Three Waters Reform Programme IPWEA Webinar 24 March 2021 - www.dia.govt.nz/Three-Waters-Reform-Programme
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Three Waters Reform Programme
IPWEA Webinar
24 March 2021
www.dia.govt.nz/Three-Waters-Reform-Programme
threewaters@dia.govt.nz
Welcome house keeping
• All attendees will be on mute throughout the session.
• Should you have any questions please send these through the Q&A function
and we will address them at the end of the presentation with the time
remaining.
• Please note this session will be recorded so should you wish to ask a
question verbally your username and video will be recorded.
• Kindly select to “All Panelists” when you are posting your questions.
Three Waters Reform Programme NOT GOVERNMENT POLICY 2
Agenda
• Reform programme overview
• Key reform questions
• Establishment and transition
• Timeline for the reform programme
• Next steps
Three Waters Reform Programme NOT GOVERNMENT POLICY 3
Background
Central/Local
Government
Forum
COVID-19 28 May 2020
Decision to outbreak and
create Taumata response
Government Arowai, new
Inquiry into water services
Havelock North regulator
Drinking Water Central and local government
agree partnership approach to
progress three waters services
Central and local delivery reform, in conjunction
government work with infrastructure investment
Central government together to respond to package – formation of joint
progresses three waters COVID-19, to support Steering Committee. Both
Three Waters Review set regulatory reforms, and delivery of essential parties recognise the importance
up to address the agrees to support voluntary services to communities. of Te Mana o Te Wai, and
challenges facing the changes to service delivery involvement of the Treaty
regulation and delivery of arrangements. partner in these discussions.
three waters services.
Three Waters Reform Programme NOT GOVERNMENT POLICY 4Quick overview
• 67 Territorial Authorities and Unitary Authorities own and operate the majority of NZ’s water services.
• In July 2020, the Government announced a $710 million funding package to support economic recovery
relating to COVID-19, and to address persistent issues facing the three waters sector, through a
combination of infrastructure investment and water service delivery reform
• The service delivery reforms were conceived of as a three-year, multi-phase programme
• The initial phase involves a partnership-based, voluntary approach to reform, and a good faith approach
with councils
• All eligible councils agreed to participate in the initial phase and to receive a share of the stimulus package –
signing a Memorandum of Understanding with the Crown
• Work to date is based on a shared understanding between central and local government that a partnership
approach will best support wider community interests, and ensure any transition to new service delivery
arrangements is well managed and as smooth as possible
• A Joint Three Waters Steering Committee has been established, comprising central and local government
representatives
Three Waters Reform Programme NOT GOVERNMENT POLICY 5Impetus for reform
Reviews into the delivery of three waters services in New Zealand have identified significant ongoing
challenges and a considerable level of underinvestment in three waters infrastructure
Why is reform needed?
Risk of failure to meet safe drinking water standards
with potentially serious consequences for public health, the environment and the economy
A constrained ability to plan, fund and finance resilient systems
that can cope with climate change, emergencies and natural hazards
Ability to meet national and local environmental objectives
for freshwater and the marine environment
Housing infrastructure supply unable to keep pace with strong demand
in high-growth areas
Limits on regional development and wellbeing
particularly for areas with declining rating bases
Three Waters Reform Programme NOT GOVERNMENT POLICY 6Key design features of a new service delivery model
Decisions and directions during 2020 mean the reform proposals will include certain features:
Multi-regional entities of scale
Success factors
Significant aggregation into a small number of multi-regional activities.
Independent decision making
Public ownership
Management and governance
Entities must be publicly owned, with mechanisms to prevent future privatisation. competency
Statutory entities Financial independence
Three waters entities designed and established by legislation.
Flexible cost effective financing
Asset ownership Equity/equality between local
Three waters entities responsible for ownership of all water infrastructure assets. authorities
Structural longevity
Competency based boards
Professional directors on three waters boards, operating under a commercial mandate. Mechanisms for enabling iwi/hapū and
community input
Balance sheet separation
Complete structural separation from local authorities.
Three Waters Reform Programme NOT GOVERNMENT POLICY 7A growing infrastructure deficit
• Early analysis commissioned using publicly available information WICS Phase One: Estimated enhancement and expenditure
growth between 2020 and 2050
on council assets, finances and connected properties found a
120
conservative estimate of:
Total expenditure ($NZ billion)
o an estimated $34 billion to maintain and replace the 100
existing asset base due to ageing infrastructure $16 bn
80
o a minimum of $27bn of additional investment (in addition
$9 bn $34 bn
to the above) required over the next 30 years to upgrade 60
existing three waters assets to meet environmental and
$34 bn
current drinking water standards. The upper estimate is 40
around $46bn.
20
$46 bn
o a minimum of $9 bn to maintain and replace the new $27 bn
asset base introduced over the next 30 years. The upper 0
estimate is around $16 bn. Low estimate High estimate
Total replacement and refurbishment (new asset base)
• These estimates made no allowance for investment required to Total replacement and refurbishment (existing asset base)
meet population growth or to address resilience issues. Total enhancement expenditure
In total, this early analysis suggests a total investment of around $70 to $96 billion is required over 30 years
Three Waters Reform Programme NOT GOVERNMENT POLICY 8Funding affordability challenges
WICS Phase One: Predicted enhancement investment
• Without reform, catching up on the required investment per property over 30 years (Auckland, Metro, Provincial
will have significant implications for local authority finances, and Rural)*
and would present affordability issues for many $80,000
communities. $70,000
• For rural councils, average costs per household would $60,000
increase by between 2 and 3 times in real terms.
$50,000
• Some communities would face much larger rises. $40,000
• The situation is not much better for larger provincial and $30,000
metropolitan councils under the current structure.
$20,000
• Average annual costs per household for provincial councils
$10,000
would need to increase by between 1.5 and 2.5 times in
today’s dollars to meet the required investment. $0
Auckland Metro Provincial Rural*
• Similarly, costs in metropolitan councils would need to Lowest Average Highest
*Excludes 4 rural councils (out of 23) that have predicted enhancement per property in excess of
increase by between 1.4 and 1.8 times. NZ$90,000. These 4 councils account for 12% of the population of the rural group.
Three Waters Reform Programme NOT GOVERNMENT POLICY 9Early analysis from the RFI
• Council staff have recently completed the most comprehensive data collection on three waters assets and
service delivery ever undertaken in New Zealand.
• The results of the RFI are still being processed but early insights are showing us that previous estimates
were conservative. Note that these figures represent preliminary analysis and are subject to change as we
undertake more detailed analysis
• We anticipate the investment needed to maintain and enhance infrastructure, and meet requirements of
growth, could be in the order of $50-$90 billion.
• The total investment required once maintenance and renewals are factored in, could be in the order of
$110 to $170 billion over the next 30 to 40 years.
• This will exacerbate the impacts on costs to households and businesses.
• We anticipate the final RFI analysis to be completed over the coming months, and shared with you shortly
after.
Three Waters Reform Programme NOT GOVERNMENT POLICY 10How reform can help meet investment needs
• Service delivery reform can help reduce the extent to WICS Phase One: Indicative real cost per household in
current prices*
which costs need to increase and reverse the 6,000
infrastructure deficit more quickly. 5,120
Indicative real cost per average household ($NZ)
• Greater sharing of costs across larger populations can 5,000
ensure access to affordable services of a minimum
4,000
standard across the country. Mean: Rural Councils
• Analysis suggests that entities require between 3,000
2,410
500,000 and 1,000,000 customers/connections in Mean: Provincial Councils
order to fully realise these efficiencies. 2,000
Mean: Metropolitan Councils
1,300
• Entities are expected to have greater debt capacity 1,000
1,120
1,025 980
than councils to share the costs of long-term assets 910 700 700 700 740
380
over longer timeframes. 0
Base case Base case 5 entities 4 entities 3 entities 2 entities
• However, determining the best size of new entities (2019) (2050) (2050)
Amalgamation scenarios
(2050) (2050) (2050)
contains a variety of other trade-offs that require *figures based on Water Industry Commission of Scotland initial analysis of publicly available data and
careful consideration (discussed later today). subject to change as part of further analysis using more detailed data collected from local authorities
The degree to which efficiencies can be realised is related to the number and scale of entities
Three Waters Reform Programme NOT GOVERNMENT POLICY 11Benefits of scale
The investment challenge is significant, scale will help minimise the impact on communities
SCALE Improved outcomes for
CONSIDERATIONS Greater financial capacity Strengthened operations Improved asset management
communities
DESCRIPTION Enables the significant A step change in operational scale Greater balance sheet capacity Service improvement at a lower
investment required to occur enabling greater professional enabling a more strategic and cost than would otherwise be the
off the balance sheet of pathways for staff and coordinated approach across case
council owners and through organisational capabilities catchments
the increased financial Introduction of a range of
capacity of specialist entities Contributes to improved Significant contribution to protections for consumers
procurement practice and lower improving environmental and through a new regulatory regime
Also enables more flexible operating costs quality outcomes
funding tools More direct mechanisms for
iwi/Māori to influence outcomes
Provides resilience if councils with clearer accountabilities
opt out of reform
Three Waters Reform Programme NOT GOVERNMENT POLICY 12Key reform questions
Key issues to consider when developing reform proposals
• Number of entities and their boundaries
• Ownership structures and governance arrangements for new water services entities
• E.g. how to provide for the key design features on the previous slide, and roles for local government
• Retaining local voice and influence
• E.g. regarding prioritisation of infrastructure to support growth, climate change adaptation, and ensuring water services
entities are responsive to the needs and concerns of local communities
• Māori rights and interests throughout the new service delivery system
• Will the water services entities provide 2 or 3 waters?
• Mechanism for protecting consumers
• What will be the impact on councils?
• E.g. immediate financial impacts; concerns about ongoing sustainability and role; implications for staff
• Transition arrangements
Three Waters Reform Programme NOT GOVERNMENT POLICY 14Number and boundaries
Advice to Ministers and the Joint Central/Local Government Steering Committee will consider the following factors:
FEWER
ENTITIES 1. Potential to achieve scale benefits from larger
water service delivery entity to a broader
population/customer base.
2. Alignment of geographical boundaries to encompass
MORE
natural communities of interest, belonging and identity
ENTITIES
including rohe/takiwā.
3. Relationship with relevant regulatory boundaries
including to enable water to be managed from source to
the sea – ki uta ki tai.
Three Waters Reform Programme NOT GOVERNMENT POLICY 15A range of scenarios are being examined
- + - + - + - + - +
Key
ROHE/TAKIWA AND
REGULATORY ALIGNMENT SCALE
COMMUNITIES OF INTEREST
Three Waters Reform Programme NOT GOVERNMENT POLICY 16Enabling legislation
Emerging Outlines purpose, objectives, powers and functions of the new entities.
Also provides further detail on establishment and minimum requirements
of key governance features.
‘base case’ Local Local
Local
Authority
Mana
entity
Authority A Authority B whenua
‘N’
Appoints
structure for Governor Representative Group
testing Local Authority Reps
Mana whenua
Reps
Independent Strategic and
Selection performance
Panel Appoints Issues expectations
strategic and
Appoints performance
expectations
Water Service Entity
Statement of Guides
Entity Board Intent formulation
Appoints Entity
Produces
Key planning &
Entity Management strategic
documents
Three Waters Reform Programme NOT GOVERNMENT POLICY 17Stormwater
• Enabling the new water entities to deliver all three waters is an opportunity to make a step-change in the way
that we deliver stormwater services to meet existing and future challenges such as climate change.
• This approach would help uphold Te Mana o Te Wai and take a systems view of water from source to sea.
• Stormwater systems also effect urban water quality and housing supply.
• But the transfer of responsibility for stormwater to new water entities is complex and further work is being
undertaken to:
o Ensure the new entities and councils can continue work together to effectively manage stormwater; and
o Identify a timeframe and process for transferring the responsibility for managing stormwater.
• We have established stormwater technical working group to develop a transition plan for the future
management of the stormwater system.
As a starting proposition, Three Waters Ministers have agreed to explore further the transfer of stormwater
infrastructure to new water services entities.
Three Waters Reform Programme NOT GOVERNMENT POLICY 18High Level Overview – Establishment and
Transition
The key objectives of a transition work programme, should the reforms proceed, are:
• To advance the Government’s reform objectives with the sector in a way that successfully
supports adoption of the reform with stakeholders.
• To ensure that the reform objectives are supported by a smooth transition and
implementation approach that is efficient, effective and minimises disruption to
communities and consumers.
While subject to Cabinet decisions, the transition to new entities will need a considered and long-term
programme of work to ensure we set the entities up for success on day one, and into the future.
Three Waters Reform Programme NOT GOVERNMENT POLICY 19Emerging thinking – indicative only
Establishment Timeframe – roughly 3 + years
Purpose of Phase Transition Roughly 1 + years
Responsible for ensuring the decisions by Cabinet
are implemented Purpose of Phase
The key period of transition from delivery of the
Main Activity services by local government to the new water entities
Setting up the unit to support the reform Implementation Ongoing
programme prior to the new entity creation Main Activity
Confirming how to move from the old to the new
Will be the consistent function until the entities Purpose of Phase
system, including price paths, timeframes for
are established, with some handover after the The new Water Entities are
handover and interim agreements
new water entities are live operationally live
A key operational phase, with a likely focus on
staffing, scope of assets to be transferred, access to
Key roles will likely cover: Main Activity
non transferred assets and contract novations
• Governance Standing up the final operational
• Management We expect this phase to be commenced following the
structure and new entities
• Form and structure establishment of the Transition Regional Water Entity
• Resourcing Boards (the pre cursor to the Water Entity Boards of
Key early tasks
• Reporting / accountability • ICT integration
the Water Entities), who will take regional ownership
• Finalisation of staffing structures
and decision making during the transition phase
Will work closely with key stakeholders including
Councils, Central Government and the new Water Until the new Water Entities are operationally active
Entities
Please Note: This mahi is entirely dependent on the decisions made by Cabinet, therefore, the phases are subject to material change.
Three Waters Reform Programme NOT GOVERNMENT POLICY 20Emerging thinking – what this would mean
Establishment Timeframe – roughly 3 + years
Transition Contingency for
Roughly 1 + years
transition
Realistically establishment won’t
effectively commence until 2022 Implementation Ongoing
(given timing of voluntary decision)
2022 calendar year 2023 calendar year 2024 calendar year
2021 - 2024 LTP period 2024 - 2027 LTP
What this means for councils and their staff (who do not opt-out of reform):
• Councils will continue to be delivering water services until at least early 2024
• Council involvement in transition will be required during 2022 and 2023. Some We are targeting all Water Service
funding will be set aside to support back filling of staff Entities to be operationally live by
• Working assumption that the 2024 – 2027 LTP will no longer include water services. June 2024 for administrative ease
Assistance is likely to be required to develop the initial asset management plan of
the Water Service Entities. This is to be worked through
Three Waters Reform Programme NOT GOVERNMENT POLICY 21Reform timeline October 2022
Local Government
Elections
Mid 2021 Late 2021
Decision
points
Cabinet decisions on Council decisions about
reform proposals participation in reforms
Communication
& engagement
March Communicate Cabinet Ongoing local government and iwi/hapū/Māori engagement
Engagement with LG and iwi/hapū on reform proposals decisions with the Crown
Mid-Feb onwards Mid-2021 onwards (into transition)
Pre-campaign reform publicity and education Public communications and information campaign
Legislation
LGA02 (Water Services Reform) Amendment Bill, to enable council decisions Water Services Entities Bill, to create new statutory entities
Introduced early 2021; enacted mid/late 2021 Introduced late 2021; enacted mid-2022
Feb-April
Data analysis &
Commercial and financial Mid-2021
February DIA release aggregated data
support
analysis from RFI
Council RFI analysis and council-specific
submissions & April package to support community
refinements Council proactive discussion and decision
release of individual RFI
Stimulus
Council stimulus investment works underway – until 31 March 2022 April 2022
works
Final quarterly report
Quarterly reporting – Stimulus milestones
Establishment Timeframe – roughly 3 + years
Transition Roughly 1 + years
Implementation Ongoing
Three Waters Reform Programme NOT GOVERNMENT POLICY 22Next steps
• Completion of analysis to support advice on number and boundaries of water services entities –
February to April
• Development of advice on other aspects of the reforms
• Commercial and financial analysis is occurring in parallel, informed by advice from Standard & Poor’s
• Engagement with local government and iwi/Māori on key scenarios and proposals – March
• Progression of legislation to amend LGA02 consultation and decision-making provisions – February
to September
• Cabinet decisions on detailed reform proposals – May
• Legislation to create new water services entities – drafted for introduction in late 2021 and
enactment mid-2022
• Council decisions on ‘opt out’ – last quarter of 2021
Three Waters Reform Programme NOT GOVERNMENT POLICY 23Questions?
Please use the Q and A function to post your
questions or use the raise hand button to ask your
question verbally.Ngā mihi,
Thank you
Reform Programme Webpage: www.dia.govt.nz/Three-Waters-Reform-Programme
Email: threewaters@dia.govt.nzYou can also read
