The reason Jacinda Ardern, Nanaia Mahuta think Three Waters will be a success

Despite the backlash, Jacinda Ardern and Nanaia Mahuta are confident Three Waters will be a success, because they say it's an opportunity for councils to invest in infrastructure. 

Three Waters is the Government's plan to establish four publicly-owned entities to take responsibility for drinking water, wastewater and stormwater from local councils.

The reforms stem from Havelock North's outbreak of gastroenteritis in 2016 when four people died and 5000 became ill, as well as drought in Auckland and old pipes bursting in Wellington.

The Government on Wednesday confirmed it will force the reforms on local councils after it was first pitched as voluntary, and many mayors Newshub spoke to are not happy.

But despite 60 out of 67 local councils opposing the reforms, Prime Minister Jacinda Ardern insists they are necessary to prevent rising water costs and health issues. 

"The facts say that 64 percent of councils do not have water revenues to meet the full cost of running water services and assets," Ardern said in Parliament. 

"I believe that 34,000 New Zealanders get sick from drinking water every year, and, in the 2019-2020 year, there were over 3000 overflows from sewerage networks. No one would say that that is OK or right or can continue. 

"We need a plan. It so happens that this Government is willing to progress one, even if members on the other side know nothing about what the opportunities or costs are other than to say they oppose it."

Local Government Minister Nanaia Mahuta says it's an opportunity for councils. 

"Once we found out more information and got a comprehensive picture across the country, we realised that this is systemic, it is longstanding; under-investment in water infrastructure is compromised by the way in which council balance sheets work and we needed to find another way," she told The AM Show. 

"Councils will continue to own their assets under the new model that I'm proposing, alongside other councils in that entity. They can leverage those assets in order to provide greater investment in water infrastructure within that entity."

Prime Minister Jacinda Ardern and Local Government Minister Nanaia Mahuta.
Prime Minister Jacinda Ardern and Local Government Minister Nanaia Mahuta. Photo credit: Getty Images

Under the Three Waters model, councils will remain the owners of their water assets but they will not have control over them anymore. 

Their influence will be via regional representative groups of no more than 12 members. These groups - 50 percent council members and 50 percent iwi - will appoint members to the four water entities, who will be independent. 

Since the four water entities span multiple regions, the regional representative groups will be made up of councillors and iwi from multiple regions. It's unclear how they will be chosen. 

A key part of the reforms is what's called 'balance sheet separation'. It means that while the water entities will be owned by councils, they will be financially independent, so the financial position of councils will have no effect on the financial position of the entities, and vice versa.

"Auckland is a prime example because of its constrained balance sheet," Mahuta said. 

"Watercare has deferred a lot of its projects because it's constrained by Auckland Council's balance sheet. We're trying to change that situation and separate balance sheets and leverage across the region so that everyone benefits."

Auckland Mayor Phil Goff.
Auckland Mayor Phil Goff. Photo credit: Getty Images

Auckland Mayor Phil Goff says the model is unfair. 

"Auckland would contribute 94 percent of the assets acquired by the new water entity and get in return a minority voice on an oversight committee which in any case would have no effective power of governance and no ability to ensure responsiveness.

"Far from underinvesting in infrastructure, in this year's 10-year Budget, Auckland Council has invested $11 billion in water services for the coming decade. Projects like the $1.2 billion Central Interceptor address problems like wastewater overflows and will dramatically improve water quality of our beaches and harbours."

But Mahuta says the reforms will save Auckland ratepayers from higher water costs in the coming years. 

"Within the next two years Auckland's water bills will at least double and under the reform proposals that we are making Auckland ratepayers will benefit significantly in terms of reduced costs."

Continued public ownership of water services is a bottom line for the Government, with any future proposal for privatisation requiring 75 percent of votes in favour in a public referendum. That makes it tricky to undo. 

There will be opportunities for public consultation over the coming years including public submissions via the parliamentary select committee process, and public participation with a new working group set up. 

What else did the Government consider?

The Government has been investigating a range of options for four years. 

It considered funding the status quo, and a national centralised fund similar to the NZ Transport Agency (NZTA) model. The Government also considered having 16 entities. But the alternatives were considered unsustainable and unaffordable.

The Government tried to make the reforms easier for councils by announcing a whopping $2.5 billion package in July to ensure they were not only "no worse off", but "better off" from the restructure of water assets. 

The four water service entities are scheduled to begin operating in July 2024.