On Why Three Waters Is A Good Idea Worth Supporting

If anyone needs a fresh reminder of the value of state broadcasting, yesterday’s interview about the Three Waters reforms between RNZ’s Kathryn Ryan and Local Government Minister Nanaia Mahuta provided it. The interview was a stellar example of a crucial issue being lucidly debated, and without grandstanding on either side of the mike. Ryan’s interviewing style is not everyone’s cup of tea. On occasions, she can sound less like she is having a conversation and more like someone setting an exam question. Not this time. Ryan has her head around the intricacies of the water reforms, posed all the right questions and – thanks in part to Mahuta’s calm and clear responses -- the interview unfolded organically. Check out the interview here. There’s a synopsis of the key points here.

Before outlining what Three Waters will (and won’t) do, it may be worth keeping in mind that New Zealand’s current system of water management is unsustainable, inequitable and plagued by deteriorating infrastructure. All of it being evidence that a small country like New Zealand really can’t afford to continue to allow 67 different councils to manage our water assets while having vastly different levels of funds, competence and diligence. Every local body politician in the country is under pressure to defer maintenance rather than incur the public’s displeasure by raising the rates needed to finance the fixing of the pipes. Ten years ago, the Auditor-General warned that our system for managing water would culminate in crumbling water infrastructure in many parts of the country. Around the country, that future has arrived.

Much has been made of the political claim that the central government is seizing local assets. It isn’t (see below.) Moreover, as business commentator Brian Fallow pointed out in the NZ Herald a few days ago, these are not “assets'' in any normal sense of items of monetary or practical value. “Isn’t it more the case,” Fallow wrote, “that these pipes and pumps and sewage treatment plants are the physical embodiment of responsibilities which will pre-empt more and more of councils' future income?”

Because that sounds more like a liability than an asset. How many of us know whether our local council is one of the 43, out of 67, which [Mahuta] says do not have the revenue to cover their water services operating expenditure at the moment, let alone once infrastructure starts failing? And if we live in the territory of the other 24 councils, do we entirely lack any sense of solidarity with our less fortunate neighbours?

In response to this crisis, Three Waters proposes to amalgamate the management of stormwater, wastewater and drinking water into four bodies. This will deliver efficiencies of scale at the operational level, while creating a larger credit-worthy base from which to leverage the funds required for re-investment, thereby easing the burden on ratepayers. A minority of councils (most but not all of them are in large urban areas) are blessed with a catchment area of high property value ratepayers able to fund the investment in effective water management

Even so, compensation for these relatively few high performers is not a fair or feasible way to look at the situation. As Mahuta pointed out yesterday, this country is so small that many of us live in one council area, work in another and spend our holidays in yet another, while expecting that the drinking water will be of the same high standard wherever we go.

"If we accept that [compensation] argument, then we accept rural communities in particular, and those communities that have a low rate-paying base [ eg Porirua] can be left to their own devices which will lead to ... continued eroding investment into waters infrastructure.

The ownership model

One of the heated criticisms of the Three Waters proposal has been that it amounts to an “asset grab” whereby central government will be seizing the ownership of assets owned by local communities. This isn’t the case. The reality is more nuanced, and balanced. Over the course of four years of consultation with local government and after the evaluation of various suggested models, the current proposal is that councils will collectively own whichever of the four bodies pertains to heir region, and in turn, it will be those four bodies that will own the assets. In effect, local councils will collectively own the owners of the assets. As Mahuta explained:

Under the model that I'm proposing ... those assets will transfer into one of the four entities. Councils will continue to own the assets alongside other councils, but the leverage of those assets ... will accrue to the whole entity…This is a public model, so one of the things about the model is that there'll be no shareholding or dividends because if shares and dividends were created that would make it very attractive for privatisation.

Right. The prevailing fear is that the gains delivered by the model will be at the expense of local control. However, it is worth keeping in mind that local control via democratically elected councils did not prevent the water contamination that resulted in several deaths and cases of serious illness in Havelock North. Nor did direct council control prevent the burst water pipes that dumped raw sewage onto the streets of the capital, and into its beloved harbour. Under Three Waters, the capacity for democratic inputs would remain, but would operate more at arms length. As RNZ put it:

Under the proposals, councils and mana whenua would jointly appoint a regional representative group which would appoint an independent selection panel, which would in turn appoint the board which manages and runs the entity…

Mahuta explained the changes in the management model in this way :

Councils would have some control over the entities through a statement of performance expectations which would guide the strategy of their entity. "There will be the opportunity for councils to drive some of their aspirations in this manner, and an economic regulator in terms of benefits back to ratepayers can drive some price smoothing and also equity objectives.

In other words, there will be inbuilt performance expectations, checks, and safety mechanisms. Any profits made would be ploughed back into the provision of services. Nor could the four water entities ever be sold by a future government unless at least 75 per cent of the votes cast in a referendum agreed to allow it.

Arguably, the Three Waters proposal is a case of central government ending the era of kicking the can down the road on water provision and maintenance. As far as is humanly possible, the proposals appear to balance a raft of competing interests within the action plan required to meet an urgent need. To repeat: Three Waters offers efficiencies of scale, which in turn will enable the four large entities to leverage the investment funds required. In the process, this promises to ease the burden on ratepayers to fund this crucial aspect of public infrastructure. Currently, such investment is occurring only when and if local politicians are willing and able to treat the maintenance of water infrastructure as a funding priority, despite the pressure coming on them to keep a lid on rates rises.

Iwi partners

Three Waters also offers a voice for whenua in policies to do with managing mana o te wai issues but this voice stops well short of a veto. Some commentators have warned of a stealth takeover of water assets by iwi authorities, but the proposal will merely – in accord with Treaty principles and in line with rulings on freshwater ownership – provide mana whenua and councils with an equal voice in the process. Will this amount to a takeover, or will it make the whole system more inclined (and more able) to act as kaitiaki with respect to our water resources in future? As Fallow says:

Essentially, there would be two layers to the governance structure. Councils and mana whenua would each provide half of probably 12 members of a regional representative group, which would specify strategic and performance expectations for each new entity and also select a committee which would appoint the entity's board. So you would have management directed by, and accountable to, a board selected on the basis of relevant competence, which in turn would be accountable to the regional representative group representing councils and mana whenua.

The inclusion of mana whenua in the structure is not only about the vexed issue of Māori rights and interests in freshwater. It should also ensure a stronger voice for environmental stewardship and intergenerational equity than local body politicians can be trusted to provide.

There’s a clear choice involved here. As Fallow concludes, a lot of the injured innocence emanating from those in council offices now clutching their precious water assets to their chest like so many Gollums, smacks more of a desire to protect jobs for the boys than a credible defence of local democracy. For people who gave Labour a clear mandate to govern at the last election, Three Waters is one of the few examples (so far) where the government seems prepared to spend its political capital on delivering an unpopular, widely misunderstood but essential package of reform.

Footnote One: Opponents of the proposals can’t have it both ways. They can hardly demonise the allegedly vast powers being given to mana whenua under Three Waters when – in fact – this is equal to the alleged impotence being imposed on existing councils. So is it impotence or omnipotence ? Or merely a practical balance, as called for under the Treaty?

Footnote Two: National has a long track record of using scare tactics to derail proposals that serve the public good. In 1975, National notoriously painted a sensible proposal to progressively fund national superannuation as being a money and assets grab by Big Government, and tantamount to communism. The scare advertising succeeded. So much so that National won the 1975 election. As a result, New Zealand was denied a vital investment vehicle – similar to what Singapore, no communist haven, had in train - that would have vastly increased New Zealand’s wealth, our investment clout within the global economy, and our ability to fund the welfare of pensioners, and other vulnerable social groups.

It took another 25 years before the Cullen Fund managed to implement a shadow of the original proposal. This time around, we can’t afford to allow the opportunists in Act and National to stoke the same kind of bogus fears that Big Government is embarked on an asset grab of the country’s water resources.

Those Brilliant Kiwi Scientists

In his opening speech to the COP26 conference in Glasgow, British PM Boris Johnson made a passing reference to “brilliant Kiwi scientists” and their efforts at trying to limit the impact of the agricultural pollution helping to fuel climate change. Embarrassingly, New Zealand seems to have revelled in the attention it was getting on the world stage. Weird. In context, the mention was part of a warning that the world is doing too little, too late. Here’s the section of Johnson’s gloomy speech that gave us a mention:

“Even if this conference ends with binding global commitments for game-changing real world action, two weeks from now smokestacks will still belch in industrial heartlands, cows will still belch in their pastures - even if some brilliant Kiwi scientists are teaching them to be more polite -cars powered by petrol and diesel will still choke congested roads in the world’s great cities….“

Hmmm. Is it really a compliment to have our best efforts cited as an example of a world that is re-arranging the deck-chairs on the Titanic? Similarly… Here at home, the work of those brilliant Kiwi scientists to lessen methane emissions and to enable better capture of the nitrogen deposited by urinating cows also seems a bit beside the point, so long as we continue to shy away from making agriculture pay its way on climate change.

Keep in mind that at COP26, our promises to halve net emissions by 2030 still ask farmers to cut their net emissions by only 10 % during that period, even though agriculture accounts for 48% of our global warming emissions. Also, farmers are enjoying great returns from very high global prices for their produce, so they will never be in a better position than they are now to absorb the costs, say, of reducing the size of their dairy herds. At home and abroad, Johnson was dead right to intimate that the efforts of Kiwi scientists to mitigate climate change are both ‘brilliant” and a case of pissing in the wind.

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