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Government Water Reforms To Build Economic Resilience And Save Ratepayers Money

Hon Nanaia Mahuta

Minister of Local Government
Minita Kaunihera ā-Rohe

The Government is proposing to establish four publicly-owned entities to take responsibility of drinking water, wastewater and stormwater infrastructure across New Zealand, saving ratepayers thousands of dollars and better ensuring the $120 to $185 billion investment in services can be made.

“The data shows the case for change is compelling. Without these changes DIA modelling shows that even at the more conservative end of estimates, the average household bill for water services could be as high as $1900 to $9000 by 2051, which would be unaffordable for many communities,” Local Government Minister Nanaia Mahuta said.

“Under our proposal for four providers those figures range from $800 to $1,640, saving households thousands of dollars.

“It’s estimated New Zealand will need to invest between $120 billion and $185 billion to maintain safe, sustainable and environmentally appropriate drinking water, wastewater and stormwater infrastructure over the next 30 years, costs that most local councils simply can’t shoulder on their own.

“The Government has considered the evidence and proposes that four large water entities will create an affordable system that ensures secure delivery of safe drinking water and resilient wastewater and stormwater systems.

“We have seen the effects of a system in crisis: fatalities from bacteria in drinking water, broken sewer pipes, poorly treated wastewater running into streams and rivers, no-swim notices at the beaches, regular boil-water notices, and lead contamination,” said Nanaia Mahuta.

Nanaia Mahuta also released information showing how the reforms will affect each council and the projected costs for their communities with and without three waters reform.

“As we undertake our economic recovery, these four entities will ensure the upgrade of infrastructure for our most precious natural resource, which will not only help reign in increasing costs for households but provide local jobs while contributing to regional economies,” Nanaia Mahuta said.

The reforms are indicated to grow New Zealand’s GDP by $14 billion to $23 billion over the next 30 years and generate 5,850 to 9,260 full-time equivalent jobs.

“Without this change, communities are going to either face very large bills for water services; or infrastructure will continue to degrade with ongoing health and environmental consequences. Both of these outcomes are unacceptable,” said Nanaia Mahuta.

At present, 67 councils provide most of the country’s three waters services, a system that is in too many cases ineffective, inefficient, and not fit for purpose.

“Underinvestment, including deferred maintenance and renewals expenditure, has left a legacy of impending costs and poor services for future generations,” said Nanaia Mahuta.

Today’s comprehensive release is part of a package of proposed reforms including the recent establishment of Taumata Arowai, the new water services regulator, and the planned introduction of economic regulation. It includes the proposed boundaries of the four water providers, further details on the proposed water services entities, including governance arrangements, the role of iwi, and how they would be regulated.

“The Government will continue to work with the sector, iwi and industry on some of the details to give these transformational reforms the best chance of success. We will be making further announcements in the coming weeks, including a three waters reform support package for councils and their communities,’’ Nanaia Mahuta said.

“Now that Councils have received this data they can now assess the impact of these proposed reforms. We now need to ensure that ratepayers and households understand the beneficial health, environmental and cost impacts so we can move forward with greater confidence,” said Nanaia Mahuta.

Supporting information can be found at: [LINK LIVE AT 10.30AM]

Note for Editors:

The Minister will be available to answer questions at a media stand-up at 10.30am in her office.

Supporting information can be found in the following embargoed Google Drive (the DIA web link above will be updated with the supporting information at 10.30am):

This supporting information includes:

- Two A3 overviews of the reform proposals

- Proactively released cabinet papers:

o A New System For Three Waters Service Delivery

o Designing the New Water Service Delivery Entities

o Protecting and Promoting Iwi/Māori Rights and Interests in the New Three Waters Service Delivery Model

- Regulatory Impact Assessment: Decision on the reform of three waters service delivery arrangements

- WICS supporting material: modelling the effect of ranges for key parameters for Auckland Council

- WICS supporting material: council outcomes under amalgamation

The individual council dashboards are available here.


Proactive Q&A

Why is reform needed?

New Zealand’s three waters system is facing a significant crisis and will continue to do so without major transformation. Reform will provide safe, affordable and sustainable water services for the benefit of all New Zealanders.

New Zealand’s Three Waters infrastructure requires investment of between $120 billion and $185 billion over 30 years. Without reform this is expected to result in large increases to household water costs. Reform will deliver water services more affordably and with improved quality and reliability.

Why has the Government decided that four is the best number of entities?

Having four entities strikes the right balance between economic benefits associated with larger entities, catchment considerations and the needs and interests of local communities.

What are the boundaries of the proposed entities?

How will these arrangements make water services more affordable, safe and efficient?

These multi-regional entities will have the significant advantages of:

· superior long-term financing arrangements through balance-sheet separation from debt-constrained councils;

· the ability to spread costs across larger areas over time;

· operational efficiencies;

· developing and maintaining more sustainable career pathways and expertise in the water industry into the future.

Are there other advantages to these reforms?

Research indicates that the reforms will grow GDP by $14 billion to $23 billion over the next 30 years and 5,850 to 9,260 full-time equivalent (FTE) jobs between 2022 and 2051.

Who will own these new water services entities?

Local authorities are the ‘owners’ of the entity, on behalf of their communities – this is a ‘no shareholding’ ownership with no financial recognition of ownership.

A Regional Representative Group made up of local authority members and mana whenua will, through a voting process, put in place an independent panel that will in turn appoint board members to govern the local three waters entity.

What protections will there be against future privatisation of the entities?

Continued public ownership of three waters water services and infrastructure is a bottom line for the Government. We are developing safeguards against future privatisation, making it more difficult to privatise than under the current arrangements. These include legislation specifying that local authorities that constitute each water services entity would be the owners of the entity and any future privatisation proposal be put to a referendum.

The entities will also be established in a way that prevents them from paying dividends or offering other financial reward to their owners, making them unattractive to potential alternative owners.

How will the new system retain consumer and community influence?

In addition to the Representative Group which will act on behalf of communities, each entity will be required to engage with communities in a meaningful and effective manner on key documents. The entities will also be required to publish these, and to report on how consumer and community feedback was incorporated into decision-making and set up a forum to assist with effective and meaningful engagement.

How do the reforms provide a greater role for iwi/Māori in three waters service provision?

The reform provides a whole of system approach to better meeting the needs of iwi/Māori in the three waters provision. This includes appropriate statutory recognition of the Treaty of Waitangi and Te Mana o te Wai in legislation.

The reforms will mean mana whenua share equal rights with territorial authorities on the Regional Representative Group at the strategic level of the new water services entities where they will exercise greater tino rangatiratanga than the current system allows.

What local council-specific information is being released?

A local “dashboard’’ has been created to help councils and their communities understand how elements of the three waters system are performing and the potential opportunities of reform for individual councils. The dashboards pull together information from several sources into a consolidated evidence base for three waters reform. This includes the projected average cost of providing these services per household for councils in 2051 with and without reform.

How is the reform and no-reform household cost calculated?

There is currently a wide variety of costs faced by New Zealand households for water services, with all 67 councils using different methodologies and charging systems.

The WICS analysis converts the revenue required to fund future investment into an average figure per household which is presented in the dashboard. It is important to note that these are not projections of likely household water charges in 2051, but represent the total revenue requirement, averaged over each household to continue investing in our three waters services. This methodology enables comparison of outcomes across councils on a nationally-consistent basis.

A cap (of $8,690) has been applied to the average costs per household figures in 2051 for councils without reform. This recognises the affordability challenges associated with meeting costs above this level and uncertainty involved in projecting costs over a 30-year period. The cap has been set at the 65th percentile of average household costs across the country.

What other information do the dashboards contain?

The local dashboards also contain projected economic growth, current council investment in renewals as a percentage of depreciation, debt to revenue and a services snapshot.

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