Three Waters

The Government’s Three Waters Reform is about changing how New Zealand’s stormwater, drinking water and wastewater services are delivered.

Three Waters – drinking, waste and storm

Currently services sit in the hands of our 67 councils. The reform proposes shifting the delivery of three waters services to four new entities that can borrow enough to fund New Zealand’s water infrastructure upgrades, both now and in the future. Water assets will remain publicly owned by councils, who play a key role in the entities’ governance and priority-setting processes. 

 

Background

Why reform is needed

Significantly more investment is needed in our water services delivery and infrastructure over the next 30 years – this is something everyone agrees on, no matter what they think of the Government’s reform proposals.  

An effective three waters system is critical for the health and wellbeing of all New Zealanders. We all deserve safe, clean drinking water – and resilient stormwater and wastewater services that enable communities to prosper and grow while protecting the environment.

The need for change is urgent so that the environmental and public health aspirations of our communities are met, and we can combat future challenges, including:

  • Adapting to climate change and building resilience to natural hazards
  • Improving service delivery to meet communities' health, environmental and cultural needs
  • Responding to growth, housing, and urban development needs
  • Maintaining and upgrading ageing infrastructure
  • Operating within a constrained budget and workforce

 

Why it’s happening now

Local government has been talking about the need for water reform for a long time. This isn’t a new conversation – every Government has agreed change is needed for years, but nothing has been done.

In 2016, Havelock North’s drinking water was affected by major campylobacter contamination. As a result, an estimated 5,500 residents fell ill, 45 people were hospitalised, and tragically, the outbreak has been linked to four deaths. 

This shook public confidence and raised significant questions about the safety and security of New Zealand’s drinking water. 

But it’s not just Havelock North. In 2020, 40,000 Kiwis had to boil their tap water, so it was drinkable. More than 100 wastewater treatment plants are in breach of consents, with a third of wastewater treatment plants needing to be reconsented by 2024. 2020 also saw New Zealand’s wastewater systems overflowing or blocking more than 3,000 times.  

And every year, 35,000 New Zealanders get sick from water that doesn’t meet international standards for clean drinking water.

The current reform proposals follow years of deliberation on how to address our water services issues.

 

Why is the reform so controversial?

This has become an intensely political conversation. 

The reform, which proposes four large water services entities, has raised many questions for councils – partly because operating water services provides councils with a critical connection to their communities and is a core part of their placemaking role.

Councils take their responsibility to deliver for their unique communities very seriously. LGNZ has been clear that councils’ concerns must be addressed.

There’s a spectrum of views among our members and LGNZ’s role is to advocate for the sector overall at a national level. That doesn’t limit each council’s ability to advocate for their community, which they know best.

 

Making sure key concerns are tackled 

Key concerns from Councils

We've heard a range of concerns from our members. Some key concerns are that assets are being transferred out of local control, the risk of privatisation, that local communities won’t have any say over the water entities, concerns around co-governance, that the model doesn’t stack up, communities will get a lower level of service, and that communities won’t have any opportunity to have a say on the reform process.

The sector has influenced policy as it’s been developed

The Joint Central/Local Government Three Waters Steering Committee, which was set up in has shared the sector’s concerns with the DIA policy team and Ministers as the reform proposals have evolved. This has significantly influenced the shape of the proposals as well as the information provided to the sector, including peer reviews of modelling work by Farrierswier and Beca.

Providing feedback on representation, governance and accountability

LGNZ pushed for the formation of the independent Governance, Representation and Accountability Working Group – set up to improve the Government's proposal with comprehensive input from the sector.  The issues interrogated by the Working Group were at the heart of councils’ concerns with the model.  

The group made 47 recommendations, nearly all of which were accepted by the Minister. Key recommendations included:

  • Creating a public shareholding, held by councils, to make ownership crystal clear
  • New protections against privatisation
  • Much stronger mechanisms for local voice

The Working Group went through a robust, transparent process to reach these recommendations. They listened to everyone who wanted to present a model and took the best features from each model.

Rural water isn’t one-size-fits-all

The Rural Supplies Technical working group looked at how the water system reforms should handle rural supply schemes.

Water issues are different for rural communities - because water is used for stock and irrigation, as well as household drinking water.  Some rural water schemes have complex histories, including management and maintenance by their communities. There’s a strong sense of ownership.

LGNZ has heard concerns from our rural members about ownership, governance, cost and accountability and we were pleased to see this Working Group report acknowledging and responding to rural communities’ concerns.

We had strongly advocated for reform not to affect privately owned supplies, and it's now clear private supplies won’t transfer to the new water entities.  And for council-owned schemes that are mostly used for stock or irrigation, the Group suggests a process for potentially putting them back into community ownership. 

Regulation vs reform – they are different

Who’s affected by reform?

  • Reform only covers council-owned supplies – there are about 100 of these. Only council-owned supplies transfer to the new water entities.
  • The reform doesn’t cover the tens of thousands of privately owned supplies – no privately owned water schemes will transfer to the entities.

What does regulation cover?

  • The new water regulator, Taumata Arowai, came into being last year. Taumata Arowai is responsible for drinking water quality and making sure water suppliers meet standards. 

Water Services Entities Bill

Introduced on 2 June 2022, the Water Services Entities Bill will establish the four publicly owned water services entities. It’s been referred to the Finance and Expenditure Select Committee, which will seek public feedback.

This is another, critical opportunity for councils’ voices to be loudly heard. LGNZ will be both encouraging individual councils to submit as well as producing our own submission.

We continue to have concerns about aspects of the Government’s model, and we believe that well-reasoned and solutions-focused submissions will result in improvements to the Bill.

Our submission will focus on dissecting the bill, making sure it is workable legislation and looking at how it can be improved from a whole-of-sector point of view. We will be clear there are a range of views across the sector on the proposed model, while recognising the need for system reform. How local voice is expressed, how the model integrates with councils’ placemaking roles and functions and whether the connection with representative democracy is strong enough will also be of focus. 

We have shared our submission outline with members and are looking for feedback by 8 July.

What is LGNZ’s position?

LGNZ is non-partisan and works with the government of the day on issues that concern the sector. Our role is to act in the national, overall interest of councils. 

 We understand that other political concerns are playing out through this conversation. But that’s not something we can engage in. 

We’ve fought hard to make sure that what’s on the table reflects the sector’s concerns. We’ve also worked to ensure it does not disadvantage councils, as well as giving them a springboard to think about future wellbeing and placemaking initiatives.

We’re led by our National Council, which is made up of mayors, chairs and elected members who are elected by the sector. In early 2020, National Council decided being at the table would be the most effective way to influence reform and create the best possible outcome for local government. That means we can influence Government decisions and outcomes behind the scenes, while still preserving space for public disagreement and independence. 

We recognise there’s a variety of strong local views on three waters reform, and this creates tension in terms of our national role. Different councils want us to do different things. That’s meant we’ve focused on making sure that wherever the model ends up, it must connect councils with communities.

We are guided by the principle that advocacy is multidimensional, and good advocacy is sophisticated and nuanced. LGNZ, on behalf of councils, has real reach and influence with central government – no matter who forms the government of the day. We have always and will always advocate for the sector’s best interests as a whole.
 

Our position on mandating reform

It was clear the Government was determined to enact three waters reform. That’s why we pushed so hard to optimise any package for the sector before that decision was made.

But we’ve never supported the reform becoming mandatory. This was a painful outcome for the sector, and we pushed back at every possible step.

We’ve put the sector in a better position given reform has been made mandatory. We secured $2.5+ billion to make sure no council is worse off – and all councils and their communities are better off. 

Better off funding

The Better off funding is a $2.5b support package for local authorities under the reform programme.

The purpose of the package is for councils to support their communities. Without the Heads of Agreement LGNZ negotiated with the Crown, councils wouldn’t have this money. It gives councils the opportunity to create and accelerate projects that build resilience to climate change and other natural hazards, deliver infrastructure that supports housing development, and enhance local placemaking and community wellbeing.

This first $500 million of the $2 billion better off package comes from the Crown and is available from 1 July 2022.

This funding doesn’t come with political strings. Applying for this funding doesn’t preclude councils from holding a position on the reform and accepting this funding doesn’t imply support for the reform.