NZ Government to End Centralised Water Resource Control, Ratepayers Could Face Higher Bills

The race politics aspects of Three Waters ensured it would be met with opposition; now Councils will have to find billions of dollars.

Flood water flows through cracks in the road surface on Udy Street, Petone, after a bout of severe weather in Wellington, New Zealand, on Nov. 15, 2016. Hagen Hopkins/Getty Images

Local Government Minister Simeon Brown has confirmed that Labour’s Three Waters legislation will be repealed by Feb. 23, restoring local water assets—and the bill for replacing them—back to local councils.

The coalition government’s alternative, called Local Water Done Well, will then be implemented by progressing two further bills through Parliament.

“Local Water Done Well recognises the importance of local decision-making and flexibility for communities and councils to determine how their water services will be delivered in the future. We will do this while ensuring a strong emphasis on meeting rules for water quality and investment in infrastructure,” Mr. Brown said.

What Is ‘Three Waters’?

The “three waters” are wastewater, stormwater, and drinking water. Wastewater includes sewage and everything else that gets emptied down drains. Most of it is channelled to treatment plants.

The infrastructure which carries these waters—much of it almost 100 years old—is failing due to decades of under-investment by councils, who were mindful of the impact on rates.

That has led to some catastrophic outcomes, such as when Campylobacter bacteria in the water made more than 8,000 people sick in Havelock North in 2016. Four died, 45 were hospitalised, and many were left permanently disabled.

Media—both traditional and social—regularly feature pictures of broken water mains and gushing sewage pipes in the streets of Wellington, the nation’s capital, and sewage washing up on Auckland beaches after heavy rain.

The cost of fixing the entire country’s water system is estimated to be $130 billion to $180 billion (US$110 billion) over the next 30 years. By way of comparison, total annual expenditure by central government in the year ended June 2023 was $154 billion.

For a small country with a limited tax base, the magnitude of such an expense is enormous.

What Did Labour Propose?

The former Labour-led government, which was in power between 2017 and 2023, intended to take the water services of the country’s 67 local councils and bring them under the control of four semi-autonomous regional entities, to be operating by July 2024.

There was no specific detail on how these semi-autonomous entities would pay for the needed upgrades, but it was widely assumed that the government would take on the expense.

In late 2021 and early 2022, a working group of mayors and Māori representatives reviewed the plans and made 47 recommendations. The government accepted 44 of them and, in June 2022, then Local Government Minister Nanaia Mahuta introduced the Water Services Entities Bill.

It was passed into law in December of that year, to considerable opposition.

Minister of Foreign Affairs Nanaia Mahuta talks to media during a press conference at Parliament in Wellington, New Zealand, on April 22, 2021. Hagen Hopkins/Getty Images

While there were concerns over aspects such as stripping assets from councils—which the government countered by pointing out that it also relieved them of the cost—by far the most contentious section of the legislation was that relating to co-governance.

Because water is explicitly mentioned in the Treaty of Waitangi as a taonga (treasure) over which Māori retained a degree of influence, Labour believed some form of partnership between Māori and the Crown was therefore required.

While they would not gain a place on the board of the four new water entities, the legislation sets up regional oversight groups with equal membership of local Māori and councils.

The groups would appoint the board members of the entities, and advise on strategic decisions. They would not be involved in operational matters.

As Selwyn Parker of the Lowy Institute explained at the time of the election: “Privately, many New Zealanders see this as a Māori takeover.”

Councils were divided, some welcoming anything which avoided them having to impose unpopular rate increases while others lamented the loss of local control.

Many groups were set up to oppose the move, including “Just Say No” (which now appears to have disappeared) and “One Law 4 All” whose website describes it as “sharing of sovereignty between democratically-elected government and councils on the one hand and an unelected and feudal tribal elite on the other.”

New Zealand Foreign Minister Winston Peters speaks at the "Save Tiwai" public meeting held at the Invercargill Workingmen's Club in Invercargill, New Zealand, on July 24, 2020. Dianne Manson/Getty Images

The ACT Party went into the election explicitly opposed to co-governance, while New Zealand First leader Winston Peters spoke of a “drive for separatism [in which] history is being rewritten, laws are being reinterpreted and precedent is being jettisoned for racially jingoistic jargon that would shock Māori scholars of a former age.”

So when National took power by forming a coalition with those two parties, Three Waters was inevitably jettisoned.

So Now What Happens?

National plans to have all the legislation in place to implement its alternative, “Local Water Done Well, by mid-2025.

Mr. Brown says a technical advisory group would soon be appointed to provide expert advice on its eventual implementation.

“This will restore continued local council ownership and control of water services, and responsibility for service delivery,” he said.

The first of two bills, set for 2024, will require the establishment of council-controlled organisations, “enabling councils to start shifting the delivery of water services into more financially sustainable configurations should they wish to do so.”

A second bill, in 2025 “will set out provisions relating to long-term requirements for financial sustainability, provide for a complete economic regulation regime, and a new range of structural and financing tools, including a new type of financially independent council-controlled organisation.”

Protestors outside Parliament buildings hold up a sign reading "Hands Off Our Water" in protest at the government's planned Three Waters reforms in Wellington, New Zealand, on Aug. 23, 2022. Lynn Grieveson/Getty Images

As a result, the responsibility for fixing the problem is being handed back to councils and, through them, to ratepayers.

National’s policy explains: “Financial sustainability means there’s enough money coming in, either from rates or from user-pays, to cover the maintenance and depreciation of infrastructure and investment in new assets. We’ll require councils to ringfence money for water infrastructure, instead of spending it on other services.”

While Labour’s plan would have seen taxes paying for the work, the burden would have been spread across a much wider tax base. Under National’s plan, it falls back on the shoulders of property owners, and in some cases their tenants.

Labour’s local government spokesperson Kieran McAnulty termed the repeal “irresponsible,” saying National was ignoring the cost, pointing out that the larger combined entities would have been able to effectively borrow more money than councils currently could.

“Councils can’t do this by themselves, but this is exactly where the government has left them—without any support,” he said.

“At a time where families are already feeling a lot of pressure with the cost of living, this is going to be a kick in the guts.”