National and Labour's solutions to the undisputed problem of Three Waters aren't that different, writes Jonathan Milne. The difference is not over how the water infrastructure is managed, but simply who does it.
Comment: Now, here is an excellent idea. Each of the country's 67 local authorities must, as part of its long-term plan, prepare and adopt an infrastructure strategy for a period of at least 30 consecutive financial years. That strategy must outline how the local authority intends to manage its drinking water, wastewater and stormwater assets, taking into account the need to renew or replace existing ones, and respond to growth or decline in the demand for services.
The strategy must maintain or improve public health and environmental outcomes or, at least, mitigate adverse effects on them. It must also provide for the resilience of those infrastructure assets by identifying and managing risks relating to natural hazards and by making appropriate financial provision for those risks.
This may sound like the plan National leader Christopher Luxon laid out in his speech to the party's Bluegreens forum in Blenheim at the weekend – a solution that's financially sustainable to avoid more international humiliations like the gushers from aged sewers in Wellington; to avoid more expensive fiascos like the wastewater plant blowout in Mangawhai.
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But actually it's not Luxon's plan: this is section 101B of the existing Local Government Act. For nearly 10 years, councils have been legally required to set aside depreciation for their water and other infrastructure – in Luxon's words, to "ringfence" the money.
So how did that go?
Sadly, not at all well. The Auditor-General and industry body Water NZ have long been warning councils have either not set aside the depreciation funds, or have spent it on other imperatives that feel more pressing at the time. Pipes, sewers and culverts are out of sight, out of mind – until they burst.
Way back in 2013, alarmed into action by audits of all 67 councils, the Office of the Auditor-General closely scrutinised 31 local authorities, which between them owned 74 percent of total local authority property, plant, and equipment. It reported to Parliament the following year. From 2007 to 2013, local authorities had consistently spent less than they intended on capital works, including on asset renewals, the auditors found. There were often explanations and good reasons for under-spending, such as project delays – but the problem was getting worse by the year.
"New Zealand has, for a long time, not invested enough in providing and maintaining its infrastructure, and those short-term financial savings are illusory when they impede long-term growth or cause environmental damage with wastewater failures." – Christopher Luxon, National leader
So when Luxon pins hopes of fiscal sustainability on ringfenced money for water infrastructure, combined with economies of scale by allowing councils to form regional water organisations, he is being optimistic. So too Auckland, Christchurch, and 30 smaller district councils which have made similar calls – they should know better than anyone that this solution has been tried, and failed.
There were good ideas aired in Blenheim, too – ones that should succeed.
Here's one: A water quality regulator to set strict drinking water standards. Again, this may sound like an excellent practical proposal from Luxon at the weekend aimed at avoiding more tragedies like the fatal gastro outbreak in Havelock North; at averting more boil water notices and lead-contaminated drinking water; to ensure the 100 unconsented wastewater plants from the Far North to Southland are brought up to scratch. Actually, this isn't Luxon either: this new regulator has already been set in place by the Taumata Arowai Water Services Regulator Act 2020, and is up and running.
Here's another: Setting in place a drinking water economic regulator within the Commerce Commission to set and enforce standards for long-term water infrastructure investment. But that too has already been introduced to Parliament in the final piece of the Three Waters legislative jigsaw puzzle. That happened just before Christmas.
In Parliament, councils and the community, the political divisions over the Three Waters reforms seem intractable. Yet when it comes to the crunch of finding a fix, some of Labour and National's regulatory solutions aren't all that different.
"New Zealand has, for a long time, not invested enough in providing and maintaining its infrastructure, and those short-term financial savings are illusory when they impede long-term growth or cause environmental damage with wastewater failures," Luxon said in his speech.
Councils' failed record on infrastructure management means international financiers simply don't trust them enough to lend them the capital they need at the rates they want to build the water plants they now need.
"While some communities operate and maintain efficient, high-quality water services, others struggle to make new investments against the pressures of council debt caps and other service demands."
The truth is, like it or lump it, councils' rates takes have fallen far behind population growth over the past 50 years, so most can't pay for their infrastructure upfront. And their failed record on infrastructure management means international financiers simply don't trust them enough to lend them the capital they need at the rates they want to build the water plants they now need.
When Luxon says debt is the appropriate way to fund the construction of new assets, he's absolutely right. Debt shares the burden across the generations who use the assets.
But to then pass the buck back to cash-strapped councils to develop their own "financially sustainable plans" to pay for the infrastructure, when they are already hitting Local Government Funding Agency-imposed debt caps, isn't a plan. It's politically bankrupt.
To be fair, the Labour Government's airy assurances that its four big new water corporations will be able to borrow more, at better rates, is similarly lacking in specifics; apparently officials have spoken to some institutional investors who think maybe they might be interested. That's not the level of certainty anyone would hope for.
So the real difference is not over how the water infrastructure is managed, but over who does it.
Four large specialist not-for-profit council-owned corporations operated by engineers and other technocrats, at arms length from the three-year cycles of expedient short-termism that characterises electoral politics, yet required to comply with strategies and key performance indicators set by their directors and by the council and iwi representatives who oversee them?
Or the same councils that have (sometimes through no fault of their own) mostly struggled to deliver drinking water and sewage infrastructure that met the safety, sanitary and environmental standards of past years – let alone the standards we now demand of them with rising water tables, more frequent extreme weather events and growing populations of the 21st century?
Perhaps the answer to who manages the Three Waters depends on one's confidence in how well New Zealand's model of local democracy functions in serving majority groups, minority groups, and future generations.
Some will say, like Winston Churchill, that it's the least-bad solution we've got; others will say, we need to do better.
