The Government has announced the process and timetable for the implementation of the Local Water Done Well programme.
The announcements provide confirmation of the broad direction of travel. There is a lot of detailed policy development to come. We remain committed to providing managerial and technical perspectives into the process and welcome thoughts from our members.
Speaking at the post-Cabinet press conference, the Prime Minister and Local Government Minister announced that legislation will provide for the establishment of a new class of local government owned but financially separate entities as an option that councils may choose to pursue. The legislation will also give effect to the requirements to prepare service delivery plans and to strengthen economic regulation.
The first Bill
The first Bill will be enacted mid-year. This Bill will include the framework and requirements for the clear plans for the delivery of water services that were signaled in the manifesto. This starts the clock ticking on a 12-month deadline for local authorities to submit these plans to Government.
While not specifically mentioned in today’s announcement, the manifesto states that these plans will require Ministerial approval. It’s not clear exactly how the approval process would operate in practice – particularly as a decision to reject a plan potentially injects the Minister into decisions other than water such as water charging or levels of service in other areas. We would expect the Minister would seek advice from agencies such as the economic regulator and therefore that this will be a lengthy process.
Both the Prime Minister and Minister explicitly ruled out financial support for councils either with infrastructure needs or with the cost of undertaking service delivery planning and making any changes to delivery. DIA will support the sector with technical advice and support. It appears that the proposals will rely on economic drivers to generate change as opposed to a Government direction.
The second Bill
The second Bill will contain the detail of the regime of economic regulation and what are described as the new range of structural and financial tools for councils, including the financially independent CCO. This will be enacted in the middle of 2025.
Much will depend on the attitude of the rating agencies and capital markers to this new model. The Prime Minister indicated that conversations have taken place and that the agencies are comfortable with the proposal. Commentators have observed that achieving the necessary balance sheet separation is not merely a matter of who owns what equity, but the degree of control over the direction the organisation. These CCOs appear unlikely to operate as those established under the Local Government Act would – exactly how large the differences are will only become apparent when the Cabinet papers are released.
Another significant area of difference between these proposals and the affordable water reforms is that the Government will leave it for councils and Māori to develop proposed approaches to ensuring an authentic voice for Māori in decision-making. There will be no mandatory approach. We assume that this important relationship would be something that would be documented in the proposed service delivery plan.
The second Bill will also set up the regulatory backstop powers referred to in the manifesto. The Minister described these as being broadly similar to what he referred to as the “step in” powers available under the Local Government Act such as Crown observers and managers.
The Government has formed a Technical Advisory Group. As we understand it, this is solely an advisory body rather than a representative one. It therefore includes no elected members either past or present. Details of the membership are below. We understand this group will cease operation on 30 June this year.
The Government also confirmed its intention to enact the legislation repealing the previous government’s reforms by 23 February. This date of enactment has some significance as it appears that the “consult on a CD with water services out” option will be available only to those councils that have adopted a CD by the date of enactment.
Please contact us if you have any feedback or require support at this time.
Technical Advisory Group
Andreas Heuser (chair), managing director at Castalia Limited. Andreas has a background in economic and policy projects specialising in energy sector strategy, water reform, and natural resource economics.
Raveen Jaduram, director of the New Zealand Infrastructure Commission. Raveen has a background in water infrastructure, including six years as the Chief Executive of Watercare.
Wendy Walker, chief executive of Porirua City Council. Wendy has a background in local government, strategic planning, and public management.
Mark Reese, partner at Chapman Tripp. Mark specialises in finance and infrastructure and has knowledge and experience across legal and financial aspects of project and asset financing.
Simon Weston, chief executive of Whangārei District Council. Simon has a background in infrastructure, construction and local government in the United Kingdom, Auckland, and Northland.