New Zealand has ringfenced $2.5bn to ease financial pressures on councils as they deal with a controversial shake-up of the water industry.
With $1.5bn already allocated to the Three Waters Reform program, prime minister Jacinda Ardern said on Thursday that councils would be given $500m to cushion extra costs and another $2bn for future investment.
The scheme was launched in 2020 to overhaul the way local government manages its drinking water, wastewater and stormwater services.
The services are mostly spread among 67 different councils, and many face infrastructure funding deficits, difficulties meeting environmental expectations and challenges arising out of climate change and natural disasters.
The programme to improve the services in cities, towns and communities also aims to safeguard natural environments from wastewater hazards and stormwater overflow, but is separate to the ongoing efforts to protect freshwater sources from agricultural and industrial pollution. The environment ministry said in 2019 that two-thirds of all rivers were unswimmable and three-quarters of native freshwater fish species were threatened with extinction.
In June, Nanaia Mahuta, the minister for local government, announced the creation of four new publicly owned regional entities to better manage water services.
“We have seen the effects of a system in crisis: fatalities from bacteria in drinking water, broken sewer pipes, poorly treated wastewater running into streams and rivers, no-swim notices at the beaches, regular boil-water notices, and lead contamination,” Mahuta said.
The announcement drew mixed reactions from the councils, with some immediately opting out of the changes. The opt-out provision raised questions amongst other parties within government about whether it would need to force councils to sign up, for the reforms to be effective.
Ardern said on Thursday that the reforms would significantly change the asset base of councils and $500m was being set aside to ensure they would be no worse off as a result.
The “no worse off” component proposes to help cushion the costs councils could incur through the transfer of assets, liabilities, revenue and staff to the new entities.
The remaining $2bn was to allow councils to invest in the future for local government, urban development, and the wellbeing of their communities, Ardern said.
Arden said without the reforms, households could expect to pay two to five times what they pay now for water services. “This is unfair to communities. It is also unsustainable and has knock-on effects to other areas,” she said.
Mahuta said it was important that central and local government worked together to remedy the significant problems and risks facing water infrastructure and services.
“New Zealand’s water system is one of the country’s most significant infrastructure sectors, touching every aspect of our lives,” Mahuta said. “Our communities will need to invest between $120bn-185bn over the next 30 years to maintain, replace and upgrade ageing assets and to provide for growth.”
The reforms include a provision to retain all water assets in public ownership, with emphasis being placed on communities having a say in how their assets are run.
The funding package comes on top of the $761m committed to the reform programme in 2020, and $296m announced in budget 2021 for the costs involved with the establishment and transition of the new water entities.
The new water entities are set to begin operating in three years’ time.
The government said the changes will grow GDP by $14bn to $23bn over the next 30 years and it estimates they will create 6,000 to 9,000 jobs.
The National party leader, Judith Collins, told media the funding announcement amounted to “a bribe” and was an attempt to save reforms that were failing.
“These reforms are poorly conceived and will result in low accountability, bloated service entities, more bureaucracy, and messy cross-subsidising between neighbouring regions. The claimed scale benefits and cost savings remain unconvincing,” Collins told RNZ.
