Councils with constrained balance sheets and no appetite to hike rates have struggled to invest in adequate water infrastructure, leading to leaky pipes and occasionally contaminated water. The Department of Internal Affairs reckons that without water reform, households would be hit with costs of $1900 to $9000 a year to fix broken water infrastructure.
With reform, those costs drop to $800 to $1640 a year. National disputes the scale of the investment the Government says is required, but there is no denying the bill will be large.
National’s alternative policy is aimed at ensuring councils do not shirk water investment, but there is little detail on how councils and ratepayers will come up with the cash to pay for it, beyond a tacit approval of allowing them to pass on Watercare-style water bills to households that do not already get them.
Under National’s plan, water assets would return to council control. The new water quality regulator, Taumata Arowai, established by Labour to ensure councils deliver clean water, will be kept - as per National’s existing policy.
The big difference is the establishment of a new water infrastructure investment regulator, which would ensure that councils are investing adequately in water infrastructure - something that has been a problem in the past.
It would also ensure that councils are charging appropriately for that investment, either through rates or through charging for water services directly through Watercare-style water bills.
“Under National, councils will be required to demonstrate a clear plan to deliver ongoing investment in water infrastructure. Those plans will need to be approved by the Minister of Local Government,” Luxon said.
“While water quality regulator Taumata Arowai will set strict standards for water quality, National will establish a Water Infrastructure Regulator within the Commerce Commission to set and enforce standards for long-term water infrastructure investment.
“Councils will be required to ringfence money for water infrastructure and not spend it on other services instead,” he said.
Many councils, particularly smaller ones, may still struggle to fund investment.
National said councils will have the ability to voluntarily link up to create regional Council Controlled Organisations, which they say will have balance-sheet separation from the councils that own them.
This would look something like a cross between what the Government is currently proposing and Wellington Water.
In Wellington, the many local councils banded together to form Wellington Water, but still own their pipes and manage how much investment they get separately.
National’s plan would allow councils to go further by allowing these new water companies to borrow money themselves.
If they form Wellington Water-style amalgamated entities, these would have the balance sheet separation that Labour’s new water entities have, allowing them to borrow much more to fund water infrastructure - and to borrow separately from the councils that own them.
Labour has already hit out against the plan, with Local Government Minister Kieran McAnulty calling it a “policy of higher rates in the middle of a cost of living crisis”.
“After 4 years to think their solution is the status quo - the very thing councils don’t want,” McAnulty said.
They are setting high standards but putting in place none of the economies of scale to pay for them. This will mean councils have to hike rates to pay for the requirements set by National,” he said.
Former local government minister Nanaia Mahuta has already said one of the reasons for the unpopular levels of limited local control under her scheme was that ratings agencies needed to be satisfied the new entities were separate from the councils that owned them for them to achieve the balance-sheet separation that underpinned their low borrowing costs.
There is likely to be considerable debate over how many councils will be forced to amalgamate water services, and whether these councils can achieve the balance sheet separation from their water entity necessary to underpin low borrowing costs.
National has also said that in some cases, it would also allow the Government to step in and provide funding to the entities on a “case-by-case” basis.
Luxon said the answer to water woes was not “Labour’s unpopular Three Waters scheme that the Government has pushed through Parliament”.
He said National would “set and enforce strict water quality standards and require councils to invest in the ongoing maintenance and replacement of their vital water infrastructure, while keeping control of their assets that ratepayers have paid for”.
