Goodbye Three Waters - hello, “Affordable Water Reforms”.

The Government has scrapped a major part of its unpopular Three Waters reforms, ditching the four mega entities that would have delivered Three Waters (freshwater, wastewater, and stormwater) services to households.

These four entities will become 10 entities, with their boundaries established roughly along the lines of New Zealand’s 16 regional councils. The ten entities will allow local councils more direct engagement with the water entities that will manage water services on their behalf.

The Three Waters reforms were meant to help local councils deal with the eyewatering cost of investment in water infrastructure - estimated to be about $130 billion-$185 billion over the next thirty years.

Modelling commissioned by the Government reckoned those costs would push up household water and rates bills to as much as $9000 a year by 2051.

Local Government Minister Kieran McAnulty said his model would deliver savings to households of between $2,770-$5,400 per year by 2054.

“Under our proposal to establish 10 entities New Zealand households will still make big savings, projected at $2,770 - $5,400 a year by 2054 on average within each region,” McAnulty said.

“By extending the number of publicly owned water entities to 10, every district council in the country will have a say and representation over their local water services entities through regional representative groups, forming a partnership between council representatives and iwi/Māori that will provide strategic oversight and direction to the entities,” he said.

But National leader Christopher Luxon was unimpressed. He said the Government had simply rebranded Three Waters by changing the name of the reforms and switching from four to 10 entities.

“It’s a dumb policy and we’re going to repeal it,” Luxon said.

“As my mum and dad would say, change the label on a Lada, it’s still a Lada.

“All this Government has done is essentially rebrand Three Waters with a different name. It’s gone from four entities to 10 with the same structure and hasn’t changed the divisive co-governance.

“It needs to be repealed,” Luxon said.

Luxon said National’s ‘Local Water Done Well’ plan for water infrastructure included councils “having access to long-term debt funding so they’re financially sustainable”.

One contentious part of the reforms is unchanged. The entities will be owned by councils via a shareholding. They will report to a local representative group which is jointly comprised of local council representatives (with every council in the country having representation) as well as mana whenua.

The representation on these groups will be split 50-50 between mana whenua and councils - meaning they would be co-governed like the previous model of three waters.

Prime Minister Chris Hipkins actually denied that this model was co-governance. Saying Three Waters does not and never has included co-governance pointing out that there is no requirement for the entity boards to be co-governed - only the group the boards report to is split 50-50.

“So let’s be clear about this. It’s not co-governance and it wasn’t co-governance,” Hipkins said.

“Let’s be clear about co-governance - co-governance as it’s traditionally understood, was taken off the table in Three Waters reform process some time ago. There was an early discussion around whether a full co-governance model should be adopted here and ultimately, the government decided not to do that,” Hipkins said.

While co-governance on the entity boards was ultimately ditched, the last time the Government reviewed the Three Waters Reforms, it deliberately kept the elements of co-governance that appear in today’s policy: 50-50 representative groups.

Former local government minister Nanaia Mahuta even defended this aspect of the reforms in the House in May last year.

“Let me be clear. Co-governance arrangements exist at the regional representative group level, where 50-50 governance oversight between councils and mana whenua is exercised for the broader wellbeing and benefit of the whole community by setting the strategic performance expectations of the newly created water service entities,” Mahuta said.

The Government claimed the ten entity model would achieve what is known as “balance sheet separation” meaning the new entities would be considered sufficiently separate from local councils to have their own borrowing capacity, allowing them to debt-fund billions of dollars of water investment.

The new water entities. Photo / Supplied

The entities will be run by professional boards, which will report back to the local representative groups.

“These groups will continue to sit below the governance board, in which each member will be appointed on merit and qualification, but 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,” he said.

The Government’s modelling, provided by WICS, the Scottish water provider, had come under intense criticism from detractors of Three Waters Reform.

McAnulty announced today that the Government’s modelling had been peer reviewed by two further consultancies.

“The projected costs have been peer reviewed by both Farrierswier Consulting (an expert Australian regulatory economic specialists) and Beca (a leading international engineering firm) and make for pretty grim reading.

“Leaving councils to deal with this themselves will lead to unaffordable rate rises. It would be setting councils up to fail and I can’t in good conscience do that,” McAnulty said.

The Three Waters reforms were the brainchild of former Local Government Minister Nanaia Mahuta.

McAnulty has been reviewing the reforms since he took over the portfolio from Mahuta earlier this year.

National and Act respond

National’s local government spokesman Simon Watts said the attempt to rebrand the “toxic Three Waters Reforms” would not “fool Kiwis and won’t fix New Zealand’s water infrastructure”.

‘The message from Kiwis is very clear – they want local water assets in local hands, and with no divisive co-governance structures imposed on them,” he said.

Watts noted that Labour’s decision to switch to more entities made a “mockery” of its previous attempts to claim the previous four entity model was “the only way to go and would provide huge economic benefits”.

“The number of entities isn’t what New Zealanders care about - they care about ownership and control, and Labour’s rejigged proposal still locks local communities out of decision making,” he said.

Act leader David Seymour said the retention of co-governance showed Hipkins had been unable to face down Labour’s Māori caucus.

“Co-government remains part of Three Waters because the Prime Minister was either too scared to stare down the powerful Māori Caucus, or he did and he lost,” Seymour said.

“This shows how powerful the Māori Caucus is and that Chris Hipkins has no control over them. If Hipkins had control over of them, he would have at least dropped the unpopular and divisive co-government element of Three Waters. Instead, Māori MPs are riding roughshod over him,” he said.

“If the Prime Minister is going to continue down the path of co-government, he needs to make his case for it, and it needs to be stronger than just that the Māori Caucus want it. The problem is, this is the only argument he has,” he said.

National’s alternative model would establish a regulator to force councils to invest adequately in water infrastructure. They could voluntarily join up with other councils to do this.

McAnulty said the Government had “explored all the alternatives put forward” including the proposal put up by National.

“It didn’t stack up the only way to make this work financially for ratepayers and local communities is to have a separate entity that’s still owned by the council, but is run independently by an independent governing body. That’s the only way that credit agencies will allow them to borrow at the extent that they need it - that’s the rationale behind the changes,” McAnulty said.

Councils’ reaction.

Local Government New Zealand (LGNZ), the umbrella group representing all councils said more information was needed before councils could decide whether to back the changes.

“There are 78 councils across the motu. Within local government there are many and varied views on reform. One thing the vast majority agree on is that water reform is necessary,” said president Stuart Crosby.

“We will need to go back to our councils to understand their views on the new model,” he said.

The breakaway Communities 4 Local Democracy He hapori mō te Manapori group said they were unhappy there were not more “meaningful changes”.

Co-Chairs, Mayors Helen Worboys and Dan Gordon said they believed New Zealanders would “see though” the reforms, which simply put a new name on an existing policy.

South Wairarapa Mayor Martin Connelly, who was at the announcement, was more positive.

“What a small council like us need is we need secure safe water. We need it to be affordable and we need it to be delivered in a way where we feel we’re having the influence on decision making that we need,” Connelly said.

He said the previous model of four entity meant it was “very difficult for a council like ours or, or to see that we would ever have any influence”.

Connelly said that mayors briefed on the new proposals via Zoom this morning appeared to like what they were hearing.

“I was on the the Zoom meeting this morning and I can assure you that there was no animosity or no opposition at all.

“In fact, what there was, was a constant string - you know, how little messages pop up on Zoom when people think things - so there was a constant stream of ‘well done’”, he said.