29 Apr 2022

Three waters: Councils to be shareholders as government accepts recommendations

12:10 pm on 29 April 2022

The government has accepted 44 of the three waters working group's 47 recommendations for changes to its water infrastructure reform programme, with minor changes.

Watch the ministers' announcement

Speaking from the Pātaka Art and Museum in Porirua, north of Wellington, Local Government Minister Nanaia Mahuta and Infrastructure Minister Grant Robertson have this morning laid out next steps.

The reforms would move responsibility for the management of drinking, waste and stormwater from 67 local councils to four large, specialised water management organisations.

However, after months of deliberations, they confirmed councils would be given non-financial shareholding interests in the four water service entites, guaranteeing ownership - one of the key concerns raised over the government's initial model.

This would be allocated based on population - with one share per 50,000 people, rounded up to ensure at least one share per council - and would be reassessed to account for population changes every five years.

The co-governance provisions proposed - to have mana whenua and councils given equal number of seats on a representation group which sets the entites' strategic direction but has no say in operational matters - would remain, with the additional option of having co-chairs.

The separate boards of the entities themselves would be appointed by the regional representation group, based on competency requirements with a ban on conflicts of interest - including a prohibition for councillors to be on the entity boards.

Some of the proposals also called for the representation group to have greater influence over the entities.

There will also be extra protections against privatisation which would require at least three quarters of Parliament to agree before any sale or merger could be done.

Robertson said there was an accepted need for change, and the reforms were fundamentally about delivering clean and safe drinking water at an affordable price.

"You only have to look at the number of burst pipes, boil water notices and the volume of sewerage spewing into our harbours to see we can't carry on as we are," he said.

"At the heart of councils' concerns have been the issues of ownership and voice ... we have listened to these concerns and modified our proposals accordingly."

Mahuta said she acknowledged there was anxiety about change, but services had been underinvested in for too long.

"We are now at a point where the case for change is well made and the policy has been robustly tested and improved. We have listened to concerns and now is time to move forward."

During the briefing, Mahuta said to all local government and iwi leaders around the motu, she wants to offer the government's acknowledgement of their leadership in the role of custodians of water services and promoting water quality.

Robust water systems lacking - Mahuta

She said the working group made sensible, well considered recommendations that tackled the issues of most concerns to councils, "community connection to local infrastructure, ensuring local voice is evident in decisions impacting on communities, and strengthened governance oversight measures".

"We've listened to those ideas and considered all of the suggestions. Today I'm pleased to announce that Cabinet has listened to the advice of the working group and accepted the majority of the working group's recommendations in full."

She said the government has accepted 44 of the 47 recommendations, with three that need to be worked on further.

"New Zealanders have the right to expect that when they turn on the tap the water that comes out will be clean, safe reliable and won't make them sick.

"In a developed country like ours it should go without saying that our storm and wastewater services are resilient and robust enough to keep our communities safe ... unfortunately, we're not delivering on this expectation at the moment and we need to get to that point to ensure the future resilience every community across the country.

"It is at this regional oversight level where the long-term impacts of water services are worked through and its strategic objectives set for the intergenerational benefit of communities and the environment."

She said the enduring relationship between councils and mana whenua will set in place a more fertile and productive space for making decisions reflecting the wellbeing of communities and the environment into the future.

"Māori have a long-term interest in the sustainability and mauri of water, in fact just this morning we went out to visit a wetland here in Porirua and heard many other initiatives about how nature-based solutions and working with the land can improve community outcomes. That's the kind of future we want to see everywhere around the country," Mahuta said.

"By extension, enduring public ownership of our water entities protects water and the public interest in these significant assets. The Crown has Treaty obligations to meet, which is why we support the working group's suggestions to strengthen oversight at the regional level but I want to be clear - that ownership of the entities themselves will remain with councils alone through a shareholding model."

She said this approach was backed by mana whenua representatives on the working group.

She has also written to all political parties in Parliament to seek cross-party support for the continued public ownership of the entities.

'For too long can has been kicked down road'

Robertson said all the leaders of local government were present at the announcement today, which was reflective of the importance of the decision.

Mahuta's leadership on this issue had been exceptional and her commitment to getting a solution to achieve the goal had been incredible, he said.

"The recommendations have made the reform programme better ... we are now in the best possible position to move forward and that is what we are going to do. New Zealand has spent more than 20 years getting to this point and as the working group itself made clear, we cannot afford for it to take another 20 years.

"For too long the can has been kicked down the road."

He said he is confident the proposed structures will provide the ability to raise the capital required for the upgrades and repairs to water infrastructure.

"Without reform, households are facing water costs of up to $9000 per year, or the prospect of services that fail to meet the needs of their communities."

He said co-governance at the regional representational level will ensure the board's decisions reflect community interests, and provide certainty for New Zealanders who fear the reforms could lead to another asset sale.

"Iwi Māori have never expressed a wish to sell water assets and they bring an intergenerational, long-term lens to issues relating to water in their area. Having their participation alongside councils at the strategic level gives further safeguards that water assets will not be sold off."

He said he's struck by the fact the vast bulk of councils have accepted and wanted a co-governance arrangement.

"That's because councils are used to it in their own work and understand its value. In turn, iwi on the working group were supportive of the clarity of council ownership of the assets on behalf of their communities."

Te Rūnanga o Toa Rangatira chief executive Helmut Karewa Modlik refers to an artifact at the gallery, of Kupe, who left it there 1000 years ago, and said it and the other taonga within the museum from other tūpuna gives context about the reforms.

"All of us who are here and listening and participating in this, we're only stewards who are here for a brief time."

He said in his lifetime the Porirua harbour has changed from a food basket to a pond.

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Anita Baker Photo: SUPPLIED

"Things don't change, by definition, until they do. And change is always a challenge ... Ngāti Toa doesn't care who owns the infrastructure, we only care that our environment and our water and our people have the health that is our obligation to provide for them."

Porirua mayor Anita Baker said the reforms are a wake-up call.

"We knew change had to come. We couldn't maintain our water quality, our infrastructure and our services to the level our residents had every right to demand and expect. We're talking hundreds of millions in future financial investment.

"We therefore reviewed the minister's proposal not in isolation but in the context of what we know is an unsustainable status quo."

She thanked the ministers for listening to councils' concerns, and making the changes recommended.

The recommendations which were not accepted by the government included 44 and 45, which would have seen the Crown forking out for further analysis of how much funding would be required to fix degraded waterways, and see the Crown maintain financial interests in water services.

Department of Internal Affairs officials explained these were essentially redundant, as the case had already been laid out and the reforms were in part intended to ensure taxpayers would not have to pay extra.

The reforms were launched in response to the Havelock North campylobacter water crisis which has seen the government already bring in legislation to improve drinking water standards.

However, the investment needed to bring the country's infrastructure up to this new code and prepare for climate change and future water supply concerns would require large amounts of funding.

The four entities are estimated to be able to borrow at levels six to eight times what their revenue would be, which compares to council borrowing of just three times revenue, which also has to be spent on other local assets.

The government's solution - to consolidate - aims to allow the new water service entities to borrow much larger sums than councils could ever manage alone, but fears of losing control, accountability, and ownership of water infrastructure built up over generations has seen a strong backlash from many ratepayers and councils.

In response, the government set up a working group composed of mayors, Māori representatives, and an independent chair.

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