PM Jacinda Ardern and Nanaia Mahuta launch the three waters proposals in 2020 near the site of the Havelock North water poisoning

While Parliament has been debating the three waters legislation, the Department of Internal Affairs has been getting ready to implement it.

Because Labour has an absolute majority, even losing the support of Te Paati Maor and the Greens, as it did yesterday on the third reading, meant that the passage of the legislation was never in doubt.

And so since February, Heather Shotter, the former chief executive of the Palmerston North City Council, has headed a Three Waters transition unit within the Department of Internal Affairs which has been preparing for the new water structure to go live in July 2024.

The immediate consequence of that is that she is ready to announce the chief executives of the four super water entities, probably before Christmas.

Her problem is that if National forms the next Government, they have promised to “repeal and replace” the legislation passed yesterday.

They have not said what they will replace Labour’s mode with, but any reasoned analysis would suggest they would end up doing much of what Labour has done.

The implication of the anti-three waters campaign led by the right-wing Taxpayers’ Union that a repeal would lead to restoring the status quo is unlikely to be viable.

Labour has provoked this response because it has confused the issue by continually arguing that the reason for reform is to make drinking water safer to prevent another Havelock North 2016 series of fatalities because of “dirty” drinking water.

At last month’s InfrastructureNZ conference, Shotter herself presented an eloquent case for change which largely ignored the kind of argument the Prime Minister was presenting.

“These entities will bring economies of scale,” she said.


“They will provide safe, reliable and efficient water services through improved investment and management of those systems and a catchment-wide approach that is simply not possible at present.

Shotter’s focus was on the investment the three waters sector would require.

“Much of that water

 infrastructure is aged and is in serious need of upgrading and revitalising,” she said.

“That is beyond councils’ balance sheets and certainly ratepayers’ wallets.

“We have put the focus back on water after decades of underinvestment.”

And that is the core of the case for the reforms.

Simply, local Government cannot be trusted by the central Government to invest its water revenues in three waters infrastructure.

n a 2019 report, the Auditor General found that in 2018/19, all councils’ renewal capital expenditure on three waters infrastructure was 79% of depreciation. 

“We remain concerned that councils might not be adequately reinvesting in critical assets,” the Auditor General, John Ryan, warned.

A May 2020 Treasury paper argued that Covid made matters worse.

“This is because of the prioritisation decisions that many local authorities will be considering to cushion the blow to ratepayers and manage debt/revenue ratios,” it said.

“Three waters projects may be one of the first areas of spending that will be cut, which would compound pre-existing under-investment.”

National Finance Minister in 2015, Bill English, was aware of the problem.

He launched a 30-year Infrastructure Plan which included a commitment that Infrastructure providers would collaborate more effectively within and across regions, “taking a long-term view and ensuring adequate investment in high-growth communities.”

As a start, the plan proposed the coming together of three Waikato local bodies, Hamilton City, Waipa and  Waikato District Council as a pilot to explore the benefits of working together on three waters issues.

That idea that addressing the failure of councils to invest in water infrastructure would require that they merge their efforts was reinforced when InfrastructureNZ led a delegation of lobby groups, local government representatives and infrastructure providers to Scotland in 2017.

The delegation’s report endorsed the Scottish model of only one water entity for the entire country.

“As the only water supply and wastewater provider in Scotland, Scottish Water has used scale, focus and good asset management to cut services costs and improve service quality,” it said.

An example of the pressures that three waters infrastructure can place on a Council is evident in the Kaipara District Council.

Its 18,700 ratepayers pay about $44 million a year, but the Council has total debt of $44 million, much of it incurred for a wastewater plant in Mangawhai. However, there are now plans for 30,000 new houses in the district over the next ten years with no specific proposals for how the three waters infrastructure for those developments would be funded.

Under the Three Waters plans, the Council would be part of the Auckland water entity.

But these are not the issues and challenges that the Prime Minister and Mahuta have usually addressed in their public comments on Three Waters.

Launching the proposals in June 2021, Mahuta emphasised the safety aspect.

“We have seen the effects of a system in crisis: fatalities from bacteria in drinking water, broken sewer pipes, poorly treated wastewater running into streams and rivers, no-swim notices at the beaches, regular boil-water notices, and lead contamination,” she said.

Ardern echoed that.

 “Safe, affordable drinking water and good quality wastewater and stormwater services are critical for the health and wellbeing of our communities and our environment,” she told the Local Government New Zealand conference last year in a speech that did not address the kind of funding challenges faced by Kaipara.

At the same time, the Government had done two other things to draw attention away from the core reason for undertaking the reforms; it had proposed two governance bodies, with one, the Regional Water Representation Group (RRG) to have 50 per cent manu whenua membership.

It was the first major co-governance proposal outside of Treaty settlements, and it has provoked a backlash.

Significantly, Environment Minister David Parker has been at pains to point out that his Natural and Built Environments Bill rejected exactly the same sort of co-governance arrangement, a measure of his perception that it was electorally unpopular.

At the same time, the creation of two governance bodies, the RRG and the Water Entity board, which would actually run the pipes and reservoirs and treatment plants, provoked criticism that there was no direct accountability.

That was the substance of a submission from the Auditor General to the Select Committee considering the legislation.

Thus public attention was drawn away from the core reason for the reforms; the ability to create entities big enough and independent enough to be to attract debt funding from the international market.

Instead, protesters and the Opposition focussed on the co-governance and accountability issues, arguing that “Ardern” was trying to “steal” local assets.

The failure by the Government to address these arguments head-on has left them to grow and to now be adopted by the Opposition.

They could well be a significant factor in Labour’s slippage in the polls.

So the country is now left in a situation where a massive reform process involving every local body in the country is well underway.

Shotter’s team are now surveying all local government entities to establish exactly what the state of their three waters infrastructure and debt is.

They are doing so under threat from the  Opposition, it is planning to overturn it, but it is unclear what would replace it if it became the Government later next year.

Shotter, however, remains optimistic as she looks to what she hopes will be the future.

“Arrangements across entities and stakeholders will maximise efficiency and improve the overall system delivery and performance,” she told the Infrastructure conference.

“We will have built a world-leading workforce, the envy of other countries.

“There will be a customer-focused system that improves outcomes for end users through leveraging technology, data and information, and customers will know their role in the water system and the value of water and will feel that they are able to participate as and when as appropriate.

“Our national and local economies and communities will have boomed from a secure pipeline of infrastructure investment, of smart, integrated procurement, of pipes and plants that are unlocking housing and economic development. “

But you very rarely heard that from the Beehive.