New fund will pave way for multi-billion dollar overhaul of water sector

Wednesday, 8 July 2020

Local Government Minister Nanaia Mahuta has led a huge overhaul of water provision that could see regional bodies in charge of supplies. (Video first published in November 2018)

A $761 million package for a major overhaul of the country’s ailing water sector was announced today. The money will help councils upgrade creaking infrastructure and services – but they'll have to agree to sweeping changes proposed by the Government to get the cash.

Billions of dollars of investment is urgently needed to ensure drinking water supplies are safe, wastewater is not damaging the environment and to replace ageing and leaking pipes.

The extent of the problem has come under fresh scrutiny since 2016’s Havelock North campylobacter outbreak, which left four people dead and 5500 ill.

Too many wastewater facilities, like this pipe in Hokitika from a few years ago, do not meet environmental standards.

Ministers are now driving through sweeping reforms that over the next three years will see tighter regulation and major changes to the way water services are managed.

* Auckland's Watercare to run Waikato District Council's water services from July

* $3500 bill for every household in small-town New Zealand to fix ageing wastewater plants

Prime Minister Jacinda Ardern has vowed that the lessons of the Havelock North outbreak will be heeded.

* Major water management reform could take responsibility for drinking water from councils

Councils, which own and manage most treatment plants and provide drinking water to almost 90 per cent of the population, are set to be stripped of their roles. Instead, water provision will be taken over by a small number of publicly owned super-regional entities.

While there is a substantial pot of cash to help councils pay for maintenance and renewals, they will only get funding if they agree to the Government’s reform plans – and will still have to meet strict new drinking and waste water standards even if they do not.

And though the money will be a lifeline for smaller authorities, there are concerns that ratepayers in larger urban areas will have to subsidise improvements in rural communities where cash is in short supply.

Unveiling the plans on Wednesday at the site of the water bore that was the source of the fatal Havelock North outbreak, Prime Minister Jacinda Ardern said she was determined not to allow such a tragedy to happen again.

“Investing in water infrastructure is about investing in the health of New Zealanders,” she said. “New Zealand’s public water infrastructure is run down and needs upgrading, but local government often doesn’t have the resources needed to fix it.

Local Government Minister Nanaia Mahuta at the announcement of a $761 million package to help councils upgrade creaking infrastructure and services.

“This $761 million investment will kick start much-needed work to bring our drinking, waste and storm water infrastructure up to scratch.”

The money will be used to create jobs and pay for maintenance and infrastructure renewal – a welcome boost, given the financial strain councils face from the fallout of the coronavirus pandemic.

Funds will be allocated based on population and area, to those authorities that opt in to the Government’s plans, with money split equally across the country between urban and rural or provincial communities.

Around $50m has been earmarked for councils in the Hawke’s Bay area, while $51m is set aside to support Taumata Arowai, the new water services regulator being set up to ensure drinking water is safe. A further $30m is to help rural drinking water suppliers meet safety standards.

“There are massive looming costs across the three waters networks,” Local Government Minister Nanaia Mahuta said.

“The current service delivery arrangements, particularly for the smaller rural and provincial councils, are not well-placed to meet these.

“Today’s announcement will lend the reform programme’s initial stages very real impetus.”

Local Government New Zealand president Dave Cull welcomed the funding, as it recognised water as part of New Zealand's broad infrastructure, planning and governance system.

“Too often water reform proposals have focused exclusively on scale, without assessing the spillover effects for things like planning efficiency, infrastructure delivery, and governance and accountability of the system – or that there may be other ways of achieving the same outcome.”

The Prime Minister acknowledged the challenges posed by Covid-19 have increased on smaller communities. “We are here to support you.”

She said funding was going to come for water projects regardless of Covid-19.

Ardern didn’t give a time frame for when funding would begin, but said they needed to act fast and funding would come “quickly”.

Hastings mayor Sandra Hazlehurst said Hawke’s Bay’s five councils were very grateful for the Government’s contribution.

“There is considerable work to do on ensuring the security and affordability of our three waters services over the long term across all of Hawke’s Bay. We are delighted Government recognises the collaborative approach we are already committed to in Hawke’s Bay.”

Upgrades to infrastructure will mean no more scenes like this outlet pipe from Hokitika’s oxidation ponds flowing directly onto the beach.

Central Hawke’s Bay mayor Alex Walker said “Wai [water] does not recognise boundaries and neither do our communities. That’s why it makes such good sense for the councils of Hawke’s Bay to be working together to find the best regional solution for the future security and sustainability of our three waters services”.

Hawke’s Bay Regional Council Chair Rex Graham said “without a joint approach, smaller communities will always struggle to comply with the regulations. I’m pleased to see Government looking to support regions like Hawke’s Bay to come up with solutions that work best for all our communities – rural and urban.”

EYE-WATERING COSTS

Overhauling the water sector comes with a very big bill.

The asset value of wastewater treatment plants is estimated at $20 billion, while the drinking and wastewater pipe network is about $80b.

An early idea from the Department of Internal Affairs showed two options for how water provision in New Zealand could be changed, run on a regional or “super-regional” basis.

But a report by the Auditor-General in 2014 found that the suggested renewal of this infrastructure had fallen between $6b and $7b behind what it needs to be.

Around half of all wastewater treatment plants – those discharging to the coast and into fresh water bodies – need up to $4b spent to meet environmental expectations over the next decade.

Upgrading drinking water treatment plants will require up to $575m, though some in the sector believe that cost could be significantly higher.

Yet the drinking and wastewater plant costs only represent about 20 per cent of the infrastructure. The other 80 per cent is in the pipe network, and government experts say the bill to bring that up to speed is the big unknown – though it is thought to be much higher again.

At current estimates, the total infrastructure bill is likely to be at least $10b – though overseas experience of reform is that actual costs can be two or three times higher than thought.

A NEW LANDSCAPE

Reform of the water system has been influenced by models used overseas, particularly in Scotland and Tasmania.

The current model has 61 territorial authorities and seven unitary authorities providing services, along with major providers in Auckland and Wellington.

The Government wants to revamp the system to have a small number of publicly owned multi-regional entities, based on factors such as benefits of scale, communities of interest and catchments. At least one large urban area would sit within each entity.

But the model carries the danger of larger areas having to subsidise infrastructure improvements in smaller ones.

Costs would likely have to be shared across regions, the Government said, but the extent of this would be discussed with local authorities.

Increased costs due to cross-subsidisation in the short term would likely be matched in the medium term by benefits of the changes to create sustainable larger-scale entities.