Local Government Minister Nanaia Mahuta announced the decision this morning, following years of policy development and consultation on an initiative intended to deal with the creaking underground infrastructure problems afflicting many of NZ’s towns and cities.
The four new water entities will cover:
•Auckland and Northland, covering about 1.75 million people, and possibly adding the Thames/Coromandel area, subject to consultation.
•All districts from the Waikato, Bay of Plenty, Taranaki, and upper parts of Manawatū-Whanganui, taking in water services for 799,608 people.
•The lower North Island and upper South Island regions of Tasman, Nelson and Marlborough, covering 955,154 people.
•The rest of the South Island, covering 864,350 people.
The decision to create four water entities and the broad regional splits are not up for negotiation, although there are possible tweaks to the boundaries in three areas.
“The data shows the case for change is compelling. Without these changes (Department of Internal Affairs) modelling shows that even at the more conservative end of estimates, the average household bill for water services could be as high as $1900 to $9000 by 2051, which would be unaffordable for many communities,” Mahuta said.
“Under our proposal for four providers, those figures range from $800-$1640, saving households thousands of dollars.”
The Government has yet to decide whether or not it will allow local bodies to opt out of the scheme, with Whangarei district council announcing yesterday it would not participate and the Auckland Mayor Phil Goff expressing opposition in recent weeks.
Mahuta has openly discussed legislating to create the change, which is being sweetened by offers of central government funding to help cover the estimated cost of water infrastructure upgrades over the next 30 years of between $120 billion and $185b.
Councils that chose not to participate would not receive government funding and would have to go it alone, but would still be subject to a new economic regulation regime, similar to that governing the electricity networks and telecommunications infrastructure.
Designed for monopoly service providers, such a regime would regulate how much water entities could charge for their services, while also requiring them to invest to meet nationally consistent standards for drinking, waste and stormwater systems.
The absence of such regulatory consistency has led to a wide range of outcomes for different parts of the country, with some cities and towns investing adequately and others falling well behind the requirement for water services appropriate for both human and environmental health.
The Department of Internal Affairs, which has led the massive policy-making effort, estimates cost savings and efficiencies over the status quo of 45% over the next 30 years.
“Underinvestment, including deferred maintenance and renewals expenditure, has left a legacy of impending costs and poor services for future generations,” she said.
“Without this change, communities are going to either face very large bills for water services, or infrastructure will continue to degrade with ongoing health and environmental consequences. Both of these outcomes are unacceptable.”
The announcement was accompanied by detailed estimates of the comparative cost in each region of sticking with current arrangements or amalgamating resources for economies of scale and tighter regulation.
A key element of the reforms is a requirement that water service operators remain community-owned, with proposed legislation requiring a local referendum and a 75% majority if there were ever a proposal to privatise any of the entities.
They would be prevented from paying dividends and while ownership will remain with the local bodies covered by each of the four, they will not be controlled by shareholdings in proportion to the original size of each contributing local council’s water service operations.
Boards will be appointed rather than elected, chosen for their relevant skills and will substantially increase Māori governance of water assets by having a 50:50 split between local government-appointed and Māori appointments on their boards.
Further detail of the estimated impacts of the reforms on individual councils’ finances is due for release in mid-July.
