Water reforms: Auckland sorted, rest of NZ?
A government deal with Auckland Council may solve a costly problem with Watercare, but the viability of water services elsewhere remains uncertain.
“I liken it to if you were set adrift at sea. You’d be hoping for a life raft to come past, but if a bit of driftwood came past, you’d grab hold of that as well. And at the moment, we’re looking at driftwood,” said Clutha District mayor Bryan Cadogan.
Prime Minister Christopher Luxon, Local Government Minister Simeon Brown and Auckland Mayor Wayne Brown jointly announced on Sunday a solution to a 25% increase in water rates coming down the pipeline for Aucklanders.
The Government had remedied the incoming rates bills – a result of scrapping the prior Labour Government’s proposed water reforms – by agreeing to pass law that would financially separate Watercare, a council-controlled organisation, from Auckland Council.
Both the Government and council had sought confirmation from credit rating agency S&P that this arrangement would enable sufficient “balance sheet separation” in the eyes of the rating agencies to allow Watercare to borrow more to maintain its infrastructure investment programme, without weighing on the council’s credit rating.
Minister Brown said the Government was now working with other councils on financially sustainable solutions to investment in water services.
Under the Government’s “local water done well” programme, councils have been asked to join with others to produce water infrastructure plans that involve council-controlled organisations (CCOs) that will – in theory – also obtain balance sheet separation.
“We’re also working with the local government funding agency to look at what support they could potentially provide for a CCO-type model,” Brown said.
Labour local government spokesperson Kieran McAnulty said the Auckland solution would not be able to be applied elsewhere, because Auckland and Watercare were unique. He questioned whether other CCOs would be able to be separated to other councils’ books.
“Essentially, Auckland is going to still end up paying more under this, and they would have done under [Labour’s] reform,” he said.
“Now it raises some pretty major questions about what’s going to happen around the rest of the country.”
As in Wellington, where councils are looking to combine water services with Wairarapa and Horowhenua, the Auckland arrangement will be reviewed by Christchurch with interest.
Christchurch mayor Phil Mauger said in a statement the council was holding a public workshop on May 16 to start “a more formal look” at a new water entity for the city. The conversation would include “how we might work with neighbouring councils”.
McAnulty said the Government also needed to “clear up” the question of what happens to Watercare if it defaults. Under the arrangement announced Sunday, loans taken by Watercare will not be underwritten by the Government.
“If it is a case that neither the council nor the Crown can legally step in to prop Watercare up, then they are liable to their debtors.
“So if it all turns sour, in theory, if those questions aren’t answered ... they could have to sell the assets to a private operator in order to cover their debts.
“It must be said though, I don’t think that will happen in the case of Watercare, because of the way that it’s set up, but that it’s a legitimate question, and it's certainly one that’s relevant to other areas as well, depending on how they set it up.”
Yesterday, Minister Brown said in a statement that Watercare would be similar to other regulated entities and would have “substantial scope” to adjust its charges, costs, and investments to ensure long-term financial sustainability.