Three Waters reform programme

The Three Waters reform programme (also known as Three Waters) is a public infrastructure restructuring programme launched by the Sixth Labour Government to centralise the management of water supply and sanitation in New Zealand. It proposes shifting control of stormwater, drinking water and wastewater management from the country's 67 local councils to four new publicly-owned regional entities by July 2024.[1][2] Details of the proposed reforms were announced in October 2021. The Three Waters reforms were criticised by several mayors and the opposition National and ACT parties.[3][4][5]

From November 2021, a working group of mayors and Māori representatives reviewed issues of representation, governance and accountability, and reported back in March 2022 with 47 recommendations.[6][7] In April 2022, the government accepted 44 of the recommendations. Key changes to the original proposals included providing non-financial shareholdings for councils in the four new water entities, and increased legislative protection against future privatisation of the water assets. Regional representative groups would be established as part of the governance structure, with equal representation of council and tangata whenua. These representative groups would appoint the members of the boards of the four water entities, based on skill and competence.[8]

History

Three Waters Review

In mid 2017, the Fifth National Government launched a review of the regulation and supply arrangements of drinking water, wastewater and stormwater (three waters). This review ran in parallel with the later stages of the Inquiry into the Havelock North drinking water contamination of 2016. The Three Waters Review was published in January 2019.[9]

In 2019, the Sixth Labour Government announced plans for regulatory changes in response to the Three Waters Review, including:

  • establish a new, dedicated drinking water regulator
  • extend regulatory coverage to all drinking water suppliers, except individual household self-suppliers
  • provide a multi-barrier approach to drinking water treatment and safety
  • strengthen government oversight and stewardship of wastewater and stormwater services
  • provide transitional arrangements of up to five years to allow water suppliers to adjust to the regulations.[10][11][12][13]

Water services legislation

The Taumata Arowai–the Water Services Regulator Bill was introduced to Parliament on 12 December 2019.[14] The Government indicated a separate Water Services bill would be proposed at a later date to give effect to decisions to implement system-wide reforms to the regulation of drinking water and source water, and targeted reforms to improve the regulation and performance of wastewater and stormwater networks.[15]

Mahuta's reform proposals

On 28 January 2020, Nanaia Mahuta, the Minister of Local Government, released Cabinet papers and minutes setting out intentions for reform of service delivery and funding arrangements for the three waters services nationwide.[16]

The Cabinet paper referred to two key challenges facing New Zealand's three waters service delivery: affordability and capability. The paper referred to the cumulative effect of increasing capital and operating costs to meet infrastructure challenges, and constrained sector capability to address key public health and environmental challenges. It noted that these challenges are particularly acute for smaller council and non-council drinking water suppliers, with smaller ratepayer and consumer funding bases.[16]

The paper described the current situation (in most regions), where individual councils supply and manage water systems and services alongside their other duties. There was specific reference to Wellington Water (which manages the water assets of six councils) as an example of one approach to service delivery that had successfully built capability through the scale of operations. However, the paper also noted that Wellington Water currently has no ability to make trade-offs between operating and capital expenditure, nor can it cross-subsidise between owners or ratepayers in different districts.[16]

A transition is envisaged to a next stage where water services are fully 'ring-fenced' from other council services, with charges for ratepayers specifically identifying the water services in their rates. At this stage, councils may share service provision with other councils. The final stage envisaged in the paper is the full transfer of ownership of the water assets to a new entity governed by an independent board of directors, and with specialist employees who would focus on water services.[16]

The Government indicated that it would work in partnership with local government to explore options for transitioning councils to new service delivery arrangements, seeking safer, more affordable and reliable three waters services. The first step was to support the investigation of opportunities within regions for collaborative approaches to water service delivery.[17]

Hawke's Bay investigation

As an initial step towards implementing the proposed reforms, on 27 January 2020 the Government announced funding of $1.55m for an investigation of opportunities for greater coordination in three waters service delivery across the Hawke's Bay region, involving five councils: Napier City Council, Hastings District Council, Central Hawke's Bay District Council, Wairoa District Council and Hawke's Bay Regional Council.[18]

Otago and Southland investigation

In May 2020, ten councils in the Otago and Southland regions commenced the development of a business case for a collaborative approach to managing the three waters assets. The business case was expected to take about eight months and would be followed by public consultation. The Government agreed to cover half of the cost, with a deadline for councils to consider changes to service delivery models by the end of 2021. The ten councils involved in the investigation were Dunedin City Council, Central Otago District Council, Clutha District Council, Queenstown Lakes District Council, Waitaki District Council, Otago Regional Council, Gore District Council, Invercargill City Council, Southland District Council and Environment Southland.[19]

Advertising campaign

In late June 2021, the New Zealand Government launched a NZ$3.5 million multimedia advertising campaign called "Better Water is Better for Everyone" to promote its Three Waters reform programme. The advertising campaign was criticised by several mayors and local body councillors and officials including Mayor of Waimate Craig Rowley, Mayor of Waitaki Gary Kircher, Tasman District Council engineering services manager Richard Kirby, Councillors Kit Maling, David Ogilvie for alleged sensationalism, inaccuracies, and for portraying local councils' management of water resources in a negative light. In response, the Department of Internal Affairs reaffirmed the Government's commitment to working with local councils on the Three Waters reform programme.[20][21] In addition, $500,000 was set aside by the Government for the development, maintenance, and hosting of the Three Waters reform programme's website.[22]

By October 2021, the Advertising Standards Authority had received a total of 48 complaints about the Three Waters reform programme. The watchdog ruled that the advertisements were neither misleading or offensive in the context of advocacy advertising.[22]

Launch of nationwide programme

On 27 October 2021, Mahuta unveiled the Government's Three Waters reform programme. The plan involves the mandatory transfer of the management of stormwater, drinking water and wastewater from the country's 67 local councils and territorial bodies to four new water entities, with the goal of improving the quality and lowering the cost of water utilities. The Government planned to start creating these four new entities in late 2021, and they would assume control of water utilities in July 2024.[1][2][23] Though the Government had initially stated that the Three Waters programme would be optional for local government bodies, they subsequently decided to mandate in July 2021.[24]

During the announcement, Mahuta also created a working group to advise the Government on how the four water entities' governance would work. According to Mahuta, the group's findings would be placed into a supplementary order paper (SOP) to amend legislation creating the new entities that would manage the three waters systems. Despite its unpopularity with local councils and the public, the Government persisted with the Three Waters reform programme.[25]

On 9 December 2021, the Government postponed until 2022, the introduction of legislation creating the new entities that would manage the Three Waters systems. The Government confirmed that it would wait until the working group had finished their findings, before introducing the new legislation.[25] In mid-December, Mahuta argued that the Three Waters reform should proceed, despite opposition from several local governments, due to the under-investment in the country's water infrastructure. Mahuta also urged party leaders to prevent the privatisation of New Zealand's water assets, entrenching a safeguard requiring a supermajority of 75% of MP's support before a water asset could be sold.[24]

Review by working group

A working group of mayors and Māori representatives was formed in November 2021, to review the planned reform programme, focussing on improvements in the three most contentious aspects of the original proposal: representation, governance and accountability.[6] The working group reported back in March 2022, with 47 recommendations.[7] On 29 April 2022, Mahuta announced that the Government had accepted 44 of the recommendations, with three that needed some further work. One of the key changes was that councils would be given non-financial shareholdings in the new water entities, with one share per 50,000 of population, and that there would be additional legislative protection against future privatisation. Co-governance will be established in regional representative groups, where there will be an equal number of seats for mana whenua and councils. These regional oversight groups will appoint the members of the boards of the four water entities, based on skill and competence. The regional representative groups will have a role in setting strategic direction, but will not be involved in operational matters.[8]

Legislative entrenchment

On 2 June, Mahuta introduced the Water Services Entities Bill as the first of several new bills to entrench the three water reforms in law. The Water Services Entities Bill would establish the four regional water services entities which would take over management of water infrastructure from the 67 local councils. Under the proposed law, councils would retain ownership of their water assets through a "community share" arrangement but effective control would pass to the four new water services entities, which would have both community and Māori iwi/tribal representation. Mahuta also claimed that there would be safeguards against privatisation. Mahuta also confirmed that further legislation would be introduced to facilitate the transfer of assets and liabilities from local authorities to the Water Services Entities, integrate entities into other regulatory systems, and to cover economic regulation of the water services entities and ensure consumer protection. A National Transition Unit would oversee the establishment of the new water services entities over the next two years.[26][27][28]

Funding

On 19 July, the Government announced that it would give the 67 local councils a total of NZ$44 million to help them transition to the new Three Waters system. The Government had already allocated NZ$2.5 billion to compensate local councils for the reforms including infrastructure and other "wellbeing" investments. Associate Local Government Minister Kieran McAnulty stated that each local council would receive NZ$350,000 over the next 12 months. The opposition National and ACT parties' local government spokespersons Simon Watts and Simon Court described the funding as a "bribe" and a waster of taxpayer money.[29][30]

Reactions

Advocacy groups

The farming advocacy group Groundswell NZ has voiced opposition to the Three Waters programme, claiming that it was part of a "tsunami" of unworkable government regulations and alleging that it was the theft of the assets of council ratepayers.[31] In December 2021, the group sponsored a petition calling for the Three Waters programme to be scrapped, which attracted 3,000 signatures by 15 December.[24]

In June 2022, the New Zealand Taxpayers' Union and Groundswell organised a nationwide "roadshow" to rally opposition against the Three Waters reforms. They toured 36 cities and towns including Christchurch, Alexandra, and Invercargill.[32][33][34]

Government departments

The New Zealand Infrastructure Commission published an opinion piece in May 2020 supporting the reform of service delivery in the three waters sector nationwide. The chief executive advocated consolidation of asset management and service delivery functions from multiple councils into much larger entities. The main benefits would be to capture economies of scale and free up councils from the specialist technical requirements of managing utility services.[35]

2021

In April 2021, the mayor of the small Hawke's Bay town of Wairoa expressed concerns that the transfer of the three waters assets from local councils into large regional entities would have serious consequences for local government.[36]

In early September, Invercargill's deputy mayor Nobby Clark submitted a notice of motion that the Invercargill City Council advise the Government that it would not be making any decision on the Three Waters issue until it had consulted the local community. This notice of motion was supported by Mayor of Invercargill Tim Shadbolt. Clark's motion did not pass due to a six-to-six tie.[37]

On 9 September, Mayor of Dunedin Aaron Hawkins published an op-ed column in the Otago Daily Times expressing concerns about the Three Waters programme's financial benefits, local consultation and the lack of safeguards against privatisation. However, Hawkins also objected to some opponents' objections to Māori iwi (tribes) being involved in the decision-making process.[38]

In late October, the Government's decision to centralize water utilities and services was criticised by several local councils and mayors including Mayor of Auckland Phil Goff, Mayor of Christchurch Lianne Dalziel, Mayor of Hastings Sandra Hazlehurst, Mayor of the Far North District John Carter, Mayor of Dunedin Hawkins, and Mayor of Wellington Andy Foster.[3][4][39]

In mid-November, the Whangārei District Council, Timaru District Council and Waimakariri District Council launched legal proceedings in the Wellington High Court seeking a judgement about the meaning of council "ownership" of the three waters assets under the planned reforms.[40] By 16 November, the Wairoa District Council and the Napier City Council passed motions to sign "memorandums of understanding" with "partner councils" to oppose the Three Waters reform model. The New Zealand Herald reported that over 30 councils were prepared to sign the MOUs.[41]

In mid-December, the "Communities 4 Local Democracy He hapori mō te Manapori” group converged on Parliament and met with politicians to express their opposition to the Three Waters programme. The group represented 23 mayors and local councils including Manawatū District Council Mayor Helen Worboys, the Christchurch City Council, and the Waimate District Council. The delegation met with representatives from various political parties, including the governing Labour and National parties.[24][42][43] The "Communities 4 Local Democracy" group had emerged in response to the local government advocacy body Local Government New Zealand not reflecting the views of their membership on the issue. However, the Communities group did not include any councils from Otago and Southland. The Invercargill City Council had voted against joining the group due to the $15,000 contribution fee.[42] Dunedin Mayor Hawkins said incorrectly that the Dunedin City Council (DCC) had declined to join the group since its rules would have required Dunedin residents to fund what he regarded as a futile legal action.[43]

2022

On 23 February 2022, the Dunedin City Council voted to join "Communities 4 Local Democracy" by a margin of eight to seven. By that time, the number of local authorities involved in the advocacy group had risen to 28.[44] In response to the DCC's decision to join "Communities 4 Local Democracy," two local Māori runanga (tribal councils) Kati Huirapa ki Puketeraki and Te Runanga o Otakou withdrew from their partnership with the city council; citing a breakdown in their relationship.[45][46] On 29 March, the DCC voted by a margin of seven to six to reverse their earlier decision to join "Communities 4 Local Democracy." Supporters including Mayor Hawkins argued that joining the pressure group adversely affected the Council's relations with local Māori while opponents like Councillor Lee Vandervis criticised the Council's reversal as a rejection of local democracy in favour of "centralised control."[47]

In April, the mayors of the Gore District and the Southland District expressed support for the revised plans announced by government in response to the working group recommendations, including the shareholdings to be allocated to councils.[48] The Mayor of Porirua expressed similar support. The President of Local Government New Zealand supported the need for change and the certainty provided by the government's announcements. However, the mayor of Auckland, although supporting much of the reforms, complained that Auckland was being disadvantaged and losing control of its water assets, because of the failure of other local bodies.[49]

In early July, Waimakariri District Mayor and Communities 4 Local Democracy deputy chair Dan Gordon urged the Invercargill City Council to reconsider its decision not to join the lobby group.[50] On 4 July, the Southland District Council confirmed that it would oppose the Government's Three Water reforms and seek to retain control over its water assets.[51][52] On 6 July, the Wellington City Council voted against joining the anti-Three Waters Communities 4 Local Democracy. However, Mayor Andy Foster used his casting vote to express his disagreement with the Government's Three Water reforms.[53]

Despite its stated opposition to the Three Waters reforms, the Taupō District Council applied for NZ$4.93 million in funding from the Government for an upgrade to Owen Delany Park. These funds come from the Government's Better Off Funding programme, which supports local government transition through the Three Waters reforms. Taupō District Mayor David Trewavas justified the funding application on the grounds that the Park upgrade would benefit the community.[54]

Following the release of 2022 New Zealand local elections results in early October 2022, surveys by online media organisations Newsroom and The Spinoff found that a majority of elected mayors opposed the Three Waters reforms. Newsroom's survey of 220 newly-elected mayors and councillors found that 76% of respondents opposed the Three Water reforms.[55] Similarly, The Spinoff's survey of 66 elected mayors found that 43 mayors were opposed to the Three Waters reforms, 14 were undecided, and that nine supported them.[56]

During the 2022 Auckland mayoral election, mayoral candidate Wayne Brown campaigned on halting the Three Water reforms programme in Auckland. Following his election as Mayor of Auckland, Brown instructed the region's water management company Watercare to stop working on the programme on 17 October, describing it as a "doomed proposal".[57] In addition, other newly-elected mayors including Mayor of Invercargill Nobby Clark and Mayor of Nelson Nick Smith have expressed opposition to Three Waters.[58][59]

On 31st October 2022, Brown along with the Mayor of Christchurch Phil Mauger and the Mayor of Waimakariri Ben Gordon proposed an alternative Three Waters plan which would maintain the national water regulator Taumata Arowai but would maintain local ownership, control and accountability over water resources including stormwater assets, transport and drainage. Other proposed changes have included providing affordable finance to support high standard investments in water infrastructure and encouraging local water services entities to consolidate into regional water entities.[60][61]

Māori leaders and groups

In mid-May 2021, Te Maire Tau, the chair of Te Kura Taka Pini, the Māori tribe Ngāi Tahu's freshwater group, disputed claims by the opposition National Party leader Judith Collins that the Government was planning to transfer 50% of the publicly owned water assets in the South Island to Ngāi Tahu. He said Ngāi Tahu did not want to own water infrastructure, and believed that it should remain in public ownership, but that Ngāi Tahu was seeking a share of governance responsibilities.[62]

In May 2021, some Māori leaders from Ruapehu District, Whanganui, South Taranaki and Rangitikei District, including Fiona Kahukura Chase and former Māori Party Member of Parliament Dame Tariana Turia, said that the creation of large entities to manage water infrastructure would make it more difficult for local Māori to be part of policy making.[63]

Following the launch of the Three Waters programme in late October 2021, Te Maire Tau, the co-chair of Te Kura Taka Pini, welcomed the Three Water reforms, claiming they would improve water services and environmental outcomes.[64]

Political parties

In mid May 2021, National Party leader Judith Collins claimed that the Government was planning to transfer 50% of the publicly-owned water assets in the South Island to the Māori tribe Ngāi Tahu.[62]

In late October 2021, the opposition National and ACT parties vowed to repeal the Three Waters reforms if elected into government.[5][65]

Christopher Luxon, who had replaced Collins as National Party leader, accused the Government of misleading local councils about Three Waters being optional.[24] In response to criticism, Labour Party leader and Prime Minister Jacinda Ardern denied that the Government had misled local councils by pitching the Three Waters programme as optional but later determining that it was mandatory, claiming that the Government had worked with local councils to build a consensus for several months.[66]

In response to the revised reform plans announced by government on 29 April 2022, opposition parties criticised the reforms because of the loss of control by local councils, and the design of the governance structure. They promised to repeal the proposed legislation if elected to government.[49]

In late July 2022, Luxon stated that the Three Waters reforms could become an electoral issue at the 2023 general election, claiming that the Government had not listened to local democracy, local government, and local voices when implementing the reforms.[67]

Public opinion

On 22 October 2021, a Curia-Taxpayers' Union poll found that 54% of voters opposed the scheme while 19% supported the scheme. Despite its unpopularity with local councils and the public, the Government persisted with the Three Waters reform programme.[68][25]

On 22 November 2021, a Newshub–Reid Research poll found that 48% of people opposed the reforms while 27% supported, with 25% unsure. Of Labour voters, 40% were in support with 30% opposed and 31% unsure.[69]

Protests

In mid-September 2021, about 25 protesters opposed to the Three Waters reforms stormed the offices of the Nelson City Council. The protest violated COVID-19 lockdown restrictions in force throughout New Zealand at the time.[70]

In early October 2021, about 70 protesters opposed to the Three Waters reforms picketed the offices of the Tauranga City Council. The protest violated COVID-19 lockdown restrictions in force at the time.[71]

On 21 May 2022, protesters opposed to the Three Waters reforms attempted to march across the Auckland Harbour Bridge. They assaulted Police and disrupted traffic. In response, Police arrested 11 protesters.[72]

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