Report from global economic consultants Castalia ‘debunks’ Government claims that amalgamating the water services into four big regional authorities would save money.

Analysis: Northland may be cut off from Auckland and the country by a new Level 3/4 boundary – but listening to the talk from councils in the north, the area might as well be an island unto itself.

Whangārei and the Far North have both now voted to walk away from the Government’s big Three Waters reforms, and neighbouring Kaipara District Council last week passed a strongly-worded motion criticising the water plans.

This morning, Whangārei mayor Sheryl Mai has provided Newsroom a report her council commissioned from global economic consultants Castalia. She says it debunks Local Government Minister Nanaia Mahuta’s claims that amalgamating the water services into four big regional authorities would save money.

The findings are of national significance, she argues. “The report shows the so-called savings promoted by Government are unlikely to occur, which means the reforms are likely to produce poorer outcomes for most New Zealanders.”

In what could drive a big wedge between the country’s 67 local councils and the Government, if confirmed, Mai says the Government has offered Whangārei – the loudest critic of the reforms – an extra $90m financial sustainability payment to sign up.

That is on top of $38m “better off” funding to improve its water, housing and jobs infrastructure, and another $5m allocation to compensate for stranded assets.

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“My understanding is that not all councils are eligible for the financial stability portion allocation,” Mai tells Newsroom.

As generous as that offer will seem to some smaller councils, Mai says it would be “derisory” compensation for handing over $1.2b of drinking water, wastewater and stormwater assets.

The Department of Internal Affairs doesn’t characterise the money as compensation for the assets, but as a remedy for the council’s reduced capacity to borrow to provide its ratepayers other infrastructure. Essentially, councils borrow against their water assets like individuals do against their homes; the money isn’t necessarily used to pay for the water infrastructure.

The department has supplied councils with a new financial impact assessment that finds the loss of Whangārei’s water assets and revenue would have the effect of lowering its credit rating a notch, and lowering its headroom to borrow by $90m – hence the provisional of a financial sustainability payment.

Local Government Minister Nanaia Mahuta explains the $2.5 billion Three Waters infrastructure support package to mayors and councillors at the Local Government NZ conference. Photo: Jeremy Hill Photography

Whangārei District Council chief executive Rob Forlong said he had talked with Internal Affairs officials, who confirmed the provisional offer of the financial sustainability allocation, part of a $500m fund to ensure councils are “no worse off”. It is subject to detailed due diligence.

Newsroom has been supplied a copy of the assessment. It shows other councils that may be entitled to financial sustainability allocations are South Waikato ($19m), Manawatū ($2m), Hutt City ($28m), Wellington ($158m), Waitaki ($10m) and Dunedin ($2m). Hutt City’s Campbell Barry is a cheerleader for the reforms, but some of the other mayors have expressed uncertainty … though that could be said of more than 20 of the country’s mayors.

While the Northland councils have been the most forthright in their rejection of the Three Waters reforms, there are increasing mutterings throughout the rest of the country. Phil Goff says he doesn’t see what’s in it for Auckland; Lianne Dalziel is dubious about its benefits for Christchurch, and this week I’ve been supplied with advice to Dunedin councillors that casts doubt on the reforms.

Ashburton | Auckland | Buller | Carterton | Central Hawke’s Bay 
Central Otago | Chatham Islands | Christchurch | Clutha | Dunedin 
Far North | Gisborne | Gore | Grey | Hamilton | Hastings | Hauraki 
Horowhenua | Hurunui | Hutt | Invercargill | Kaikōura | Kaipara 
Kāpiti Coast | Kawerau | Mackenzie | Manawatū | Marlborough 
Masterton | Matamata-Piako | Napier | Nelson | New Plymouth 
Ōpōtiki | Otorohanga | Palmerston North | Porirua | Queenstown Lakes 
| Rangitikei | Rotorua | Ruapehu | Selwyn | South Taranaki 
South Waikato | South Wairarapa | Southland | Stratford | Tararua
Tasman | Taupō | Tauranga | Thames-Coromandel | Timaru | Upper Hutt
Waikato | Waimakariri | Waimate | Waipā | Wairoa | Waitaki | Waitomo
Wellington | Western Bay of Plenty | Westland | Whakatāne
Whanganui | Whangārei

Garry Moore was a Labour loyalist when he was Mayor of Christchurch; now he’s torn up his membership card. He called a public meeting this week, by Zoom, to discuss and oppose the changes. He tells me 126 people attended. “I’m hoping local government is slowly waking up!”

Moore has written to Duncan Webb, the Government MP and financial expenditure select committee chair, warning that political careers may stand or fall on the outcome of the Three Water changes. 

“If these supposed reforms are shoved through within your lifetime you will witness that Labour created the privatisation of water,” he writes. “There is little, if any, potential for local input to water planning in what is being proposed by the Government, of which you are a whip. The Labour Party is continuing down the path established by Roger Douglas and the neo liberal economic disciples who still reside all over the place.

“It’s time to stop. It’s time to pause and seek alternative solutions. There is no debate about what your Government is attempting to achieve regarding high standards for water. However, if these proposed reforms are forced through the next local government elections will be fought on one topic. Water.”

Newsroom has sought Mahuta’s response to the report.

Meanwhile, to Mai there’s a bigger picture. As well as pushing for the amalgamation of Council-run water, wastewater and stormwater services, she says, the Government is centralising health, planning and polytechnics. “While we can all agree we need to protect our water for all New Zealanders; any change needs to be based on facts, not a deeply flawed ideology.”

Newsroom Pro managing editor Jonathan Milne covers business, politics and the economy.

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