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Three Waters – Where Things Stand

Nelson City Council will consider a report on the Three Waters reforms and what they could mean for Nelson at a Council meeting on Thursday 23 September.

The report analyses the Government proposal, made in July 2021, including reductions in projected costs, and the impact of transferring Nelson’s Three Waters infrastructure, and related debt, into one of four new water entities.

Every council has been asked to provide feedback on the proposal and the report includes a draft letter from Council providing feedback to the Government on gaps in information and areas that need addressing.

At this stage, Council is not being asked to make a decision about whether Nelson should opt-in or out of the reform.

Attached to the report is a review of the modelling provided by Government regarding water charges in Nelson from independent advisors Morrison Low.

The review found that Nelson ratepayers are likely to have lower household charges under the proposed Three Waters model than through continued Council service delivery.

Mayor Rachel Reese says Council’s independent review of central government’s modelling shows a significant saving for Nelsonians.

“If we continue to stand alone, by 2051 our cost per household for water services is projected to be $2330 per year. Under the proposal, the cost per household is projected to be $1260. While other Councils are projected to receive greater savings this is still an economically beneficial position for Nelson water users.

“This is a difference of more than $1000 per household, which means we really do have to give careful consideration to the proposal.”

Nelsonians had the opportunity to speak with Mayor Reese, Chief Executive Pat Dougherty, and Local Government New Zealand Deputy Chief Executive – Advocacy Jason Krupp about the Three Waters reforms in two zoom webinars held last week. More than 150 people joined live to take part in these sessions.

Chief Executive Dougherty says New Zealand is changing, and standards for wastewater, stormwater, and drinking water are rising.

“The modelling Government has used to set out the terms of this reform is not based on business as usual. As our standards for water, wastewater and stormwater rise and the effects of climate change put more pressure on our water systems, the cost to maintain and improve infrastructure is going to increase considerably.

“On this basis, the report considers that the case for national change has been made.”

Are our water infrastructure assets being sold?

“We are not selling them, we are transferring them,” says Chief Executive Dougherty.

“We would transfer $716m of assets and $81m debt associated with those assets. Selling the assets was raised very early in the process, but if the new entities had to buy and own these assets, the amount of debt they would need to take on would leave them unable to make the improvements they are being set up to do without forcing up the price of water.

“Under the proposed reform, the assets would transfer to the new entity, and the councils involved are named as owners. If we sold these assets, then Nelsonians would end up repaying debts they had already paid off once.”

Nelson would also benefit from a $20m ‘better off’ payment to support the Three Waters service reform and focus on other local wellbeing outcomes associated with climate change and resilience, housing and urban design and planning, and community wellbeing.

What are the issues?

Mayor Reese says there are several key issues that Council wants the Government to address, to make sure the reforms work for local communities.

“We need to hear how the new entities will plan and deliver resilient water services, as well as making efficiency gains. Ensuring our stormwater network can cope with increased rainfall is just as important as reducing the cost to deliver services.

“Councils need to be much ‘closer to the engineroom’; the representation and governance proposal needs to be simpler.

“We need to know more about how the new entities will work alongside councils so that our community’s voice is heard. How do councils advocate for local issues and local priorities?

“And we need to ensure that protections against privatisation are guaranteed.”

So what happens now?

Councils have been asked to provide feedback to the Government on the reform, the impact at a local level, and the Government’s financial support package. Thursday’s meeting is not about opting in or opting out but about agreeing on feedback.

The Government will review this information, consider the next steps and then come back with a timetable for decision making.

Background information for Nelson:

  • Nelson’s funding allocation from the “better off’ package is $20.7 million. This funding would be allocated to local wellbeing outcomes associated with climate change and resilience, housing and urban design and planning, and community wellbeing.
  • Nelson City Council has been placed in Water Services Entity C, although the precise boundaries are still up for discussion. See the map below for proposed boundaries. The proposed boundary between Entity C and Entity D is a cause for concern for both Marlborough and Tasman District Councils as it could mean their districts are split between the two entities. Both Marlborough and Tasman have expressed a preference that their districts are not split by these reforms. Nelson City Council supports this view.
  • The Three Waters activities are more highly indebted relative to revenue than the rest of Council, with a forecast debt to revenue ratio of 222%.
  • At the proposed transfer date, Council’s overall debt to revenue ratio will have increased from the current level of 70% to 132%, still well under the cap of 175%. If the transfer to Three Waters goes ahead in June 2024, the debt to revenue ratio would reduce to 101%.

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