Published in Newsroom, 10th November 2021
The Government has decided to move ahead with its reform programme for the so-called “Three Waters” (drinking water, wastewater, and stormwater) despite broad opposition to it, including from two leading Labour Mayors, Lianne Dalziel of Christchurch and Phil Goff of Auckland.
For a government that is often seen as risk-averse and keen to protect its popularity, this suggests either a gross political misstep, or an otherwise overwhelming case. What is the case?
Almost everybody in local government accepts that something needs to change. Eighty-five per cent of the population receive their water services from their local council, and yet:
- A fifth are supplied with drinking water that does not meet New Zealand standards
- A quarter of wastewater treatment services are operating on expired consents.
- At least half of all stormwater services are not monitored for quality.
- 21 per cent of water supplied is lost before use, and water loss could be reduced in 83% of districts.
- According to overall performance standards for water delivery systems, New Zealand’s local councils are at less than half of that of UK equivalents.
- Most systems serve fewer than 100,000 users, when at least half a million is desirable.
- Only about half of earmarked economic depreciation is spent on infrastructure each year.
- It is estimated that there is an accumulated infrastructure deficit across the three waters of $120-185 billion.
- Almost all local authorities are unable to raise debt for the investment required.
- To meet required investment, household costs would need to increase from two to ten times.
And this is without even mentioning the public events that brought this crisis to a head, such as the outbreak of gastroenteritis in Havelock North in 2016, human waste on Auckland beaches in 2018, the Auckland drought of 2020, and raw sewage in Wellington streets and wastewater in Porirua in 2021.
These are governance failures of a major dimension – usually associated with the failing urban infrastructures of developing countries and not of a modern democratic state like New Zealand.
How did it come to this? After all, New Zealand has prided itself on the thorough-going nature of the reforms to the public sector carried out in the 1980s and since, which included changes at the local level such as achieving dramatic improvements in productivity in the ports and deregulating electricity supply – but the structure, size, and number of local government entities have been largely left untouched since the major changes of 1989.
The fundamental problem for the policy community is that the glory of local government – its democracy and responsiveness to local communities of interest – is also its weakness. Where elected politicians are answerable every three years to ratepayers concerned about the costs they might incur in the near future, long-term investment is the first to suffer. Indeed, it is evident that funding of roads and footpaths – the visible manifestation of local government – is privileged over funding of long-term infrastructure that lies under ground and is hard for the average voter to monitor and appreciate.
The only substantial reform of local government since the restructuring of the late 1980s was the establishment of a single entity to replace the seven Auckland councils following the report of the Royal Commission in 2009. This new structure, with more arm’s length operational bodies run by competency-selected professionals, has given Auckland a greater ability to plan ahead, hire talent, raise capital, harmonise water rates, and settle on water rate rises of up to 9.5% through to 2029.
While the case for reform in the governance of the three waters may be strong, and while the benefits will be substantial – improvements in GDP, productivity gains, more jobs, lower increases in household costs for all councils (particularly those in rural areas), and the ability to raise capital, the sector remains opposed, often most vehemently from those most likely to benefit, such as the 43 out of 67 councils that at this moment do not have the revenue to cover water services operating expenditure.
The Government has proposed an elaborate structure that gives ownership of four regional entities to constituent councils, but the ownership of the actual waters infrastructure will rest with those entities, which in turn will be governed by independent boards run by competent professionals. There will be regional representative boards, and Maori will be involved as partners. This is an attempt to find the right form of interface between local democracy on the one hand and effective stewardship of long-term investment in infrastructure on the other. The proposal is now open for further discussion with the sector.
What this episode suggests is that there may be an agenda for longer-term and “future proofing” of local government. If the outcomes of the Royal Commission on Auckland Governance are any guide, this may involve a mixture of amalgamation at the council level balanced by local committees or boards, together with greater involvement of Maori and, where necessary, competency-based boards for some functions with longer-term time horizons.
The Three Waters reform programme attempts to address a significant failure in governance at the local level. The government needs to show flexibility in implementing it, without losing the essence of the key reform proposals.
New Zealand is among the most centralised of countries. There may now be an opportunity, after the three waters reform programme is through, to give local government another chance at reshaping itself to develop a more fulfilling and constitutionally useful role for the future.