Cash-strapped Far North District Council has pencilled in a 33 percent rates rise next year to start work on mandatory drinking water and wastewater upgrades, due to the new Government’s repeal of the Three Waters reforms.
That increase would be about $1000 next year for many households – more than twice what it would have been.
Northerners aren’t alone; West Coast councils are planning 30 percent-plus rates hikes too, and Hamilton ratepayers face a 25.5 percent increase.
Water quality regulations require the Far North council to replace or upgrade six 70-year-old wastewater treatment plants, at a cost of hundreds of millions of dollars.
The council had tightened its belt in order to keep the rates rise to 14 percent – then the Government confirmed it would be liable for water assets and that blew out to 33 percent.
“That’s not doable,” says Mayor Moko Tepania. He says councillors will have to make tough decisions in the New Year, around cuts to their capital works programme, and day-to-day staff and services.
Four of the wastewater plants due to be replaced are feeding treated sewage into the Hokianga Harbour. The council has agreed to a temporary three-year extension to their consents, from next week, while it designs land dispersal schemes rather than harbour discharges.
Jessie McVeagh grew up beside Hokianga Harbour; now she is fighting to stop partially-treated sewage being discharged into the same waters where her 14-year-old son Kahu now swims.
“We grew up just drinking water out of our rivers, eating kai moana off the rocks, swimming – it didn’t occur to us that you could get sick. Coming back home before Kahu was born, I thought our water was really clean – but slowly I realised, it’s not.”
“Key principles of our future plan for the delivery of water services include … fit-for-purpose service delivery models and financing tools, such as improving the current council-controlled organisation model and developing a new class of financially separate council-owned organisation.”
Simeon Brown, Local Government Minister
“The wastewater plants don’t function. The Opononi discharge is often non-compliant – they’ve had abatement notices. The commissioners said immediate work has to be done.”
She is one of an increasing number of community leaders and water quality experts calling on the new Government to step in to contribute to the enormous costs that its Three Waters repeal lays at the door of local communities.
Buller mayor Jamie Cleine is proposing a 31.8 percent rates rise, which includes upgrading seven small water supplies each supplying as few as a hundred households. He says that rates rise is “totally intolerable”.
“For those that were staunchly opposed to the Three Waters reforms, there must be some ‘oh, crap’ moments now for councils across the country that are facing the reality of a letter from the minister last week saying, ‘great news guys, the responsibility and ownership of your assets is going to stay with you’.”
Cleine gives the example of Waimangaroa, just 16km up the coast from Westport. Its water supply comes from a weir on a stream on the Denniston Plateau, in the mountains behind the village. It is run down into locals’ taps, completely untreated. They have a permanent “boil water” notice.
The council had been quoted $2 million to install a protozoa barrier and other treatment required to get the water up toe the standards required by new regulations. It couldn’t afford that, for a water supply that serves just 130 households, a panelbeater and a coffee cart.
One option might be to return the water supply to the local community, and for the council to wash its hands of responsibility.
If the Government is to make councils liable for the water assets, Cleine says it must contribute.
“All these little supplies, which didn’t used to have to achieve that quality standard, and now do –they should fund that infrastructure to get it up to speed,” he argues. “But the problem still remains, if you have a treatment plant, in those remote places, with not very many people serviced by them, the operating costs are quite huge.”
Water runs brown
In Waimangaroa, Barry and Sue Lightbown say there are no jobs. Most of the 250 residents, like them, are retired.
But Barry Lightbown has skin in the game – he’s a former plumber and Christchurch plumbing and drainage inspector who’s been pushing for better Buller District Council oversight of the small water supply.
“It was put in as a community supply in the 1950s by volunteers, and somewhere along the way, no one knows when, the council took ownership of it.”
Residents are used to having the water run brown from their taps; that’s not the problem. The problem is the contaminants they can’t see – and unfortunately, the water’s turbidity makes the cheap solution of household UV filters ineffective.
Lightbown argues household treatments would be better than nothing.
“We’re hamstrung because New Zealand signed us up to World Health Organization and United Nations treaties for water treatment. And the standards are way too high. Politician talk about Rolls Royces and Ferraris. What we want is a Toyota.
“We just can’t afford a $2 or $3 million water treatment plant sitting up there. How do 130 ratepayers pay for that?”
He doesn’t think the previous Government’s Three Waters reforms were ever going to fly, and he’s sick of Taumata Arowai telling them how they should treat their water.
“The new government wants these standards? They want the council to retain ownership? Then there’s got to be some central government funding to help the smaller communities. That’s the only way they can do it.”
New ‘financially separate council-owned organisations’
Newsroom has obtained a letter from Local Government Minister Simeon Brown, telling mayors he’ll relax consultation and audit requirements so they can lock in their long-term rates and spending plans.
He says the Government will retain the strong emphasis on complying with water quality rules and investment in infrastructure – but delivering that will be councils’ responsibility, rather than the role of the 10 big council-owned regional water corporations proposed by the previous government.
For the first time, he’s revealed the structure through which the Government hopes to finance water and wastewater infrastructure: by developing “a new class of financially separate council-owned organisation”.
That implies a legislated structure to separate the debts of the new council-owned organisation from council balance sheets, so it won’t constrain the ability of councils to borrow to finance other core infrastructure like roads and libraries.
He’s told mayors that a key principle will be ensuring water services are financially sustainable. “Financial sustainability means revenue sufficiency, balance sheet separation, ring-fencing and funding for growth.”
Councils had been drafting long-term plans that did not include drinking water, wastewater and stormwaters among their assets and liabilities, because Parliament had enacted laws taking them off their hands.
Legally, they’re required to approve their finalised long-term plans next year, which would have meant getting them off to the auditors about now.
Now, they must redraw those plans to include 10 years of investment in water assets, many of which are coming up for new resource consents and expensive renewals.
Furthermore, the new regulator Taumata Arowai is enforcing tougher new water quality standards.
After the Queenstown Lakes cryptosporidium outbreak in October, thought likely to have spread through an unprotected water reticulation network, Taumata Arowai has just written to nearly 30 councils highlighting similarly vulnerable water supplies. It’s warned that they must act to make those supplies compliant.
All of this adds up to big rewrites of council plans and longterm budgets. So Simeon Brown has told mayors they don’t have to reconsult on the changes, they needn’t get their consultation documents audited, and they have an extra three months to adopt their new plans.
“I want to acknowledge that councils across the country are facing multiple challenges, including pressures with water infrastructure,” he tells them. “I also want to acknowledge that many councils have done a good job of managing their water infrastructure, and that there is not a one-size-fits-all solution to moving to more financially sustainable water services.
“The Government is committed to addressing the long-standing challenges this country is facing with our water services infrastructure.”
The question of whether the new solution achieves separation from council balance sheets will ultimately be answered lenders, here and around the world. Standard & Poor, the international credit ratings agency, has provided officials view on different reform models.
Martin Foo, an analyst at S&P Global Ratings, say the extension of the statutory deadline should provide welcome breathing space for councils that need to go back to the drawing board now that the incoming government has confirmed the repeal of water services legislation.
On whether the new “financially separate council-owned organisation” would be considered by lenders to be distinct from its council owners, he says the devil is in the detail.
The rating agency would need to assess whether financial separation is genuinely achieved, not just in an accounting sense but from a credit rating angle too. Foo says there’s still something of a disconnect between the letter’s idea of “local decision-making” and financial separation. “It is not easy to disentangle political control from financial control.”
If, as speculated, there were a statutory clause barring councils from backstopping the new council-owned organisations’ debts, then he says this would seemingly tip policy slightly back in the direction of Labour’s original water services entity model, but without the co-governance.
“If councils were barred from backstopping the new water council-owned organisations, those organisations will likely face higher financing costs and won’t be able to borrow from the NZ Local Government Funding Agency, complicating the task of bridging the infrastructure deficit.”
Subjecting water infrastructure to economic regulation might ensure that higher water tariffs can be charged, Foo adds. “This could be challenging given the political focus on cost of living. Prime Minister Luxon has previously commented that while he doesn’t want council rates to go up, he seems open to the possibility of higher water charges.”
Jamie Cleine says, whatever reform path is taken, the status quo can’t continue. The country urgently needs a solution to pay for upgrading its water infrastructure: “Someone’s got to do something – it’s broken.”
The new Government gives small tax cuts with one hand and Local Governments take big rates increases with the other hand. Most of us may now have less spare money to spend.
As an FNDC ratepayer I am a bit concerned at quoted remarks from Mayor Tepania. There is no reference on the FNDC website to the rates rise quoted – no press releases or consultations that I could find. While 6 wastewater plants may require upgrades, this is in the context of 15 wastewater plants. The wastewater plant in my nearest town was replaced with a new one that came online in 2020 – so clearly this is not 1 of the 6. In the FNDC area many properties (including ‘rural residential’ like mine) have just town water supply or no water services at all. Presumably only those using wastewater services will be affected by funding needs for upgrades or replacement. Such is the benefit of local decisions.
The new government is yet to detail how it will make the National Party ‘local water done well’ policy work. It is only then that councils can assess the financial impact.
Hi Bryan, you’re in Kerikeri, right? You’re correct that Kerikeri’s new wastewater plant is not on the list of those needing new resource consents. However, the bad news is that population growth means that after just three years, it’s already nearly at capacity.
I live near Kerikeri – I get town water but nothing else – so any issues with wastewater should not affect me. This year I have had to spend around $25k replacing a failed septic system (aged, old design tank) with a modern system of the same design as that used for new-builds. I expect that my rates will not be affected, and I am grateful that these decisions remain as a function of the FNDC.
You did not address the major points I made though, particularly the lack of correlation of rates increases and the unknown nature of Government assistance to local councils for water asset maintenance.
“that population growth means that after just three years, it’s already nearly at capacity” – that, Johnathan, is the problem! It means that all the newcomers haven’t been paying the full cost of setting up home in Kerikeri – they are expecting a subsidy from existing Kerikeri ratepayers. Developers are making supernormal profits because they are not paying for the full cost of the services required by the additional homes they build – Queenstown and Wanaka have the same issues – developers walking away with hundreds of millions in profits leaving local authorities with huge investment burdens to service these developments.
Three Waters or not, the costs of dealing with our water infrastructure was never going to be covered by Council rates. As with so much else, we have for too long avoided the expense of keeping vital infrastructure maintained and intact. We boomers and younger folk, all of us, have been living off the work and sacrifice of our pioneering grand parents. Taxes are simply the dues we pay to live in a modern nation. If we are happy to live with pipes breaking down every few days, restrictions on supply, water borne diseases, etc, so be it. But let’s be real. Proper facilities cost money, if we want up to date infrastructure, we have to pay for it.
In the 2000’s I was working (as an Electrical & controls Engineer) on a number of water/waste water projects in Northland and I was quite shocked by the rudimentary nature of treatment such as from one town raw sewage was pumped out of town into basically a big pond with a brush aerator valiantly trying to get oxygen into the pond. Some people might remember pipes collapsing near Pahia/Waitangi and causing a nasty spill. Anyway in ~2007 /2008 after the Clark Government put up a good amount of funding to get a number of projects done Opus (now WSP) and MWH ( now Stantec) set up a joint office in Kerikeri to design and deliver a number of projects. Then John Key government was elected and one of the first things was that the funding was pulled and that was the end of the program to provide significant and necessary upgrades. I don’t know what was actually done and there will be others including Wayne Brown and council officers who will have more knowledge.
Don’t know if the cancellation helped to pay for the tax cuts then.
AARGH More propaganda Johnathan! “After the Queenstown Lakes cryptosporidium outbreak in October, thought likely to have spread through an unprotected water reticulation network, Taumata Arowai has just written to nearly 30 councils highlighting similarly vulnerable water supplies. It’s warned that they must act to make those supplies compliant.” There is no evidence at all that the crypto outbreak in Queenstown had anything to do with the QLDC water supply and the epidemiology was typical of human to human contact likely starting in some food premises. Also the odds are heavily stacked in that direction – there are some 8000 cases of gastro infections reported annually (they are notifiable diseases) none of which in a typical year come from Council operated water supplies. So the odds are 8000:1 that the source was foodborne or human to human contact. Also the epidemiology is quite different – a water supply source tends to result in mass infections as occurred in Havelock North.
This entire issue is one of excessive regulatory imposition and a lack of creative thinking – Ive managed water supplies in some really difficult catchments one being in the mid Murray River where the water is so turbid that on a typical day it looks like something from a flooded river – with millions of hectares of irrigated land and several cities upstream not to mention rafts of blue-green algae floating by. We also had a substantial number of small communities – yet the water service staff had no trouble treating this water through both traditional sand filtration systems and through membrane filtration to produce drinking water of the highest quality. There is a complete lack of innovative thought going on in this realm – In the council in Australia we operated dual supplies outdoor taps got a mix of raw water and in some towns mixed with treated effluent – which is a great way of disposing of treated wastes – while inside taps got treated water. One of our problems is that we are treating all of the water to the highest standard for human consumption but only about 1% of the water is put to that sensitive use – the rest of it is simply used because it is wet. There is no thought given to require new homes to install compositing ($3000) or electric incinerator ($8000) toilets or for roof tank water supplemental supplies to be installed. Just think about what having each home in Auckland equipped with a 15,000 litre roof tank would do to water storage and demand and to stormwater discharges – even if the roof tank only supplied the outdoor taps and laundry. That would add 15Gigalitres to Auckland storage, it would add an area of 10,000hectares to the water supply catchment. For small communities the installation of small scale membrane filtration systems is quite economic – about $3-5000 per household – some of these systems can turn seawater into good quality drinking water. I presently live in a rural community and our council supplies very good quality water at an affordable rate but at rate of 0.9l/minute so I have a 5000l water tank and a pump and council provides a good water supply that would not have been economically feasible of it were an “on demand” supply and my sewage is disposed to a 100m2 patch of lawn through a 3 stage aerobic septic system – and if you want a lush green lawn there is nothing better! However I’m of the view that we need to be moving to composting or incinerating toilets in all new builds for several reasons – the first is that they are self contained, the second is that disposal capacity increases at the same rate as urban growth – and the final and most important one is that humanity can not continue to dispose of the nutrients embedded in its waste discharges to the oceans and rivers. The phosphate in our sewage is the ultimate finite resource and it is a lot scarcer than oil and unlike oil there are no substitutes.