A major change to the government’s contentious Three Waters policy has been confirmed, with 10 regional water infrastructure entities to be formed instead of the originally proposed four.
The change will reduce some of the economies of scale for borrowing that the four so-called “mega-entities” would have had, but the change is intended to deal with opposition from many local councils fearing that local priorities would be lost in a four-entity structure.
Prime Minister Chris Hipkins and Local Government Minister Kieran McAnulty announced the amendments, along with an attempted rebranding of the policy as “affordable water”.
The policy reset was announced at a water treatment plant in Greytown in McAnulty’s Wairarapa electorate.
It appears not to have made any material changes to the other two areas of political opposition to the policy: Māori co-governance at a strategic level in equal representation with local councils, or the requirement for councils to divest water infrastructure assets into the 10 new entities in a “balance sheet separation” process essential to increasing the new entities’ borrowing capacity.
The huge projected cost of water infrastructure upgrades – claimed at between $120 billion and $185bn over the next 30 years – will require not only greater borrowing than is permitted by many councils’ borrowing limits but will also need capital injections from central government.
The water entities will, in principle, be unable to dodge investment upgrades, as they have in the past, because of new regulatory structures that will decide both the required quality of services and the price at which they can be offered.
However, early indications are that the rejigged proposals will not satisfy the most vocal and well-organised lobby against the reforms, Communities for Local Democracy (C4LD).
It sees balance sheet separation as a form of asset theft – a claim it failed to win in a High Court action late last year, despite the judge ruling that councils’ rights as shareholders were materially weakened by the proposed reforms.
Today’s announcement is effectively the last major element of Hipkins’ desire to “reset” the Labour government’s agenda following the resignation of Jacinda Ardern in late January.
Key to the 10 proposed new entities is that their boundaries will be based on existing regional areas.
Each entity would be “run by a professional board, with members appointed on competency and skill”, while strategic oversight and direction would be provided “by local representative groups with every local council in the country, as well as mana whenua, getting a seat at the table”.
The document does not detail whether the council/iwi split on the Regional Representation Groups (RRGs) will remain 50:50, as originally proposed, but are now positioned as sitting “below the governance board, in which each member will be appointed on merit and qualification”.
“By increasing the number of entities, we will be able to ensure the needs of every community, especially small rural towns, are heard and met,” ministers said in a statement.
“These reforms are absolutely essential. Leaving things as they are will mean unaffordable rate bills,” McAnulty said in a statement.
The water services entities would start delivering water services from July 1 2026, at the latest – and could start earlier if ready.