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Puketāpapa
Local Board
21 October
2021
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Memorandum
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30 August 2021
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To:
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All Local Boards
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Subject:
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Three Waters
Reform – Council analysis of government proposal.
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From:
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Megan Tyler –
Chief of Strategy.
Alistair Cameron
– Manager, CCO / External Partnerships.
Claire Gomas –
Principle Advisor, CCO / External Partnerships.
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Contact
information:
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Claire.gomas@aucklandcouncil.govt.nz
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Purpose
1. To
outline the Government’s Three Water Reform (the reform) proposal and
funding package, its implications for Tāmaki Makaurau and Auckland Council
decision-making and the areas where local boards may wish to provide input into
the council’s feedback to government.
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Summary
Over the past four years central and local
government have been considering the issues and opportunities facing the
system for regulating and managing the three waters (drinking water,
wastewater, and stormwater) – Three Waters Reform.
The Government has concluded that the case for change[1] to the three waters service delivery system
has been made and during June and July 2021 it released information and made
announcements on:
· the direction and form of Three Waters Reform, including
proposals for new Water Service Entities (Auckland forms part of Entity A),
their governance arrangements and public ownership
· individual Council data
based on the information supplied by councils under the Request for
Information (RFI) process and Water Industry
Commission Scotland (WICS) analysis of that data
· a package of investment ($2.5b, Auckland’s share
would be $509m) for councils to invest in the future for local government,
urban development, and the wellbeing of communities, ensuring no council is
worse off as a result of the reforms, and funding support for transition
· an eight-week process (ending 30 September 2021) for
councils to understand the implications of the reform announcements, ask
questions and propose solutions and for Government to work with councils and mana whenua on key aspects of the reform (including
governance, integrated planning and community voice).
This report is to support Local Board feedback
on the government proposal, to inform the Governing Body’s response to
the government at the end of the 8 week period.
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Context
Government reform programme and
announcements
2. For the past four years, the government has been exploring the
challenges and opportunities facing the three waters system. They are seeking
to address a complex set of issues relating to the regulation, funding,
financing, and provision of drinking water, wastewater, and stormwater services
(the three waters), and to deliver better outcomes for New Zealand’s
people, environment, and economy. The reform proposes a comprehensive,
system-wide change that aims to improve the safety, quality, and environmental performance
of three water services. The Government is proposing to establish four
publicly-owned entities to take responsibility for drinking water, wastewater
and stormwater infrastructure across New Zealand.
3. In
June, the government released its case for change, the key design features of a
new water services system (including the number of entities, boundaries, the
regulatory environment and governance arrangements) and information and
analysis specific to individual councils. The government’s proposal is
described below.
4. In
July, the Government in
partnership with Local Government New Zealand announced a financial support
package to support transition to the new three waters system, and to position
the sector for the future. It consists of three broad elements:
· A ‘better off’ element: an investment of $2 billion into the future for local government
and community wellbeing, consistent with the priorities of both central and
local government. Allocation of this fund is based on a
nationally-consistent formula, reflecting population (75%), deprivation (20%)
and land area (5%). Auckland can expect to receive $509 million and this will
be debt funded by the water service entities.
· A ‘no council worse off’ element: an allocation of up to around $500 million to ensure that no local
authority is in a materially worse position financially to continue to provide
services to its community as a direct result of the reform. According to the
DIA’s Funding Impact Tool, Auckland Council doesn’t qualify for a
share of this package.
· Cover of reasonable transition costs:
package of $0.3 billion, intended to make sure council service delivery (including of water services) during transition is not
disrupted.
5. In addition to the funding announcements, the Government has
committed to further discussions with local government and iwi/Māori over
the next eight weeks on:
· the
boundaries of the Water Service Entities
· how
local authorities can continue to have influence on service outcomes and other
issues of importance to their communities (e.g. chlorine-free water)
· ensuring
there is appropriate integration between the needs, planning and priorities of
local authorities and those of the Water Service Entities
· how
to strengthen the accountability of the Water Service Entities to the
communities that they serve, for example through a water ombudsman.
6. As
a result, the original timetable for implementing the reform and for councils
to consult on a decision to opt out (or not), no longer applies.
7. Next
steps are expected to be announced after 30 September 2021, which would include
the timeframes and responsibilities for any community or public consultation.
8. It
is also important to note that the Government has not ruled out legislating for
an “all-in” approach to reform to realise the national interest
benefits of the reform.
9. On
the assumption that the reform goes ahead, it is anticipated that councils will
continue to deliver water services until at least early 2024 and council involvement
in transition will be required throughout.
10. In
addition to the Three Waters Reforms discussed above, the Government has also
announced further wide-ranging reforms of freshwater, resource management,
climate change and zero carbon, all of which have potential to have significant
impacts on the delivery of the Three Waters services. These impacts have
regulatory rule, operations and cost impacts.
Council workshops and
decisions
11. In October 2018, council’s Environment and Community Committee
agreed an early position on reform of the three waters sector [ENV/2018/135],
which stated:
· strong support for the government’s bottom line of continued
public ownership.
· while the quality of Auckland’s reticulated water supply is
consistently ‘Aa’, higher standards for water are likely to
mean higher costs for some communities.
· any subsidies for communities should come from central government
taxes, not from rates or user charges
· the council group is happy to offer its expertise to other councils
on a contractual basis to achieve efficiencies of scale, noting that
Watercare is currently in early negotiations to provide three waters services
to the Waikato district on a commercial basis. This is premised on Auckland not
being negatively affected and no cross-subsidisation occurring.
· there should be careful consideration of whether stormwater is
included in changes to service delivery and offering to share the analysis
around whether some stormwater functions should go to Watercare, once the
council has made decisions on this.
12. On
27 August 2020, the council agreed to participate in the first stage of the
water delivery services reform programme. That agreement represented a
commitment to assess reform options in good faith, including the
government’s preferred option. It did not commit the council to any
change. This agreement expired in June 2021.
13. In
March 2021, the government at a series of workshops presented to Council and
local board chairs on their reform proposals. The meetings also raised a number
of areas that council and DIA staff have been working together to address.
These are
· Credit
rating – how to achieve access to capital without reducing accountability
and protect ownership and interests of Aucklanders
· Strategic
alignment – what mechanisms are needed to ensure that council can plan
and coordinate infrastructure for growth
· Veolia
contract – to understand better this commercial contract and the
implications of reform proposals on it.
14. In June 2021 the government released information and cabinet papers
providing the business case and design elements of the three waters service
delivery entities.
15. Briefing
memos have been provided to elected members and LGNZ have made available briefings
and workshops to ensure elected members are informed and have a chance to
express their concerns.
16. On
the 20 August, a briefing with local boards was held on the matters that
government and LGNZ are seeking feedback on.
Government’s case for change and water reform proposal
17. Government’s
modelling indicates that New Zealand will need to invest between $120 billion
to $185 billion in three waters infrastructure over the next 30 years to meet
drinking water and environmental standards and provide for future population
growth. This equates to an average household cost for most councils on a
standalone basis to be between $1910 and $8690 by 2051. It also estimated these
average household costs could be reduced to between $800 and $1640 per
household and efficiencies in the range of 45% over 15-30 years if the reform
process went ahead. An additional 5,800 to 9,300 jobs and an increase in
GDP of between $14b to $23b in net present value terms over 30 years were also
forecast.
18. The
Government has decided to:
· establish
four statutory, publicly-owned water services entities that own and operate
three waters infrastructure on behalf of local authorities;
· establish
independent, competency-based boards to govern;
· set
a clear national policy direction for the three waters sector, including
integration with any new spatial / resource management planning processes;
· establish
an economic regulation regime;
· develop
an industry transformation strategy.
19. Advice
on the approach for transitioning stormwater to the new WSE has been delayed
and is now expected to be released by the end of the month. The reform assumes
the new entities will take over the service delivery, infrastructure, and
related functions,
responsibilities and assets that currently sit with local government for all
three waters, including stormwater. The cabinet papers indicate that there are
a number of complex issues, practicalities and potential risks that need to be
addressed as part of the transfer of stormwater assets and responsibilities to
new water services entities, including in relation to the interface between:
· the
wider stormwater system, local road drainage, and
overland flow paths across parks and reserves
· the
water services entities, territorial authorities, road-controlling authorities,
regional councils, and other relevant agencies, such as
Waka Kotahi
20. Although
the detailed position has not been released, staff have identified additional
risks and areas that need resolution:
· ensuring
that land and water management is integrated in order to provide effective and
efficient responses to challenges such as climate change, growth and hazard
management
· retention
of capability and tools required to satisfy Council’s remaining
responsibilities.
· coordinated
management of natural assets (such as urban streams) so that multiple outcomes
can be realised for communities (ecology, amenity, bio-diversity, recreation
and stormwater conveyance)
· how
stormwater delivery would be prioritised within a three-waters entity.
21. The proposed safeguards against privatisation can be found on page
26 of the DIA’s summary of the case for change.
22. 
Both DIA and LGNZ have produced two page national overviews,
available on the DIA website[2] and LGNZ
websites[3] respectively.
23. The
key elements of the reform that impact Auckland are:
· Auckland,
along with the Far North, Kaipara and Whangerei councils form Entity A
(connected population 1.7m)
· Auckland
Council will be listed as an owner, on behalf of our community, in statute
· Auckland
Councils, the Far North councils and mana whenua will have a joint overseeing
role on a Regional Representative Group (RRG). This group will have some
influence but not control of the new WSEs and will be responsible for:
o appointing
(and removing) an Independent Selection Panel (ISP) that appoints and removes
the WSE board
o issuing
a Statement of Strategic and Performance Expectations, and
o monitoring
the performance of both the ISP and the entity Board.
24. The
new water services system is depicted in the diagram below.
25. These
arrangements are anticipated to make water services more affordable, safe and
efficient through:
· long-term
financing arrangements through balance-sheet separation from debt-constrained councils
· the
ability to spread costs across larger areas over time
· operational
efficiencies
· developing
and maintaining more sustainable career pathways in the water industry into the future
26. The
new entities will come into effect 1 July 2024 and a transition agency will be
established to manage the transition process.
Discussion
Overview
27. Staff
have reviewed the information provided by the government and have developed an
understanding of how the WICs and DIA modelling has been undertaken. In
summary, there are a number of areas where staff disagree with the assumptions
and conclusions that have been made. These include the quality of the
assumptions used to determine that reform would be able to achieve 50%
efficiency savings, and the resulting impacts on household costs.
28. Staff
have focussed on the implications for council and the community from the
government’s proposal. This includes considering the benefits and risks
with the government’s proposal compared with maintaining the status quo
(with the option of transitioning council’s Healthy Waters department to
Watercare).
29. 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.
30. 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 revenue, 97% of debt but only
have up to 35% of representation on a Regional Representative Group. This group
has only indirect influence on the water service entity.
31. There
are also risks that would need to be mitigated, including: ensuring
coordination, cooperation and integration with strategic, spatial, growth and
local planning.
32. There
are risks associated with transition to this model, many of which are outside
of Council’s control. Managing these risks (disruption, resourcing
challenges) will be common under all options and staff have not focussed on
these yet.
33. Other
Government reforms (Resource Management Act, Future for Local Government) pose
opportunities and challenges with and without water reform.
34. The
council has been invited to review the information provided and provide
feedback. The government is particularly interested in ensuring effective
representation, integration between growth planning and water services planning
and how communities have a voice in the system and influence over local
decisions.
a) Review of information
provided for accuracy
35. Council
and Watercare provided the Department of Internal Affairs with the information
assessed and modelled by DIA/WICS. This information is summarised in the local
authorities’ individual dashboards and government’s business case.
36. Watercare
is identified by the government as a lead performer, with the key elements of
each of Auckland’s water networks (the water and wastewater bulk network
and stormwater pipes) being in good condition.
37. Auckland’s
three water assets and debt as at 30 June 2020 are summarised in the table
below.
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Assets
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Debt
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Water/Wastewater
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$9.6b
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$2.0b
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Stormwater
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$5.1b
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$0.9b*
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TOTAL
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$14.7b
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$2.9b
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* Note there is no separately identified
debt for stormwater. This figure was taken from the RFI numbers supplied to the
DIA
38. At
the end of June, DIA supplied to council a financial model created by WICS.
This model shows the cost to water users, with the economic regulator proposed
under the water reform proposals if councils ‘opted-out’ of Three
Waters reform. The consequence of economic regulation was reflected in much
higher capital expenditure (investment) and depreciation charges than those
reflected in the LTP 2022-31. Over the next ten years,
the Council have currently budgeted $11.1b of capital investment in the LTP.
Under a regulated environment these costs are estimated to increase to $14.4b.
39. Capital
expenditure is largely debt financed, which reduces the burden on current
ratepayers and ensures future generations that also benefit from the investment
pay their share. The higher capital programme necessary under a regulated
environment would therefore require higher amounts of debt.
40. However,
the model contained some assumptions that were clearly 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.
41. The
benefits identified by the government are predicated on the new water service
entities being financially independent and able to raise debt. To achieve this
the water entities’ balance sheet needs to be separated from councils.
42. Auckland Council has credit ratings from S&P Global and
Moody’s. These agencies use different methodologies, with S&P
including Watercare when it looks at the council group’s results and
Moody’s eliminating them. Under S&P’s methodology, separating
Watercare’s debt and revenue from the group improves the council’s
debt-to-revenue ratio. DIA estimate this at $1.2billion, 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. Therefore, the separation of Watercare does not
create any additional borrowing capacity.
43. Regardless
of whether Entity A is established, council and the new entity will face
increased costs as a result of regulation.
44. Staff
have not been able to quantify the costs associated with the ability of
non-Council water supplies to meet standards and requirements and the risks to Council, as these are unknown at
this stage.
45. The WICS model also 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.
Independent
reviews of government’s analysis
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 the 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 when 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.
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. Scottish Water is
also a two waters entity, not three.
48. Farrierswier
also noted that the use of English 2003-04 econometric models presents a number
of problems when applied to NZ that required a range of scaling, fitting of
models and special adjustments, all based on further assumptions.
49. The
Beca report states that, on balance, the forecasts from the WICs modelling may
underestimate the necessary investment costs as they may not accurately assess
the impacts from new regulation standards, iwi/Māori interests, or
Aotearoa’s seismic and resilience risks.
50. Regional
impacts vary, and while every region is expected to be positively impacted by
the reform proposal in terms of GDP and employment growth, relative to current
regional GDP, metropolitan areas see the smallest relative gains when compared
to the average impact nationally).
51. The
Chief Economist unit has reviewed the publicly available material. Their key
concern is whether Auckland will gain efficiencies through the reorganisation,
translating into lower costs to Auckland residents. For many of the other
regions in Aotearoa, the benefits arise from scale. Auckland is different.
Watercare already provides scale benefits and has an independent board and
while efficiency improvements can be achieved the benefits for Auckland are
likely to be less than for other parts of Aotearoa.
b) The three areas where specific feedback is being sought
Governance
arrangements
52. To
allow the proposed water service entities the ability to raise debt and invest
in water infrastructure, the proposed model has raised a number of issues to
which the government is now seeking feedback and solutions. These are the:
· loss
of local authority control, with complex governance
arrangements and dispersed accountabilities
· resulting
challenges in planning and coordinating infrastructure provision to support
growth and development
· reduced
community or local voice
53. These
issues are caused by the need to achieve separation of the proposed water
entities balance sheet from councils. The more control that councils have
over the water entities, and the higher the degree of accountability to
councils, the more likely the rating agencies are to consolidate the water
entities debt onto the councils’ balance sheets. Therefore, the
government’s proposal intentionally reduces the level of control of local
government.
54. Under
the government’s proposal, local government will have equal representation
on the Regional Representative Group (RRG) alongside mana whenua. This group:
· appoints
and monitors an independent panel, that is responsible for appointing and
removing the board
· develops
a Statement of Strategy Performance Expectations that will guide the entity in
its formation of key strategic and planning documents.
55. The WSE have to take into account (but not comply) with these
documents and formally report annually on their performance. Councils and mana
whenua have no direct influence on the entity.
56. In
the case of Entity A, to allow for Auckland Council’s significantly
greater size, the RRG might be expanded to 14 members (seven for local
authorities and seven for mana whenua), with Auckland Council appointing five
of the council representatives (35 per cent).
57. Staff
have considered alternative models (such as a shareholding model) for
delivering water services and tested these against the Crown’s
objectives. All of the models considered require some form of government
support and reduced council ‘control’.
58. Auckland
Council may wish to advocate for:
· greater
representation on the Regional
Representative Group
· direct
board appointments
· approval
and modification rights to the Statement of Intent
· advocate
for the Government to explore other mechanisms to allow for greater investment
in water infrastructure by the proposed entities, including other mechanisms
for achieving balance sheet separation such as explicit government financial
support (which result in a greater degree of control and accountability of the
water entities).
Importance of integrated strategic direction and planning
59. 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.
60. 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 and community infrastructure in all areas of development
capacity that the entity could enable through its investment.
61. How
the entities determine the level of investment or priority given to
maintenance, renewals or investment for growth across regions is unclear, or
their requirements to coordinate any of this with council or council’s
strategic documents. There are likely to be a number of factors which could
make alignment with Auckland priorities challenging for the water entities,
including:
· the economic
regulator’s oversight of investment and pricing decisions
· in early
years, the entities will likely focus on bringing poor quality infrastructure
up to standard. This will change over time as the most urgent infrastructure
upgrades are completed
· post resource
management system reform the areas water entities cover will be subject to
multiple regional spatial strategies and natural and built environment plans
(two strategies and two plans – Auckland and Northland - in the case of
Entity A).
62. The
Auckland Water Strategy could potentially act as a tool for providing greater
direction through the development of a set of targets for the water entity.
These could include the targets around drinking water consumption, drought
response, growth and land use, water sensitive design and ecological health.
However central government’s current proposal for reform does not provide
a mechanism by which council would direct a water entity to achieve any targets
or be held to account for delivery.
Community voice and
influence over local decisions in the three water reform proposals
63. The
proposed model has the entities directly accountable to their board, Taumata
Arowai for water quality, an economic regulator for price, regional/unitary
authorities for discharge consents, and a consumer body. The government has
indicated that the role of local authorities will include ensuring new water
entities are responsive to local communities’ needs. However, the accountability
back to local government through the suggested Regional Representative Group is
weak. The main tool will be a non-enforceable Statement of Strategic
Performance Expectations and through ‘softer’ influence. The
opportunity for the community to influence a larger water entity will be less
than at present under the proposal.
64. In considering ensuring all communities have both a voice in the
system and influence over local decisions, we have focused on three
aspects:
· community
engagement on key strategies and plans
· community
voice and influence over local decisions
· consumer rights.
65. The
current proposal notes that the new water entities will be required to engage
with consumers and communities on key strategies and plans that affect them.
However, there is limited detail on what this would entail. We suggest that at
a minimum, the set-up of the new entities should specify the requirements or
principles for consultation, for example as they are set out in the Local
Government Act 2002. Individuals and communities should be able to participate
effectively in decision-making on strategies and plans, to ensure decisions are
well informed. It would be helpful for Entity A to recognise Auckland’s
unique governance structure and the respective roles of the governing body and
local boards.
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 entitles
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 larger-scale impacts (for example the impact on sensitive environments, such
as when replacing the treatment facilities at Huia). The proposals should
therefore specify how communities can input into these projects at appropriate
levels. Doing so, will ensure 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.
67. Local
boards and CCOs have recently developed “joint engagement plans”
which outline key projects in each local board area and agreed engagement
levels (with both local boards and the community). The joint engagement plans
are agreed annually at public meetings and therefore provide a transparent
mechanism for the public to understand key projects in their area and how they
will be consulted on them. While these plans are still being refined, this is a
model that could be considered for the new entities.
68. Detailed proposals for consumer protection (and economic regulation)
are to be developed over a slightly longer timeframe – the Ministry of
Business and, Innovation and Employment will consult publicly on these
proposals in October 2021. The proposals will include:
· the
ability for a regulator to mandate and monitor service quality standards (for example so consumers can be sure their drinking water is safe)
· the
process for setting prices, including requirements for pricing
transparency
· options
for how to facilitate consumer advocacy, including for those who are vulnerable
due to their age, health, disability, or financial position. This will include
the establishment of a consumer advocacy council (or the extension of an
existing body) to provide expert advocacy on behalf of consumers
· the
design of an appropriate dispute resolution process.
69. We
agree that to protect consumer rights, the proposals need to be clear how
service standards and prices will be set and monitored, consumer advocacy
ensured, and complaints processes and mechanisms set up for dispute resolution.
Council decision making and consultation
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 wellbeing
(now and into the future), provide opportunities for Māori to contribute
to their decision-making processes, 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[4].
71. The
DIA guidance to local authorities states that “no formal decisions are
required” from local authorities at present, and expresses a view local
authorities do not need to consult their communities on this matter at this
stage.
72. Given
the Government’s:
· 8
week period of engagement with mana whenua and councils
· commitment
to explore issues such as council and community influence of service outcomes,
integration with other reform proposals, spatial and local planning
· request
for councils to give feedback on the proposal, identify issues and solutions
· and
uncertainty around next steps, including whether the
reform may become mandatory or legislative change will remove legal barriers to
opting in
it would be
premature to make a decision to opt out of the reform process and may expose
the Council to litigation risk.
73. If
reform is not made mandatory, to ensure sufficient information is available to
meet the moral and legal requirements of Council decision-making, staff will
further develop the analysis of options (based on further information from the
Government, advice on next steps, and regional discussions) prior to Council
decision making and consultation on future water services delivery. Whether
this is ultimately required will be dependent on where the Government gets to
with the reform process and the decisions it makes after 30 September 2021.
Areas where further information is needed
74. There are still issues that need to be resolved and areas where
further information is needed, including:
· representation
from and on behalf of mana whenua
· integration
with other local government reform processes
· integration
with spatial and local planning processes and growth
· the
nature, role and timing of economic regulation
· prioritisation
of investment
· what
will a Government Bill cover and whether the reform will be mandatory
· conditions
associated with the Government’s package of funding for local
government
· transition arrangements, including our own workforce challenges (without
transition challenges on top) and due diligence for asset transfers etc.
Risks
75. Significant risks, legal responsibility and financial implications
have been identified in analysing the reform proposals and completing an
analysis of options for this report. The table below summarises these
risks along with opportunities to reduce them through the next stages of the
reform.
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Issues
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Risks with government proposal
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Opportunities/Mitigation
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Strategy
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· Direction is set by national
GPS and may not reflect Aucklanders’ interests (e.g. a compact quality
city, environmental restoration and enhancement, water consumption targets)
|
· Council continues to work
with the Crown to influence key strategy elements (e.g. climate resilience,)
|
|
Land use planning
|
· Fragmented and uncoordinated planning and
provision of infrastructure leading to higher costs and poor community
outcomes
· Inability for council to fund transport
and community infrastructure to match water investment Lack of alignment of
WSE work programme with Council’s policies and plans
· Reputational risks
|
· Council continues to work with Crown to
determine the mechanisms available to councils to influence land use and
management of growth
· Council provides leadership and examples
of how to coordinate in areas of growth
|
|
Investment and Levels of services
|
· Levels of service are
determined by economic regulator / WSE and may result in lower levels of
service for Aucklanders
· Auckland could be
deprioritised to meet greater operational obligations /service levels outside
Auckland
· Stormwater could be
deprioritised, at least initially, while the focus of the regulator is on
water supply and wastewater
|
· Council advocates for
ensuring that there is no reduction in current levels of service
|
|
Economic Regulation
|
· Economic regulation is likely to starting
with information disclosure and price quality path
· May reduce council’s ability to
influence and direct WSE’s activities
|
· Council undertake work on areas of focus
for economic regulator to help inform government’s proposal and
response to consultation document.
|
|
Industry capacity / supply chain /
efficiency
|
· There is not sufficient
industry capacity to undertake all investment required
· Potentially a loss of
efficiency due to disruption associated with transition and competition for
key staff between WSEs
· Potential for duplication of
functions within council and WSE
· Potential loss of clarity
between council roles and WSE roles
|
· Continue to build understanding of potential
areas of duplication of function in Auckland. This work, would better prepare
Council to limit the inefficiencies and capability challenges generated by
transition.
· Staff – gives key
Auckland based staff certainty
|
|
Costs of reform
|
· The costs of water reform to council are
unknown[5]
but are expected to increase as a result of proposed economic and water
quality regulation.
· The responsibilities and therefore costs
with the transfer of stormwater to the new WSE are unknown but may relate to
the need to duplicate capability and tools in order to satisfy remaining
council functions
|
· Work with transition arrangements to
identify the functions, capabilities and costs required to serve each
organisation and that these are allocated appropriately. Likely bespoke series
of agreements between the organisations will be needed.
|
|
Integrated land and water management
|
· Decoupling of stormwater and land management functions
will make developing and implementing efficient and effective responses to
big challenges such as climate change, hazards and growth, more challenging.
· Loss of capability and tools
needed to carry out Council’s statutory responsibilities as a regional
council.
· Potential loss of ability to coordinate and direct the
management of natural assets (such as urban streams) so that multiple
outcomes can be realised for communities (ecology, amenity, bio-diversity,
recreation and stormwater conveyance)
|
· Retention of capability and
tools required to satisfy Council’s regional council responsibilities.
· Retain control of natural
assets such as urban streams where located on public open space.
|
Iwi/Māori
76. The issues covered in this paper are important for Māori. The
Crown is currently leading the engagement with iwi/Māori, mana whenua.
Council is in the process of engaging with the Kaitiaki Mana Whenua Forum, the
Independent Maori Statutory Board and various operational mana whenua forums on
their views of the reform proposals.
Climate Change
77. Climate considerations (both mitigation and adaptation), resilience
and environmental impacts are drivers of the reform process. While there
are no specific impacts arising from this report the decisions that occur post
September 2021 will have an impact on climate and environmental issues.
Next steps
78. The future of water services delivery is a significant issue.
This report however does not commit to the council to a decision relating to
that reform. The government is expected to outline the next steps in the
process following feedback from councils in October 2021.
