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Financial Independence Critical For Sustainable Funding Of Water

Long-term financial independence is critical for enabling local water entities to sustainably manage water assets and water standards into the future, according to a newly released policy position on water infrastructure and services by Infrastructure New Zealand.

“Maintaining the status quo, where underfunded councils are left to oversee a steady deterioration of their water infrastructure, is not an option,” says Infrastructure New Zealand Advocacy and Strategy Lead Martina Moroney. “If the current situation is left to continue, New Zealanders will face significant social, economic and environmental costs along with ongoing risks to public health.”

Infrastructure New Zealand wishes to see the Government provide clarity around its water reform programme and the replacement for the Three Waters legislation as soon as possible.

“Ultimately, it will be important to achieve economies of scale through mergers and shared service arrangements. However, whatever water service entities are eventually established, the Government must ensure balance sheet separation from councils, and that appropriate funding mechanisms and access to borrowing is available to the new entities to renew existing network infrastructure and adequately maintain new infrastructure.”

“Financial independence, or rather debt headroom, will be crucial for the new water entities as it will allow them to borrow to fund the significant backlog in asset renewal and replacement, while allowing for repayment to be made over the life of these long-term assets.”

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“In the meantime, it is likely that central Government will need to consider credit wrapping council water services and providing bridging funding until the new entities are established and self-sufficient,” says Moroney.

Furthermore, Infrastructure New Zealand recommends that volumetric water charges are explored so that, like other utilities such as telecommunications and electricity, consumer demand can be better managed, and a direct service-related revenue stream created.

Infrastructure New Zealand is optimistic about the Government’s position, and it looks forward to positively contributing to their reform agenda.

Also released today by Infrastructure New Zealand is a policy paper on the improvements required to enhance New Zealand’s delivery of megaprojects. Recent cost overruns and project delays have highlighted the need for improvements to the way New Zealand plans, funds and delivers its major projects. The paper makes key recommendations to inform a refinement of the government’s decision-making tools and integrated planning systems.

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