The Government today announced a $2.5 billion package to support local government transition through the reforms to New Zealand’s drinking water, wastewater and stormwater services. The package will also stimulate local economies while creating jobs and unlocking infrastructure for housing.
“New Zealand’s water systems are facing a significant crisis and will continue to do so without major transformation. Overhauling our drinking, waste and stormwater services will benefit all New Zealand communities, no matter where they are in the country,” Prime Minister Jacinda Ardern said.
“The support package announced today will ensure that no council is worse off as a result of the reforms. $500 million is set aside to provide certainty for local authorities that they will be supported through the transition process, and to ensure the financial impacts of reform will be managed.
“We also want to acknowledge the significant change that the shift in these assets means for Council balance sheets. So the remainder of the package seeks to ensure Councils are better off despite this change to their asset base.
“To do this we have set aside $2 billion for councils to invest in the future for local government, urban development, and the wellbeing of their communities,” Jacinda Ardern said.
Local Government Minister Nanaia Mahuta said that Central and Local Government had very similar goals and it was important that the two tiers of government approached these challenges together.
“New Zealand’s water system is one of the country’s most significant infrastructure sectors, touching every aspect of our lives. Our communities will need to invest between $120-185 billion over the next 30 years to maintain, replace and upgrade ageing assets and to provide for growth,” Nanaia Mahuta said.
“We acknowledge the significant pressures that all councils are facing with considerable change on the way. The water reforms have provided an opportunity for Government and local councils to work together to ensure the reforms are fit for purpose. We are pleased to be working closely with Local Government New Zealand not just on these reforms, but on other challenges and opportunities” said Nanaia Mahuta.
The Government has signed a commitment to work together with Local Government New Zealand to engage and consult with councils and other stakeholders over the next 6-8 weeks and beyond.
“The reforms are about acting for the greater good, with significant benefits to all communities. But they will have the best chance of success if all councils participate. We are working with the sector to ensure everyone understands the reform-related information, and to explain the policy proposals, the benefits of reform, and the details of the support package,” said Nanaia Mahuta.
“All of our water assets will be retained in local ownership; that has been a bottom line for us. We have added a public referendum provision to provide the ultimate protection against privatisation. There will be mechanisms to ensure a strong community say in how the assets and services are run and how planning will be managed,” said Nanaia Mahuta.
The $500 million “no worse off” component of the support package seeks to address the costs and financial impacts that councils would incur such as the transfer of water assets, liabilities, revenue and staff to a new water services entity. The funding also ensures councils will be able to continue to sustainably perform their non-water related roles and functions.
But we also know that calculating the long-term impact of the transition of these services for councils is difficult.
The “better off” component of the support package, which comprises $1 billion Crown funding and $1 billion from the new water services entities is allocated to councils on the basis of a nationally consistent formula. Councils will be able to use this funding to support the three waters service reform, and focus on other local wellbeing outcomes associated with climate change and resilience, housing and urban design and planning, and community wellbeing
The funding package comes on top of the $761 million committed to the reform programme in 2020, and $296 million announced in Budget 2021 for the costs involved with the establishment and transition of the new water entities.
The reforms will grow GDP by $14 billion to $23 billion over the next 30 years and create an estimated 6000 to 9000 jobs.
Is the Government buying the councils’ water assets?
- No. The assets are currently owned by communities through their councils. Under the reforms, communities will continue to own the assets through the water entities. These entities will be collectively owned by local councils for the communities they are serving.
What happens next?
- It has been agreed to have a six to eight-week period following this conference during which officials from the Department of Internal Affairs will work in partnership with Local Government New Zealand to further engage with the sector, after which the Government will meet again to discuss next steps for the reforms.
- This will assist sector members to understand the reform-related information, and explain the policy proposals, the benefits of reform, and the details of the support package.
When will the entities exist?
- The waters services entities are scheduled to begin operating in three years’ time on 1 July 2024.
How will the Government act to prevent privatisation?
- Continued public ownership of Three Waters services and infrastructure is a bottom line for the Government.
- Most water infrastructure is already publicly owned by communities through their councils. The water entities will be collectively owned by local councils for the communities they are serving.
- The Government will develop legislation specifying that local authorities will be the owners of the entities and any future privatisation proposal must be put to the community through a referendum requiring at least 75 per cent agreement for change.
- The entities will be structured in a way that prevents them from paying dividends or offering other financial rewards. This will make them unattractive to potential alternative owners.
How will communities retain influence over water services?
- Oversight will be shared through a local Representative Group made up of local councils and mana whenua. This group will set expectations for the entity and select an independent panel to appoint an entity board.
- Each entity will be required to engage with communities in a meaningful and effective manner on all key documents and report on how consumer and community feedback was incorporated into decision-making.
How will transition be managed?
- Local Government will be supported through the transition process to ensure business as usual operations are not disrupted.
- A sum of $296 million has been set aside to help manage the costs of transitioning to the new entities.
What impact will the reforms have on the workforce?
- Developing a sustainable workforce, which can deliver on the increased activity, is critical to the success of the reforms.
- This includes developing the existing workforce to adapt to the reforms, as well as creating a pipeline of an appropriately skilled workforce through education, training, immigration and substitution initiatives.
- Modelling and research suggest the water sector workforce will need to grow significantly over the coming years.
- Transition planning is being developed to ensure much needed certainty for the workforce.
Better Off funding allocation
The formula used to allocate funding takes into account population, relative deprivation and land area. This formula recognises the relative needs of local communities, the unique challenges facing local authorities in meeting those needs, and differences across the country in the ability to pay for those needs.
|Central Hawke’s Bay||$ 11,339,488|
|Central Otago||$ 12,835,059|
|Chatham Islands||$ 8,821,612|
|Far North||$ 35,175,304|
|Kapiti Coast||$ 21,051,824|
|Lower Hutt||$ 38,718,543|
|New Plymouth||$ 31,586,541|
|Palmerston North||$ 32,630,589|
|Queenstown Lakes||$ 16,125,708|
|Rotorua Lakes||$ 32,193,519|
|South Taranaki||$ 18,196,605|
|South Waikato||$ 18,564,602|
|South Wairarapa||$ 7,501,228|
|Upper Hutt||$ 18,054,621|
|Western Bay of Plenty||$ 21,377,135|