First councils were told they could 'opt in' to the merger of their three waters infrastructure, then that they would have to 'opt out'. Now the decision may be taken from their hands.
Smaller communities have been alarmed at threats from some of the country's cities to walk away from a massive amalgamation and upgrade of the country's drinking water, wastewater and stormwaters.
The projected cost of the reforms has ballooned in just six months. In a December Cabinet paper, the infrastructure upgrades were costed at $27b to $46b over 30 years. The costings, which now include maintaining and refurbishing water assets, have now soared to between $120b and $185b – though officials say much of that spending will be required whether or not the reform goes ahead.
Auckland, Whangārei and Napier councils are among those cities that have warned they could opt out of the reforms. That would create enormous problems for the new structure. For instance, the Far North and Kaipara, which are two of the most poorly-connected communities, would be isolated by the withdrawal of their neighbouring cities.
Auckland mayor Phil Goff spoke to Newsroom, saying his city's water network already covered 1.7 million people – a third of the country's population – and there were no efficiencies to be gained by merging it with Northland networks.
He wanted an assurance the city's water would remain owned and controlled by Auckland ratepayers, or he would encourage the council to opt out by the December deadline.
Goff supported improved cost-efficiency and water quality, but not if it meant splitting off valuable public assets into independent organisations that could be privatised by a future government. As a minister in the Fourth Labour Government, Goff had backed the privatisation of state assets like railways, and he didn't want to do that again. "We learn from experience," he told Newsroom.
Whangārei deputy mayor Greg Innes said analysis showed the city would be worse off to the tune of $150m borrowing capacity if it was forced to amalgamate, so it would expect government compensation to ratepayers if the move went ahead.
“While Councils across New Zealand, in particular Auckland and Wellington, are having major problems with failing wastewater infrastructure, we are about 10 years ahead of most of them," he said.
"I would be very concerned if Government backed away from the 'opt in' process ... We were promised that these reforms would be voluntary and that our individual circumstances could be taken into account. To compulsorily take our ratepayers' assets would be immoral."
Now, some mayors have pleaded for government to avoid a "patchwork" of exclusions and takeovers by the four big regional water authorities it is creating; they have asked for a law change to ensure that all 67 councils' water infrastructure is combined in the new regime.
In the next few weeks, the Government is expected to decide the approach and timing of an 18-month transition period; in that period, a body will oversee councils' spending to make sure they neither neglect maintenance of their water assets, nor spend up big on any white elephants.
Local Government Minister Nanaia Mahuta had originally told councils the water reforms would be voluntary; now she is expected to take that decision to Cabinet.
"The benefit of this reform should be for everybody. While I understand councils want to see the specifics around the details for them, the overall ambition is system-wide reform and everyone benefits." – Nanaia Mahuta, Local Government Minister
She warned Auckland, in particular, against "parochialism" – pointing out that Aucklanders are happy to holiday in communities like Northland and Coromandel and should equally be willing to support them in getting good, clean drinking water and hygienic wastewater.
"When we released the first tranche of funding of about $710 million, we made a clear statement that this was an 'opt in' process. We got 100 percent of councils participating," she told Newsroom.
"As we continued on and sought more information ... it's become even more evident that the case for change is compelling.
"What I've said all along, and now seen evidence that we're starting to release, is the benefit of this reform should be for everybody. While I understand councils want to see the specifics around the details for them, the overall ambition is system-wide reform and everyone benefits."
It was local leaders who were driving that call for universal reform, she said. "There are several council leaders who support the direction of reform but this is a challenging issue for them around the council table and locally, because it's such a complex set of issues to consider. They agree the case for change is strong, they want to see more information so they can put the benefits of reform to their own communities, and they have asked me to consider a way in which we could lead the reforms in a way they can endorse."
In districts like Kaipara, only one in four households is connected to the town water supply. In Southland, it's about two-fifths. Ultimately, Mahuta said, she wanted to follow Scotland's lead and connect up as many households as possible.
And while there would be initial disparities in how much households paid, depending on where they lived, she would like to see those eventually ironed out.
“Having 67 separate councils carry on what they’re doing makes no sense to me," she said. “As far as I’m concerned, the train is on the track now; it’s not an option to pretend change is not needed and needed quickly." – Paula Southgate, Hamilton mayor
A Department of Internal Affairs spokesperson said a December 2020 Cabinet decision gave councils the chance to "opt out". "However in recent months numerous approaches have been made by sector leaders as to the possibility of the reforms being legislated. This is a matter for Government to consider."
In smaller communities, there was trepidation and they were awaiting details of what, if any, compensation they would get for losing their assets.
Kaipara was the site of a high-profile rates strike that was fought all the way to the Supreme Court, over liability for the cost of a new wastewater plant for the beachside community of Mangawhai. Years on, Mangawhai has sewerage but the thousands of households there still aren't connected up to drinking water supplies.
Mayor Jason Smith said he supported the autonomy of councils to make their own decisions on whether to hand over their assets but, equally, he worried about the impact on small districts like his if the neighbouring cities turned their backs. It would create a messy patchwork of water authorities, he warned. In the case of the Mangawhai wastewater plant, the council had run up nearly $50m debt to pay for a $30m plant – he asked, would the Government take all that debt off the council's hands?
Down in Clutha, the predominantly farming-based district has traditionally paid for its infrastructure upfront. The council is almost debt-free. Mayor Bryan Cadogan said it would seem unfair if it had to hand over its freehold water infrastructure, and his ratepayers then had to pick up the tab for neighbouring councils' heavily-mortgaged waterworks.
Some city mayors backed Mahuta.
Hamilton mayor Paula Southgate said that without reform, the cost of providing water services would be two or three times what it is now. "How can ratepayers be expected to fund that?” she asked.
“Having 67 separate councils carry on what they’re doing makes no sense to me," she said. “As far as I’m concerned, the train is on the track now; it’s not an option to pretend change is not needed and needed quickly."
Even before they start, the water reforms have already cost $1 billion. Government provided $710m in July 2020 to support the three waters reform programme, including investment in local government three waters infrastructure across New Zealand. Last month, Budget 2021 allocated a further $296m to fund the costs of the creation of new entities and other transition costs, should the reforms proceed.
