This week the Government announced that, as part of its Local Water Done Well policy, Watercare will become financially separated from Auckland Council, allowing it to take on additional debt to fund water infrastructure.
Local Water Done Well is the Government’s water infrastructure policy that replaces the previous Government’s Three Waters reforms. While the previous policy envisioned the transfer of drinking water, storm water and wastewater services from local authorities to ten (originally four) water services entities, responsibility for how water services are delivered remains firmly with local councils under the new policy.
The Government’s Plan for Local Water Done Well involves:
- Repealing the Three Waters legislation;
- Restoring council ownership and control;
- Setting stricter rules for water quality and investment in infrastructure; and
- Ensuring water services are financially sustainable.
The Government passed legislation in February repealing the Three Waters legislation and intends to introduce two further bills over the next two years to deliver its plan. The second bill is expected to be introduced this month, and the third bill is expected to be passed by mid-2025.
This week’s announcement was made at a joint press conference by Prime Minister Christopher Luxon, Local Government Minister Simeon Brown, and Auckland Mayor Wayne Brown. It was announced that Watercare will be financially separated from Auckland Council by legislation to achieve balance sheet separation, allowing Watercare to take on additional debt to fund water infrastructure. Under this plan, it is proposed that water rates will increase for Aucklanders by 7.2% rather than the previously projected 25.8% (which would have been required under the status quo).
Watercare will continue to be owned and controlled by Auckland Council. However, the bill will remove the ability for Auckland Council to provide financial assistance to Watercare and will prevent the Crown from guaranteeing any loans entered into by Watercare. The bill will also provide that Watercare, rather than Auckland Council, would have the legislative responsibility for delivering water and wastewater to Aucklanders.
The purpose of these changes is to achieve balance sheet separation between Watercare and Auckland Council in the eyes of rating agencies, allowing Watercare to borrow outside the constraints of Auckland Council’s debt limit. This is similar to an underlying premise of the previous Government’s Three Waters Programme, but delivered in a way that maintains council ownership and control.
In addition to the financial separation of Watercare, the second bill intends to assist other councils to set up similar council-controlled organisations to manage their water infrastructure.
This announcement provides further insight into how the Government intends to deliver its Local Water Done Well plan and will be useful for local authorities across New Zealand to consider when planning for the future delivery of water services. Whether this delivery will ultimately be on a local or regional (read amalgamation) basis will depend on council’s confidence in their ability to comply with the new set of standards for quality and pricing that are due to follow.
This article was co-authored by Rebecca Neil, a Solicitor in our Construction and Infrastructure team.
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