Three Waters Reforms

It’s been a while since our last blog, and there’s no lack of topical sustainability-related issues to write about. Ranging from the impacts of climate change to the effects of fuel price inflation, NZ and the wider world are facing some big challenges. However one sustainability issue that has struck a chord with many New Zealanders is the usually dry matter of ‘three waters’ infrastructure.

A year or two ago, many people had no idea what ‘three waters’ referred to and no interest in the pipes that lay under their streets. Now, most Kiwis have a view on water infrastructure, which incorporates drinking water, wastewater (AKA sewage) and stormwater. In fact many commentators think it could be the issue that decides the 2023 election.

Most councils certainly have a strong view, as they currently own the water pipes and assets on behalf of their local communities. The vast majority of councils are either opposed to the government’s proposal or concerned about certain aspects, and 60 out of 67 councils signalled they’d opt out of the original voluntary proposal – which is why the Minister then made it mandatory! Nearly half the councils joined together to form Communities 4 Local Democracy, which points out some myths about central government’s rationale for the reforms and proposes a different approach.

Many others also oppose the government proposals, ranging from the Taxpayer’s Union to Groundswell to the Water Users’ Group to a number of iwi, including several in the Eastern BOP.

Here in the Bay, most councils have come out against the reforms. Tauranga City Council is the only exception. Its government appointed Chair, Anne Tolley, stated “we need much stronger communications from Government”. That was met with a resounding “Really?” from the local community, after the government’s ridiculous advertising campaign last year, which was charitably labeled by Commissioner Tolley as “a missed opportunity“.

Mayor Webber has had his own involvement in the 3 waters reforms, but most of the mayoral contenders and councillors at Western BOP District Council are opposed to the government’s proposal. The other BOP councils are firmly opposed, with Whakatane, Kawerau, and Opotiki councils all members of Communities for Local Democracy, and Rotorua Lakes Council stating “On 30 June 2022 the Council reviewed its preliminary position with elected members agreeing they do not support the proposal as it currently stands“.

In fact it’s increasingly hard to find people who actually support the current proposal – especially people who have read the government’s plan as well as analysis by councils, Castalia and others. One thing that is clear from a sustainability perspective: this is all about $$$.

To be clear, there is a definite environmental imperative, and the Labour government is right to be concerned about better environmental outcomes. But that’s why they set up Taumata Arowai, the new water services regulator, which clearly states its purpose: “We are committed to ensuring all communities have access to safe drinking water every day. We also have an oversight role in protecting the environment from the impacts of wastewater and stormwater.

Which raises the question: If the government is correct and this new regulator has the ‘teeth’ to ensure safe drinking water and better environmental outcomes, then why is the government seizing the water assets from local councils? Councils will be required to meet the appropriate environmental standards, and Taumata Arowai will take action if they don’t.

In spite of the rhetoric, the government’s plan is not designed around environmental outcomes, but to secure the biggest amount of cash to fund water infrastructure. In other words, the three waters reform comes back to the growth agenda.

In its desire to address the housing crisis, the government seems prepared to trade off pretty much everything else, including affordability, sustainable urban form, and reducing carbon emissions. It has mandated councils to allow three story dwellings in residential areas in all NZ cities and prioritised expensive roading projects that enable growth. That is clearly seen in Tauranga, where the Papamoa East Interchange, Cameron Rd 3-laning, and Tauriko roading projects were given top priority, as they (directly or indirectly) open up more greenfield growth areas.

The one thing that could block new subdivisions is if councils don’t invest enough in water infrastructure. Why would that happen? There is an imposed limit to the amount of debt that councils can take on (the debt limit is a ratio to their income), so councils are constantly trying to increase rates to enable them to take on more debt. TCC is a good example – up go the rates in 2021 and 2022, and up will go the debt over the next few years.

The problem for government is that water pipes aren’t very sexy. So councils often prioritise flashy things (such as an exhibition centre) ahead of expensive infrastructure for the government’s growth agenda (such as water pipes). Hence the government has decided to take matters into their own hands and seize control of the water infrastructure. They’ll hand over a few bucks in return, but only a tiny fraction of what the assets are worth.

Submissions on the draft Water Entities Bill close on Friday 22 July at 11.59pm. There are many reasons to oppose this reform, and you can find a variety of views at the links above. We’ll just summarise some key issues that you may like to submit on from a sustainability perspective:

1. The reforms are undemocratic and the process has been deeply flawed. Only a few councils support the proposed model, and National and ACT are committed to overturning the government restructuring of the sector, which makes this a completely unsustainable option.

2. Communities will lose control of their water infrastructure. There may be some advantages in amalgamation, but the government plan to reduce 67 water entities down to 4 entities is extreme, and results in loss of local or even regional control. There has been no convincing evidence presented that demonstrates an overall benefit of forced amalgamation at this scale.

3. The proposed governance structure is complex, unwieldy, and unaccountable, and only reinforces the loss of control by local communities. That could be okay if things are going along well, but what about when there are inevitable problems at a local level?

4. The much-touted improved environmental outcomes will actually result from the new water regulations and the role of the new water regulator, Taumata Arowai. The seizure of community assets by the state will not ensure better environmental outcomes, and may well result in worse results in some cases.

5. Water infrastructure is different to something like the electricity grid. The Transpower network is connected nationwide, but water infrastructure is not. The natural scale for water is catchments, and that means a regional approach is the optimal outcome. After all, Regional Council boundaries were set according to catchments, so we agree with a majority of NZ councils that regional water entities or collaborations are the best approach.

6. Stormwater is a problem if there are only four water entities. Stormwater is mostly dealt with by small-scale local infrastructure that is closely integrated with parks, reserves and roading – all of which are managed by councils.

7. Central government set up the Futures for Local Government (FfLG) process to deal with issues such as the reform of councils, amalgamations, and addressing any gaps in government processes. The government should not force through this process in the three waters reforms – rather, it should integrate the two processes and let the FfLG process determine the optimal outcomes for three waters infrastructure.

8. The proposed model is based on advice from people involved with Scottish Water. However NZ is different to Scotland, and even if it wasn’t, it is incredibly narrow-minded to base restructuring of this vital community infrastructure on such a limited (and flawed) analysis. The rushed and forced process has not allowed time for other options to be properly considered.

9. Central government assures us the reforms will lead to great outcomes, including much cheaper water rates. Like many others, we don’t believe that. If you can recall the promises made around the electricity reforms of the 1990s, I’m sure you’ll forgive us for being skeptical.

10. The driver for government has been to set up entities that borrow large amounts of money ‘off the books’. i.e. councils can’t borrow enough to fund growth infrastructure, and central government doesn’t want to fund the large amount of infrastructure needed to support its growth agenda. The upside looks good: more money to spend on much-needed upgrading of Wellington’s wastewater system and other water infrastructure around the country. But it’s a high-risk model, as we’ll have no control over the highly leveraged entities, so if interest rates are high, they’ll charge higher water rates than the government’s quoted figures.

11. A controversial issue has been the proposed co-governance structure of the four water entities with iwi Māori. There are important democratic issues at stake, but the media has mostly just pointed out some oppositional views across racial lines. What hasn’t been made clear in mainstream media is the widespread rejection of the government’s proposal by many Māori and Pākehā. A good example is right here in the Bay of Plenty, where the three Eastern Bay councils (which have a Māori majority population) all oppose the government reform, and a key reason is the widespread opposition from many Mana Whenua in their region.

12. Finally, there are better alternatives. Our favoured option is a similar idea to that proposed by a majority of NZ councils:
– Set up a Regional Three Waters Committee in each region (mirroring the Regional Transport Committees)
– Those committees are administered by regional councils and comprise mayors and/or councillors from each council (and regional council), with a parallel structure for council staff (all just like Transport Committees)
– They are responsible for delivering a Regional Three Waters Plan (along the lines of the Regional Land Transport Plans)
– Those plans must comply with all government water standards and with a Government Policy Statement (GPS) on Three Waters – like the government’s 3-yearly GPS on Transport, the GPS on 3 Waters would state the government priorities for the upcoming period
– The key difference is that councils would retain ownership, but central government would co-fund three waters infrastructure (as it used to, and as it still does for transport infrastructure)
– As with transport, central government would co-fund projects all across NZ – it couldn’t leave out certain districts to fend for themselves
– However, if councils want to receive significant government co-funding, they’ll need to:
a) Create a comprehensive regional plan that complies with all government requirements (e.g. safe drinking water)
b) Help to deliver on key government priorities (e.g. enabling housing)
c) Make a compelling case for why, for instance, BOP region deserves more funding than somewhere else.

This proposal has some significant benefits, including retaining local control, and has the advantage of cheaper borrowing (government debt will have lower interest rates than the new water entities).

The other advantage is that this can be scaled appropriately. There could be 12 to 14 regions (top of South Island and Otago-Southland could be combined, as for transport planning), and that would buy time to integrate this process with the Futures for Local Government reforms. That may result in the amalgamation of some councils, or some councils proactively combining their structures around three waters management.

The regional model would offer many of the benefits of larger-scale entities and better environmental outcomes, without losing democratic control. It would also de-risk the financial model, while still allowing for pan-regional collaborations and future amalgamations, if the benefits were shown.

It doesn’t fund a rampant growth agenda ‘off the government’s books’. However, we don’t think that the government’s plan for highly leveraged water entities to take on huge amounts of debt and charge increasingly higher water rates is a good thing, and our concern is that their reform will lead to less sustainable outcomes than ever. If the government wants growth, it needs to fund growth infrastructure and stop pointing the finger at local government and local residents’ groups.

If you want to share your views, however briefly, please make a submission here.

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