The water reform is aimed at reducing future costs for Whanganui residents and providing better environmental, cultural and social outcomes.
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
2051 no reform (Whanganui District Council)
2051 under reform (Entity B)
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.