If reforms proceed, the additional $500 million support fund would cover 'stranded costs' like surplus staff who are not required by the four new water authorities.
ANALYSIS: Nelson Mayor Rachel Reese stood on the stage alongside ministers Nanaia Mahuta and Grant Robertson, and issued a promise: all the other mayors present could go home and reassure the staff working on their water infrastructure that their jobs were safe.
"This support package provides more than money," said Reese, a member of Local Government's Three Waters steering group. "It provides for our people.
"I want to acknowledge all of our staff who work in our organisations and say to them that we worked very hard for you. We felt this was critically important to your careers and the roles you play in our communities. And you will have a guaranteed role in the new entities. The role will retain the features, the salary, the terms, the location of your current role."
It is a guarantee the councils will struggle to fulfil.
The mayors and their teams will spend the next two years negotiating the distribution of $500 million, give or take, to be provided to councils according to the extent they can show they are disadvantaged by the reforms.
It's a balancing act – the Government has agreed its four new regional water authorities will take over the debt on ratepayers' water assets, but they won't pay for the equity.
With their new language of "local ownership", ministers can't concede that councils are losing ownership of their drinking water, wastewater and stormwater systems, which means they can't be seen to be paid for the assets.
Councils like Whangārei argue they have looked after their water networks, and own them without any debt – so if they are to lose them to new regional entities, their ratepayers should be compensated. Without that compensation, some have vowed to opt out.
At the weekend's Local Government NZ AGM in Blenheim, Whangārei mayor Sheryl Mai moved that the organisation affirm its commitment to councils being allowed to opt out. Reese, who chairs the steering group working on the reforms, moved an amendment from the floor and, after 40 minutes of robust debate, the 67 councils agreed a watered down motion.
Hutt City mayor Campbell Barry said it was "very disappointing" to see councils talking about withdrawing from talks entirely. "That would be a terrible outcome, and would take us back to where Local Government NZ has been in the past, where it's adversarial and oppositional in its thinking. It's really important we're working in partnership with government."
Two-thirds of councils agreed the reforms should not be made mandatory – which left a sizeable minority of 25 percent supporting compulsion.
Last week, the Government published its plans to allocate its initial $2 billion of sweeteners for local jobs, houses and water infrastructure. The chart above illustrates that $2b – but it also includes another $200m of funding for stranded water costs.
It's part of $500m of "no worse off" funding to be allocated to councils who find the loss of water assets undermines their capacity to borrow, and those left with so-called stranded costs. A senior Local Government NZ spokesperson said these might, say, be procurement systems that are redundant when the councils hand off their water assets – but equally often these "stranded costs" will be employees like administrators and asset managers.
Government and mayors have been anxious to reassure their technical staff that their jobs will be safe – but the position of other staff looks less secure. The negotiated heads of agreement indicates there will be "organisational overheads" that are not able to be transferred as part of the Three Waters reform. They will be reallocated by the local authority to other activities, for up to two years.
Newsroom analysis of the two funding streams – the $2b "better off" package and the $500m "no worse off" package – suggests those local councils who hold their assets debt-free, or with minimal debt, will not be rewarded for their fiscal conservatism.
One senior adviser close to the negotiations said the consensus was that it would be inappropriate to reward debt-free councils simply because their ratepayers had been affluent enough to pay for infrastructure up front or – worse – that they had stayed debt-free by failing to adequately maintain and upgrade their water assets.
Infrastructure Minister Grant Robertson said the no worse off fund was "up to" $500m. "It will be about whether we need to pay it out; whether there is a demonstrable, unavoidable sets of stranded costs and financial sustainability requirements," he told Newsroom.
"The way I would look it is that making sure we have safe, quality drinking water, and making sure our waste and stormwater systems are working well, is not something anyone in this room would want to opt out of." – Grant Robertson, Infrastructure Minister
"Certain councils have assets that are theirs, and that will disappear, but I don't want to pre-empt the ongoing work to get that methodology right.
"We are trying to do a genuine methodology about whose assets are where, and whose financial situation would be made significantly worse than this. We're trying to be fair here.
"We think this would work best with everybody in it, and I think everybody taking a bit of time to think it through, will come to that conclusion," he added. "The way I would look it is that making sure we have safe, quality drinking water, and making sure our waste and stormwater systems are working well, is not something anyone in this room would want to opt out of.""
There are seven districts that declared to Internal Affairs officials that their water assets were debt-free: Whangārei, Waikato, Waitomo, Ōpōtiki, Grey, Westland and Waitaki. Among them are four of the more forthright opponents of the reforms, Whangārei, Ōpōtiki, Waitaki and Grey districts.1
In all, there are about 18 councils that appear from the public comments, private discussions or conference votes to be close to opting out of the reforms: Far North, Whangārei, Auckland, perhaps Thames-Coromandel, Ōpōtiki, Matamata-Piako, Waipā, Gisborne, Napier, Carterton2, Kāpiti Coast, Grey, perhaps Hurunui, Christchurch, Timaru, Waitaki, Clutha, and Waimakariri.
WHAT'S YOUR COUNCIL'S POSITION? Ashburton | Auckland | Buller | Carterton | Central Hawke's Bay | Central Otago | Chatham Islands | Christchurch | Clutha | Dunedin | Far North | Gisborne | Gore | Grey | Hamilton | Hastings | Hauraki | Horowhenua | Hurunui | Hutt | Invercargill | Kaikōura | Kaipara | Kāpiti Coast | Kawerau | Mackenzie | Manawatū | Marlborough | Masterton | Matamata-Piako | Napier | Nelson | New Plymouth | Ōpōtiki | Otorohanga | Palmerston North | Porirua | Queenstown Lakes | Rangitikei | Rotorua | Ruapehu | Selwyn | South Taranaki | South Waikato | South Wairarapa | Southland | Stratford | Tararua | Tasman | Taupō | Tauranga | Thames-Coromandel | Timaru | Upper Hutt | Waikato | Waimakariri | Waimate | Waipā | Wairoa | Waitaki | Waitomo | Wellington | Western Bay of Plenty | Westland | Whakatāne | Whanganui | Whangārei
"I had a conversation with a mayor of one of those councils on the way in, and talked about the fact that we can work this out," Grant Robertson said. "I come back to what I said before – we do go into this with open minds, and I think that's the important thing for me.
"And I guess our job, on a day-to-day basis, is to think about the wellbeing and the good of all New Zealanders. Your job, on a day-to-day basis, is to think about the wellbeing and the good of the people in your rohe. What we've got to do is bring those two things together. We owe it to New Zealanders."
Whangārei's Sheryl Mai, who has led opposition to the reforms, said her original motion sought explicit assurance that individual councils were allowed to opt out. "I've spoken with a number of mayors over the past few days, and had a group of mayors saying, I want to stand up and second that motion!"
She had approached Infrastructure Minister Grant Robertson at the start of the conference, and told him they had to talk. "He knows my concerns, and I expressed to him the need for discussion, and he acknowledged that on stage."
Ōpōtiki mayor Lyn Riesterer said 50 percent of her district's residents were on one of three council-owned water supplies. "The rest of us, like myself, are on bores or tankwater or drawing water from streams," she said.
"So we're not interested in belonging to a large entity because all we see is that costs for water, in our district, will go up a huge amount. And we've found huge errors in the dashboard data the Department of Internal Affairs has published. They are expecting up to 90,000 more people to move to our district in the next 30 years – what a load of bullshit!"
Campbell Barry wears two hats, as mayor of Hutt City and chairperson of Wellington Water. "You've got the $2b fund, which is an allocation to each council, but the one I find more interesting is the uncapped $500m fund that recognises councils who in recent years have invested heavily in water assets, who've loaded their debt up. Talking to some of them, they feel their balance sheets would be unfairly impacted by moving to these reforms, and what does that mean for them? So I'm not sure that $500m is going to be enough."
"Speaking as a the mayor of Lower Hutt, and in the Wellington region, I can see on a day-to-day basis the challenges we are facing with our own infrastructure. And if you look from the top of the North Island right down to the bottom of the South, there are challenges.
"There will come a time when investment is going to be needed. and that's going to be a significant burden on small populations to deliver the water quality that will be required in the future."
"We're all New Zealanders, we all expect to be able to have safe drinking water, we all expect our wastewater to be dealt with appropriately, no matter where we are. We don't live our lives within council boundaries, we travel and we want to be sure the whole of the country is getting on top of this problem. The status quo simply cannot continue."
Note: Newsroom assessed that Carterton should be included on this list on the basis of conversations with participants at the Local Government NZ conference. The council’s mayor Greg Lang and deputy mayor Rebecca Vergunst advise that the council is not leaning towards opting out of the reforms, and should not be included on this list. South Wairarapa District Council was wrongly included on the list and has been removed.
Correction: Based on published Department of Internal Affairs data, a previous version of this article wrongly reported that Hutt City Council had no debt on its Three Waters infrastructure. The council advises it has $55m debt on its water assets.
