Three waters lite

Written By: - Date published: 8:55 am, May 6th, 2024 - 39 comments
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Yesterday the Government and Auckland Council announced the reaching of an agreement which will see Auckland’s water bills rise but not as much as previously anticipated.

Auckland Council has just finished consulting with the inhabitants of Tamaki Makaurau on what they thought about a 25.8% increase in their water bills on July 1 of this year.

The programmed increase was previously 9.5% but the ending of Three Waters meant that this was not going to happen.

The Government has gone to town with its rhetoric about the change, claiming that it has delivered on its election promise to provide a “financially sustainable model for Auckland under its Local Water Done Well plan”.

What it has done is ensured that Auckland Council and Watercare can engage in balance sheet separation, that is make it appear to the financial markets that these are two distinct entities which are separate from each other.

The Three Waters reform also proposed balance sheet separation although in Three Waters’ case the entities would have been larger and four of them would have covered the whole country.

Auckland is the easiest area to solve the funding of water issues because of its size. Other areas, particularly those with more spread out populations such as the West Coast, will not have this benefit.

There are no other magical aspects to the announcement, just balance sheet separation. There is no money tree, no Crown money and no way of ensuring that the entity has the long term funding needed to make sure that its infrastructure is repaired and enhanced so that the new water standards required by Taumata Arowai can be met.

I have always wondered why balance sheet separation was required.

The up side is that if Watercare goes broke then Auckland Council does not have to worry about it.

Given that Watercare is a well run utility that sells water you would think that the chances of this are remote.

And the issue always is that if somehow it went broke then unless Auckland Council picked up the tab then the vultures of the market may be able to pick it up.

The down side is that Watercare will pay more for its borrowing.

As noted by Bernard Orsman in the Herald Watercare will have a lower credit rating than the council, and therefore pay slightly higher interest rates on its debt.

Council’s current credit rating is AA (Standard and Poors) and AA2 (Moody’s).

It should be noted that under S&P’s evaluation of the effects of the Three Waters Reform on Auckland Council’s credit rating would have increased from AA to AA+. Also that the credit rating for the water supply entities was anticipated to be AA. This presumed there was high likelihood of support from the Crown should the water services entity face financial distress.

National’s alternative approach means a lower credit rating for Auckland Council and a lower credit rating for Watercare. This will cost us over time because of increased interest charges and given the amount Watercare will have to borrow these will be significant.

This point has been emphasised by Labour’s Local Government Spokesperson Kieran McAnaulty. From One News:

Labour’s local government spokesperson Kieran McAnulty said the Government’s plan will still cost Aucklanders more in rates than if the Hipkins-era Affordable Water Reforms had not been repealed.

That plan would have seen the establishment of 10 regionally owned and led public water entities based on existing local authority boundaries.

McAnulty said water charges would increase by 7% under the coalition’s plan, as opposed to 2% if they had followed through with Labour’s affordable water plan.

“This is because the Auckland/Northland entity would’ve had a credit rating of AA, while Watercare will be BBB at best, so the cost of borrowing will be larger.”

And don’t take my word for it. Standard and Poors reported that the repeal of Affordable Water Reform legislation would be politically popular but financially detrimental for many New Zealand local councils. It said that alternative reform proposals, such as the voluntary formation of council-controlled water utilities, might not alleviate high sectorwide debt and based on this its net outlook bias on 25 rated councils is negative and downgrade pressure is said to be building.

Of course while the fiscal analysis suggested that Three Waters provided a much superior result compared to the status quo much of the opposition to the policy was based on thinly veilled dog whistling racism.

But Iwi already has significant involvement in Watercare’s decision making.

Tainui has a major say in the use of Waikato River water thanks to its treaty settlement which I note was completed under National.

And Watercare’s latest Statement of Intent states this:

Watercare is an active member of the Māori Outcomes Steering Group. The Māori Outcomes Steering Group reports into Council’s Executive Leadership Team and the Council Group Chief Executives and has oversight of the long-term plan funding for Māori Outcomes.

Watercare has identified initiatives within its Achieving Māori Outcomes Plan that it will advance over the next 3 to 4 years to improve social, economic, and cultural wellbeing for Māori communities throughout Auckland. The plan aligns to Kia Ora Tāmaki Makaurau, the Council group’s Māori Outcomes Performance Measurement Framework, and progress against the plan is reported to Council quarterly.

Watercare’s Te Rua Whetū – Māori Outcomes & Relationships Unit, has strong relationships with their counterpart teams at Council and other CCOs, and is committed to explore opportunities to improve the consistency between CCOs in how they contribute to Kia Ora Tāmaki Makaurau.

Watercare will continue to provide Council with regular updates on engagement hui with iwi and mana whenua including update relevant to Kia Ora Tāmaki Makaurau and Watercare’s Achieving Māori Outcomes Plan.

In terms of its relationship with Iwi the Watercare site said this:

We recognise the importance of the values held by kaitiaki (guardians or protectors). These include their environmental and spiritual ties to ancestral lands, water, sites, waahi tapu (sacred areas) and other taonga (treasures), and the wellbeing of the entire iwi.
Our engagement with mana whenua includes valuable input when considering the cultural, environmental, social and economic impact of projects.


In 2012 we established the Mana Whenua Kaitiaki Forum to encourage discussion and guidance, and to share views on the management of water and wastewater. The forum’s focus has widened to all matters affecting the strategic interests of mana whenua across the Auckland region.


The Kaitiaki Schedule is regularly sent to the 19 tribal authorities. It sets out our planned work programme, most of which requires resource consent. Representatives are invited to express interest in projects. Whether they choose to join the project team or just make comments, there is an opportunity for iwi input throughout the process of developing infrastructure.

And like it or not there are unresolved treaty issues about Water. When the Crown promised to safeguard for Tangata Whenua their taonga it is hard to imagine how this could not include water.

I personally have absolutely no qualms about significant Iwi involvement in the future of water. Their role as Kaitiaki is important for among other reasons environmental and their sense of Manaakitanga will ensure that we are all looked after.

And there is involvement of Iwi in the selection Auckland Council selects Watercare’s directors. This role is delegated to the Performance and Appointments Committee. The Independent Maori Statutory Board has an appointee on this committee.

It is fair to say that Watercare is already subject to significan Iwi influence, which in my view is a good thing.

To the Anti Co Governance zealots out there can I offer the words of former National Minister Chris Finlayson. About Co Governance he said:

Co-governance’ has become a term that people don’t understand. They think it means co-government.

People who are frightened by co-governance think they’ll be locked out of access to our natural resources, for example. When what it really means is that involving iwi in a myriad of decisions can actually result in a better country.

The people I call ‘the KKK brigade’ are out there. They dream of a world that never was, and never could be. They are the people — and these words aren’t mine but are taken from a former British foreign secretary — that you can call the ‘sour right’. They don’t really understand tangata whenua. They don’t like change.”

The other aspect that has not been mentioned about the Auckland Council deal is that it will still be directly responsible for Stormwater and will have to fund this in the normal way.

Stand by as you get inundated with claims that the Government has solved Auckland’s water issues. What it has done is ensured water charges will continue to increase dramatically, interest rates for borrowing for both Watercare and Auckland Council will be higher, and the prospect of privatisation of water will be greater.

Aotearoa New Zealand you have been sold a dud.

39 comments on “Three waters lite ”

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  1. Ad 1
    6 May 2024 at 9:03 am

    With this government preparing to pass legislation barring Auckland Council support for Auckland's Watercare, as an alternative to Labour's Three Waters Reform, the smaller weaker councils across New Zealand will only wonder what hostile takeovers they will be subjected to from larger water entities and councils nearby.

    Pretty sad to hear the mayor of Whangarei Council this morning wondering aloud about who or what will support Kaipara and Far North Council, when Whangarei is debt free for water infrastructure and could do the actual work of bringing the Northland water assets together into a cooperative water entity. Standard National divide-and-rule stuff.

    Still, this Auckland deal is a win for the government achieved with little grief or debate.

    • Traveller 1.1
      6 May 2024 at 11:11 am

      Hostile takeovers? Sounds like 3 Waters.

      Troubled Three Waters | Otago Daily Times Online News (odt.co.nz)

      • Drowsy M. Kram 1.1.1
        6 May 2024 at 12:55 pm

        Two and a half years on from that ODT article, failure to launch 3Waters is coming back to bite ratepayers.

        Repeal – delay – let's go back to the drawing board and get our country back on track. Fiddling while Aotearoa's water infrastructure degrades.

        The amalgamation aspects of 3Waters might have generated economies of scale – let’s hope that whatever our CoC govt rolls out will do the trick.

        Six year wait for three waters reforms far too long, says Scottish expert [27 June 2022]
        The Water Industry Commission of Scotland had succeeded because it had created economies of scale in areas of high-cost expertise and senior management but had recognised that the delivery of water services remained “intensely local”. He believed this was not well understood or believed by New Zealanders opposed to the reforms. “You need to have a professional responsive staff in place, like professional hydrologists, professional asset planners, professional people for dealing with procurement, professional people for dealing with finances and bond markets. To do that you need real scale. Because if you don't, you can't afford the top specialists because (they) are typically quite well-paid individuals.” Sharing their costs over a community of 50,000 to 100,000 people was very different from sharing their costs over a million people.

        Three waters rebrand insufficient [13 April 2023]
        “The Green Party also remains concerned that the Government continues to leave the door open to future privatisation of water services. Stronger safeguards to guarantee public ownership now and for future generations is essential.

        Also hope I'm long gone before Kiwi water infrastructure is privatised in another wretched neoliberal wealth transfer.

        Water Privatisation – Pros and Cons [13 December 2022]
        So we have all the drawbacks of privatisation without any of the benefits. It seems the average householder is getting the worst of high bills, poor service and disregard for the environment. With global warming causing extreme weather, there is likely to be increasing pressure on water infrastructure in the coming years, but the system of private ownership and weak government regulation seems poorly equipped to deal with the challenges of the coming years.

        The wretched state of Thames Water is one of the best arguments for public ownership we have [28 June 2023]
        Water privatisation in England and Wales has achieved just one thing: the enrichment of executives and overseas shareholders

        • Traveller 1.1.1.1
          6 May 2024 at 1:16 pm

          "Two and a half years on from that ODT article, failure to launch 3Waters is coming back to bite ratepayers."

          Not really. Ratepayers were always going to pay for infrastructure investment, either though rates or taxes. The issue is what is the more efficient way of managing the investment and ongoing supply. 3Waters was 'dogged' with problems, including contradiction (Three Waters Truth Revealed | Taxpayers' Union (youtube.com)), poor communication (Three Waters' TV ad evaporates after commission warning | BusinessDesk) and doubtful comparisons (Water sector amalgamation: Is New Zealand really like Scotland? – Castalia (castalia-advisors.com)). In fact, it was a 'dog'.

          • Drowsy M. Kram 1.1.1.1.1
            6 May 2024 at 1:54 pm

            Local Water Done Well Well Well.

            Water: What are National and Act doing in the shadows?
            National and Act’s policies on drinking water would reduce protections and ignore the recommendations of the inquiry into the Havelock North campylobacter outbreak

            Let's hope like hell that our CoC govt's dogged attempts to remedy significant long-standing deficits in water infrastructure, not to mention deteriorating water quality, their way meet with success – how good are you at holding your breath?

            https://maps.greenpeace.org/maps/aotearoa/know-your-nitrate/

            • Traveller 1.1.1.1.1.1
              6 May 2024 at 3:04 pm

              I live in Auckland. Watercare is doing a very good job at both upgrading infrastructure and delivering water quality without the unnecessary weight of a centralised control structure.

              • Ad …
                6 May 2024 at 3:32 pm

                A very good job at upgrading infrastructure? Really?

                – They still have no water sources north of the Waitakere Dam despite nearly 900,000 people already living in that area and over 500,000 more planned

                – Quite unprepared for the drought of 2020-21 which required them to go begging to the Waikato Council and Waikato iwi authority

                – Massive sewerage overflows into multiple creeks and streams over multiple decades.

                – Simply not integrating with the AC stormwater team despite so much warning about the integration of climate change flash flooding and Watercare's own catchments.

                There's so much just-in-time planning that goes on despite the demand growth.

                Central Interceptor

          • mickysavage 1.1.1.1.2
            6 May 2024 at 8:01 pm

            I appreciate your engaging in the debate but …

            Can’t you do better than the Taxpayers Union and Callista?

            And yes ratepayers or more accurately consumers of water will pay for it but this is why the interest rate on borrowing is so important and why 3 Waters provided the best solution.

            • Traveller 1.1.1.1.2.1
              6 May 2024 at 8:23 pm

              If that was really the case, 3Waters would have been an easy sell.

        • Shanreagh 1.1.1.2
          6 May 2024 at 10:26 pm

          Also hope I'm long gone before Kiwi water infrastructure is privatised in another wretched neoliberal wealth transfer.

          Drowsy this made me feel intensely sad. I guess the feeling that here is a person who saw privatisation/neo lib for the crock that it is first time round, like me. We don't need to read any scholarly works to know that no leopards have changed their spots in the interim 30-40 years & the concept of privatisation is just as bad this time round as it was before.

  2. Tiger Mountain 2
    6 May 2024 at 9:15 am

    Well the Natzos comprehensively dominated the narrative on Three Waters–but…but…–have done nothing to to solve the crumbling, health endangering infrastructure and burst pipe issues across the nation.

    Tory Mayors and District Councils are imposing massive rates increases from 16.5% to the high twenties.

  3. Ad 3
    6 May 2024 at 9:18 am

    People may recall the total crisis Auckland was in during the 2020-21 drought.

    Poor planning by Watercare following its near-total reliance on low dam investment and high Waikato draw was initially opposed by Maori and Hamilton Council and Waipa.

    https://www.rnz.co.nz/news/national/419614/waikato-iwi-look-to-block-auckland-water-grab

    First Goff and Watercare had to go cap in hand to Waikato Council and Tainui.

    https://www.scoop.co.nz/stories/AK2006/S00361/auckland-and-waikato-hold-constructive-water-talks.htm

    Mayor Goff had to go cap in hand to get it accelerated by the government.

    https://www.rnz.co.nz/news/national/420168/auckland-s-use-of-waikato-river-to-be-fast-tracked-government

    Goff got his approval via Board if Inquiry.

    https://www.watercare.co.nz/About-us/News-media/Board-of-Inquiry-grants-consent-for-increased-Waik

    But what could have been a major water entity retreated from Waipa and now only does the Auckland region.

    With this new deal we are about to go into another huge round of cross-Council territorial contests …

    … when we could have had actual managed cooperation between all of them.

  4. SPC 4
    6 May 2024 at 12:08 pm

    So the National Party supported balance sheet separation the whole time – despite saying loss of "council control" of their assets was a problem.

    It seems the amalgamation and co-governance components of balance sheet separation were the problem.

    But they will only remain council owned entities while they can function as self contained bodies (being bought up by utilities companies otherwise).

    The advantage is the water body can borrow more for investment and over long term periods, the disadvantage the water bodies will have higher borrowing costs.

    https://www.interest.co.nz/public-policy/127603/government-will-pass-legislation-barring-council-or-crown-support-auckland%E2%80%99s

    • AB 4.1
      6 May 2024 at 3:11 pm

      This approach – especially if it is repeated in regions without Auckland's large population and existing system of charging for water – seems designed to put small, local water-management entities into financial difficulty Thus making them ripe for privatisation and sale to asset-management companies, or to takeover by the water management entities of large neighbouring councils. In either case, you get a sort of amalgamation anyway, but within a commercial framework, not a local government framework.

      Aucklanders meanwhile can expect rates to increase somewhat less, but for this to be all clawed back and more by ever-increasing water charges. With water ultimately being rationed by the ability to pay for it, rather than the need for it.

      • Traveller 4.1.1
        6 May 2024 at 7:01 pm

        "…seems designed to put small, local water-management entities into financial difficulty Thus making them ripe for privatisation and sale to asset-management companies…"

        In reality the opposite is true. Small entities have too low a revenue potential to be attractive to institutional investors. The large entities envisaged by the 3Waters reforms were far more attractive for privatisation.

        "…or to takeover by the water management entities of large neighbouring councils."

        Not 'take-over, but certainly amalgamation.

        "In either case, you get a sort of amalgamation anyway, but within a commercial framework, not a local government framework."

        We can have both. Watercare is one such example.

        • SPC 4.1.1.1
          6 May 2024 at 7:08 pm

          Separating councils from the water bodies allows them an asset they can sell to do other things/lower non water charge rate increases. Brown has form for this already.

          Sure it is not the minor councils that are the targets of utility corporates.

          • Traveller 4.1.1.1.1
            6 May 2024 at 7:15 pm

            "Separating councils from the water bodies allows them an asset they can sell to do other things/lower non water charge rate increases.

            In reality, Council's without separation can still sell off their water assets. It's just a process to work through.

            • SPC 4.1.1.1.1.1
              6 May 2024 at 7:24 pm

              Could. National is assisting/incentivising a structural change that takes councils along that road.

              • Traveller …
                6 May 2024 at 7:27 pm

                My view is the larger entities under the 3 waters model were far more attractive for privatisation.

                • SPC …
                  6 May 2024 at 7:45 pm

                  Not mine, Watercare does not want Northland for a reason.

                  The same applied in all 10 areas.

                  It was the main objection was from some of the larger councils. It is the one reason smaller councils were less critical of the proposed change (and why National over-egged co-governance).

                  For a private sector corporate the value of scale is outweighed by the cost of some regions.

                  The Maori role in management (dealing with WT decisions such as on power company sales) was also an obstruction to on-sale – notably removed by this government.

                  • Traveller …
                    6 May 2024 at 8:06 pm

                    "Watercare does not want Northland for a reason. The same applied in all 10 areas."

                    3Waters was seen as undemocratic from the outset. There is now a much clearer motivation for councils to amalgamate water resourcing voluntarily.

                    Whangarei DC have been investing in water infrastructure (Ventia | New Plant in Whau Valley to future-proof community water supply), and already cooperate with the Far North and Kaipara Council's.

                    • SPC …
                      6 May 2024 at 8:20 pm

                      What clearer motivation to include higher cost areas? Why would anyone do that voluntarily?

                      There would only have been a motivation to merge water bodies (10) if the ability for balance sheet separation and to borrow long term was restricted to them rather than existing ones. Then it might have been voluntary. Now it is unlikely.

                      Brown, ex Northland, has screwed them.

                  • Traveller …
                    6 May 2024 at 8:28 pm

                    "Then it might have been voluntary."

                    Nothing about 3Waters was going to be voluntary.

                    "What clearer motivation to include higher cost areas? Why would anyone do that voluntarily?"

                    That's always an issue, whichever model is chosen. When Watercare was formed, Papakura had huge issues with their water. I remember the Deputy Mayor Bill Cashmore commenting some years after amalgamation that Papakura's water infrastructure would never have had the investment if not for amalgamation.

                    • SPC …
                      6 May 2024 at 9:00 pm

                      10 area amalgamation came with the capacity to borrow and at lower cost. It also offered some of the advantages of the original 4 bodies in terms of greater scale and shared use of expertise.

                      Thus Northland got the Papakura upgrade.

                      This way means government now has its own future borrowing cost to face to help out the unwanted provinces/lower population areas.

                  • Traveller …
                    6 May 2024 at 9:25 pm

                    "10 area amalgamation came with the capacity to borrow and at lower cost. It also offered some of the advantages of the original 4 bodies in terms of greater scale and shared use of expertise."

                    The final iteration of 3 Waters was better, but it still compromised local control, and didn't resolve the concerns over the high costs of the model. Three Waters cost blowout expected to hit $1 billion in ‘mega-bureaucracy’ – NZ Herald (behind paywall).

                    "This way means government now has its own future borrowing cost to face to help out the unwanted provinces/lower population areas."

                    There was always going to have to be more borrowing. Just as there was always going to be more cost.

                    • SPC …
                      6 May 2024 at 11:03 pm

                      Twas not the higher cost of the model, but the higher cost of having 10, rather than the origjnal 4, water bodies.

      • SPC 4.1.2
        6 May 2024 at 7:03 pm

        Agree.

        But note it will reduce the extent of the intitial water charge increase – because of the ability to borrow more and for longer terms the ability then exists to defer immediate higher cost on water users.

        This will be even more an issue for other areas increasing spending because of a historic under investment.

        They might be facing 20% pa intitial increases falling to 10% later in the decade.

        They will be wondering what sort of plan they will need for the government to approve of balance sheet separation so they can avoid the higher initial increase in rates/water charges.

        I suspect the government will be doing this in two stages – first supplicants wanting the Auckland deal, then the others without the ratepayer base unable to borrow the money needing government assistance in the second stage.

  5. Mike the Lefty 5
    6 May 2024 at 5:03 pm

    National's model makes it harder for the smaller local bodies who will find it harder to get loans and/or pay higher interest rates to fix their ageing water infrastructures.

    These are the rural towns which, ironically, usually support National to the hilt.

    • Ad 5.1
      6 May 2024 at 5:27 pm

      Yes agree, and with no mechanism to encourage the aggregation they so desperately need.

  6. SPC 6
    6 May 2024 at 7:22 pm

    It's interesting that a Wellington City councillor is claiming Wellington councils have to amalgamate to get a deal – when the councils have already formed a water company for the region.

    The Wellington City council is more indebted than some of the others. The idea would have been as likely as Auckland wanting Watercare to include Northland otherwise.

  7. newsense 7
    7 May 2024 at 3:17 am

    Of the essentials of life, drinking water is now not something guaranteed by the democratic representatives of our city or state.

    There is no guarantee of drinking water in our largest city.

    That’s the plan of Brown, Brown and Luxon. Winning the culture war!