Auckland to keep assets despite Watercare's financial woes - Goff

6:32 pm on 19 January 2021

Despite the increased financial pressures Watercare is facing, the supercity has no plans to hand over the ownership of its assets to a new entity as part of the government's three waters reforms, Auckland Mayor Phil Goff says.

Auckland mayor Phil Goff speaks to media following Cabinet's extension of the alert level 3 lockdown.

Auckland Mayor Phil Goff. Photo: RNZ / Dan Cook

Under the government's planned reforms, water services would no longer be controlled by the country's councils and would instead be operated by a small number of publicly owned multi-regional entities.

The exact ownership structures are still being worked out, but the local authorities may still have the option of retaining ownership of the assets, or holding shares in the new organisations.

According to a Cabinet minute released by Local Government Minister Nanaia Mahuta last month, a shortlist of options has been identified and further consultation with councils and iwi is planned in March.

Councils will still have the ability to opt out of the reforms. Government officials are also looking at options for Crown and iwi/Māori ownership of the new water services providers.

A Cabinet paper from December stated the country's water service providers were facing a $30 billion to $50 billion infrastructure deficit.

"Eliminating this deficit could take 30 years, and will be beyond the funding and operational capacity of most councils and communities under current arrangements.

"We have an opportunity to address this situation by reforming Three Waters service delivery arrangements, to create a small number of large-scale water entities, with sufficient balance sheet capacity to raise debt to fund these investment requirements."

A spokesperson for Auckland Mayor Phil Goff said Auckland Council agreed in August last year to participate in the first stage of the government's water reform programme.

"That agreement represents a commitment to assess reform options in good faith, including the government's preferred option. It does not commit the council to any change, and it can exit the reform process in June 2021 if it wishes to.

"Council officers are now undertaking work to assess the government's preferred option and a briefing to the Governing Body is expected in late February/early March."

The spokesperson said one advantage of the government's proposal would be central government acting as a guarantor for debt to build the infrastructure, without adding pressure to the council's debt-to-revenue ratio.

"This could allow Watercare to borrow more to build and replace infrastructure while spreading the cost over a generation so that the level of water rate increases could be moderated.

"The mayor is in favour of exploring the government's proposal for Three Waters reform, however his top priority is to ensure that it stacks up for Auckland, that water infrastructure remains owned by Aucklanders through their council, that it doesn't lead to Aucklanders subsidising water assets in other regions, and continues to provide council with the levers it needs to ensure Aucklanders have a say and level of control over the region's water supply."

Watercare has been hit hard by the financial impact of Covid-19 and the region's drought. Just before Christmas its board approved an annual price increase of 7 percent for 2021 and 2022, 9.5 percent from 2023 to 2029, and 3.5 percent until 2031.

The board cited a loss of revenue as the cause, with the region's ongoing drought adding $209 million in additional costs to its overheads.

An independent review of Watercare last year by the Water Industry Commission for Scotland (WICS) found it would need to cut costs and boost investment by up to $1.7 billion over a decade to rank with those in the United Kingdom.

WICS said Watercare should be investing about $300 million a year more than is allowed for in the council's current 10-year plan, which is up for review.

Watercare was approached for comment but referred questions to the Auckland Council.

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