C4LD Letter to MPs
Member of Parliament
Parliament Buildings
WELLINGTON
By email
ALTERNATIVE PROPOSAL TO ADVANCE THREE WATERS REFORM
The Government intends to soon introduce into Parliament a Bill that will reorganise extensively the Three Waters sector (drinking water, wastewater, and stormwater) in New Zealand.
The purpose of this letter is to outline to you as a Parliamentarian who soon may be considering that Bill, the views of the member Councils of Communities 4 Local Democracy - He hapori mō te Manapori (“C4LD”) on the Government’s proposals.
C4LD is comprised presently of 32 Partner Councils, representing approximately 1.4 million people. We came together to work collectively to find a better way to achieve the health and environmental outcomes that most people desire. However, quite apart from the Partner Councils of C4LD, there are many other councils that do not support the Government’s mandated four entity model. Most notably Auckland Council, representing another 1.7 million people.
In this letter we set out the broad parameters of an alternative set of reform proposals which would achieve the health and environmental policy outcomes that most parties agree are desirable. It is our view that the set of proposals outlined in this letter are likely to achieve multi-party support in Parliament; indeed, this is an outcome we are prepared to champion with all Members of Parliament.
Without multi-party support the Government’s proposed reforms will not be durable. Without regulatory certainty there cannot be investment certainty. Without investment certainty there will not be investment. Such an outcome accordingly fails the chief measure of success for any set of infrastructure policy reform. The result is that needed improvements to health and environmental settings will once again be delayed.
We presented our alternative proposal to the Minister of Local Government Hon Nanaia Mahuta and her officials when we met at Parliament on the 4th of April and followed this up with a letter.
Our alternative proposal has 10 high-level components. They are:
1. Foundation principle - community property rights in Three Waters assets are to be both respected and meaningful;
2. The Government should agree to amend its current reform process and allow time for the revised approach to be reflected in draft legislation;
3. With respect to investment decision-making, asset owners should be required to actively seek to initiate authentic discussions with mana whenua at a local level that consider co-design and partnership arrangements that acknowledge and enable Te Tiriti based pathways at a local and regional level;
4. In return, asset owners agree to commit to meeting health and environmental standards, once known, within an appropriate timeframe (for this reason we fully support the drinking water regulator Taumata Arowai);
5. The regulatory framework should specify a “backstop” provision that identifies a set of circumstances which would justify future Crown intervention if an asset owner was not making acceptable progress towards meeting those regulatory requirements;
6. Progress should be reported on annually by asset owners and be benchmarked across the sector;
7. To further incentivise sector progress, a formal process might be established that requires an asset owner to prepare a plan for ministerial approval that would map out the steps it proposes to take to meet the required standards in a financially viable and sustainable manner (a similar process that respected property rights was used in the Energy Companies Act 1992);
8. A process to finance and allocate funds to areas that will require financial assistance, be designed that is national in application and independently administered accordingly to objective and transparent criteria (this is consistent with the recommendation of the Productivity Commission in November 2019);
9. This subsidy scheme will be designed to meet investment shortfalls until such time as sufficient progress has been made. At which point the scheme will cease and asset owners will finance matters on a business-as-usual approach; and
10. A sector-wide sector best-practice improvement process be created and membership made compulsory (in similar manner used to implement successfully the One Network Road Classification Framework and now One Network Framework in the road infrastructure area; and governed by Waka Kotahi (NZTA) and the Local Government Sector).
Our analysis (Attachment 1) prepared by our independent consultants, Castalia, shows that alternative structural arrangements to that proposed by the Government are perfectly capable, and in most cases, more capable, of achieving the desired policy outcomes. Importantly, these alternative structural arrangements protect local voice, respect community property rights, and just as importantly, are a far more effective protection against privatisation than any legislation which could be easily unwound by a future Parliament. As we all know, a current Parliament cannot bind a future Parliament.
We propose two broad approaches:
1. A regional multiply-owned council water enterprise. Such an approach would achieve the Government’s goal of balance sheet separation provided no one council owns more than 50% of that enterprise. This is specifically provided for in International Financial Reporting Standard 10. The proposed Hawkes Bay regional model is a good example of the type of enterprise that could be established and which would have local community support; and
2. A single council owned water enterprise. We accept that this option would not achieve balance sheet separation. Accordingly, we think proponents of this approach would have to satisfy the Government of the day that it would be backed by a financially viable investment plan (using the proposed process noted above). But in principle, if a single-council owned entity is viable and could achieve the health and environmental outcomes required, then a Government ought to be agnostic about organisational design, particularly for assets it neither owns nor is proposing to purchase.
Mana whenua involvement in investment decision-making (as opposed to regulatory decision-making) is a key aspect of the reforms for the Government. The Partner Councils of C4LD support that objective consistent with the protection of both local voice and community property rights. However, in our view, the Government’s proposal will not reflect local realities and communities of interest and, importantly, iwi and hapū rohe and areas of interest, in most parts of the country. We consider that a more local approach gives better representation to mana whenua, particularly in the North Island where there are very many iwi and hapū.
We are conscious that there is significant and mischievous comment currently circulating about C4LD’s approach to mana whenua involvement in investment decision-making. We reject categorically such comment. To clarify matters, Partner Councils have prepared the attached statement (Attachment 2) which clearly sets out our position.
C4LD believes that Three Waters assets should continue to be owned by communities through their councils either directly or through real shareholding arrangements that confer the usual rights and obligations that go with equity ownership. The Government’s approach does not do that. Further it is our view that the Government’s approach amounts to the expropriation of council assets without true value compensation. We note that this matter is at issue in the litigation being pursued by some councils at present.
The Government’s proposals are widely opposed across the country. Whilst presently, the Government has the Parliamentary majority to achieve its preferred position, this does not mean that the position is durable. It is not. Opposition Parties have already publicly committed to repeal any such legislation. Our preference, and we think the country’s preference is to achieve a multi-party and durable approach. In our view our proposal can achieve that with your support. We commend it to you.
It is not too late to rectify matters. We are not that far apart in our objectives. Indeed, what we are offering in our 10 point plan is an approach that we believe would achieve broad support. We are prepared to partner and work with the Government and all political parties to turn this around and find a lasting solution that we can all support.
We would be happy to meet with you to further explain the detail of our alternative approach to Three Waters reform if you would find that helpful.
Yours sincerely
Mayor Helen Worboys Manawatu District Council Chair
Mayor Dan Gordon Waimakariri District Council Deputy Chair