Issues councils are facing that have led the Government to introduce Local Water Done Well.

Costs

All of local government has had to face significant increases to their costs. The capacity of residents to pay more in rates is at its peak and councils are limited in the ways they can raise money - particularly for expensive, long term infrastructure. Many councils have reached their limits for borrowing.

Estimates show that New Zealand needs to spend between $120 billion and $185 billion on water infrastructure over the next 30 years.

Local Water Done Well enables councils to increase their access to funding without it affecting their balance sheet.

Over the past three years, local government costs have significantly gone up:

• Bridges are 38% more expensive to build
• Sewage systems are 30% more expensive to build
• Roads and water supply system are 27% more expensive to build

The CPI – inflation - was between 2 and 7%

[source: Brad Olsen, Infometrics]

Insurance premiums for councils have also increased significantly (+15%) in the last three years – far more than the rate of inflation.

Old age/storm damage

Aging waters infrastructure that is breaking, overloaded or has reached the natural end of life and needs to be replaced.

Storm events are becoming more frequent and can cause immense localised damage.

Local Water Done Well provides a pathway for councils to plan and deliver upgrades (or new infrastructure) in the most strategic and timely way.

There is an unfair expectation/requirement for today’s property owners to fund urgent infrastructure fixes (yet the beneficiaries of that infrastructure could be enjoying the benefit for the next 50-100 years).

Population growth

The number of people in our towns and villages is either growing fast (and needs to be catered for) or is widely spread out in little clusters.

Many towns and villages have intake or treatment plants that were built in the “good old days” when there were not the standards there are today (and certainly not the increased standards there are going to be introduced under new regulations). These old systems need costly upgrades and replacements to cope with population growth.

Competing demands

Single councils struggle to afford all their community wants/needs and have to make trade-offs all the time eg new pipes/treatment plants v resealing country roads v a playground v a library or community centre v insurance v meeting new regulations v maintaining parks and sports fields v treating waste water to the required standards etc.

Setting aside tens of millions to fund just one future treatment plant is a tough ask for any single community, for example a Wastewater Treatment Plant in Cambridge is expected to cost $100M and in Matamata $60M.

Separating out waters services from rates funding can free up rates capital for other infrastructure and services.

More regulation

Under Local Water Done Well, there are to be three regulators for waters services - the Regional Council, Taumata Arowai and the Commerce Commission.

The intent is that water services are moving to “whole of system” regulation rather than the current ‘end of pipe’ regulation.

This is a significant change for councils – regardless of whether they go into a CCO or joint arrangement or whether they decide to keep an in-house business unit.

Costs are going to go up.

Workforce planning staff

Individually, each council requires a highly skilled workforce to provide and deliver quality water services.

A CCO, like Waikato Waters Ltd, offers the geographic reach, scale and vision to be a compelling proposition for prospective employees. It would give staff line of sight of councils’ collective intentions and a future career pathway.

A joint CCO makes service delivery more resilient, particularly for smaller councils where operations can be highly dependent on a few individuals.

Councils must:

• analyse a range of options for water services delivery
• choose a preferred option
• consult their communities on their preferred option
• receive feedback and make a final decision by the end of June 2025
• include the decision in a Water Services Delivery Plan together with the timeline for implementing that decision
• submit the Water Services Delivery Plan to the Minister of Local Government (via Department of Internal Affairs) by 3 September 2025
• start implementing the WSDP from 1 July 2026

A Water Services Delivery Plan (WSDP):

• is a one-off plan councils are required to submit under Local Water Done Well
• must include detailed information about water services operations, assets, revenue, expenditure, pricing, future capital expenditure, and how councils plan to
• finance and deliver their preferred model
• must demonstrate how the water services will be financially sustainable* by June 2028.

*Financial sustainability means water services revenue [income] is sufficient to meet the costs of delivering water services.

Water Services Delivery Plans are for a minimum ten-year timeframe but can be up to 30 years.

The Water Services Delivery Plan must be certified as true by the Chief Executive, signed off by the elected council and submitted to the Minister for Local Government by September 2025.

• Taumata Arowai are creating a single wastewater discharge standard. This will potentially require higher standards of treatment for discharges to waterways.
  Taumata Arowai is the water services regulator for NZ. They have an oversight role in relation to the environmental performance of public drinking water, wastewater, and stormwater networks.
• The Waikato Regional Council will continue to regulate the taking of water and discharge of wastewater and stormwater (end of pipe) as per the proposed new standards.
• The Commerce Commission will oversee (and regulate) the investment in network and treatment plants - including requiring any action needed to improve performance. The cost of providing water services will also become regulated with a consumer protection regime and this will also be overseen by the Commerce Commission.

The seven councils that signed the Heads of Agreement are:

• Hauraki District
• Matamata-Piako District
• Ōtorohanga District
• South Waikato District
• Taupō District
• Waipā District
• Waitomo District Council

Waikato Water Done Well has also been strongly supported by Waikato Regional Council to date.

Each council must decide if Waikato Water Done Well is going to be their preferred option to consult on before May 2025.

The Heads of Agreement does not commit individual councils to confirm Waikato Water Done Well as a preferred option – just that they will contribute to the analysis.

Each council is also analysing other options and may choose to go with one of those instead eg going it alone or joining with different councils.

Council’s assessed their local needs as follows:

The full proposal for Waikato Water Done Well can be found here. 

The following diagram is a summary of how the ownership and accountability will operate.

Together the seven councils have…

• 41% of the region’s population (205,000 people)
• growth higher than the national average of 2.07% - ranging between 3% to10.2% over the last five years
• 39% of the region’s water and wastewater connections (>129,000)
• 45% of the region’s water services annual revenue (excluding development contributions) at $154m.

Waikato Water Done Well is a model that offers the participating councils a range of benefits.

1. Enables a catchment-based approach for water quality, infrastructure planning and construction, regulatory requirements and consenting
2. Enables water service/s delivery to be managed more efficiently and so become more affordable
3. Enables greater ability to borrow money (over a longer period of time) so much needed waters infrastructure can be constructed
4. Enables opportunities for a skilled, sustainable and community-based waters workforce
5. Enables more focus on customers/people
6. Enables standardised data, analysis, compliance, processes eg resource consents
7. Enables local control to be retained through the way the CCO is structured
8. Enables broader expectations to be met eg Treaty settlement obligations, investment in regional catchment solutions, economic growth
9. Enables visibility of the actual costs of waters services (not buried within or subsidised by other council activities)
10. Enables rates income to be reduced or potentially diverted to other community needs.

Efficiencies include:

• access to lower interest financing
• one asset management plan informed by councils’ long-term infrastructure strategies and spatial plans
• a single combined capital works programme equals greater bargaining power for procurement of services
• streamlining of processes
• reduced duplication
• pooling of resources
• smart consenting – integrated approach on catchment-wide basis
• consolidated data collection.

Operational efficiencies can be enhanced by working across current Council boundaries eg the Morrinsville water supply catchment is in the Waipa district and the treatment plant is close to Cambridge as it is to Morrinsville, and the Paeroa Wastewater Plant is closer to Te Aroha than Te Aroha is to Matamata. 

Map of Assets

Affordability can be improved under the Waikato Water Done Well model in a couple of ways.

First, because the CCO can borrow more over a longer period, it can use that debt to hold water charges comparatively lower. That makes sense. Using debt to fund the investment in long life assets (some of which have a lifespan of 75-100 years) means the cost can be spread across the generations who use them (this is like paying your mortgage off over 30 years rather than 10 - it is cheaper per month).

Secondly, the Waikato Water Done Well model can deliver savings because: 

• increased scale brings opportunities for investments in efficiencies that smaller councils can’t justify  
• certainty of revenue streams, independent of political cycles, allows for optimisation of capital delivery across years and across the region. This provides certainty to contractors who can then invest in more machinery and people. And because they have greater confidence in on-going work, they can also price their services at a comparatively lower point.

Cumulative net cost savings over the next 15 years for councils under Waikato Water Done Well…

Those savings could be used to pay back some debt, build more needed infrastructure or give back to communities in lower water charges.

Ultimately it will be up to the Board to decide what water charges are. But being able to borrow more and the savings from operating at scale mean that it has the ability to keep water more affordable than any one council could.

The short answer is no.  At the start, the CCO will continue to charge for water in the same way as councils intended in the long-term plan that was in place when the CCO was established.  The new water services legislation will require the CCO to set out its intended price increases from 1 July 2027.  This will have to align with the expectations of councils.

An expectation that councils have already communicated is that the CCO must target price increases lower than what councils could achieve on their own.  The future price path is likely to have differences in prices across districts to reflect differences in investment, borrowings and costs of service.

In the long-term, as the cost savings and efficiencies of working together are realised, the CCO may choose to use these savings to bring prices closer together.  They can do this as and when it suits their customers, the CCO and its shareholding councils.  This will be sharing the benefits of what is realised from working together across communities.

Getting to the stage of an established CCO with councils being able to commit to a shareholding agreement is expected to cost around $2million.  It will also take time and effort to actually transfer water services businesses from each council into the CCO.

As part of considering Waikato Water Done Well as an option, work is underway to develop a programme of work that will achieve a safe transfer from council to the CCO. Once this is complete, we will know in detail what we need to do and when we need to do it.  The intention is that this will be financed by the councils in the short-term, but the CCO will then reimburse the councils for this cost once it is operational.

Hamilton City and Waikato District have agreed to develop a different option to put to their communities.

And while both approaches acknowledge there is value in having one Waikato-wide CCO in the long term, for now, each grouping is on a different path to get there.

Thames Coromandel District (also part of the Waikato) is looking at different options also.

Waikato Water Done Well initial focus is on the delivery of water and wastewater services.
Stormwater services will remain in each council until such time as they decide to contract these services to the CCO.

In the meantime, councils would remain responsible for setting the level of service and rates for stormwater – but also to ring fence the costs of these services. 

No.

You will be billed for water and wastewater (sewerage) by either your Council or the Waikato CCO.

If your Council transitions to the Waikato CCO the bill may continue to come from your Council until a full transition is completed.

The amount you pay is determined by the Council or CCO based on the cost to provide that service i.e. water supply or wastewater treatment.

In time, yes.

However, at the beginning, when the CCO is first established, councils may send out the bills on behalf of Waikato Waters. These details are still being worked out.

Whether the bill is from councils on behalf of the CCO or from the CCO, there will be clarity on how much you are paying for water services.

If a council decides to continue to deliver water services in house - then the council will also set out how much they are charging for water compared to other council activities.

If a new CCO is established (Waikato Waters Ltd) then they will be the provider of water and wastewater services across the area of the partner councils. Individual households/businesses will become customers of Waikato Waters noting that each council remains a shareholder in the new organisation.

Yes, with the approval of the existing council shareholders

From late 2026, once Waikato Waters Ltd is fully operational, councils that did not opt into the initial offering, may be able to join.

Waikato Waters is expected to be established in 2025 but it would not begin full operations until the first half of 2026.

Each council will determine the timing of its transition into the CCO.

All revenue collected by Waikato Waters Ltd must be spent on water services.  (The CCO does not issue “dividends” the way a private company does.)

The Commerce Commission will regulate that this is occurring.

As councils transfer their water services business into Waikato Waters, shares would be allocated based on the number of water/wastewater connections.

Before any assets are transferred to Waikato Waters balance sheet, their value would be determined using an agreed valuation method.

In addition to the powers of intervention under the Local Government Act, the Minister can appoint a Crown water services specialist if a Water Services Delivery Plan:

• is not submitted
• is not compliant with the legislative requirements (and amendments requested by officials are not made)
• is not being given effect to. 

Depending on the terms of appointment, a Crown water services specialist can:

• prepare a Water Services Delivery Plan for the relevant council(s)
• direct a specific Water Services Delivery Plan be adopted 
• assist the council(s) giving effect to an accepted Water Services Delivery Plan. 

A Crown facilitator can also be appointed if there are problems preparing a Water Services Delivery Plan or implementing.  As the name implies, their role is more facilitative whereas the Crown water services specialist can be directive.