Prime Minister labels Wellington Water a ‘basket case’

Monday, 3 March 2025

Prime Minister Christopher Luxon has described Wellington Water as a “basket case”, in the wake of a scathing report on contractor costs and financial management.

The report, released Monday, laid bare how Wellington ratepayers were stung for repairing and maintaining water pipes — with prices inflated by as much as a factor of three.

It revealed the entity’s unplanned water spending per kilometre trebled between 2017 to 2022. Inflation only accounted for around a third of that increase.

This has led to the utility paying nearly three times as much as councils in Christchurch, Hamilton, Rotorua, and Whanganui.

Speaking at a press conference on Monday, Luxon said the details he had seen were “unacceptable”.

“Wellington Water is a basket case and it has been for some time. It's not a proper CCO [council-controlled organisation] like we seen in other parts of the country, throughout the unique corruption that's been built up over a number of years.

“The reality is that they need to professionalise the management of the water assets here in this region. It's not a proper CCO that has balance sheet separation, proper governance, proper management … that is not a way to manage long term water assets.”

Earlier, Wellington Water Committee chairperson and Hutt City Mayor Campbell Barry said the report highlighted “deep-rooted cultural and systemic issues within the organisation which date as far back as 2018”.

“What is concerning for me is that the report identifies that Wellington Water has been putting the panel members (contractors) ahead of ratepayers,” he said.

“This is absolutely unacceptable, and I want to be very clear - this must not continue.”

Wellington City councillor Ben McNulty said the region had been “betrayed” by Wellington Water but it was “bullshit” to suggest contractors were not aware they were overcharging. Now contractors had to figure out how they were going to pay back for what they had “creamed off the back of ratepayers”, he said.

New Zealand is facing increasing scrutiny over infrastructure procurement and spending with many publicly-funded projects experiencing cost overruns, inefficiencies, and accountability issues.

That includes Auckland City Rail Link (CRL), Wellington's Transmission Gully Motorway, Christchurch's Metro Sports Facility, the New Dunedin Hospital Project and iRex, KiwiRail's project to replace the existing Interislander ferry fleet.

The cost overruns and inefficiencies now revealed are likely to have significant implications for the government’s Local Water Done Well plan to address New Zealand's long-standing water infrastructure challenges.

Details will frustrate ratepayers across the region, currently bearing steep rates increases as councils grapple with the costs of fixing a pipe network crumbling after decades of underfunding.

The Post understands Government ministers already briefed on the reports were left staggered and angry.

The report by infrastructure consulting firm AECOM and a peer review by construction consultancy Rider Levett Bucknall identified significantly higher operations and maintenance costs for Wellington Water compared to other similar councils, particularly for unplanned or unexpected maintenance.

The reviewers scrutinised Wellington Water’s contractor panel which divvies capital works jobs out to approved suppliers.

They found average contract rates for pipe installation “well exceeded the average of the peer council valuation unit rates [price per km]” particularly for water and wastewater.

Other costs, especially temporary traffic management and those to set up and disestablish sites were “significant”.

However, a theme throughout the report and peer-review is the limitation and inadequacy of available data.

AECOM recommends further investigation into contract mechanisms, internal processes, supplier overheads and cost data.

Regional mayors were due to receive copies of the report at 8am Monday in a briefing by Wellington Water.

It is likely to bring fresh tensions to the already-strained relationships between elected officials and Wellington Water. Local politicians have been vocal in their criticism of the utility’s performance in the face of strong pressure for more funding.

Wellington Mayor Tory Whanau was “deeply concerned at these revelations ratepayers are potentially being ripped off by Wellington Water and contractors”.

“I’m glad to see the issues we raised finally being acted on, by Wellington Water’s new leadership, but it should have happened sooner,” she said.

Upper Hutt mayor Wayne Guppy said the report confirmed what he had been “banging on about” for the past four years. “There were warning signs.”

Anita Baker, Porirua’s mayor, said shareholding councils had sought assurance of value for money, which was lacking.

“The reports also found a lack of oversight, assurance and weak financial processes and controls in the management of consultant and contractor panels,” she said.

Fulton Hogan, Wellington Water’s major preferred contractor and alliance partner, said all questions of it had to be answered by Wellington Water.

Wellington Water last year confirmed that the person speaking on behalf of Wellington Water – when plumbers complained about being blocked from helping fix leaks – was actually a direct employee of Fulton Hogan.

On Monday afternoon Local Government Minister Simon Watts said he had received an initial briefing on the report which showed why the country needed Local Water Well Done.

'Although this is primarily a matter between Wellington Water and its shareholding councils, this report adds to the concerns I already have about the current situation with regards to water services in the Wellington region and the need for rapid action to resolve.

'A key feature of Local Water Done Well is increased transparency of how water services are delivered, including what ratepayers are funding and how efficient water providers are at delivering water services. It will mean that everyone can see how water service providers spend the money they charge for their services, see what’s going well and identify and monitor areas for improvement.

'My expectation is that the issues at Wellington Water outlined in this report would not happen under the regulated utility model for water services overseen by the Commission.'

The latest report comes after the Wellington City Council and Wellington Water in 2023 commissioned an earlier report.

It’s the latest blow for the beleaguered organisation.

Chief executive Tonia Haskell resigned after a budgeting blunder left councils scrambling to find an extra $51 million over three years.

A subsequent review found a lack of strong checks and balances, and strategic leadership and problems with internal culture.

Haskell was replaced by water engineer Pat Dougherty in September. Dougherty resigned as a director of Wellington Water to take up the post.

The utility’s board chairperson, Nick Leggett, said the organisation had encouraged staff to “speak up and raise risks early”.

“Through this change in culture and direction, we expected to find more areas where improvement was needed, and we haven’t been proven wrong,” Leggett said.

“Recently more information has surfaced around the costs we are being charged by our contractors and suppliers, as well as staff raising concerns on the way our consultants and contractors are being managed.

“It was clear that the level of controls was not in place to ensure proper oversight and prudent financial management. We took these concerns very seriously and investigated.”

The review “confirmed a lack of oversight, assurance, and weak financial processes and controls around how the company manages its consultants and contractors, which opens us up to risks around fraud.

“This had to be changed immediately, and we have done so.”

Leggett said one “isolated incident” of alleged theft was identified. “The person responsible no longer works for us and the matter is now in the hands of the police.”

Last month, Dougherty asked the city council for an extra $37.5 million, partly to better manage the entity.

He told councillors it had become too reliant on contractors and consultants, lost sight of value for money for customers and wanted to replace 30 outside workers with in-house staff.