Three Waters: Wellington Water preparing appeal to new Government to be test case for new fix

Wellington Water, the organisation that manages water for six Wellington councils, thinks it can be the first one to test the new National-led Government’s alternative to Labour’s Three Waters reforms.

Hutt City Mayor Campbell Barry, who chairs the Wellington Water Committee, told the Herald they were preparing a briefing to the new Local Government Minister to see if they could be the first or one of the first councils into the new system. Wellington might replace Auckland and Northland, who are the first regions to go into Labour’s soon-to-be repealed model.

“We think we are in a stronger position in our region, having a number of councils that are already working together on what that looks like a solution,” Barry said.

“There is a potential for a head start there,” he said.

Councils are struggling to pay for the cost of investing in infrastructure for the three waters: freshwater, stormwater, and waste water. Many councils have little headroom to borrow more before reaching their debt caps, and cannot continue to raise rates like they have done in the past.

Labour’s solution was to take three waters assets, mainly pipes and reservoirs, off councils and merge them into one of four (later increased to 10) mega-water entities that would be owned by councils but ultimately co-governed by councils and mana whenua through a complicated governance structure.

The entities would have balance sheet separation from the councils that owned them, which would allow them to borrow heavily without impacting their shareholder councils. The borrowing would likely have been serviced through water charges.

National has pledged to repeal this within 100 days of taking office and restore what it calls local control. Under National, councils will be free to go their own way, provided they meet minimum quality standards and levels of investment.

Councils will have the freedom to voluntarily amalgamate into an entity that looks a lot like one of the entities Labour proposed minus the co-governance component: something that owns the infrastructure, has a separated balance sheet, and borrows heavily to invest in new pipes.

Mayor Campbell Barry chairs the Wellington Water Committee. Photo / Georgina Campbell

Wellington Water is already part of the way there because councils have partly amalgamated water management. However it lacks the most important part of the new model: balance sheet separation.

Barry thinks it could be a test case to see if Wellington Water could work with the Government to prove the new system works.

“We are in a unique position in comparison to everywhere else in the country. That gives us an opportunity. If there is a desire to work with us, we’ve got the capability and the understanding to help drive this within the council and within Wellington Water,” he said.

Barry stressed others may differ.

“Others will have varying views but I know the vast majority are keen to do that,” he said.

Barry had some questions about the model National has proposed.

“This can’t be Wellington Water 2.0 in my view. I haven’t seen anything that would solve the balance sheet separation,” he said, saying balance sheet separation would be a “bottom line” of any new system working.

“There is a bottom line of balance sheet separation. If we both agree that that is an absolute bottom line then that’s fantastic.”

He said councils had worked out a good solution to the question of how Labour’s proposed entities would be responsible for taking on debt councils had borrowed to invest in their own pipes. This solution could be carried over to the new system.

Barry also warned that the voluntary aspect of the reforms left the system vulnerable to holdout councils. Labour had initially looked at making its system voluntary, but decided to force councils into amalgamation after deciding that a patchwork of councils in and out of the reforms would mean they would not work.

There is some uncertainty about the transition to the new regime. One question is whether the Department of Internal Affairs works with the new Government to come up with a new off-the-shelf CCO model that councils can use if they wish to amalgamate, or whether the councils would have to fund this work themselves. Either option would be expensive - the question is who would be forced to pay. Three Waters was one of the main sources of the Government’s high consultant spend.