Three Waters Reforms
Over the past three years, Central and local government have been considering how best to regulate and deliver the three water services (drinking water, wastewater and stormwater).
Options for new service delivery arrangements are still being considered, however, the Government’s preference is for four larger water entities. Those entities would replace 67 separate councils (or their agencies) which currently manage their district's three waters services independently.
The Three Waters Reform Programme signals a significant change for Councils, and currently there is uncertainty around how water supply, wastewater and stormwater services will be delivered to our community in the future.
There is a lot of information we are yet to learn about the Three Waters Reforms (TWR) and how it will impact our district, and for the most part we will be guided by Central Government and the TWR steering group.
The Government is reviewing how to improve the regulation and supply arrangements of drinking water, wastewater and stormwater (three waters) to better support New Zealand’s prosperity, health, safety and environment. Most three waters assets and services, but not all, are owned and delivered by local councils.
The Three Waters Review is a cross-government initiative led by the Minister of Local Government. Other involved agencies and portfolios include: Health, Environment, Finance, Business Innovation and Employment, Commerce and Consumer Affairs, Primary Industries, Climate Change, Infrastructure, Civil Defence and Emergency Management, Housing and Urban Development, Transport, Conservation, and Rural Communities.
When did this begin?
The Review, beginning in mid-2017, ran in parallel to the latter stages of the Government Inquiry into Havelock North Drinking Water, which was set up following the campylobacter outbreak in 2016. Up to 5500 people were ill as a result and four people are thought to have died from associated causes.
The initial findings of the Review were consistent with many of the Havelock North Inquiry’s findings, and raised broader questions about the effectiveness of the regulatory regime for the three waters, and the capability and sustainability of water service providers.
Effective three waters services are essential for our communities
- Our health and safety: depends on safe drinking water, safe disposal of wastewater and effective stormwater drainage.
- Our prosperity: depends on adequate supply of cost effective three waters services for housing, businesses and community services.
- Our environment: depends on well managed extraction of drinking water, and careful disposal of wastewater and stormwater.
Memorandum of Understanding (MoU)
In August 2020, the Government signed a Memorandum of Understanding with many local authorities around the country, including our Council. It’s important to note putting pen to paper does not bind our Council to any future agreements or decisions, it simply adds us to the ongoing conversation.
As part of that conversation, Council was granted $3.36 million that has now resulted in proposed work being brought forward and additionally some new projects.
Three waters infrastructure stimulus package
8 JULY 2020
On 8 July 2020, the Government announced a funding package of $761 million to provide immediate post-COVID-19 stimulus to local authorities to maintain and improve three waters infrastructure, support reform of local government water services delivery arrangements, and support the operation of Taumata Arowai. Information about this work, including updates, media releases and background documents, is available on the Central/Local Government Three Waters Reform Programme webpage.
Three waters regulatory reform
27 JULY 2020
On 27 July 2020, the Water Services Bill was introduced to Parliament (an announcement by the Minister of Local Government is available here: New water services bill for safe drinking water 28 July 2020). The Bill contains all of the details of the new drinking water regulatory system, and provisions relating to source water protection and Taumata Arowai’s wastewater and stormwater functions.
The Bill and its progress can be viewed on the Parliament website here: Water Services Bill
A second, complementary Bill, the Taumata Arowai – Water Services Regulator Bill, sets out Taumata Arowai’s objectives, general functions, and operating principles, and establishes Taumata Arowai as a Crown agent.
The impact of these reforms is still unclear, but we're in regular contact with the DIA to learn more. As part of their dashboard information for local authorities, the DIA have suggested Waimate will experience employment and economic growth as a result of the reforms.
You can view the interactive dashboard for the Waimate District HERE, or see below.
Government's Funding Package
The Government has also announced a $2.5 billion package to support local government transition through the water reforms. The package includes $500 million to make sure that no council is worse off as a result of the reforms, and $2 billion for councils to invest in the future for local government, urban development and the wellbeing of communities.
We hope to receive more information and clarity in the coming weeks. In the meantime, we will continue to constructively engage in this conversation with ratepayers and the Government, before moving towards a decision on behalf of the Waimate District later this year.
As part of their dashboard data, the Government has suggested the average household cost for the delivery of three waters within the Waimate District is $1200. Under the reforms, this annual amount will rise to $1640 per household, with the Government stating that without reform, the annual cost could be as high as $9000 per annum by 2051.
The multi-region water entities would remain owned by local councils in their boundaries (see image below), protected by a provision requiring a referendum with a 75% majority voting for privatisation. They would be governed and managed by people appointed by an independent panel, itself appointed by a representative group of local council and mana whenua delegates.
Consultation with communities would be required when developing strategy, investment plans and proposed prices or charges, similar to what councils do now. The entity’s financial and operational autonomy would allow them to borrow, free from local government debt restrictions.
But the water entities would not pay their owners any dividends.
And an economic regulator would be established to ensure good financial performance by the four water monopolies. That would sit alongside Taumata Arowai, the drinking water regulator, that was created to take over from the current drinking water regulator, the Ministry of Health.
Councils' water assets, and debt, would be transferred to the new entities.
Safe drinking water for all New Zealanders and visitors to our shores is a reasonable expectation and high-performing drinking water, wastewater and stormwater services are essential for the protection of public health, and the health of the environment.
Recognising this importance, in September 2019, the New Zealand Government agreed to create a new water services regulator to administer and enforce a new drinking water regulatory system, while contributing to improved environmental outcomes from wastewater and stormwater networks.
In March 2021 Taumata Arowai was established as a Crown entity. Taumata Arowai will become New Zealand’s drinking water regulator, replacing the Ministry of Health, when the Water Services Bill is passed, which is expected to be in the second half of 2021.
Once Taumata Arowai is fully functional, it will:
- Oversee and administer an expanded and strengthened drinking - water regulatory system to ensure all New Zealand communities have access to safe drinking water. That includes holding drinking water suppliers to account, if need be. See: For water suppliers (Taumata Arowai website).
- Oversee, from a national perspective, the environmental performance of wastewater and stormwater networks. (Regional councils will remain the primary regulators of wastewater and stormwater).
Three Waters Reforms Programme - Government Support Package
The Government has developed, in close partnership with Local Government New Zealand, a package of $2.5 billion to support the sector through the transition to the new water services delivery system, and to position the sector for the future. This package will ensure that local authorities are supported through the transition process, the financial impacts of reform are managed and importantly, all councils and communities will transition to the new system for delivering three waters services in a better position than where they are now.
There are two broad components to this support package:
- $2 billion of funding to invest in the future of local government and community wellbeing, while also meeting priorities for government investment (the “better off” component)
- $500 million to ensure that no local authority is financially worse off as a direct result of the reform (the “no worse off” component).
Through this package, what is available for Waimate District Council?
Should the reforms proceed, the Waimate District Council has been allocated $9.6 million. This funding will be in return for handing over more than $70 million of water infrastructure and assets within the Waimate District.
How has the allocation of the better off funding been determined?
The better off component of the support package will be allocated to territorial authorities using a nationally consistent formula based on:
- a 75% allocation based on population size
- a 20% allocation based on the New Zealand deprivation index
- a 5% allocation based on land area (excluding national parks)
The Government and Local Government New Zealand have agreed to this formula as it recognises the relative needs of local communities, the unique challenges facing local authorities in meeting those needs and the relative differences across the country in the ability to pay for those needs.
What can this funding be used for?
Council (in order to access the funding) will be required to demonstrate that the use of this funding supports the three waters service delivery reform objectives and other local wellbeing outcomes and aligns with the priorities of central and local government, through meeting some or all of the following criteria:
- supporting communities to transition to a sustainable and low-emissions economy, including building resilience to climate change and natural hazards;
- delivery of infrastructure and/or services that:
- enable housing development and growth, with a focus on brownfield and infill development opportunities where those are available,
- support local place-making and improvements in community well-being
Waimate District Council were successful in their funding application through the Three Waters Stimulus Package.
The funding approved is $3.36M. In addition to the $3.36M Government funding, Council also allocated $1.68M to enable a programme of investment totaling $4.6M. This additional contribution allowed for more projects to be funded, enabling a better urban/rural distribution.
The 17 projects prioritised within this application include:
|Queen Street SW SS upgrade||750,000|
|Reservoir and Break Tank upgrades||333,000|
|Waihaorunga Gallery upgrade||25,000|
|Hook Intake upgrade||155,000|
|Septic waste receipt||81,000|
|Waikakahi Intake investigation||20,000|
|Desludging WWTP ponds||800,000|
|Update rural hydraulic models||132,000|
|Edward Street sewer||616,000|
|Sanitary services review||15,000|
Some initial work to improve the available information needs to be completed by the end of September. Council will continue to consult on this topic and get a clear steer on whether to pass our water assets to a new entity, or to stay as we are.
Below is the proposed timeline for these reforms:
What do our district's numbers look like?
According to the figures provided by Water Industry Commission of Scotland (the company commissioned by the Government), Waimate ratepayers pay an average of $1200 for water, stormwater and wastewater services. If council continues to deliver those services, the expectation is that the figure in 30 years time will be approximately $9,000 per serviced property, and that is in today’s dollars. If we have an entity which covers most of the South Island, the Government propose that figure will instead be $1640 per annum, per household.
Does Council have faith in the numbers?
Quite simply, no. The figures are based on a number of assumptions, which we believe they have got very wrong. Our water assets are in very good order compared to most councils. Most of our water schemes have had upgrades to bring them up to the new drinking water standards and our wastewater treatment plants operate within their resource consents. In addition to that, we have been carrying out a significant programme of pipe renewals and continue to invest heavily in this space for the district.
Could a referendum be possible?
Council are looking into the legal implications, cost and strength of carrying out a referendum, but hold no position on this as yet. A local referendum would not be binding and therefore it is likely further consultation with the community will continue to help guide Council with their decision-making.
Will there be further consultation?
In the coming months, Council intend to host more public meetings to further inform ratepayers of the facts and the situation at hand.
Will my community get the same level of service under the proposal?
The Government has made an explicit commitment that staff working primarily on water would retain their salary, conditions and – critically – location if they transfer to the new water entities. Individual communities have significant potential gain from the proposal. At the moment, small contracts on an ad hoc basis give contractors no incentive to invest in specialised plant, for example, especially outside cities. At the moment, the supply chain has more market power than your average council. With four entities, the market power would switch around to the buyer.
When does Council consult with ratepayers?
Formal consultation is not required yet. That’s because the proposal from the Government hasn’t been finalised. At the moment, we’re in an 8-week review period so you can investigate the reforms, assess the potential impact on your council and suggest ways the proposal might be strengthened. Only once the reforms are more finalised will consultation obligations be triggered – if at all.
Who will own the water assets under the reform proposal?
Local authorities would be the owners of the entity, on behalf of their communities. The entities will own and operate three waters infrastructure on behalf of territorial authorities – they will hold three waters assets and associated debt. The assets aren’t being sold – the new entities would be collectively owned by councils, on behalf of communities.
In June 2021, Government released four reports as part of the evidence base to support proposed reforms. They follow the initial analysis from the Water Industry Commission for Scotland (WICS) which was released last December. The reports are part of the evidence base for reform at a national level and don’t speak to implications for individual councils.
These reports include:
The Three Waters Review is a separate but related to the Ministry for the Environment’s Essential Freshwater programme. Essential Freshwater is focused on establishing an integrated freshwater management system that ensures all discharges and water users are contributing to the achievement of agreed catchment and regional-level freshwater outcomes.
Three waters questions relate to how best to achieve safety and improved environmental outcomes in relation to largely, but not exclusively, council-controlled drinking water, wastewater and stormwater systems.
Emerging three waters regulatory proposals will be designed to be consistent with Essential Freshwater policy options. However, immediate concerns about the safety of drinking water and insufficient oversight of the three waters regulatory system require some proposals to be progressed as part of the Three Waters Review, as agreed by Cabinet.