The Government has called in the same economics consultancy that worked on its aborted foreign buyers’ tax to now help design a replacement for Three Waters.
Castalia Advisors’ Managing Director, Andreas Heuser, is to head a Technical Advisory Group that Local Government Minister Simeon Brown says is to “contribute specialist and technical expertise to myself and the Department of Internal Affairs as we develop policy and legislation to implement Local Water Done Well.”
“Local Water Done Well” was National’s election campaign name for its vague proposals to replace Three Waters.
Castalia and Heuser have, however, already been in the thick of the Three Waters debate, having developed an alternative proposal for the anti-Three Waters lobby group “Communities for Local Democracy”.
That proposal forms the basis of NatIonal’s “Local Water Done Well” unveiled yesterday.
The Department of Internal Affairs sharply criticised that proposal, and three prominent economists attacked the consultancy for its work on National’s tax proposals.
Internal Affairs called in an Australian consultant, Geoff Swier, who was one of Roger Douglas’s economic advisors in the 80s.
Swier contested the validity of many of the assumptions in the Castalia report.
Under the proposals announced yesterday by Local Government Minister Simeon Brown, Councils could group together to set up Council Controlled Organisations, which would derive income from water rates, and they would be able to use that revenue as security for borrowing to invest in water infrastructure.
Prime Minister Christopher Luxon said at his post-Cabinet press conference that they could be able to borrow as much as 600 per cent of their revenues.
“The rating agencies are very comfortable with that model,” he said.
But when asked whether the Government had spoken to the ratings agencies, he appeared to say it hadn’t.
“District councils have already engaged and had conversations with rating agencies,” was his reply.
“We’re well aware that the model meets their needs.”
In fact the Government’s “model” is almost the same as the proposal developed by Castalia for Communities for Democracy in 2022.
Both proposals have one fundamental difference with the Labour Government’s Three Waters proposal: the idea that two governance bodies would sit over the new water entities has gone.
That is important because under Labour, the supreme governance body would have half its members appointed by manu whenua.
Luxon has always linked National’s opposition to Three Waters to the co-governance proposals.
He spoke about them at Ratana last year in the same week that National released the outline of the policy it announced yesterday.
“They (Labour) haven’t been upfront on such a big constitutional issue,” he said.
“They haven’t taken people with them, and as a consequence, it has become increasingly divisive across New Zealand.”
But Castalia’s own Three Waters proposal indicates there could be significant issues with Maori not being involved in the process.
It suggested Maori involvement could be satisfied by having Maori ward councillors involved in appointing the boards of the new Council Controlled Organisations.
It also said: “Mana Whakahono a Rohe an option which could be expanded —currently in place with several councils COEs as a mid-sized, regional administrative unit can engage with hapu and Iwi over specific issues, communities and water bodies, aligned with rohe and takiwa Regionally appropriate solutions more likely.”
Mana Whakahono a Rohe are binding statutory arrangements formed under the Resource Management Act between Iwi or hapu and local authorities.
In effect, they were the antecedents of co-governance.
And then Castalia said: “Effective partnership with Maori over Te Tiriti rights and interests may require additional policy change (for example, recognition of property rights in water resources).”
That is unlikely to be welcome in the Beehive with the implications that Maori ownership of water resources might have for water allocation for agriculture, particularly in over-subscribed catchments like Canterbury.
But iwi leaders have repeatedly declared that if a price is put on water, then they will go to the Courts seeking allocation rights that the Waitangi Tribunal has already recommended they have.
There is no specific Maori presentative on the Technical Advisory Group (TAG) announced yesterday in contrast with the policy under the previous Government, which was to include Maori on most official committees and working parties.
One member of the TAG, Porirua City Council CEO, Wendy Walker, has previously raised a point that has concerned a number of Councils and Councillors, which is that removing water debt from the Council’s balance sheet would mean the Council had fewer assets.
She told a Select Committee in 2022 that this raised the spectre of council amalgamation because, after the Three Waters reforms, councils would be far smaller in terms of what they did.
“It doesn’t really make us a viable proposition for the future [that’s my] personal view,” Walker said.
“If you take water away, there’s not a lot left. There’s roading.”
But both the Prime Minister and Simeon Brown were adamant yesterday that the new model would achieve balance sheet separation between the new water bodies and their Council owners.
That also means that the new bodies’ only source of income would be water rates.
Luxon said the Government would not offer a Crown guarantee to them to cover their debt.
Labour’s former Local Government Minister Kieran McAnulty said this would now mean ratepayers would pay higher rates, with the Government confirming it had no plan to help councils deal with ageing water infrastructure.
“The government’s confirmation today is that it will repeal the affordable water reforms and see higher rates for every ratepayer – up to 90 per cent in some individual councils – in 30 years,” he said.
“The cost of fixing our broken water infrastructure is estimated at $185 billion over just three decades. It is simply irresponsible of National to ignore the problem.”
Wellington City already faces that prospect with its proposal to spend $1.1 billion on water infrastructure over the next ten years, likely to push next year’s forecast rates up from 13.8 per cent to 15.4 per cent.
The question will now be how long before National’s balance sheet separation allows Wellington Water to borrow more to counter that need for rates rises.
But first, Wellington ratepayers will be getting water meters and paying separately for their water.
It is hard to see how National’s move yesterday will change much – except that it possibly provokes a Maori backlash that will head to the courts.