Consumer Affairs Minister Andrew Bayly, LGFA chair Craig Stobo, and Local Government Minister Simeon Brown at the morning announcement. Photo: RNZ / REECE BAKER
Cabinet has approved a new way of delivering water services after it unwound the previous Labour government's Three Waters reforms.
Local Government Minister Simeon Brown has announced council-controlled organisations - known as CCOs - will immediately be able to borrow for water infrastructure through the Local Government Funding Agency.
The first Local Water Done Well bill is expected to pass in Parliament this month.
After that, councils will have a year to provide plans setting out the funding they need and how they will ensure financial sustainability for water services into the future - including through CCOs, joint-council arrangements for funding water services.
The funding collected through specific water rates would be ring-fenced for use on water infrastructure, and bolstered by borrowing from the LGFA, which was set up under the Local Government Borrowing Act 2011 in the wake of the global financial crisis.
It is also a CCO, and was developed as a way of allowing councils to borrow at cheaper rates than they could otherwise. It has 31 shareholders, which includes 30 councils and the government.
Brown said CCOs through the LGFA would be able to borrow up to five times what they took in through water rates - about twice what they could borrow on their own - subject to "prudent credit criteria".
He said the government and the funding agency were also exploring increasing debt limits, potentially up to 350 percent of revenue, for high-growth councils, and allowing lending to CCOs not supported by parent councils.
"This will enable councils to better manage debt and make essential infrastructure investments without drastic rate hikes," Brown said.
"Our expectation is that councils will now use this certainty and the additional borrowing capacity to reduce pressure on ratepayers while being able to invest in the critical water infrastructure New Zealand needs."
The government is also looking at setting up an economic regulation regime under the Commerce Commission, similar to what Labour had proposed.
Changes to water quality standards
Cabinet also agreed to a shift in water quality standards from the Water Services Authority, Taumata Arowai.
Brown said the changes would remove barriers for the regulator.
The changes include:
- Ensuring Taumata Arowai considers the cost of compliance on suppliers
- Excluding 'shared domestic supplies' serving 25 consumers or fewer from regulation
- Enabling Taumata Arowai to proactively allow exemptions from some regulations if they would be impractical, inefficient, unduly costly or burdensome
- Removing the requirement for Taumata Arowai and suppliers to give effect to Te Mana o te Wai
Government's plan 'doesn't solve the fundamental problem' - Labour
Labour's Local Government spokesperson Kieran McAnulty said the government's approach would only continue to push rates up.
He said the announcement on Thursday was a political solution, and Labour had not gone down that route because it would not achieve the savings needed.
He said he was disappointed by the plan.
"Just disappointed, because I know that this is going to lead to ongoing rates increases, and I know that households can't afford that, and it's the only option available to councils, whether they work together under a CCO or not.
"There's a clear reason why this wasn't pursued. It's because the credit rating agencies made it very clear that unless there was balance sheet separation, the savings that are required wouldn't be found."
He said it was telling that the minister did not have a clear answer on what credit rating agencies thought about the plan, and was downplaying the $185b that had been estimated as the figure required to bring water infrastructure - like pipes, treatment plants and dams - up to standard.
"It's quite clear that they are deliberately underestimating or [under]stating the cost that will be required over the next 30 years, and they're ignoring the fact that that assessment, that cost, came from councils' own figures. It wasn't magicked up."
