By John McDonald (CityWatch NZ Editor and 2024 Hamilton East Ward By-election Candidate)
With major changes to water services progressing through Parliament and councils in early 2025, it is important to reflect on why these services have problems in New Zealand.
Whether it was Labour’s “Three Waters” or the Coalition’s “Local Waters Done Well”, both reform programmes are designed to create new corporate entities to manage water services. These larger entities will take water services from councils, borrow huge amounts to fund water infrastructure, then collect revenue from local populations to pay the interest on those debts.
The “Local Waters Done Well” is arguably better than the “Three Waters” scheme it replaced. “Local Waters Done Well” is more voluntary, with councils choosing whether they join or create new water service entities. However, there is speculation that central government may still compel some neighbouring councils to merge their water services. The controversial iwi co-governance arrangements from Labour’s “Three Waters” scheme have been publicly dropped from the Coalition’s replacement legislation. However, some councils will consider adding special iwi positions to the governance structure of their new water Council Controlled Organisations (CCOs).
My main concerns with the changes to water services is the lack of accountability for decades of underinvestment in water infrastructure and the politicians being willing to burden ratepayers with huge debts. These debts can result from decisions which were not the fault of ratepayers.
Will the “Local Waters Done Well” changes provide ratepayers with any effective protection and against mismanagement and the resulting debts.
There have been allegations and suspicions that some council have been collecting money from ratepayers on the pretense of spending that money on maintaining depreciating water infrastructure, while spending those funds on non-water activities. Although some councils have increased water infrastructure spending in recently years, there were many years where depreciation funds were spent elsewhere as indicated by this 2023 Newroom article.
Who will be held accountable for this misallocation of funds and the decision to under-invest in this critical infrastructure?
Should people be burdened by intergenerational debt because of a history of such council wrongdoing?
“In the past, they have tended to collect money from ratepayers to cover depreciation of their water infrastructure (as they’ve had to by law since 1996), but then they have spent much of that money on other stuff – from playgrounds to potholes…
…In the 2017 fiscal year, for example, only 81 per cent of depreciation was spent on water.
In some places, Wellington for example, the numbers were far worse. As Newsroom reported in 2021, the percentage of depreciation spent on drinking water supply in the capital in 2019 was 36 percent, the figure for wastewater was 51 percent, and for stormwater 44 percent. Under-funding had been going on for decades.”
Nikki Mandow, Why NZ (really) needs water reform – in five charts, Newsroom, 26 March 2023
Wellington Water has become notorious for its underinvestment in water infrastructure, multiple failures, and other “blunders”. That organisation does not inspire confidence in either the Council Controlled Organisation model or deals such as Public-Private Partnerships.
Are ratepayers being burdened with massive debts as a consequence of councils being provided with a lack of accountability by central government?
The Mangawhai sewerage system case in 2008-2012 provides an example of councils racking up huge debts and burdening ratepayers with unlawful rates. That case also demonstrates that the lack of accountability in the system is by design.
Most of parties in Parliament voted for the legislation that would become the Kaipara District Council (Validation of Rates and Other Matters) Act 2013. Though MPs from most parties acknowledged that the extra cost imposed on the people of Kaipara resulted from “bad decisions, mismanagement, and incompetence”, most parties still voted for that legislation which retrospectively validated the unlawfully activity and forced the ratepayers to pay for the debt.
Lack of accountability and burdening ratepayers with debts from “bad decisions, mismanagement, and incompetence” is something that received support from both the Labour and National parties in 2012.
Below is the timeline of the Mangawhai sewerage system case as reported by Stuff Digital Limited.
“2008: Kaipara District Council ratepayers started to be charged rates to cover the cost of the new Mangawhai sewerage system. Concerns were first raised that the rates did not comply with the law.
2011: Cost blow-out of the sewerage scheme is revealed. The council had consulted on the basis that it was to cost less than $17m. The final cost was $62.4m.
2012: Legal opinion tells the council that the rates are non-compliant.
2012: Kaipara District Council proposes big rates increase to cover the blow-out, on average 31 per cent per property. Rates strike begins. Commissioners appointed to the council.
2012: Act of parliament validates the unlawful rates.
2012: Mangawhai Residents and Ratepayers Association goes to the High Court. The judge ruled the rates in question had been validated but the sewerage scheme and the loan to pay for it were unlawful. But because the council was liable for the debts, ratepayers had to be responsible.
2014: Striking ratepayers offer $550,000 to settle their bill. The commissioners refused the payment. Legal proceedings against rates strikers began. Northland Regional Council did not take payment of its outstanding rates directly, so it became part of the legal action.”
Susan Edmunds, Rebellion in paradise: The ratepayers who fought the law and won, Stuff Digital Limited, 10 September 2017
Will the “Local Waters Done Well” bill’s proposed regulatory system be effective at stopping similar cost blow-outs from occurring?
Will the “Local Waters Done Well” reforms be effective at preventing “bad decisions, mismanagement, and incompetence” leading to huge debts and great burdens being placed on communities of ratepayers and billpayers?
Will the new regulatory system instead create new layers of bureaucracy where any effective accountability for wrongdoing becomes lost?
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Further reading on this issue:
OPINION: Is Removing Water Services from Rates an Existential Threat to Councils?
Newsroom article: Three Waters repeal forces councils to hike rates by a third
