The path ahead for Three Waters is clear
On Thursday, new Minister of Local Government Simeon Brown announced the repeal of the previous government’s Three Waters legislation. This announcement was lost somewhat amongst louder debate on ferries, and budget blowouts of other infrastructure projects. However, the replacement legislation that was also signalled as part of Minister Brown’s announcement is critical in ensuring that reform gives communities and councils the necessary access to borrowing and capital to rehabilitate failing water networks in many parts of New Zealand.
Despite the magnification of the differences between Labour and National on Three Waters, there appears to be fundamental agreement on the need for reform. Under the new government’s plan, there will be more local influence retained through community ownership on Three Water networks. At the same time, there is a clear path to improvement of those assets as the Government is making it clear that those same communities will have to comply with much stricter health, environmental and economic regulation.
The New Zealand Infrastructure Commission has produced information that showed that the more autonomous asset management is from political control, the better it performs. The new direction the Government has signalled towards economic regulation and away from direct political decision-making on Three Water assets should see improved long-term performance of these vital assets for our communities. Pipes will no longer have to compete against the myriad other things a council can choose to spend money on!
It is imperative that the new council-controlled entities created to manage water can borrow more in their own names and effectively address the backlog of renewal that will continue to be an environmental and public health risk. It will take time to reduce this enormous deficit so the fast enactment of fresh legislation, along with the details of that legislation, will be crucial.
For instance, separating the balance sheets of councils from the new entities is a must. Reform must recognise that resources to fund water must better match the huge capital value that sits in our communities. For instance, local government bodies own around 50% of New Zealand’s infrastructure, yet has less than 10% of the tax income to invest in it.
Hundreds of millions of dollars have already been invested in developing comprehensive systems that will be superior to what most councils currently operate their Three Water functions from.
This includes but is not limited to procurement and treasury functions, customer management and vital asset management systems.
These contemporary systems should not now be lost. New entities should choose to be able to pick them up and run with them so that we forgo any significant waste of taxpayer funds.
It will be important that scale is developed in the new entities as this will allow them to develop understanding of their newly acquired assets and their ability to significantly increase the physical works needed to upgrade the most at-risk parts of those networks.
Important signals are needed as soon as possible to allow the infrastructure sector to gear up its capacity to get the work done reliably and competitively.
Infrastructure New Zealand supports the democratic mandate of any government to make decisions on any matter. However, great infrastructure for our country isn’t painted in party colours, and many projects are likely to outlast any one government in mere planning and construction time alone.
We must find a new way of planning and funding infrastructure to reduce the yo-yoing that now occurs when governments change.
New Zealand is in the bottom 10% of OECD nations when it comes to the value we get from our infrastructure spend. Planned projects not going ahead only makes this worse.
Infrastructure New Zealand recently released research demonstrating that we could save billions of dollars every year by providing greater certainty through a more comprehensive infrastructure pipeline. Those savings can then be reinvested in even more projects to reduce our $200 billion infrastructure deficit faster.
Moving to greater bipartisan agreement on the need for that infrastructure pipeline will give greater confidence to an industry struggling to secure and retain talent. Every time a project is cancelled, we see important work wasted and a loss of talent as infrastructure workers move to nations which provide greater certainty. When we need to turn the tap back on, the sector must then go out and build its talent back up, which adds huge costs.
We strongly support the new government moving to build its internal infrastructure advisory and delivery system to negotiate, partner and build infrastructure through a proposed National Infrastructure Agency. This will assist all projects built across the nation, and send important international market signals to institutions that New Zealand is serious about an improved long-term approach to infrastructure.
Water is a key part of our infrastructure deficit, and we face uncomfortable exposure until we have a new system to drive better asset information and action on renewing aged networks. It’s now time to come together and ensure we get improved locally influenced structures in place soon, so everyone can get on with the job.