More say comes at significant cost

A109 Light Utility Helicopter flight with mayor Gisborne City from the air in November 2023.

Opinion

Debate on the Three Waters makeover called Affordable Water Reforms has centred initially on the contentious parts that remained, such as co-governance and the removal of assets from council balance sheets, but as time goes on the focus may well switch to the costs the Government’s volte-face has created.

The main selling point of the original four entities model was the cost savings from economies of scale that the four mega entities would have produced.

Those economies get significantly reduced in the new proposal with its 10 entities which, for a start, will all have their own bureaucracies to fund.

Figures quoted for people in the Gisborne-Hawke’s Bay entity show that annual water costs 30 years from now under the original plan would have been $2030, but would be $4010 or nearly double under the 10 entities model.

Local Government Minister Kieran McAnulty says the proposed changes to the Three Waters programme were about finding a balance to financial benefit and ensuring local representation.

McAnulty told RNZ there was no way to please everyone. “And we’ve found that . . . all of those that were in support of four (entities) would still rather 10 than nothing, and I think that’s the context that we’ve got to look at this.”

The Government knew it would not get the whole local government sector on board, he said.

“But we also know we’ve got to do something because the country’s facing a massive problem and the country’s also got a very clear choice. It’s always going to be done by borrowing, so it comes down to the cost of borrowing,” he said.

Ratings agency S&P Global says there is no free lunch and New Zealanders face much higher costs to fund this investment no matter who delivers it. The agency also says there has been too little scrutiny of the perceived $120bn to $185bn investment required, and warns that the reform process is already creating a series of winners and losers — with many of the bigger councils pressing ahead with “gold plated” water treatment plants, gambling on the costs being off their books.

Meanwhile the draft Review into the Future of Local Government says that water assets are a major part of council balance sheets as well as their biggest expenditure item and is warning that small councils face questions over their long-term viability. Does this raise the prospect of future amalgamations?