Watercare is telling Aucklanders it may need to increase bills by up to 25.8 per cent from July as senior politicians work on solutions to soften the blow.

A 25.8 per cent rise would take the water bill for an average household from $1340 to $1688. This is on top of a possible rate rise of 7.5 per cent by the council in July, taking the average household rates bill from $3560 to $3827.

The gloomy prospect of increasing water bills for residents during the cost of living crisis and recession is mentioned in Watercare’s “Tapped In” autumn newsletter.

“The amount you pay for water and wastewater services is scheduled to change on July 1. We may need to increase prices by up to 25.8 per cent to run our business while sticking to Auckland Council’s borrowing limit,” the newsletter reads.

It’s the last four words - “Auckland Council’s borrowing limit” - that are behind a big price hike.

This is because of the uncertainty created by the new Government ditching Labour’s Three Waters reforms and replacing them with National’s Local Water Done Well plan.

The previous Labour Government’s reforms would have separated Watercare’s balance sheet from Auckland Council, allowing it to borrow more and keep prices closer to its existing price path of 9.5 per cent next year.

As things stand, National’s policy will leave Watercare’s debt on the council’s books with insufficient headroom to fund Watercare’s $13.9b capital investment programme over the next decade. This would leave Watercare with two choices - cut the programme or increase prices by 25.8 per cent.

To solve this issue, Mayor Brown and Local Government Minister Simeon Brown are developing options to take Watercare’s debt off the council’s balance sheet.

Wayne Brown said the projected highly increasing price path is unacceptable.

National has ditched Labour's Three Waters reforms and replaced it with a model that potentially has financial consequences for Aucklanders.

“I am working hard with the Government and Watercare on options to resolve the issue. I’m confident a solution will be found,” he said, adding some options under consideration involve cutting or deferring funding for planned capital works.

Previously, the Mayor said the “simple” fix from the Government was a Crown guarantee for new debt by Watercare.

Simeon Brown said the Government is working with Auckland Council as it develops options for the financial sustainability of Watercare’s investment programme, saying this will ensure affordable water charges for Aucklanders.

He said Cabinet has agreed on a path that would require law changes for a financially sustainable model for Watercare to be included in transitional legislation for its water reforms.

Auckland Mayor Wayne Brown says the projected highly increasing price path is unacceptable. Photo / Michael Craig

Watercare board chairwoman Margaret Devlin said the board understands news of the project price rise will not be welcome as Aucklanders struggle with the cost of living.

But she gave no indication the board would budge from a potential 25.8 per cent hike and reduce its $13.9b budget if a solution is not found.

In agreeing on the potential price rise, she said the board had to balance the vital need to invest in new water and wastewater infrastructure to ensure safe and reliable water services with the council’s directives around Watercare’s borrowing limit.

“We want to reassure them [customers] that central and local government want to avoid significant price rises for Auckland, and they are working together to achieve a financially sustainable water model. We understand ongoing conversations are positive,” she said.

The potential water price hike comes as Auckland Council wrestles with its finances.

The dire financial situation has forced the council to cut services, hike rates and sell assets, including offloading council-owned shares in Auckland International Airport.

Auckland Mayor Wayne Brown is also considering selling the Port of Auckland operating business by way of a long-term lease and putting the proceeds into a new $3 billion-to-$4b investment fund.

Brown is campaigning for central Government to return GST charged on rates to local authorities and start paying rates on Government-owned buildings, which are currently exempt.

Bernard Orsman is an Auckland-based reporter who has been covering local government and transport since 1998. He joined the Herald in 1990 and worked in the parliamentary press gallery for six years.

This article was originally published on the NZ Herald here