Thursday, December 7, 2023

Four Three Waters entities to become 10 as reform options emerge

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Move to placate local government said to be prepared for cabinet consideration.
The bill received 88,383 submissions.
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The government looks ready to abandon the forced amalgamation of New Zealand’s local council-owned water services into four “mega entities” in favour of 10 such groupings.

A 10-entity solution is emerging as the preferred policy alternative in a move intended to placate local government opponents of the scheme while leaving other contentious elements of the policy in place.

Multiple sources have told BusinessDesk this is the primary recommendation that will go to the cabinet for decisions in coming weeks.

However, other changes sought by critics of the policy appear likely to be more rhetorical tweaks and a new push to deal with what the president of Local Government New Zealand (LGNZ), Stuart Crosby, described as the “grossly mismanaged” communication of the original policy.

The politically toxic policy has been the subject of a five-month review ordered by the then-local government minister, Nanaia Mahuta, before she lost the portfolio in a January 31 reshuffle by the newly installed prime minister, Chris Hipkins.

Bottom lines for the outcome were that “water services entities continue to be publicly owned, have operational and financial autonomy to make much-needed investment, and have oversight from local authorities and mana whenua”, and that “our water services allow for local influence and democratic accountability”.

The 10-entity proposal deals with the last of these bottom lines, which did not include a required number of entities.

However, the other two most contentious issues are Māori co-governance arrangements and the requirement that the water assets be separated from councils’ balance sheets to allow them to borrow more than they currently can, to meet huge projected future upgrade investments.

These appear unlikely to change, although it’s been suggested there will be a push to stop using the word “co-governance”. Instead, there will be a push to explain how the regional representative groups involving local government owners and iwi representatives will operate as a strategic guide for water issues.

Corporate governance of the entities themselves would come from competency-based professional boards of directors, dealing with a team of senior managers in the normal way.

Balance sheet separation – seen by opponents in the Communities for Local Democracy lobby as asset theft – will also still be a feature of the new regime, also consistent with Mahuta’s original bottom lines.

Three councils lost a high court bid to have their ownership rights confirmed in February, although Justice Jill Mallon accepted that those rights would be “materially diluted” by the reforms.

It is also understood that the government will stop using the term “three waters” to try to shift the debate into new territory where it can attempt, again, to explain the policy.

Three Waters policy was left off Hipkins’  so-called “policy bonfire”.

But that was only while the cabinet considered options to assuage various fears: that the reforms give undue power to iwi through co-governance arrangements with local government shareholders; that the reforms expropriate council assets; and that four entities to cover the whole country is too few.

The rethink has been held up by the focus required by the government and local government on responding to destructive extreme weather events earlier this year. 

The reforms are being driven by patchy performance across the country on drinking, waste and stormwater infrastructure, with some $120 billion to $180bn of investment estimated to be needed in the next 30 years.

Financing requires central government funding in many cases, particularly where councils are unable to borrow enough to upgrade to new regulatory standards that are coming into force as part of the reform process.

LGNZ’s Crosby said “we haven’t heard at all” what the government’s final decisions might be but said that signals to date “would steer towards more entities” than the originally proposed four.

A larger number of entities would solve the fear of decision-making not reflecting local priorities, he said.

Likewise, most councils already have constructive relationships with iwi, and LGNZ hopes that the legislation covering regional representative groups will allow each group to determine for itself how best to establish a partnership between local government owners and local iwi.

Most important to the local government sector is that the government makes decisions sooner rather than later, to end the prolonged uncertainty over structures that are meant to be in operation in 2024.

“We are expecting a decision very soon,” Crosby said.

The National Party has announced a Three Waters policy that would not force amalgamations, but is designed to encourage voluntary amalgamations, and abandons co-governance.

A spokesperson for Local Government Minister Kieran McAnulty told BusinessDesk before the Easter weekend that there was no update “today” on the process for cabinet consideration of decisions.

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