The Government is dangling $2.5 billion in front of local councils to incentivise them to support a proposal to centralise the management and ownership of the country’s drinking, storm and wastewater assets.
Prime Minister Jacinda Ardern, Finance Minister Grant Robertson and Minister for Local Government Nanaia Mahuta have descended upon Blenheim to make the offer at a Local Government New Zealand conference.
They’re promising the country’s 47 councils they would be “no worse off” transferring ownership of their water assets to four new water entities that will collectively be owned by local councils.
The Department of Internal Affairs has used a formula that considers each council’s situation, to figure out how $2 billion of funding would be distributed between councils.
It proposes Auckland, which opposes the reforms, will be allocated $508.6 million. Wellington is due to get $66.8 million, Christchurch $122.4 million, Hastings $34.9 million and Horowhenua $20.2 million - just to name a few examples.
Mahuta said: “Councils will be able to use this funding to support the three waters service reform, and focus on other local wellbeing outcomes associated with climate change and resilience, housing and urban design and planning, and community wellbeing.”
A further $500 million has been set aside to “address the costs and financial impacts that councils would incur such as the transfer of water assets, liabilities, revenue and staff to a new water services entity”.
“The funding also ensures councils will be able to continue to sustainably perform their non-water related roles and functions,” Mahuta said, labelling the $500 million a “no worse off” package.
The $2.5 billion comes on top of $761 million committed to the programme in 2020, and $296 million announced in Budget 2021 to cover the cost of setting up the entities.
The Department of Internal Affairs and Local Government New Zealand will spend the next six to eight weeks engaging with councils on the issue before the Government meets again to decide the next steps.
The idea is for councils’ participation in the water entities to be voluntary, but Mahuta hasn’t ruled out forcing them to join.
The waters services entities are scheduled to begin operating in July 2024.
Mahuta’s argument is that amalgamation will result in efficiencies. Entities will also be able to issue debt more easily than councils and won’t face the same pressures councillors do when it comes to keeping their books in the black.
Research done for the Government suggests $120 billion to $185 billion of investment is needed over the next 30 years to maintain, replace and upgrade ageing assets and to provide for growth.
Auckland Council opposes the reforms because it doesn’t want to subsidise other councils that haven’t invested as much as it has in maintaining its water assets.
Councils also fear they’d be ceding power and the changes could result in job losses.
Here is a Q+A provided by the Government:
Is the Government buying the councils’ water assets?
- No. The assets are currently owned by communities through their councils. Under the reforms, communities will continue to own the assets through the water entities. These entities will be collectively owned by local councils for the communities they are serving.
What happens next?
- It has been agreed to have a six to eight-week period following this conference during which officials from the Department of Internal Affairs will work in partnership with Local Government New Zealand to further engage with the sector, after which the Government will meet again to discuss next steps for the reforms.
- This will assist sector members to understand the reform-related information, and explain the policy proposals, the benefits of reform, and the details of the support package.
When will the entities exist?
- The waters services entities are scheduled to begin operating in three years’ time on 1 July 2024.
How will the Government act to prevent privatisation?
- Continued public ownership of Three Waters services and infrastructure is a bottom line for the Government.
- Most water infrastructure is already publicly owned by communities through their councils. The water entities will be collectively owned by local councils for the communities they are serving.
- The Government will develop legislation specifying that local authorities will be the owners of the entities and any future privatisation proposal must be put to the community through a referendum requiring at least 75 per cent agreement for change.
- The entities will be structured in a way that prevents them from paying dividends or offering other financial rewards. This will make them unattractive to potential alternative owners.
How will communities retain influence over water services?
- Oversight will be shared through a local Representative Group made up of local councils and mana whenua. This group will set expectations for the entity and select an independent panel to appoint an entity board.
- Each entity will be required to engage with communities in a meaningful and effective manner on all key documents and report on how consumer and community feedback was incorporated into decision-making.
How will transition be managed?
- Local Government will be supported through the transition process to ensure business as usual operations are not disrupted.
- A sum of $296 million has been set aside to help manage the costs of transitioning to the new entities.
What impact will the reforms have on the workforce?
- Developing a sustainable workforce, which can deliver on the increased activity, is critical to the success of the reforms.
- This includes developing the existing workforce to adapt to the reforms, as well as creating a pipeline of an appropriately skilled workforce through education, training, immigration and substitution initiatives.
- Modelling and research suggest the water sector workforce will need to grow significantly over the coming years.
- Transition planning is being developed to ensure much needed certainty for the workforce.