We continue our 12 questions about Three Waters. Does it make financial sense, as the Greens and the Three Mayors suggest, for councils to retain control of stormwater assets, which are harder to carve off?
There is quite a lot of overlap between council assets and stormwater assets. The Government realised that quickly, upon including stormwater as the third of the Three Waters. The gutters running down roads are part of the stormwater assets – so ministers were forced to specifically exclude roads from the assets being handed over to the new water corporations.
There's pressure for it to go further and exclude sports fields, culverts and public reserves, which play critical role in soaking up and carrying away water.
The strangely-named Water Services Legislation Bill, introduced last month, lays out a process for councils and central government to decide which assets will be transferred, and how.
WHO PAYS FOR THREE WATERS? 1/ Paying for Three Waters: the local pūkeko v the imported partridge 2/ Who would actually manage the borrowing for Three Waters infrastructure? 3/ Three Waters’ magical kete with room to borrow more and more 4/ On the 4th day of Christmas, what’s so good about four water companies? 5/ Achieving the gold standard of balance sheet separation 6/ Driving through water reforms in new special purpose vehicles 7/ Govt sticks to ‘bottom line’ of balance sheet separation – but why? 8/ If councils retain Three Waters, how much will they have to raise rates? 9/ The silly Ministry of Water Works – and its serious side 10/ On the 10th day of Christmas, should Three Waters become two? 11/ Too big to fail – calls for Govt to guarantee Three Waters debts 12/ Paying for Three Waters: ‘It’s always gonna come back to you in the end’
Councils have to compile a list of their Three Waters assets, and Local Government Minister Nanaia Mahuta has indicated councils will play a leading role in the decision on which stormwater assets to transfer over. The rule of thumb, some says, is that unless it's an old-fashioned pipe running through a metropolitan area, they plan to retain control of it.
Bevan Wallace says: "Councils generally have a holistic management systems and as such, carving out specific assets or classes of assets is problematic."
"Drinking and wastewater are fairly easy to generate revenues from, but the quasi-public good nature of stormwater makes this more challenging." – Amelia East, HKA NZ
The Greens and the Three Mayors argue stormwaters should be removed from the reforms entirely: they're not so easily commercialised as drinking water and wastewater, and their infrastructure is intrinsically linked to other other council infrastructure.
But the downside of that, for councils, is that some have massively under-invested in their stormwater by some councils.
Drinking water and wastewater are often the easier waters to fix; if councils keep stormwater, they will also be stuck with the costs.
“This is a challenging issue in New Zealand, because we are taking a novel approach by including stormwater in the reforms, and with that comes risk," says Amelia East. "That’s because drinking and wastewater are fairly easy to generate revenues from, but the quasi-public good nature of stormwater makes this more challenging.
"So, from that perspective, two waters is better than three.
"But at the same time, as a country on the edge of the global economy with thin labour markets, I have sympathy for the argument that leaving stormwater with councils will make it extremely challenging for councils operationally, as they will have to compete with four large utilities for engineering and construction talent.
"So avoiding the race to the bottom on stormwater really builds the case for Three Waters.”
