Opinion: Fair, equitable, local, and affordable – A counter proposal to the proposed Three Waters Reform

We’ve seen the public conversation around the Government’s Three Waters Reform ramp up in recent weeks as councils across Aotearoa have convened to formulate their feedback on the proposed four water service entity model. Kāpiti is no different in this respect but, while much of the conversation has centred around the need for more time to fully analyse the proposal, our focus has been on how we can work more constructively with the Government to achieve good outcomes for our community and NZ Inc.

As a Council that continues to deliver quality three water (drinking water, wastewater, and stormwater) outcomes, and is acknowledged by the Office of the Auditor General for our approach to demand management and long-term sustainable provision of potable water, we believe there are other ways to achieving the Government’s aspirations for three waters.

But before we move to potential solutions it’s important to take stock of how we got here and the key issues. The catalyst for change was the campylobacter contamination in Havelock North’s drinking water supply in 2017 that saw more than 5,000 people become ill, with up to four deaths associated with the outbreak.  A two-stage government review ensued and recommended several improvements, including establishing a large, aggregated water supplier and a stronger regulatory regime. It expected that standards for the three waters would be raised, with associated cost increases.

The question of funding, and affordability, is seen as the main concern. The reform uses a model generated by the Water Industry Commission for Scotland (WICS) which proposes four large water service entities (WSEs) that would drive down the cost per customer due to efficiencies of scale. This reflects the actual experience in Scotland over the last 20 years. We concluded that the WICS financial model did not accurately reflect the Kāpiti Coast position, and in fact would see Kāpiti residents paying more to subsidise necessary investment in other districts. These extra costs would not be fully offset by estimated savings from economies of scale.

Governance and ownership, and how to ensure our priorities are acknowledged and delivered under the proposed structure are also of concern. We concluded that the ownership proposal is more to allay fears of privatisation and does not carry any control features that would normally come with ownership.

So, what do we suggest?

Everyone wants to ensure good outcomes for our communities – safe drinking water and an enhanced freshwater environment at an affordable cost. Perhaps though, when faced with options, we should favour the simple over the complex.

Improve funding

Over the last two years the Government has provided over $1 billion to councils to be spent on three waters related work. That amount of money is a good starting point for addressing the needed improvements across the country however, it does not go far enough to address the inequality.

We suggest an ongoing $500 million a year is provided by government and is allocated to councils using an equivalent model to the Waka Kotahi financial assistance rate (FAR). This assistance needs to be shared on an equity basis – with more going to councils that have a demonstrated affordability problem. This is no more than the government is already contributing, so it should not be a funding concern for them.

We don’t see a need for balance sheet support in most cases. However, we believe that the Government could incentivise any councils that want to opt-in to a larger scale, shared delivery model, by agreeing to provide a government guarantee to those entities. Initially we suggest this includes Watercare, and potentially Wellington Water if it assumes asset ownership. That will allow the higher borrowing limits that are needed by some.

Improve governance

We’ve noted that decision-making in the infrastructure area is increasingly complex and councils could benefit from competency-based appointments. Our existing legislation allows for a range of structures that can contribute this, while retaining democratic oversight.

The simplest option is for councils to appoint an advisory board, similar to that of our independent Economic Development Kotahitanga Board, comprising of iwi and local business expertise, who work closely with council staff, and provide input to council decision-making. This Board has brought an external perspective, as well as energy and networks, that add value to our economic development programme and a similar approach could be applied to three waters.

Alternatively, councils could, individually or in groups, look to establish joint committees that includes external appointees and have wide-ranging decision-making powers. A working example of this is the Wellington Regional Leadership Committee involving ten councils. Taking an in-between approach and noting the region’s four metropolitan councils already have Wellington Water, we could for example set up a joint committee between the Kāpiti Coast and Horowhenua district councils, where we can share the costs and benefits of external expertise.

Improve the regulatory regime

Most of the initiatives needed in this space are already occurring and are well supported. Our wero to government though, is to pick up the pace. In the four years that water reform has been considered, some of the most basic opportunities have not been addressed. Kāpiti Coast residents and our environment continue to benefit from water metering, and we believe issues such as water meters and water treatment should be required, not encouraged.

Establishing an economic regulator will still have benefits in our proposal. It will closely monitor the costs and performance of all councils, and it could identify an affordability cap for each. Where costs are unavoidably higher than what is affordable, the funding support via FAR can kick in. Overall, this will be cheaper and less contentious than cross-subsidies between districts.

Improve best practice for infrastructure

Recently the Infrastructure Commission, Te Waihanga, was established. A core function is to prepare research and best practice guidance on major infrastructure procurement and delivery. Te Waihanga does work with councils, but it’s mandate in the local government sector could be enhanced.

Alternatively, just as the local government sector has benefitted from the establishment of the Local Government Funding Agency, a sector-led organisation could be set up.

The role of this entity would be to provide leadership in best practice asset management, innovation, and procurement. It could provide horsepower to smaller councils in times of need, and it would be the forum for all councils to contribute to and learn from each other.

Improve training pathways

The water sector already has a training organisation, but we don’t have enough new people in the pipeline. We need to put what we have on steroids. This should be a highly attractive career option, and the Water Industries Operations Group, a sector training organisation, should work with councils on recruitment drives across colleges.

Career development in terms of training, qualifications, secondments and identifying pathways for individuals, are all achievable with more resources and greater emphasis. An advertising campaign with green water coming out of the taps is unhelpful. The same amount of effort into promoting career opportunities in the water sector would be well received.

Final words

A lot of emphasis has been on the loss of control that would result from transferring all responsibility from councils to the proposed WSEs. However, through this process what has become even more evident is the potential for loss of connection.

This week our council held a blessing at our Waikanae Water Treatment Plant to clear the way for stage 2 of our $17 million upgrade programme. We reflected on how stage 1 included an innovative river recharge scheme, that sees 400-year old aquifer water drawn from underground to replenish our river at times when water levels are low. This was a collaboration between local iwi and council and is part of ensuring we have enough water supply for at least the next 30 years, through a process that is best for the health of our waterway.

Our staff are proud of their role in delivering water to our community – that local connection is why we work for the Council. At the blessing our Mayor spoke to this connection, and he said “Ko au te awa, ko te awa ko au” – I am the river, and the river is me.

Everyone wants the best outcomes (the ‘what’ and the ‘why’), but we are not in agreement about the how. This should not be a contest of ideas; it should be a collaboration of partners. And, when faced with choices, let’s go for the simple option over the complex. It will deliver better results, faster.