Frequently-asked questions

Frequently-asked questions

What’s the issue?

The government has identified that councils in general have under-invested in their water supply, wastewater and stormwater (three waters) systems. There have been many issues around the country, like the Havelock North water issues in 2016, pipes bursting in Wellington, sewage leakages into streams, and ongoing boil water notices in several locations around the country.

The government wants to make some fundamental changes to look after our environment and ensure all New Zealanders have access to safe, reliable and affordable water services.

While many councils, including Whanganui District Council, currently do a good job of delivering three waters services, the government believes that many councils will be unable to invest enough to maintain and improve their three waters assets and services in the long-term to meet the standards expected.

The government’s modelling suggests that New Zealand needs to invest between $120B and $185B in its three waters assets over the next 30 years. These estimates have been peer reviewed by Farrierswier and Beca who agree on the broad scale of the investment needed.

The government believes that changing the way we manage three waters will be more efficient, deliver better services, reduce the future costs for households and improve the environment.

What’s the government’s proposed solution?

The government’s proposal is to:

  • Establish four statutory, publicly-owned water services entities to provide safe, reliable and efficient water services
  • Enable the water services entities to own and operate three waters infrastructure on behalf of local authorities, including transferring ownership of three waters assets and access to cost-effective borrowing from capital markets to make the required investments
  • Establish independent, competency-based boards to govern each water services entityIntroduce mechanisms that
  • Introduce a series of safeguards against future privatisation of the water services entities
  • Set a clear national policy direction for the three waters sector, including expectations relating to the contribution by water services entities to any new spatial / resource management planning processes
  • Establish an economic regulation regime, to ensure efficient service delivery and to drive the achievement of efficiency gains, and consumer protection mechanisms
  • Develop an industry transformation strategy to support and enable the wider three waters industry to gear up for the new water services delivery system

It is proposed that the new water services entities would become operational on 1 July 2024.

You can find more information on the case for change and the summary of proposals in this document released by the government in June 2021.

Where is the process at?

The government released a significant amount of information on the reforms throughout June and July 2021. This information can be found on the Department of Internal Affairs Three Waters Reform website.

The government has given councils eight weeks through to the end of September 2021 to fully understand the three waters proposal and consider how it affects their council and their community. Further information on what is happening during the eight week period can be found here.

The government wants councils to identify issues of local concern and feed these back to Local Government New Zealand with suggestions on how the government’s proposal can be strengthened to address these issues.

Councils cannot make any formal decisions over the eight week engagement period. The government will not make any further decisions on the reform until the eight week engagement period is over.

What would the reform mean for Whanganui residents?

If the reforms proceed, from 1 July 2024 the new water services entities will own and operate three waters infrastructure on behalf of local authorities. The water services entities will be jointly owned by their member local authorities, so the assets remain in public ownership. The government has said it will protect public ownership through legislation to avoid the risk of future privatisation.

Whanganui is proposed to be in Entity B, with 21 other councils across the west and central parts of the North Island below Auckland, including the Waikato, Bay of Plenty, Taranaki and some parts of Manawatu-Whanganui. Further information on the proposed structure of the new water services delivery system can be found here.

Three waters entity B  

Along with transferring the assets and service delivery to the water services entity, the council would also transfer the debt outstanding on the three waters assets and any reserves relating to those assets, plus our direct water services staff to the new entity. As at 30 June 2020 Whanganui District Council’s three waters debt was $81M.

Ratepayers would see a reduced council rates bill with the removal of the rates collected for three waters. They would receive a separate bill from the water services entity for three waters services instead.

The government has said that councils’ current charging regimes will be transferred to the new entities when they begin operation on 1 July 2024. Over time, pricing structures will be standardised so that there is a single pricing structure for the entity. The entities will be required to consult with their community and customers on their proposed pricing or charges.

What are the benefits?

The water reform is aimed at reducing future costs for Whanganui residents and providing better environmental, cultural and social outcomes.

Costs

It is unlikely that costs will be lower than they are now, but they are expected to be considerably lower than what they would be without the reform going ahead. A very large investment is needed to provide improved and sustainable three waters services.

A key aspect of the reform is the cost efficiencies that are expected to be made through amalgamation. These efficiencies are expected to be achieved through procurement, effective asset management and monitoring of assets, standardisation, automation and IT systems, and smart capital investments that reduce ongoing operating costs.

The four water services entities will have significantly more purchasing power than 67 separate councils procuring goods and services independently. The economic regulator will be able to influence the water services entities to achieve target efficiency levels.

The water services entities will also be able to leverage debt to a higher degree than councils. Some councils, particularly those in high growth areas, are already constrained by their debt ceilings, and many others would be if they had to deliver the three waters investment programme required. This would mean rates would have to increase significantly to fund the required investment.

The government has published a dashboard showing how the reform programme would impact on households’ three waters services costs.

View the dashboard

Current 2021 household cost per annum

$990

2051 no reform (Whanganui District Council)

$4,200

2051 under reform (Entity B)

$1,220

While we have concerns around some aspects of the modelling, the indications are that the reforms will deliver some level of efficiency to make the required investment cheaper for the community.

Funding for councils

In late July 2021 the government announced a $2.5B local government funding package to sit alongside the three waters reforms. There are two components to the package:

  • The ‘better off’ component ($2B), for:
    • 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
  • The ‘no worse off’ component ($500M)
    • To assist councils with their stranded overheads and any other issues that may see councils financially worse off under the reform scenario. Stranded overheads are costs the council will need to continue to pay for if three waters transition to the new entities, but cannot fund any longer through three waters rates

The package is being partly funded by the water services entities and partly funded by the Crown.

Whanganui District Council has been allocated $24M from the $2B ‘better off’ funding package to spend on projects that meet the criteria. We can also apply for a share of the $500M ‘no worse off’ package for stranded overheads. The funding package is conditional on the reform going ahead.

Additional expenditure in local economy

The significant investment programme across the country is expected to increase jobs and GDP, and at a higher level in rural and provincial areas than in metropolitan areas. It is estimated that 104 jobs will be created in the Whanganui District as a result.

What are the key concerns/risks?

There are three key areas that councils have raised that need further discussion and thought:

  1. Ensuring all communities have both a voice in the system and influence over local decisions.
  2. Effective representation on the new water service entities’ oversight boards so that there is strong strategic guidance from, and accountability to, the communities they serve, including iwi / mana whenua participation. This includes effective assurance that entities, which will remain in public ownership, cannot be privatised in future.
  3. Making sure councils’ economic development and growth plans, as reflected in spatial plans, district plans or long-term plans, are appropriately integrated with water services planning.

These issues have been raised with the government via Local Government New Zealand.

We want to ensure that our local community has a continued voice in the future of its three waters assets and service levels. The government’s current proposal is discussed further below under ‘How does the Whanganui community have a voice in the water service entities?’

Can Whanganui choose to opt out of the reform?

At this stage, the government has advised that councils will all be considered to be in the reform unless they formally opt out (which cannot occur yet). However the strong messaging from the government is that they hope that councils and the community will see the overwhelming case for change. They have noted that all-in participation of councils is required to manifest the stated benefits of the reform.

Under current legislation, the council would need to publicly consult with its community on whether to remain in or opt out of the reform as this would be a significant decision for our community. However there is the possibility that the government could choose to make the three waters reform mandatory through legislation. We expect to learn more about this after the end of the eight week engagement period, in October 2021.

What would happen if we opted out?

If opting out was an available and viable option, the council would need to increase its levels of service to meet the standards set by the new regulator Taumata Arowai and any requirements of the new economic regulation regime as and when these occur. There is a risk in the medium to long term that these costs could be quite significant. We may not have the capacity to afford this investment without significant rates increases as we do not have the borrowing capacity that the water services entities will have as utility providers. It may also mean we have to trade off undertaking other projects for our community in order to afford the three waters investment required.

We also need to be aware of potential difficulties in recruiting and retaining staff and sourcing contractors to undertake work for us when competing against the four very large water services entities in the market place.

Whanganui District Council’s share of the better off funding package of $24M is only available if we proceed with the reform. 

How does the Whanganui community have a voice in the water service entities?

There are two main ways that communities and consumers have a voice under the new structure.

Local authority governance representation

Local authorities, as the water services entity owners, will have ongoing ability to influence objectives and priorities of the entities.

A Regional Representative Group of no more than 12 members from local authorities and mana whenua (50:50) will put in place formal outcomes and expectations for the water services entity that covers their area. The selection of local authority members for the Regional Representative Group will be undertaken collectively by the 22 member local authority owners, and the government has stated that appointment must have appropriate regard to geographic coverage and metropolitan, provincial and rural mix. Mana whenua will collectively select their members for the Regional Representative Group.

The Regional Representative Group will appoint an independent selection panel for the Governance Board of the new organisation. The independent selection panel will appoint the professional, competency-based Governance Board. The Governance Board will appoint a chief executive to manage the new entity, and deliver outcomes and expectations set by the Regional Representative Group.

Consumer and community direct input

Entities will be required to engage with consumers and communities on key strategies and plans that affect them as well as proposed pricing and any future changes to pricing. Each entity will be required to set up a consumer forum (details of what these look like have not yet been provided).

Discussions are underway between councils, Local Government New Zealand and the government to find further ways for local communities to influence decision-making in the entities.

What does our council think of this?

Whanganui District Council wants to ensure that the local community gets the best possible outcome if the reform goes ahead and that our community retains its voice in terms of the services delivered to Whanganui residents and businesses.

We are reviewing the government’s proposal and will provide questions and feedback via Local Government New Zealand as requested by the end of September 2021.

How do I stay informed?

There is a significant amount of information on the Department of Internal Affairs three waters programme website and information is added regularly.

We anticipate the government will announce the next steps and public consultation details following the conclusion of the eight week engagement period, ending at the end of September 2021.

We are committed in the meantime to keeping our community informed – we will share with you what we know.