Three waters: Next foreshore and seabed or essential reform

ANALYSIS:

Decisions on the Government’s wholesale water reform programme are now imminent – including whether councils will be forced to part with billions of dollars of pipes and reservoirs.

The final deadline for local council “engagement” on the changes elapsed, meaning the ball is once again in the Government’s court.

Local Government Minister Nanaia Mahuta has been working to reform the three waters – drinking, storm, and wastewater – since taking office in 2017, but the reforms have come under increasing hostility as they get closer to their deadline. Most parties in Parliament have raised some objection. National and Act have been the strongest voices against, meanwhile Te Pāti Māori has said the reforms could be “the foreshore and seabed issue for this Government”.

The problem before Mahuta is political rather than policy.

She can use Parliament to change whatever she likes about local government – she could abolish all the councils if she wished.

However, her political problem is that she wants to bring the individual councils with her in the reforms, rather than forcing reforms upon them.

So far that has proved difficult.

What is Mahuta trying to do

Mahuta describes the reforms as being made up of the pou, or pillars.

The first, and least controversial, is the creation of Taumata Arowai, which will be in charge of regulating and enforcing higher drinking water standards. This has already been established. Taumata Arowai has been created, and will very shortly become the regulator, following the passage of regulation legislation this week – the legislation being the second pou.

The third pou is far more controversial. Currently, the water piped to and from your home is managed by 67 separate councils, which look after water in different ways. Enormous Auckland Council uses Watercare, a council-controlled organisation, which the council has an enormous amount of control over.

Wellington’s six councils collectively own Wellington Water, which looks after water services in the region, but leaves the actual maintenance of the region’s pipes to the separate different councils – this separation shows Hutt City has far better infrastructure than Wellington City.

Other, tiny councils look after everything themselves.

Mahuta’s reforms would see all of these councils pool everything they have to do with water – pipes, reservoirs, services staff – into four enormous new organisations which would look after drinking water, stormwater and wastewater.

Each organisation would technically still be owned by councils, but those councils would have very limited control over how they would operate. Councils would have a small, collective, say on who is appointed to the boards of the organisation, but each council would not get its own representative on the board.

National’s local government spokesperson Chris Luxon has been strongly critical of this structure, saying it dilutes councils control over things it already owns. He said it takes the “local” out of local democracy.

Councils and mana whenua will come together in a “regional representative group”, which will appoint an independent panel, which will appoint a board to govern the entity. Councils around the country are frustrated at just how much this will dilute council control over what they own.

But there are positives too. Modelling from WICS, which looks after water in Scotland suggests councils need to invest $185 billion in water over the next three decades to keep up with the maintenance of their pipes. Most councils are planning nowhere near that kind of investment. In fact, councils are currently on track to fall short by about $100b – although many dispute that $185b is actually needed.

The new entities will likely charge councils or charge water users for water services, and be able to raise massive amounts of debt to invest in water infrastructure. Mahuta argues that amalgamation will leave ratepayers, particularly rural ratepayers, much better off because the new organisations will find huge efficiencies.

The backlash

Councils have come out strongly against the reforms.

Auckland Mayor Phil Goff has been staunchly sceptical, noting that Auckland alone among the major councils does not have problems with its water assets and is unlikely to benefit from the reforms – something the Government’s own modelling concedes because Auckland is already so big, it has a very efficient water service.

He raised concerns that Aucklanders, having invested in water assets through Watercare, should not see them confiscated.

Other councils disputed the Government’s modelling, saying they felt their investment in water was sufficient and they preferred to retain more direct control over their pipes.

There’s been more than a whiff of racism from some objections to the reforms. These generally lack coherence, but it is correct that the reforms would give mana whenua greater control over water services.

The reforms have led to dramatic scenes from New Zealand’s councils, with Timaru Council operating to walk away from LGNZ, the association of New Zealand councils, over its effective support of the reforms.

Engagement is over

The reforms are officially opt-out. Councils, at the moment, are free to go their own way if they wish.

Each council’s bylaws and standing orders mean they will come to the reforms individually. Some require a referendum or consultation on the divestment of assets like pipes. These would almost certainly be bypassed by an act of Parliament which could run roughshod over any council roadblocks.

Recently, Mahuta has refused to rule out forcing councils into the reforms if they choose to opt-out. This she could quite easily do using Parliament, but it would risk picking a fight with nearly every council in the country.

There are still concerns about how the changes would impact council balance sheets and credit ratings. Divesting councils of one of their biggest assets could limit their ability to borrow more for other investments.

But if Mahuta wants to go through with the reforms – and her intransigence in the House suggests she does – she will likely have to do it by compulsion.

Concerns about asset theft are somewhat overblown, as councils will still own the entities that own their assets, but it is certainly a major shake-up of an area councils had absolute control over. Likewise, concerns of the reforms echoing the foreshore and seabed controversy are misdirected.

There will soon be a debate over water rights, but so far Mahuta has avoided her reforms being sidetracked by this question by hewing to the longstanding legal fudge of focusing on water delivery services rather than who owns the water itself.

She’s run a blistering nationwide roadshow, having “over 150 engagements with councils, iwi Māori, the water industry, and other stakeholders”.

National agrees water is a problem, and at least some reform is necessary. It has agreed to the new water regulator, but Luxon argues a more bespoke approach is needed. Some councils could pool resources if necessary, while others could go their own way.

“We don’t think centralisation is the answer here. The answers come from the people who are closest to the problem,” he said.

Even the Greens have raised a voice of scepticism, noting that many councils have asked for the reform process to be “paused” while they get their heads around the massive changes being proposed.

Green MP Eugenie Sage asked Mahuta in question time whether Mahuta considered a “pause” in the reforms to be evidence of “partnership in action”.

Mahuta would not be swayed, saying councils have already been given ample time to understand the reforms which she said were “foreshadowed” prior to the eight-week consultation.

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