In 2023 legislation was passed by the Labour-led Government to remove the costs of water services from councils (and transfer to new organisations) in stages. Following the 2023 election, the new Government has repealed this legislation.

The previous Government’s reform intended to reduce future cost impacts for councils and the public through economies of scale in regional organisations. The new Government has advised councils are to self-determine future service delivery arrangements via a water services delivery plan (to be submitted within 12 months).

Government has stated two new pieces of legislation will be delivered in the next 12 months. The Local Government Water Services Transitional Provisions Bill), will set out guidelines relating to how councils will manage water services and water costs and will make it easier for councils to establish council-controlled organisations (CCOs) under the Local Government Act 2002.

The second bill, the Local Water Done Well Bill, will provide guidelines for long-term financial sustainability, a complete economic system for controlling water-related costs, and a new range of structural and financing tools, including a new type of financially independent CCO.

Background – the national picture

Major structural change to the delivery of water services nationwide has been a focus of local and central government for some years. A water contamination issue in Havelock North in 2016 was the catalyst for Government review and inquiry.

A two-stage Government inquiry was held, the first stage focused on identifying the direct causes of the outbreak, the second looking at the wider regulatory context and ways to reduce the likelihood of another outbreak in the future.

The Inquiry found widespread systemic failure of water suppliers to meet the high standards required for the safe supply of drinking-water to the public.

In mid-2017 a Three Waters Review, in parallel to the Inquiry, raised further questions about how effective the existing regulatory framework and about the capability and sustainability of New Zealand’s water service providers. Later work identified massive funding shortfalls in waters infrastructure provision, with initial estimates of $185B over 30 years.

Between 2020 and 2022 the Labour-led Government introduced new water regulations, a new regulatory body (Taumata Arowai) and structural changes to delivery – creating new entities to take over water services delivery from councils.

Following the 2023 elections, the new National-led government repealed legislation relating to service delivery, replacing it with its Local Water Done Well policy. Councils were required to put the costs of waters back into their LTPs. This has had significant rating impacts for many councils.

In early 2024, Government announced councils (or groups of councils) are required to prepare a Waters Plan for DIA approval. This plan will include 10-year high-level projections for future provision of water services, with a detailed three-year plan.

Enabling legislation in 2024, and in 2025 will provide options for CCO arrangements and establishment of economic regulation.

Background – the local picture

There are two linked workstreams looking at the implications of government direction and delivery of water services in the Waikato.

At a regional level, CoLab, overseen by the Waikato Mayors and Chairs Forum, is working with councils and iwi partners to consider a Waikato water services organisation, and potentially to submit a water services plan to the Minister for approval.

A draft roadmap comprising seven steps has been developed. Further work will consider structural options including the establishment of an asset owning CCO and/or potentially Waikato-wide or sub-catchment-based models.

Hamilton City Council is the largest waters service provider in the Waikato and, if involved, would be the major contributor to economies of scale in an aggregated Waikato entity.

Hamilton has previous experience in considering aggregation of water services in the Waikato. In 2014/15 In November 2014 a study identified a CCO model provided significant cost savings for customers and councils. Progressing a CCO model for the region failed after Waikato withdrew, and Waipa elected not to continue to seek a joint model with Hamilton.

Waters currently accounts for 30% of the Council’s annual operating expenditure, 54% of the proposed capital expenditure over the life of the 2024-34 Long-term Plan, and 30% of the assets owned by the Council. Solving the funding challenge for waters assets is critical for the financial sustainability of the Council.

Hamilton is considering its options to respond to government policy, deliver a Waters Plan to government, and deliver the best outcomes for its residents.

Structural options could include:

  • A standalone council or standalone CCO
  • Joining a Waikato CCO or other regional entity
  • Partnering with Tauranga (and consequentially Western Bay of Plenty District).
  • Other partnerships or shared service arrangements

At its meeting of 4 April 2024, Council confirmed the establishment of a project team to assist the Council in considering options in response to the Local Water Done Well programme.

Mayor Southgate and Cr Thomson (as alternate) were confirmed to represent Hamilton’s interests in the Mayors and Chair Forum Waikato Water Done Well project and a Council Waters Working Group established consisting of Mayor Southgate, Deputy Mayor O’Leary, Cr Thomson, Cr van Oosten, Cr Macindoe and Maangai Kana

Legislation

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Last updated 30 April 2024