|
Resolution
number KT/2021/161
MOVED by Deputy Chairperson D Grant, seconded by
Chairperson J Gillon:
That
the Kaipātiki Local Board:
a)
requests that Auckland Council
reject and opt out of the Three Waters Reform proposal.
b)
The Kaipātiki
Local Board does not
support the Government’s proposed Three Waters Reform proposal and
provides the following feedback:
i)
The Kaipātiki
Local Board’s
primary concerns with the proposal are:
A)
The removal from
council of ratepayer-owned water and wastewater assets,
B)
The possible
removal from council of ratepayer-owned stormwater infrastructure and streams
(and portions of associated reserves or parks),
C)
The lack of
accountability to elected members that the new entity would have, and the
lack of local decision-making over public water assets,
D)
The ability to give
effect to Auckland Council’s long term planning and strategies,
E)
The focus on
upgrading existing infrastructure in other parts of the Entity A region, and
not ensuring a coordinated investment in growth areas of Auckland,
F)
Lack of
clarification on the ownership of stormwater within reserves and park land
where there is the opportunity to ensure multiple community outcomes, such as
bio-diversity, community volunteer involvement, aesthetic values,
ii)
We note that both
Scotland and the state of Victoria, Australia, that have a similar population
as New Zealand and a similar model for water and wastewater delivery, do not
include stormwater in their model (Two Waters).
iii)
We note the
following concerns raised by Auckland Council in their analysis of the
governemnt proposal (as per attachment A to the report) and would like to
draw attention to them:
A)
It is anticipated
that councils will continue to deliver water services until at least early
2024 and that council involvement in the transition will be required
throughout.
B)
Central government
decisions are expected to be announced after 30 September 2021, which would
include the timeframes and responsibilities for any community or public
consultation.
C)
Point 27: Auckland
council staff disagree with the assumptions used to determine that reform
would be able to achieve 50% efficiency savings, and the resulting impacts on
household costs.
D)
Points 29-30: the
main advantage in separating Watercare from the council group’s balance
sheet is that it allows Watercare or a new entity to borrow more and bring
forward additional investment projects. Another advantage is that there would
be reduced risk to council with the entity being held responsible and meeting
the costs for any small water suppliers defaulting on water quality
regulations, however a key concern with this model is the complex governance
arrangements that provide no control and limited influence by elected
members. Auckland Council will contribute 94% of the assets, 91% of the
revenue, 97% of the debt but only have up to 35% of the representation of the
Regional Representative Group. This Group has only indirect influence on the
water services entity.
E)
Point 40: The model
contained some assumptions that were clealy incorrect when considered in
Auckland Council’s context. For example, Three Waters debt was capped
at 2.5x (250%) revenue in the model, whereas Council’s Three Waters
debt peaks at roughly 4x (400%) revenue in the LTP. The lower debt to revenue
in WICS’ model means it forecasts price rises that are much higher than
they could be.
F)
Point 42: The
separation of Watercare does not create any additional borrowing capacity.
Auckland Council has a credit rating from S&P Global and Moody’s.
These agencies use different methodologies, with S&P’s methodology,
separating Watercare’s debt and the revenue from the group improves the
council’s debt-to-revenue ratio. The Department of Internal Affairs
estimates this at $2.1billion, which does not appear to be materially
inaccurate. However, as Moody’s already eliminate Watercare from their
calculation, the separation of Watercare from the group has no impact on
Moody’s credit rating analysis of the council.
G)
Point 43:
Regardless of whether Entity A is established, council and the new entity
will face increased costs as a result of regulation.
H)
Point 45: The WICS
model assumes a level of efficiencies that will be achieved by the new water
entities (up to 50 percent). Due to the number of assumptions built into the
WICS model, it is difficult to interrogate whether the level of efficiencies
assumed for Entity A are realistic. However, it should be noted that
Watercare is already a water entity of significant scale and maturity that
has been operating for 10 years under a legal obligation to be a least cost
provider. As such, Watercare has already achieved significant efficiencies,
although further efficiencies can be expected under regulation.
I)
Point 46: The
government’s proposal and the DIA/WICS modelling have been
independently reviewed by Farrierswier (review of WICS model) and Beca
(comparison of the standards applied in EU/UK with New Zealand). Whilst
generally supportive of the model scope and direction of reform benefits
anticipated, they both raised a range of issues with the model application,
which whilst technical in nature, could have large impacts on the currently
published model results. They urged caution with using these figures for
decision-making and note that the quality of management of the future water
entities will have a critical impact on the achievement of the expected
efficiency savings.
J)
Point 47: Both the
Farrierswier and Beca reviews outline the similarities and differences
between Scotland and NZ and discuss the risks of assuming the countries are
similar. While Scotland and NZ have similar populations (5.46M v 5.11M), NZ
has 3.44 times the land area of Scotland and population is sparser. Scotland
has also not experienced the level of growth that Auckland has. Scotland
Water is also a two water entity, not three.
K)
Point 58: If the
proposal proceeds, Auckland Council may wish to advocate to Government for:
1)
Greater
representation on the Regional Representative Group
2)
Direct board
appointments
3)
Approval and
modification rights to the Statement of Intent
4)
To explore other
mechanisms to allow for greater investment in water infrastructure by the
proposed entities, including other mechanisms for achieving balance sheet
separation as explicit government financial support (which result in a
greater degree of control and accountability of water entities).
L)
Points 59-60:
Currently Council’s decisions across water, transport and community
infrastructure are guided by the Auckland Plan Development Strategy and
implemented through LTP and RLTP decision making processes. These enable us
to align investment with future growth requirements in terms of location,
sequencing and timing, and plan and provide for all the major infrastructure
needs of these areas. Alignment and coordination of infrastructure investment
will be made more difficult with separation of water infrastructure. In
particular, it is questionable under current financing and funding
arrangements whether council would have the ability to match the water
entity’s spend with respect to transport and community infrastructure.
Without clear agreements over the timing and staging of growth with water
entities, council would face significant challenges in delivering transport
infrastructure in all areas of development capacity that the entity could
enable through its investment.
M)
Point 66: The
current proposals do not specify how communities will be consulted or
involved in local decisions and projects. This is important because the new
entities will be covering large geographic areas with bigger populations and
there is a reasonable concern that community voices will be lost. Local three
water projects have a variety of local impacts from smaller-scale traffic
disruption to large-scale impacts (for example the impact on sensitive
environments, such as when replacing the treatment facilities at Huia). The
proposals should therefore specify how community voices are considered,
including possible co-ordination of work in particular locations to reduce
disruption. Note that there is likely to be high community interest in
stormwater projects on local parks and governance of these projects also
needs to be clarified.
N)
Point 70: While the
Government and LGNZ consider that national case for change has been made,
Councils do not have a national interest test for their decision making.
Councils are required to act in the interests of their communities and the community’s
well-being (now and into the future), provide opportunities for Maori to
contribute to their decision-making process, ensure prudent stewardship and
the efficient and effective use of its resources in the interests of the
district or region (including planning effectively for the future management
of its assets) and take a sustainable development approach.
c)
thank the Governing
Body for the opportunity to provide feedback on the Government’s
proposed Three Waters Reform.
CARRIED
|
For
Chairperson J Gillon
Member P Gillon
Deputy Chairperson D Grant
Member M Kenrick
|
Against
Member A Hartley
Member C Schmidt
|
Abstained
Member A Shaw
Member A Tyler
|
The motion was declared carried by 4 votes to 2.
|
