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A price worth paying’: Counting the cost of wider local voice

An Analysis of Three Waters Reforms

Local Government Minister Kieran McAnulty (Getty Images)

Jonathan Milne
Auckland, April 16, 2023

Newsroom has modelling suggesting 10 smaller regional water corporations will cost communities billions more than the government’s previous reform model. Jonathan Milne, Managing Editor of Newsroom talks to seven key Mayors about that trade-off.

Forty-two. That is how many more Councils will gain a seat at the table of the water corporations that manage the drinking water and wastewater plants their communities own.

Those additional seats will be mirrored by more seats for iwi.

It is an improvement to the local voice being welcomed by Mayors in the two regions that have been the biggest champions of regional water authorities – Hawke’s Bay and Taranaki.

Newsroom has spoken to all those Mayors; if Local Government Minister Kieran McAnulty’s changes to the Three Waters Reforms win over just those seven Councils, that will be enough to tip support in the government’s favour.

A dodgy deal

But the greater local oversight comes at a cost – “a price worth paying,” those seven Mayors say.

Councils will lose $1.5 billion in “better off” funding that former Prime Minister Jacinda Ardern had promised them as a sweetener to buy into the water reforms.

That money was to have been spent on housing, jobs, and just occasionally on water infrastructure; now it will remain on the books of the new water corporations from which the government had cheekily proposed to pinch most of it.

The Mayors acknowledge that that was always a dodgy deal, but those millions would nonetheless have helped them balance their books.

Households will pay more than they would have, thanks to yesterday’s (April 13) so-called “affordable water infrastructure” changes. That is up to $2 billion a year more by 2054, at a very rough estimate.

Newsroom has been supplied with new forecasts prepared for Internal Affairs by Scottish Consultants. These compare how much water users will have to pay in the years through to 2054, counted in 2022 dollars and updated from previous forecasts to factor in high rates of construction inflation.

To be clear, nobody would bet the farm on these numbers; some Councils think that they are shonky. They are rough models based on 2020 infrastructure plans but they are probably the best that we have got

Rising costs to households 

They show that in smaller districts, without any water reforms, the cost to the average household of water infrastructure would soar over 30 years.

In 2054, Clutha households would be liable for an average of $22,080 in 2054.

The forecasts are almost as eye-watering for households in the Far North ($16,280), Waitomo ($21,500), Stratford ($19,670), Tararua ($19,130), Wairoa ($20,860), Kaikoura ($20,460), Grey District ($21,230) and Waitaki ($19,570).

The move to 10 entities, the government boasted, would mean that the average annual household cost rises no higher than $4430 in 2054 (in Taranaki and Otago/Southland).

But there is more. Figures that were not press released on April 13 calculate how much more households would have paid if the government had proceeded with its previous plan, of four supra-regional water corporations.

The average household costs for Auckland and Northland remain the same at $1460 in 2054, as that entity will remain the same size. But by these inflation-adjusted numbers, households in Waikato, Bay of Plenty, Taranaki, Whanganui and Manawatū would have faced average charges of $2130 in 2054 – that is half what they will pay under the 10 corporation model.

It is the same for households in Gisborne, Hawke’s Bay, Wellington and the top of the South Island, who would have paid only $2030 with the bigger corporations. And those in the rest of the South Island would have paid an average of $2340.

The blunt truth

The blunt truth is that we will all be paying a lot more for our water infrastructure in 30 years’ time than we are now.

But cost efficiencies mean that the increase would have been less steep if New Zealand had proceeded with the original four-entity model; the water charge hikes will be far steeper thanks to yesterday’s changes. Either solution is cheaper than sticking with the unsustainable status quo under which each of the 67 Councils manages its own water infrastructure.

Writing at Newsroom today, political editor Jo Moir questions whether ratepayers would have agreed to such a pricy trade-off, if it had been properly explained to them at last year’s local elections.

“While local government and democracy have a place in decision making, it should not come at the expense of water and rates costing people thousands more dollars, especially in a crippling economic environment,” she argues.

But the seven Mayors in the swing regions insist that it is a price worth paying, for a greater local voice. Both Hawke’s Bay and Taranaki have been working for more than three years on regional water models.

Central Hawke’s Bay District Mayor Alex Walker says that they have consulted their community. “Our community understood, when we talked to them about the Hawke’s Bay model, that it would cost them a little bit more – but it would be at a structure that they had more oversight of and they were okay with that. So there was an understanding in the community about that tension,” he said.

Stratford Mayor Neil Volzke agrees. “I think that the trade-off is worthwhile. There may be some cost associated, but the fact that we will have a guaranteed seat on the representation group and a Taranaki-based organisation for us – I think that is worth the extra cost.”

John Milne is Managing Editor of Newsroom Pro based in Auckland. The above article has been published under a Special Agreement.

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