- Date published:
8:32 am, April 14th, 2023 - 72 comments
Categories: Environment, labour, local government, national, political parties, same old national, water - Tags:
Three Waters mark two has been announced. Instead of there being four mega entities in charge of the country’s water systems there will be more localised entities based generally on Regional Council boundaries, apart from in Auckland where the originally proposed entity will continue.
And Kieran McAnulty has given a text book example of clarity in political speak when making the announcement.
From Te Ao Maori News:
“These reforms are absolutely essential. Leaving things as they are will mean unaffordable rate bills,” McAnulty said.
“The feedback has been overwhelmingly clear that our water infrastructure deficit needs to be addressed now if we’re to save households from ballooning bills that will make water unaffordable. But also that the reform programme must be led at a regional level – we have listened closely and absolutely agree.”
He says the costs involved in meeting the upgrades needed for water systems are projected to be up to $185 billion over the next 30 years, which local councils cannot afford on their own, and households in some areas could see rates rise up to $9,730 per year by 2054 if nothing is as done.
“The projected costs have been peer-reviewed by both Farrierswier Consulting (an Australian regulatory economic specialist) and Beca (an international engineering firm) and make for pretty grim reading. Leaving councils to deal with this themselves will lead to unaffordable rate rises. It would be setting councils up to fail and I can’t in good conscience do that,” he says.
McAnulty says establishing 10 entities is projected to save households between $2,770 and $5,400 a year by 2054 on average within each region.
“By extending the number of publicly owned water entities to 10, every district council in the country will have a say and representation over their local water services entities through regional representative groups, forming a partnership between council representatives and iwi/Māori that will provide strategic oversight and direction to the entities.
“These groups will continue to sit below the governance board, in which each member will be appointed on merit and qualification but, by increasing the number of entities we will be able to ensure the needs of every community, especially small rural towns, are heard and met.
Tory mayors throughout the country continue to be unimpressed, colour me surprised. You can tell they are tories through the use of overblown rhetoric, by their insistence that their locally produced figures are correct and the Government’s figures are wrong, and by their complete indifference to the plight of neighbouring local authorities which may be struggling.
And National and Act are, surprise surprise, also unimpressed with the changes.
Simon Watts was on Radio New Zealand this morning and kept claiming that the program was untested. Which is weird because it relies heavily on the Scottish Water model which has been in place for 20 years and has been shown to work. And the concept is relatively simple, set up entities that can borrow at prime rates and have sufficient scale to operate economically, give it guidance through regional representative groups, and let the entities get on with it.
And National’s alternative proposal contains scant detail. As I said previously:
The policy looks suspiciously like Three Waters. There will be regional groupings but these will be voluntary. Councils will be required to adhere to centrally set infrastructure plans. National will facilitate long term borrowing.
This will mean that the cost will appear on local council’s balance sheets. Some councils have been really risk adverse to borrowing. For instance Auckland Council has persuaded itself that it’s debt cannot be more than 270% of income as the sky will otherwise fall down. Conceivably it will have to invest $60 billion in water infrastructure over the next thirty years. This will increase dramatically its current debt of $11 billion and blow the borrowing cap.
Instead of water entities handling long term investment decisions these will be determined by the Minister. Local control over long term strategy will be diminished under National’s plan.
The proposal feels similar to Three Waters but with increased central control and no idea how the borrowing will work or the infrastructure plans will be formulated.
The policy is a grudging acknowledgement that the status quo, which has seen faeces flow into Wellington Harbour, people poisoned and killed and pipes fall apart from old age and lack of maintenance, is no longer an option.
Interestingly Labour’s change to regional groupings makes the policies closer. And National’s alternative is strong on central control and weak on detail.
The debate is one big wall of noise. The problem is clear as is the solution.
It is good to see McAnulty front footing this. He has the twin virtues of being very clear in the way that he expresses himself and he has that rustic charm which tends to dispel angry responses, unless they are feigned.
How this debate shakes down will have a major effect on the election. But the starting point should be clear. The status quo when it comes to water is unsustainable.
this. this is what Labour needs to do on water reforms. Focus on the reason they are doing it- the cost savings.
On the old website, there was a great interactive map of savings by council area… but it was buried, impossible to find.
Now, a simple table https://t.co/9FIIN6b33c pic.twitter.com/82EZ6o2a2X
— Clint Smith (@ClintVSmith) April 13, 2023
Here is film of McAnulty absolutely nailing it.
Which is weird because it relies heavily on the Scottish Water model which has been in place for 20 years and has been shown to work.
Using Scotland as a model for solving NZ's own infrastructure challenges was always a strange decision anyway.
[You were on your final warning (https://thestandard.org.nz/open-mike-07-04-2023/#comment-1944268) only a few days ago yet you keep dumping large numbers of hidden (embedded) links masquerading as quotes. I count 6 links, no less, with not one URL to be seen. One link is to a collection of rather long Annual Reports without any further guidance as to which report, which page, which section, which paragraph, et cetera. Obviously, you expect us to fall into this trap of yours and read all the material you provided. This is a known troll tactic and idiosyncratic behaviour of yours, i.e. a pattern, and the fact that you disrespect Mod notes and waste Moderator time tells me that you need to take some time off. See you in a week or so – Incognito]
We do have a weird habit of importing public service models, theories of organisation, and even managers from the UK. Then wondering why they don't work.
It's the worst kind of cultural cringe: Rather than forge a New Zealand solution to New Zealand problems, we simply copy what the rest of the world did 10 years ago.
Ours is a uniquely local solution. That is why the Regional Representative Groups are there.
In Havelock North recently we have had water systems kill four people and poison 5,000 others, in Wellington sewer pipes regularly collapse and drain raw sewerage into the harbour, in Auckland we still pump raw sewerage into the Waitemata Harbour, many of our waterways are unswimmable and in Otago there was lead contamination in the water but in Scotland they have waterway problems and a bad smell. And you think our situation is better?
In regards to the Havelock deaths, do you or anyone know if there is any ongoing enquiry or investigation into the accountability?
They changed the entire legislative and regulatory framework as a result of an inquiry. Anything else?
So, no to accountability.
All the new rules and regulatory frameworks in the world will not make a difference of they aren't enforced.
Testing leaving a reply with the new theme.
Personally, I think that 'Liberty Belle' is simply too stupid to be capable of reform.
I particularly don't like the 'quote' covered links being used to promote SEO – which is what this looks like to me. If I see it again whilst in my more usual login (lprent), I will ban Liberty Belle or anyone other idiot doing it permanently and with malice aforethought.
1. Didn’t place the reply box at the expected indent.
2. Layout of the login fields was appalling.
3. The edit timer – seems short
Apart from that it wasn’t too bad.
Just seen your comment, after I put the ban in the Moderation Post 2023 in the back-end.
This commenter has form & history and keeps wasting people’s time, including that of this Mod.
I listened to him last night on checkpoint and he made the definition of political clarity and dont mess with me with your silly little tricks. this is serious and important and far above media nonsense purveyed by the broadcasters as news.
Agree…McAnulty may have the weirdest name to spell but he was extremely clear on Morning Report today and I liked the way he attacked the Nats for not costing their own water proposals when criticising Labour's.
There is absolutely no reason why councils would right now sign up to this new iteration of 3 Waters.
With the election this close, I suspect most will just keep their cards close to their chests until after the election. Because, if there is a change of government, they might get something they like more.
"if there is a change of government,they might get something they like more."
Can't see it in Te Touihu. Here in Tasman a real clusterf**k decision was made with the previous mayor's casting vote to go ahead with a dam now costing $200m built on a fault line and on top of weak rock. And then according to an an expert acquaintance it may not even achieve what its proponents hope and in the meantime further the division between urban and rural. Most locals did not like the idea of being tied to Wellington and the East coast under the old 3 waters proposal and are indifferent about co-governance, though the Nelson mayor unlike his open minded predecessor is being a 19th century dick about it.
Depends on the Council. Auckland already did this via Watercare so the Council could argue it doesn't really gain anything by this proposal instead of status quo (although the cost savings look high anyway, presumably because of Northland). On the other hand, Taranaki looks like it will do much better from this compared to status quo.
"No reason to sign up"????
Strange take. I think Ratepayers will be asking their Councils to sign up once they realise the impact on their pockets.
"I expect most will keep their cards close to their chests", does this mean local and regional councils? Again their voters might send strong signals at meetings about how they plan to avoid future costs….. would it be the usual ignore and delay again??
Marlborough will pay 50% less than with the status quo. That is $3,400 pa less. (3Waters would have been 80% less.)
The vanity of our District Council is costing us more. If the Council published the actual cash savings instead of hiding behind amorphous concerns like Co-governance, maybe the ratepayers might sit up and notice. Folk I have spoken to know little about what the issue is. Bad communications from the Government but serious breech of our Council. Of course the Council might be protecting the Opposition's interests? Surely not!
Really? For savings of that size, rate payers from other cities would need to be subsidising Malborough a lot. If there is going to be that much money shifting around, then it effectively becomes another tax.
All ratepayers are forecast to pay less with the 10 entity model than now.
Comparisons – status quo, 4 entity and 10 entity are shown here
TS: I am just referencing the table above from Clint Smith.
Yes. Well I would be very interested to see the assumptions that underly that chart.
It looks to be in the category of "if it seems to good to be true it probably is".
Saving a percent or so on interest is not going to achieve that.
Yes Ts.There must be some assumptions on figures but Kieran claims that the figures are from Councils. National/Act claim that the figures are wrong but of course don't show any "correct" figures let alone cost their own suggestions.
Well it is a bit hard to dispute the figures if the assumptions aren't made clear.
Do you think it passes the sniff test? So, a job that was going to cost $1000 dollars suddenly only costs $350 through a restructuring? That just seems wildly unrealistic.
Find somewhere else that has achieved that sort of savings through a restructuring. I would be interested to see it.
That sounds even more optimistic than the promise of 100000 houses in ten years.
But it makes for a good headline, and everyone just hopes that people are too poor, too hungry, too cold, too busy trying to keep it all together to realise its just a pig with lipstick. Not a sow as told, just a lipstick covered pig.
"It looks to be in the category of "if it seems to good to be true it probably is".
On steroids…and I find it curious the (supposed) savings are measured 30 years out.
Thats a very specific crystal ball the Gov has….wonder where one might get one?
Two dollar shop, real crystal balls would bust the budget.
I thought the savings were because the government could borrow at better rates than local councils and not a subsidisation from other councils? For councils with higher future costs the savings are going to be greater that for those with that wouldn't have needed to borrow so much.
The dry stuff.
Borrowing costs are lower for corporate entities with balance sheet separation from their owners (here councils).
Basically this is realised by having a minimum of three councils involved (this prevents any one council having any capacity to play politics) – so it is an independent corporate entity doing the borrowing.
The cheaper loans deliver the cost reductions. With 10 entities not as much savings as with 4 (but closer to the existing local governance set up).
PS a government guaranteeing loans to councils results in impact on the government credit rating and is inconsistent with councils having debt limits.
Yes Miravox. I guess that spreading the cost across the region would benefit the poorer or less capable areas. But our fairly new Hospital was not paid for by our town. The cost was spread across all taxpayers. As with a motor way or a bridge. The difference with the water projects is the cost would be focussed on our zone rather than the whole country. At least our now smaller region should benefit from being able to access a more skilled set of hydrologists than we could get from just our town. Would have been even better getting skills with a 4 zone model, and loans would be cheaper.
I read somewhere a few years ago that the 3 Waters plan was just a means of by-passing Council loan caps?
The major area of savings was (and still is) economies of scale and efficiencies.
Presumably we are going to source skilled people for 10 entities now rather than for four. Harder. Cost more unless the skilled are shared out amongst the regions?
Most staff from old water entities are just getting rolled into the new ones.
10 entities just means slightly fewer losses in management.
Anyone here want to work for Wellington Water?
But that is where the assumptions need to be understood. Because, to claim that sort of saving will likely mean someone else is subsidising it.
I challenge anyone here to put up numbers that show that sort of saving through efficiencies, savings in interest, or anything else directly related to council expenditure.
We could be shaping up for another “show me the money” moment.
So, if you are a rate payer you may well be subsidising some other town's water infrastructure if that is the case.
Modelling is publicly available here.
In the Key Findings of Phase 2 (page 3) in the FAQ, there is this quote:
Obviously Scotland is not NZ as the independent reviews (and WICS themselves) point out, but it's a real world example of a similar programme in a small country (5.2 million) delivering a lot of efficiencies and improvements in service (source). In 2019 dollars, costs dropped from $209 million in 2002 to $160 million in 2019 while delivering a higher level of service, and WICS has done the modelling for NZ. Their work has also been independently reviewed.
The modelling assumes (in the case of Christchurch for example) an annual cost increase of over 15% per annum for the next 30 years under the existing regime and bases the projected 'savings' from that position.
You can decide whether an annual consistent 15% increase is a realistic base case.
Yes, I thought that sort of dodgy accounting may have crept in.
The reason it is dodgy is because it is based on the assumption that councils won't decide to do the remediation work themselves, and borrow directly, or increase rates to fund the work.
All that the comparison shows at the moment is the cost of not doing the work compared to the cost of doing it. Not who organises it.
To accurately measure the savings, the comparison should be between the new entity funding the work through borrowing at a lower interest rate compared to the cost councils would incur borrowing directly to do the work themselves.
If it was analysed that way, I guarantee it wouldn’t be 50% savings or whatever the number is.
I think that explains how such dramatic savings can be magically generated.
Further to that, it is like saying that "if you don't fix your car it will cost you $$$$. So, you need to take it to the mechanic.
The government is effectively saying that you need to take it to this specific mechanic because they can do it a bit cheaper.
So, the largest part of the savings aren't directly tied to the entity. They are tied to getting the work done by someone.
the gov is also saying you will take your car to the mechanic for regular servicing and upgrades even though you never have in the past…
….something you didnt do because you didnt have the funds to pay the subsequent invoice.
Yes. But the key thing here is getting the work done. Not who does it. I will post below on a much simpler solution.
Poor analogy, and your previous remarks take no notice of the audit and verified costings .
Muddying the waters lol. Pun intended.
"S&P has been the Government's go-to at every iteration of the development of its Three Waters reforms – which makes its reports this week to big institutional investors and other clients all the more extraordinary."
"We believe there has been too little scrutiny of the affordability of the perceived NZ$120 billion to $180 billion investment in the Three Waters reforms," the reports conclude."
Crikey where has Kieran McAnultybeen hiding?
He's about as far from Nanaia Mahuta as it's possible to get.
Thank God Hipkins has found a guy that can suck the poison out of Labour's worst electoral wound.
His talents have been obvious for a while. Why else did we get the Hamilton turncoat singling him out? He’s been doing a great job with his local government responsibilities.
It just has taken far too long for new talent to be prominent. There should have been plenty of options with a 50% vote.
The other problem is- who sees him speak? And who gets their news fed through a social media filter of others describing what’s happening… Needs to be putting videos of that kind of speech everywhere. All the social media sites, every possible official place, every meeting. People need to hear from him, not what the opposition have to say.
Agree, but it is a matter of money. Labour are poor compared with well funded Act and National with their bursting war chests. Also many of the podcasts are fairly blue in tone. It is hard to compete for attention. We need to give small regular amounts to counter this too a degree.
Better to take it to the election, in my view.
When they do and Labour wins, every other party that voted against it can shut the fuck up.
Discussions with Pat above suggest that most of the savings are through getting the work done, not who does it.
With that in mind, I have applied Occam's Razor, and the KISS principle to the problem:
Upshot: The work gets done. Savings are made. Councils keep control of rate-payer assets. No convoluted bureaucratic structures required.
There is an(other) aspect to the 3 waters situation that is conveniently ignored by all…the economic impact (or opportunity cost) that must occur to solve the basic problems with our water quality and discharge….it is this that has directed the Nelsonian style governance by local bodies with the complicity of central governments of all hues.
As I have noted before the fact this remains undiscussed simply adds to the impression that all the noise around water reform is largely ( very expensive) window dressing.
The Greens are the only body that appear to have scratched this area to date…and that was a light touch.
I think what we have collectively demonstrated is that the argument that "Affordable Waters" is about saving money is a fallacy. Because there are far less convoluted ways to achieve that.
So, I the conclusion I would draw is that it is really about power and control.
Looks like it's all part of the PM's strategy to run a hip-pocket election campaign designed to obscure the real objectives you have pointed out – power and control.
Labour is deferring Policies that National will repeal. We are entering into election campaign mode and Labour is taking the wind out of the sails of its competitors whilst trying to chalk up minor scoring points. Labour might try going for a TO or heavy body blow, at least, with Budget-2023, but fiscal constraints don’t give much wriggle room. However, they might pull something ‘bold’ out of the hat if they’ve had enough time since the internal change- and make-over of the Team – it will be an Election Budget.
If the govt is going to get cheap money for councils to fix their own waters, then some serious controls would need to be put in place so as it's not siphoned off for, vanity projects, new mayoral chains and cycleways. Perhaps setting up a separate entity such as Aucklands Watercare. However this would be expensive and inefficient for small population bases.
Furthermore isn’t it time we stopped calling this stuff assests. If it doesn’t earn money it ain’t an asset, in spite of modern accounting mumbo jumbo.
The way I would run it is as a rebate scheme. So, the councils would do the work first then get reimbursed from the fund.
'Cheap money' is relative…LGFA bonds are around 0.5% higher than direct government funding and council bonds around 0.5% higher again (currently).
And if 180 billion is spent then it will be paid for by users one way or another (including interest) …either through rates (existing system) or through water charges ('affordable water') with no guarantee of any rates reductions (currently around 35% of Christchurch average rates bill is earmarked for the 3 waters)
The promised savings cannot be explained by a reduced funding cost.
But the savings are mainly through reducing forward maintenance costs. So, the mechanism I am proposing would achieve that without adding bureaucracy on top of bureaucracy.
Id suggest forward maintenance is unlikely to explain the savings either….before we can expect a forward maintenance benefit we must first rebuild the systems to the required standard….that is where the bulk of the expenditure will be i would suggest….only then can we expect some benefit from timely maintenance.
The unnecessary additional bureaucracy just adds salt to the wound
I suspect the point is that the system basically collapses some point in the future, so councils eventually have no option but to replace pipes etc. And, in the meantime they have sunk all the maintenance costs.
By bringing forward the infrastructure replacement, those maintenance costs are avoided.
But, as I said, all that is needed is a mechanism to fund it economically. It doesn't need what the government wants to put in place.
Funding is undoubtably an issue but I see the issue as much broader than 3 waters per se…we have to address population, land use, taxation and local governance/representation (to name a few) at the same time.
Trying to solve our water issues in isolation is an exercise in futility….and another indication that the purpose of these reforms have little to do with actually improving our water/environment
Yes. We likely come from different sides of the track in terms of politics. But I certainly agree those issues need to be centre of focus, and trying to shoe-horn them into a convoluted structure for managing water assets simply won't work.
Well TS. Your brilliance at solving a well recognised longterm water problem supersedes all other plans. Well done. But if it was so simple why not phone Kieran and tell him your plan and he, the Government, the National Party, and all the Councils will love you for ever. Maybe a statue or a knighthood in it for you?
Might have a few fiscal holes in but hey. We will go with it. Thanks so much.
Fire away with some of the fiscal holes that might be there.
And, as Belladonna points out below, there is already precedent for this sort of model.
But, the main point I am making is that if the main aim is "affordable" water, as the new name of the entity implies, then there are much simpler less convoluted ways of achieving that goal, that also most likely make water even more affordable.
So, the big question for me is why they haven't suggested a model similar to mine already?
And I probably likely would email Kieran if I thought it would make a difference. But, I think they have already committed to the direction they have chosen, and I suspect for reasons other than making water more “affordable”.
We already have an example of this – Waka Kotahi – NZTA.
Government funding some national infrastructure (state highways) – and co-funding local infrastructure.
AFAIK – this has been satisfactorily ring-fenced – and the money is indeed only spent on approved transport infrastructure.
That's it, and why any alternative to 3 Waters will end up very similar to 3 Waters.
The main point of 3 Waters was to get water infrastructure ownership and management as far away from elected councillors as possible so they can't syphon money off to things above ground that get them elected.
As for the "asset" palaver, that deceit arrived as part and bundle of the 90's corporatisation of local government services, and lead to many arguments and terminated careers at the time. It's absolute bull shit. A pipe in the ground is more correctly situated on the liabilities side of the ledger, and an unquantifiable liability at that, because you never know when and how much the thing is going to cost you when it eventually, or suddenly, doesn't work. And that starts from the moment someone thinks it's a good idea to put a pipe there.
Putting McAnulty in charge of this was a great move. Here, he answers the questions but also makes sure the essential messages are put out there in simple terms anyone can understand:
Newshub Nation interview
There are a few attempts to get him to bad-mouth Nanaia Mahuta. Given who she is, I don't believe there's any way she could have pitched this to voters that wouldn't have been seized on by every racist in the country as evidence of a devious plot to give white people's assets to Māori.
He is doing a better job at polishing a turd. I will grant you that.
You have at least proposed an alternative, unlike most of the people complaining about this. Your alternative sounds fine in theory, but Wellington City Council gives us a fine example of the extent to which we could rely on councils to actually do the work. Some of them would do a good job, some of them would match Wellington's performance. Putting it in the hands of dedicated bodies and giving mana whenua a clear say in what happens feels like a better approach to me.
Psycho, you would be surprised what councils can achieve if the problem of paying for it is taken off the table.
And the other thing is, that councils have the best knowledge of where the worst problems are, and so can get the best bang for buck by solving those problems first.
My apologies DTS. My sarcasm was undeserved. Perhaps you might get the Emperor has no clothes award instead.
Hmmm. Substituting sarcasm for different sarcasm. Nice.
Still haven't actually seen a reason for the sarcasm though, other than you feel like being sarcastic?
I have been out all day. Not sarcastic that 2nd time. It is possible that your simpler process is an answer. Not sure about economy of scale though but maybe the Government borrows the whole sum say year by year as needed. Each council on its own might be scraping to gather enough expertise? Anyway all OK?
Yeah. Fine. I didn't take that as nasty anyway. Just a bit of friendly banter. So, all good.
One reason the government might not want to do that plan as it would place the debt directly on government books. Having it sitting in an independent entity allows them to report government debt at a lower debt ratio. Though, it is still all smoke and mirrors, and I think overseas lenders are not stupid, and would likely see it all as the same anyway.
And the other thing is that the debt wouldn't be taken as one big hit. But over time as the work was done. So, I don't know that should be a major objection.