Change in the pipeline
Fixing New Zealand’s water infrastructure will cost billions. Could new super-regions or even a special tax be the answer? Dominic Harris speaks to those charged with finding a solution.
The image of a wastewater pipe spewing filthy green water onto a West Coast beach this winter was a sight that would have turned the stomachs of many Kiwis.
At times tinged red with animal blood from local meatworks, the water poured freely onto the sand and stone foreshore, carrying with it everything from condoms to wipes.
The stench left residents prisoners in their own homes and caused a political stink in the Westland district town of Hokitika.
But it also made a mockery of New Zealand’s clean, green and ‘‘100 per cent pure’’ mantra.
The situation appears to have been caused by a ‘‘perfect storm’’ of poor oversight, bad practice, and changing ideas about what is acceptable and climate change.
It is also a perfect example of the complex issues the Government wrestles with as it works out how to overhaul the country’s water systems.
Politicians have long-known that the so-called three waters system – wastewater, stormwater and drinking water – is not up to scratch.
‘‘Either you give way on your aspirations for safe drinking water and environmentally sound wastewater discharges, or you’re going to need to find a way to fund those services.’’
Ageing infrastructure urgently needs renewing. One in 10 wastewater treatment plants has expired consents, a fifth have consents expiring in the next four years and parts of the country do not comply with drinking water standards.
Tourism and population growth in places like Hamilton, Tauranga and Queenstown are adding pressure to the creaking pipes and climate change is already having a major effect on infrastructure.
Problems are widely apparent – Christchurch has questions over drinking water security, sewage overflows have made some Auckland beaches unsafe for swimming and Dunedin has endured sewagecontaminated stormwater flooding homes after heavy rains.
In mid-2017 the last Government set up the three waters review, led by the Department of Internal Affairs (DIA), to find ways to revolutionise water provision.
Working in parallel with the Havelock North inquiry, it examined that inquiry’s recommendation to establish an independent water regulator and dedicated water providers.
The review is getting ready to unveil options for how the new water landscape could look, reporting to the Government in October.
New regulation is inevitable. Currently it is fragmented, with the health and environment ministries and regional councils having a role.
But the system lacks economic oversight, leading to limited and poor information on the condition of infrastructure.
The Government will likely decide on regulation next year, and could choose separate regulators for environmental, economic and drinking water issues, or roll them all into one. However, there is no timeframe for bringing in a new water management model.
Delivery of three waters services, meanwhile, rests predominantly with 67 local authorities.
But last month Local Government Minister Nanaia Mahuta suggested councils could be stripped of the responsibility.
Publicly-owned providers could take over, amalgamating services to improve delivery, though the minister has ruled out privatisation.
One model being considered would create five ‘‘super-regions’’, while another would establish a water body for each of the 16 regions.
Christchurch City councillors last week questioned whether regionalisation would see the cost of responsibility for a huge swathe of South Island water burden the city’s ratepayers.
Local Government New Zealand (LGNZ) president Dave Cull also warned against a ‘‘one size fits all approach’’, calling for councils to be given time to come up to standard before stripping them of their roles and responsibilities.
Four options are on the table, three waters review director Allan Prangnell suggested.
The first follows the status quo but with a new regulatory regime.
However, at last month’s LGNZ conference, Mahuta spoke of a ‘‘real opportunity … to achieve solutions that will be of lasting benefit to our communities’’.
The next options involve regionalising water services.
‘‘There are two ways you could do that,’’ Prangnell said.
‘‘One is that you could have a water entity jointly owned, governed and funded by the territorial authorities within a region.
‘‘You’ve got 16 regions ... the 67 territorial authorities could jointly govern and manage them within a region, so you’d effectively have 16 water providers.’’
Wellington Water is an example – council-controlled and jointly owned, and run by five urban and regional councils.
‘‘The councils have retained ownership of their assets and the decision-making around investment,’’ Prangnell said, pointing out the company manages assets and plans and advises councils on spending.
Areas such as Tasman, Nelson, Marlborough and Gisborne already function as their own regions.
The third model would split New Zealand would into three to five ‘‘super regions’’, the argument being that more ratepayers makes raising revenue and funding infrastructure easier.
‘‘How they are governed, managed and owned are all up for conversation under each of those models,’’ Prangnell said.
‘‘But you could continue to have local government collective ownership within those areas.
Governance issues and how local needs and issues influence the services would need to be thought out, and he accepts there are snags with such models – concerns raised by Christchurch councillors and echoed by Cull.
Some were concerned they might have to pay for neighbouring councils which have failed to invest in their water services, Prangnell said.
But he cited the success of Watercare, which services 1.5 million Aucklanders, which was forced to charge the lowest price of its constituent districts when it was established, something it achieved through scale of numbers.
‘‘Even within that framework they were able to make huge investment into the rural areas to get on top of the drinking water challenge, and now to get on top of the wastewater challenge.’’
By sharing costs they kept bills for necessary investment down, he said.
The fourth idea would involve a new dedicated tax to help communities fund services, something that could be applied to any of the delivery models.
It could be similar to a fuel tax distributed by NZTA as subsidies for councils maintaining local roads.
No such fund for water exists and one would have to be developed, an idea the Government is examining.
Whatever option is eventually adopted – and it may yet be none of these – the key issue is cost.
The bill for upgrading water treatment plants to meet drinking water standards is expected to exceed $500 million, while a report not yet published suggests upgrading wastewater treatment plants discharging into freshwater – not including the half of all plants that discharge to the sea – will exceed $2 billion.
About $12.8bn of spending is planned for 2016-2025, but just 78 per cent of the budget for 2016/17 was spent – what the Auditor-General said reflected a ‘‘systemic underspend’’.
How this is all funded is key. Christchurch spends $330m, about a third of its entire annual budget, on three waters – but there is uncertainty for many.
Prangnell said he and the Government were keenly aware of funding issues.
‘‘At this stage the basic ideas are that for both regional and ‘super-regional’ models the recipients of those services would fund the costs, and that there isn’t a subsidy – they would be self-funding.’’
What is clear, he said, is that the current model of 67 individual councils running water services will become increasingly unaffordable.
‘‘Either you give way on your aspirations for safe drinking water and environmentally sound wastewater discharges, or you’re going to need to find a way to fund those services on a more sustainable basis than we have at the moment.’’
However three waters is eventually shaken up, there remains trepidation among many, particularly in local government.
Cull warned against jumping ahead before there was consensus.
‘‘We think the Government’s responsibility is is to set the standards, put a regulator in place, have a requirement that those standards be met and then let councils – water providers – get on and meet those standards.
‘‘In our view they are our assets, councils have been providing services very well for a very long time, let them respond to the requirement to meet the regulatory standard.’’
Prangnell has been invited to Christchurch to explain his team’s thinking to councillors in coming weeks.
He will have to talk fast to persuade them a city already burdened with the earthquake rebuild will not have its purse strings stretched even further.
Mayor Lianne Dalziel said paying for other councils to meet standards was ‘‘certainly not something that we would be interested in pursuing’’.
Councillor Vicki Buck said it was ‘‘not on’’ to put extra costs for other areas onto the city’s residents.
‘‘Our major concern is that we can’t afford to take on the financial liability for two-thirds of the South Island, the whole of the South Island or even a third of the South Island…
‘‘If you think about some of the numbers they are talking about, that’s a fraction of what they put into transport in Auckland.’’
Mahuta said she understoodrelying on rates to fund services and infrastructure is becoming increasingly unsustainable but warned the Government did not have a ‘‘bottomless pit’’ of money.