Labour’s warning to ratepayers as Govt lays out Three Waters replacement

Ratepayers will be hit harder in the pocket under the coalition Government’s plan to address the country’s ageing water infrastructure, Labour says.

Prime Minister Christopher Luxon yesterday announced the Three Waters reforms of the previous government would be repealed by February 23 and replaced with two pieces of legislation outlining how councils would retain the responsibility of improving water quality and assets, potentially through a new type of financially independent council-controlled organisation (CCO).

Prime Minister Christopher Luxon told Newstalk ZB this morning they would attempt to strike the balance of stopping the water regulation from being “hopelessly local” but not falling into being “mindlessly central”.

“I think we have found the middle way through,” Luxon said.

“We’ll put two guard rails in place, make sure they hit the water standards but importantly, also put an economic regulator and make sure they are making consistent investments in their assets.

“Then you don’t see the ridiculous situation where 40 per cent of the water has leaked out of Wellington and all of a sudden there is an emergency and there is a bit of number eight wire and band-aiding.”

Luxon, alongside Local Government Minister Simeon Brown, did not guarantee ratepayers would not face a higher cost under this plan, something Labour’s Kieran McAnulty is alleging.

“The Government’s confirmation ... it will repeal the affordable water reforms will see higher rates for every ratepayer – up to 90 per cent in some individual councils – in 30 years,” McAnulty said.

“Instead of helping councils deal with water infrastructure, they’re kicking it back on residents and homeowners and washing their hands of a problem that needs a long-term solution.

“I’m thinking of councils like South Wairarapa, which has already increased rates 20 per cent each year for the last two years. They’re going to have to continue doing that sort of stuff.”

McAnulty, who took over the local government portfolio from former MP Nanaia Mahuta, also claimed three mayors had contacted him following Luxon’s announcement to express their displeasure with the proposal.

He said fears had been expressed regarding smaller councils with fewer resources being unable to afford necessary reform if they weren’t grouped with bigger councils.

McAnulty would not name the mayors who’d contacted him, citing confidentiality.

“Councils can’t do this by themselves, but this is exactly where the Government has left them – without any support.”

There is an estimated shortfall of $130 billion to $185b in water infrastructure investment over the next 30 years.

Labour's local government spokesman Kieran McAnulty fears ratepayers will be hit harder under the new Government's plan. Photo / Warren Buckland

Luxon believed his Government’s plan was “the most efficient way” and superior to Labour’s “10 mega co-governance entities with a massive centralised bureaucracy”, which had already cost $1.2b.

Brown said councils would be ultimately responsible for improving their water infrastructure and was confident councils, through the new CCO model, could borrow more as funding would be ring-fenced.

He also confirmed councils would be allowed to group voluntarily during its long-term planning and funding for upgrades, pointing to the several councils of Hawke’s Bay that had expressed such a desire.

However, McAnulty feared the approach would lead to smaller councils with high debt being left out in the cold.

“Why would those larger councils take on a small rural council with massive debt? They won’t because it’s a burden to those councils.

“You look at Tararua District Council, they’ve got 12,000 ratepayers, they need to find $600m over the next 30 years. They can’t do that.”

Wellington’s water woes were well recognised, with the city losing up to half its water through leaks, Brown said.

Brown wrote to mayors last month about the situation and today said he had been “encouraged” by some of their public comments and noted it was now about ensuring that “actions follow the words”.

“I have confidence that the council is taking its responsibilities more seriously.”

A leak on Wellington's iconic Cuba St became so bad a small sinkhole formed and authorities cordoned it off until it could be fixed. Photo / Ethan Manera

The Government’s first bill would be passed by the middle of this year and would set out provisions related to council service delivery plans and transitional economic regulation.

The second bill would set up the long-term replacement regime. It would be introduced by December, and passed by mid-2025 – just ahead of local body elections in October that year.

That bill would also set up regulatory backstop powers, to be used if councils were failing to meet the requirements to deliver financially sustainable and safe water services.

Also announced yesterday was the creation of a technical advisory group that would include experts in finance, infrastructure and local government.

It would provide advice on policy and legislation that would allow local councils to appropriately recover costs and access the long-term debt needed to fund the required investment in water infrastructure.

Adam Pearse is a political reporter in the NZ Herald Press Gallery team, based at Parliament. He has worked for NZME since 2018, covering sport and health for the Northern Advocate in Whangārei before moving to the NZ Herald in Auckland, covering Covid-19 and crime.