Walter and Holly Raki and their kids will be at Kawerau’s Anzac Day dawn service at the Ex-Navalmen’s Club. Half the town of Kawerau is expected to turn out. The marae will put on breakfast, and then new mayor Faylene Tunui will unveil a granite sign honouring the fallen. 

Walter’s father served in the army, and both Holly’s brothers served. Many here lost family to war. With only 7,000 residents, it’s a tight community. They have lived alongside each other here for generations, working at the Tasman pulp and paper mill.

Kawerau District is just 24 sq km – you can walk from one side to the other in 20 mins. Yet locals have enjoyed some of the cheapest council infrastructure costs, thanks to mill owner Norske Skog.

Kawerau was founded in 1953 as a base for the construction of the big mill and, for many years, the mill propped up the town’s economy and infrastructure.

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Kawerau households pay some of New Zealand’s lowest rates – just $2,243 on average, according to the Taxpayers’ Union. Their fixed water charges were the cheapest in the country at just $82 a year, according to a Fair Go survey.

So does Kawerau give the lie to Government arguments that bigger is better? That there are efficiencies of scale to be gained by regionalising the provision of infrastructure like water, wastewater and solid waste disposal?

No. As always, the devil is in the detail. Norske Skog pulled out of the paper mill in 2021; it’s said to be in talks to sell some of the remaining assets to Oji Fibre, which operates the adjoining pulp mill. 

“Please do not create fake news … We are not able to comment on this matter until such time as negotiations with potential purchasers of the Tasman Mill assets are complete.”
– Carsten Dybevig, Norske Skog

The Norway-based multinational held its annual meeting in Oslo on Friday; shareholders approved financial statements showing that since it walked away from Kawerau, the company’s pre-tax earnings had improved from 662 million krone in 2021, to 3,105 million krone (NZ$478m) last year.

Carsten Dybevig, a former Conservative Party politician who is now Norske Skog’s vice-president of communication and public affairs, declined to answer questions about the disposal of the Tasman paper mill assets. “Please do not create fake news,” he said. “I am sorry to advise that we are not able to comment on this matter until such time as negotiations with potential purchasers of the Tasman Mill assets are complete.”

Norske Skog has already sold some of its Kawerau land and assets, according to its annual report, as well as offloading its Nature’s Flame wood pellet fuel business to Talley’s Group last year, for $26m.

The numbers aren’t so good for those it left behind. With the paper mill’s closure, the town lost 160 jobs, and $1m rates revenue that helped pay for its water and waste infrastructure.

Now the Infrastructure Commission and the Government-commissioned Review of the Future for Local Government have both raised questions about how smaller districts remain viable. There’s talk of merging districts like Kawerau and Whakatāne (which entirely surrounds Kawerau), three or four Wairarapa councils, or several south Canterbury councils.

Infrastructure NZ, which includes many councils as members, has met with officials to discuss future proposals around council amalgamations.

It’s not just Kawerau that faces challenges. Kaikoura has just 4,200 residents; Mackenzie District just 5,500. Clutha seems verily populous with its 18,000 residents, but claims to have the second longest drinking water network in the country at 3,500km. Chatham Islands has just 800 residents and already relies on Canterbury for many services.

Some councils like Kawerau rely heavily on rating big businesses; if some of those businesses leave town, they’re in trouble.

Annual rates bills – residential and commercial

The Government has noted Te Waihanga Infrastructure Commission's recommendation that, where appropriate, local government boundaries should be redrawn to better with align urban labour markets, commuting and urban growth patterns, and to reflect the costs and benefits of integrating regional planning and infrastructure provision.

Infrastructure Minister Grant Robertson says: "The merits of boundary changes are an element that will be considered as part of the Review into the Future of Local Government."

The independent review's report is to be published in June, but an interim report already gives clues to its thinking: "New approaches to funding and financing mechanisms will be needed to ensure local authorities are viable and sustainable," it says.

How viable are small towns?

The last wholesale programme of amalgamations was the local government reforms of 1989, which reduced the number of local and regional units of government from more than 625 to 94. Since then, there has been the occasional consolidation, like the assimilation of Banks Peninsula into Christchurch City Council, and of course the Auckland Super City.

They were controversial then; they would be even more so now. There's already local resentment at the Government's Three Waters reforms, which are seen by some community leaders as an effective seizure of assets (though legally, the ownership remains with councils).

Consolidating 67 local council water providers into 10 regional water corporations – which is the latest plan – might highlight the need for greater geographical alignment between the boundaries of different agencies and service providers.

"We just got told we weren't thinking big enough."
– Craig Rowley, Waimate mayor

Already, the government has centralised 20 district health boards into four regional divisions of Te Whatu Ora. It's merged 16 polytechs into Te Pukenga. And it's brought together 10 school education areas into three regional delivery groups, or hautū. As Public Services Minister, Chris Hipkins set in place a work programme to strengthen the regional leadership framework for the public service to support collaboration across agencies in the regions. 

According to a Cabinet Paper: "The fundamental problem the framework is trying to address is continued fragmentation and duplication across agencies on cross-cutting issues, such as child wellbeing and housing."

But equally, it might create greater community resistance to the Government's programme of centralisation, that's seen as an assault on localism and provincial communities.

As Craig Rowley, mayor of Waimate, says: "We're fifth from the bottom nationally, in population. When they first talked about water reforms, there was some money offered from the Department for Internal Affairs for councils looking at working together.

"So we spoke with our neighbours in Mackenzie and Timaru and Ashburton and we were quite keen to look at a sub regional model, just sort of locally. And we went to Department of Internal Affairs and said, we'd like to do some work on this. And we just got told we weren't thinking big enough and no, there wasn't any funding available."

That raised his ire. Never mind the Think Big of the Muldoon Government, this Government is demanding councils think bigger.

But local pride aside, the question remains of the viability of the country's smallest councils.

"It is very difficult to achieve an amalgamation of councils under current settings whereby a majority of voters need to approve it. The status quo is a known, the future is an unknown. Communities value local identity and voice."
– Martin Jenkins, Local Government Futures report

Doug Leeder is chair of the Bay of Plenty Regional Council.

From 2015 to 2017, the regional council and the local authorities commissioned Martin Jenkins to report on the futures of communities of interest in the Bay.

"Any case for change needs to be very clear, compelling and go beyond arguments about financial efficiency," he reported. "While many communities have rejected amalgamation proposals, they are not necessarily against change – particularly in the form of more shared services or more integrated functions.

"Communities are often comfortable with councils sharing services with others, where it makes sense, to be more efficient or effective in what they deliver to residents and businesses. This means there is significant scope for councils to improve the way that their functions and duties are provided, while retaining local representation and influence over decisions."

The report warned that uncertainty about the impact of proposed changes on an individual’s rates was an issue for many voters, particularly for older populations who were on fixed incomes. There was often concern about the possible impacts of wealth transfers – for example, redistributing debt, assets and rates burdens among communities.

"It is very difficult to achieve an amalgamation of councils under current settings whereby a majority of voters need to approve it ... The status quo is a known, the future is an unknown.

"Communities’ value local identity and voice – this is partly to do with a strong sense of identity and historic affiliations, and partly a very real attachment to local decision-making."

"The success of Kawerau has been underwritten by the biggest ratepayer. Now that biggest ratepayer is gone, a lot of the assets that they contributed to Kawerau need to be maintained.”
– Doug Leeder, Bay of Plenty Regional Council

Newsroom asked Leeder how manageable it would be for Kawerau and other small councils, remaining on their own, to handle increasingly complex challenges like renewing wastewater consents, collecting solid waste or upgrading roads, especially with tougher quality standards and greater input from iwi Māori.

It will be challenging, he says, and higher health and environment standards for water and waste mean it will be expensive for these small communities. They need to understand that. “These consents are coming up for renewal.”

In Kawerau, for instance, the wastewater processing is in good shape – but their deep infiltration beds were built with a rate-take heavily reliant on Norske Skog and a few smaller corporates. “Faylene is right, the success of Kawerau has been underwritten by the biggest ratepayer. Now that biggest ratepayer is gone, a lot of the assets that they contributed to Kawerau need to be maintained.”

In Opotiki, he says they have a primary Imhoff tank that just screens out the solids. It then goes into a holding pond, and then there’s provision to overflow onto the land. “They are allowed to overflow the effluent pond 41 days a year. Now, you give me one dairy farmer in the country who's allowed to overflow the effluent pond at all? So that's a particular issue. Is the community going to allow that? The short answer is no.”

Then in Whakatāne, there are challenges in several communities. Matatā was going to get a reticulated water scheme some time ago, but that failed due to iwi opposition. That means all the homes and businesses are on septic tanks, and there are real concerns about leachate levels.

Edgecumbe’s treatment hasn't changed since the 1987 earthquake.  There’s a primary treatment pond that goes into the Awaiti stream and then into the Tarawera River and out to sea. Similarly in Taneatua – the wastewater pond overflows into the Whakatane, barely 10km upstream from the drinking water intake.

“The involvement in terms of partnership with iwi Māori is going to increase. And especially with discharges to fresh water, it's not unreasonable to expect Māori to have a view that current practices are probably no longer appropriate. The bar is going to be high.” 

The fight begins

Faylene Tunui says Kawerau's 7,000 residents would fight any amalgamation.

Walter Raki agrees. As a water and waste maintenance engineer, he's one of just a handful of people still working at the paper mill – keeping things ticking over.

Presumably, it's until Norske Skog can complete a fire sale of its remaining assets.

"After Covid we took a big hit," he says. "And the closure of the mill was a bit of a downer for the community. But people are against amalgamating. If you amalgamate, you're just picking up someone else's debt, you know?"

"I know for a fact that people pushed back before, and didn't want it to happen. And they'd push back again."

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

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