All NZ councils’ water networks are to be merged in new authorities three times the size of the big power companies – but to staunch the outflow of community support, they’ll get more say in governance
Analysis: In July 2020 at a water treatment plant in Havelock North, Jacinda Ardern and Nanaia Mahuta launched an ambitious Three Waters programme to amalgamate the country’s drinking water, wastewater and stormwater networks. They chose Havelock North very pointedly, to remind the country just why this was important: “More than 5000 people got sick and up to four died in the Havelock North campylobacter outbreak,” Ardern said, “and we don’t want to see that happen again.
“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.”
The Government wanted to achieve quality and economies of scale that most of the 67 councils that owned them admitted they couldn’t achieve on their own. The ministers offered $761m kickstarter funding to councils that “opted in” to the reforms. It was free money. They all opted in.
In December last year, with considerably less fanfare, the Cabinet signed off a bullish “opt-out” reform programme. The water infrastructure would be moved to the new agencies (and councils would be compensated millions of dollars) unless councils actually voted to stay outside the new system, I reported back then. If they agreed, they would get millions, even billions, in compensation. If they didn’t agree nicely, it was likely to be forced on them.
That’s where we are now. This week Mahuta, the Local Government Minister, is expected to confirm the Three Waters reforms will be mandatory. The Government will over-ride the decisions of councils like the Far North, Whangārei and Grey District that had voted to “opt out”.
Instead, the hundreds of water infrastructure networks owned by the councils, and likely thousands more rural supplies, will be taken over by four big new water authorities about three times the size of our power gentailers.
The combined market capitalisation of the five power gentailers is $33 billion. By comparison, the drinking water, wastewater and stormwater assets of the 67 district councils are valued at $100 billion, and that’s before you factor in another 75,000-plus private or rural drinking water networks.
The mandating of the water reforms should not be read as the Government bulldozing them through against council opposition. At least, not entirely. Over the past three months Mahuta, the Department of Internal Affairs and a Local Government NZ steering committee have talked with councils and iwi.
And this week, they will announce plans for more work on the controversial reform proposal to which most councils are so staunchly opposed. There was no real choice. The alternative was to walk away from reforms that by the Government’s own account are critical – or to set up a daunting election battle in communities the length of New Zealand.
The overall work will be on the rigid governance and accountability regime proposed. The Government (and many councils) want to separate the water assets from council balance sheets, to provide greater capacity for both council and the water authorities to increase their borrowing and infrastructure investment. To do that, the Government has bowed to advice from credit agency Standard & Poor’s that elected councils should not be allowed to meddle in board appointments and how the professional directors govern the entities. In short, the credit agency doesn’t trust councils.
But that is fundamentally unacceptable to most councils and so, as Newsroom has revealed, the Government is now setting up a working group to revisit the governance and accountability structures. Auckland Mayor Phil Goff, who has been invited onto that working group, says they’re awaiting the minister’s terms of reference for their work.
Beneath that umbrella are more concerns raised in the conversations with councils and iwi, that will have to be discussed further. There is local voice – how are small communities like the Chatham Islands and Kaikoura to have any oversight of their assets in these vast new water entities?
Garry Moore, the former mayor of Christchurch, has been rallying opposition. He argues there has been no account taken of how much funding local government has set aside in their Long-Term Plans to maintain and upgrade water infrastructure. “The supposed transfer of locally-owned assets to a body divorced from local accountability is just plain theft by central government,” he says.
“The four structures are cumbersome and largely unaccountable. I have sat on many boards, in both the public and private sectors, and the proposed structure is amongst the worst I have ever seen.”
There is a question about how decision-making around the Three Waters will work in with the planning system, which is under review and in many respects being centralised.
There is a big and growing problem over schools, marae and private water supplies operating outside of the current regulatory system, which were at first thought to number fewer than 10,000. But further work has revealed there are 75,000 to 100,000 water supply networks, defined as any network that supplies two or more residences. Running and regulating these looks increasingly impossible and already, the Government has started compromising.
It will not take ownership of all these. And the new water quality regulator Taumata Arowai will require that those networks serving fewer than 500 people will face less stringent audits, and will only be required to show compliance at the end-point where the water comes out the tap. According to a Cabinet paper, most of these small schemes will face additional capital and operating costs to achieve compliance with the new regulatory requirements, the risk-based approach to the regulator’s compliance, monitoring and enforcement provides flexibility and an opportunity to minimise regulatory compliance costs for smaller suppliers.
There remains an open question about how and when the country’s stormwaters will be transferred to the control of the new water entities. Much of the stormwater network is naturalised in streams and culverts; that which is underground is susceptible to the rising waters of climate change.
The final question, which comes back to governance and accountability, is around the representation of iwi Māori on the four big entities – and that is not so much a question of reassuring conservative Pākehā scared of Māori getting an equal voice. More, it is a question of how to guarantee a voice to all the dozens of iwi who are mana whenua within wide water authority regions. Entity B, for instance, would stretch from Port Waikato to Ōpōtiki. and down to Rangitikei. Yet Bay of Plenty alone has 39 iwi.
This problem is highlighted by debates like that in the South Island, where there is a live question about whether the South Island’s big Entity D would be aligned with Ngai Tahu’s tākiwa boundary, or, as the top of the South Island’s Te Tau Ihu iwi mostly advocate, aligned with Marlborough and Tasman district council boundaries that better reflect the territory those iwi claim. Already, it appears the Chatham Islands will be included in that Entity C encapsulating the top of the South Island, Wellington and the North Island right up to East Cape.
By acknowledging that these big questions must be further considered, Nanaia Mahuta would be accepting the Three Waters reforms will take longer than she had hoped and planned. The likelihood of those $100b in water assets being transferred out of the control of councils in July 2024 is now looking more remote.