Auckland Mayor Wayne Brown remains opposed to the reforms as they stand, including the early start date.
Auckland Mayor Wayne Brown is demanding the Government make changes to its three waters reforms, including bunching Auckland and Northland together as the guinea pigs in a revised model.
The mayors of Whangarei and Kaipara districts also remain sceptical about the Government’s revised reforms and the implications for their communities.
Private negotiations are taking place between Brown and the Government to create the first water company by July 1 next year, but the mayor remains opposed to the reforms as they stand, including the early start date.
A mayoral spokesman said Brown has advised Local Government Minister Kieran McAnulty he is open to supporting the early establishment of the Auckland-Northland company, known as Entity A, provided certain changes are made that will bring tangible benefits to Auckland.
“Those changes have not yet been agreed to but are subject to ongoing negotiations,” the mayoral spokesman said.
Brown would not expand on what changes he is seeking, and his office suspects they have been redacted in a Cabinet paper, dated May 15, which has been proactively released.
The paper says there is a “strong case” for establishing Entity A first because it provides the greatest opportunity to demonstrate the early benefits of reform.
A draft initial asset management, funding and pricing plan points to prices being kept near current levels in Auckland and coming down in Northland to near Auckland levels, says the paper.
But any pricing details in the paper are redacted and neither Brown nor the mayors of the Whangarei, Kaipara and the Far North councils have seen the draft plan.
A spokesperson for McAnulty said as conversations with Brown are ongoing, it would be inappropriate to comment on the negotiations but said the “Cabinet’s proposed timeline for Entity A remains unchanged”.
McAnulty is confident the Auckland-Northland water company will reverse a 10-year programme by the council-owned water company Watercare to raise household bills by 111 per cent, from an average of $1069 to $2261, and keep them affordable.
Likewise, he said, the reforms will bring high average household charges in Northland down to similar levels in Auckland.
Auckland has already consolidated much of its water services into Watercare, providing a strong foundation to operate and build on, said McAnulty.
Asked when the new charges for Entity A’s water services will be made public, McAnulty indicated it would be in the months leading up to July next year.
“Councils will have an opportunity to comment on this plan while it is in development,” he said.
Whangarei District Mayor Vince Cocurullo has opposed Entity A in its present form, telling the Herald it does not recognise Northland’s unique identity, growth or the health of its water systems.
He said the council, serving 105,000 people, has no debt and has invested more than $150 million in water, wastewater and stormwater services since 2007.
“We have not received any information as to what next year’s charges are planned to be,” said Cocurullo.
Kaipara District Mayor Craig Jepson is sceptical that residents will be better off long-term, saying critical flaws remain in the revised reforms, such as unconvincing figures, unbelievable efficiencies and unrealistic deliverables.
The district engineer for the Far North Council, Andy Finch, could only confirm the position in the May Cabinet paper setting an expectation for household water bills to come down to near Auckland levels.
Watercare, which provides water and wastewater services to 1.7 million Aucklanders and is something of a role model for the Government’s reforms, has largely remained quiet about the reform process.
A spokesperson said the asset management, funding and pricing plan for Entity A is being developed by the Department of Internal Affairs and “as we haven’t seen the final documents, we do not want to speculate on what it means for our customers”.
However, two weeks ago the council-owned water company warned prices could rise even faster if extreme weather cause more damage to its pipes and infrastructure.
Facing a bill ranging anywhere from $100 million to $460m arising from the summer floods is making it harder to stick to its pricing plan, Watercare told the Herald.
Four months ago, Watercare chief executive Dave Chambers told a parliamentary select committee interrogation of the latest Three Waters legislation that being part of Auckland Council’s debt headroom limited how much it could borrow to invest in water.
Auckland Council treasurer John Bishop said Watercare’s share of the council group’s $11.8b debt is $2.9b.
Bishop said Entity A might still be able to borrow at the same favourable interest rates as Auckland Council, but it would depend on a number of factors, including how much debt it takes on, revenue streams and what, if any, support, such as back-up and stand-by facilities the Government provides. Ultimately, it will depend on its credit rating, he said.
Work by Treasury, provided to the Herald under the Official Information Act, said Entity A has a strong financial position, prices may reduce and it may be ready for private capital markets on”‘go live”.
Treasury said Entity A has the capacity for a further $4.09b in debt, but had reservations about the other three water entities’ ability to take on debt and undertake capital investment on day one.
The Government plans to “stagger” the remaining three entities out until July 2026.
Council chief of strategy Megan Tyler said the reform process was proving to be “really complex”, particularly moving the council’s stormwater functions across to Entity A.
She said the council is in the latter stages of moving the assets across. Things like stormwater pipes are straightforward, but it gets complex when assets have a dual purpose. Roads, which play a big part in moving stormwater, have been removed in the legislation from being transferred, but maintaining the thousands of road culverts could be done by Entity A under a service agreement, she said.
One of Auckland Council’s big concerns about the reforms is the splitting of stormwater and land use functions.
Tyler said the connection between the two is incredibly critical, saying the council is doing its best to get the right outcomes for Aucklanders and the environment in partnership with Entity A.
This has become even more important with the recent storms, what roles the council and Entity A will play in future catastrophes and who picks up the bill.
“It may well add some complexities, but we’ve still got nearly a year to try and work through it,” Tyler said.
National has promised to repeal the Government’s Three Waters reforms within 100 days if it wins October’s general election.
Local Government spokesman Simon Watts has said National will restore council ownership and control, but with stronger central government oversight, including strict rules for water quality and for investment in infrastructure.
“National will require councils to ring-fence money for water infrastructure, instead of spending it on other services, and ensure water services are financially sustainable so that future generations don’t inherit outdated or failing infrastructure.,” he said.
The Three Waters reforms, repackaged as the “Affordable Water Reforms”, are designed to lead to lower prices and higher investment in water infrastructure.
They are meant to help councils deal with the cost of investment in water, wastewater and stormwater infrastructure - estimated at an eye-watering cost of between $130 billion and $185 billion over the next 30 years.
To get some perspective of this cost, much of which will be borrowed, the Government’s gross debt is $133b.
After the Government scrapped its unpopular Three Waters reforms with four mega-water companies for 10 smaller companies, Local Government Minister Kieran McAnulty said the new model would deliver household savings of between $2770 to $5400 per year by 2054.
These savings are based on comparing the reforms against a “no reform scenario” out to 2054.
The modelling was undertaken by the Water Industry Commission for Scotland (WICS), but as a peer reviewer of the work, Farrierswier, noted, “forecasts almost always turn out incorrect, especially over a 30-year horizon”.
Brown, a professional engineer, has criticised the Government’s decision to model the water reforms on Scotland as “just dumb” given the differences in geology, erosion and number of catchments between the countries.
One contentious part of the reforms is unchanged. The new water companies will be owned by councils via a shareholding. They will report to a local representative group jointly comprised of council representatives (with every council in the country having representation) as well as mana whenua.
The representation of these groups will be split 50-50 between mana whenua and councils - meaning they would be co-governed like the previous model of three waters.
The reforms stem from Havelock North’s outbreak of gastroenteritis in 2016 where four people died and 5000 became ill, the drought in Auckland and old pipes bursting in Wellington.
Bernard Orsman is an Auckland-based reporter who has been covering local government and transport since 1998. He joined the Herald in 1990 and worked in the parliamentary press gallery for six years.
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