Tax fishhook in Three Waters plan
Aconstitutional shift could wash up with the Three Waters Reform programme – providing nonelected bodies with the power to tax property owners.
This potential change is contained within the Water Services Legislation Bill, which passed its first reading on December 13, 2022 and is now before the finance and expenditure committee. If it becomes law, the legislation will give the the four newly created water services entities the power to tax property owners for stormwater services, based on the capital value of their properties.
Normally, taxation powers are confined to governments – central or local – because elected members can be voted in or voted out. Members of the water services entities are not to be elected but appointed, either by local authorities or iwi and hapu¯.
Water and wastewater charges are based on individual connections to the system, much like electricity and telecommunication charges. However, stormwater services are not reliant on individual connections, and there is a high level of ‘‘public good’’ in protecting properties from flooding and the risk of contamination from polluted waters. The convention has been that ‘‘public good’’ is a function of government, or entities set up but accountable to government.
The Water Services Legislation Bill contains several checks and balances where the water services entities will act as if they are local authorities.
Perhaps this is why the Government proposes giving them rating powers for stormwater services. However, there is no getting away from the fact that the decisionmakers will be appointees – and this goes against the old adage of ‘‘no taxation without representation’’.
What is even more confusing is that local authorities, at least until July 1, 2029, will be sending out bills on behalf of the water services entities (the scope of which is unclear in the draft legislation).
This may be because of the historical powers that local government has had, and the rating infrastructure that has been set up. But this was not a feature of the electricity reforms of the 1980s with some electricity retailers that were previously owned by local authorities, nor when Telecom was separated from the New Zealand Post Office – they had to set up their own charging systems.
To require local authorities to be involved in invoicing for services they no longer deliver is an impost, and will come as an additional cost to consumers, because local authorities will be able to recover a reasonable administration charge from the water services entities. At present, these costs are absorbed as part of local authority overheads.
If the Three Waters reform programme proceeds as currently shaped, local authorities should not be compelled to collect new water charges, and neither should the water services entities be given taxation powers for stormwater services.
Ideally, the new water services entities should, at best, manage two waters – and local authorities, with their rating, roading and reserve powers, should remain responsible for stormwater and related flood management functions.
Submissions on the Water Services Legislation Bill close on February 12.