure network could be more than this again.

Most of this infrastructure is owned by local councils whose ability to fund these reforms is constrained by debt caps, opposition to rates rises, a lack of revenue-raising tools, and outrage over water metering.

Infometrics has said councils invested $10.7b in water assets between 2009 and 2018, and were set to spend over $17b in the next decade on upgrading their assets. 

However, more investment would be needed on top of this, thanks in part due to a historic underinvestment in water infrastructure.

An Auditor-General report in 2014 found that assets were being “run to failure” by local councils who had not met the depreciation costs of their water assets over time.

Central governments have traditionally been reluctant to step in with extra funding to plug this gap – viewing it as a core responsibility of local government.

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