Watercare's Lower Nihotupu dam. Photo / NZME
OPINION:
Good on you, Nanaia Mahuta.
The Minister of Local Government has opted not to capitulate to the myopic parochialism of many of the country's councils. Instead, she will press ahead with reforming the fragmented and failed system we currently suffer for delivering drinking water, wastewater and stormwater services.
There is to be a working group, comprising local government, iwi and water industry experts, to look afresh at the governance and accountability arrangements for the four new entities that will be charged with delivering three waters services. The consultation with the councils has delivered that much.
But the option of councils opting out, as many have expressed a desire to do, is gone. The Cabinet has decided it is to be an "all in" mandatory model.
It seems the Government has not baulked at handing this issue on a plate to the National Opposition and Christopher Luxon in particular, and has decided the risk that antagonising much of the local government sector could complicate the broader agenda of resource management reform is a risk worth taking.
The Taxpayers' Union, citing polling on the unpopularity of what is proposed, is calling on the Prime Minister to "read the room", repeat her captain's call on capital gains tax and reject the proposed reforms entirely.
But this is different. If memory serves, Jacinda Ardern's case for killing off the proposed capital gains tax was not just that she did not have the parliamentary numbers for it that term — Winston Peters said no — but that despite Labour campaigning for it for years, people just did not want it and the party had to take no for an answer.
The pros and cons of a capital gains tax had long been debated in the public domain, but that is not the case with the complex reforms proposed for three waters.
The acrid fumes of injured innocence pouring out of council offices on this issue smack of defence of jobs for the boys.
Not the boys in boots doing something useful in holes in the ground — they have nothing to fear from these changes — but rather those sitting around polished mahogany in council chambers.
That is not to say the proposed model has got the complex and bespoke governance and accountability framework for the new entities right.
They would belong, in a collective sense, to the councils in their respective regions on behalf of their communities. But this would not be ownership in the normal commercial sense, like shares in a company. The entities would not, for example, pay dividends. Their profits would be ploughed back into the provision of their services.
Nor could they be sold unless at least 75 per cent of the votes cast in a referendum agreed.
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.
The soon-to-be-established working group to review this may well recommend changes to that.
The issue has been bedevilled by the facile and tendentious use of terms like "assets" and "ownership", allowing opponents of reform to characterise what is proposed as an "asset grab".
But what do we mean by "asset"? You can take the accountant's view that it is something whose value is recorded at depreciated historic cost in a balance sheet.
If you do take that narrow, backward-looking view, you also have to acknowledge what the Auditor-General has been saying for years about the gap between depreciation claimed and the much smaller amounts councils have spent maintaining and renewing the precious assets they are now clutching, like so many Gollums, to their indignant breasts.
Alternatively, you can think of an asset as something you own that either makes you money, like shares in a business, or saves you money like owning the roof over your head. Something you are free to sell.
Is that the case here? Or is it more a case 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 the minister 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? It is absurd to imagine that lines drawn on maps to demarcate the territories of local authorities bear any relationship to the complex economic interdependencies of towns and cities to their rural hinterlands.
Are people cognisant of the benefits, in borrowing costs, of separating the balance sheets of the four proposed entities from councils' on the one hand and central government's on the other? Is it surprising a ratings agency might think that the less price-setting for these services is hostage to the incentives to procrastinate that local body politicians with a three-year electoral cycle face, then the better?
Instead, the constraints on charging will come from a yet-to-be-established economic regulator charged with guarding the interests of current and, crucially, future consumers faced with what are, after all, monopolies.
A discussion document on how that might work was also released yesterday.
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