A policy of defiance looks set to land with a whimper

Thursday, 28 August 2025

Janet Wilson is a regular opinion contributor and a freelance journalist who has also worked in communications, including with the National Party.

OPINION: There are several contenders for worst Government policy this term, from the poor rollout of the FamilyBoost payment to Uber requesting a retrospective change for a law it effectively wrote, but a clear winner plumbs the depths of the policy cycle: Local Water Done Well.

Having only been passed into law last week, with water service delivery plans delivered next Tuesday, this policy not only fails to meet its own expectations, but also threatens to saddle ratepayers with crippling water charges for decades to come.

Written almost in oppositional defiance to Labour’s much-maligned Three Waters, LWDW originally proposed that the country’s 67 territorial authorities transfer their water assets into 15 council-controlled organisations, thereby using the beauties of economies of scale to spread the debt burden.

There’d be no mandating of water assets into 10 centralised authorities, as Labour had promised. Using localism as its North Star, National promised that councils would be able to decide for themselves which CCOs they became part of.

The result? A bugger’s muddle.

Instead of 15 water entities, councils have voted to form more than 40, with 19 of them deciding to go it alone. And it’s not just larger urban areas such as Christchurch and Auckland taking the solo route, it’s councils like Wairoa, Kawerau, Whakatane and Stratford in the North Island and Waitaki and Mackenzie in the South Island, small, rural, cash-strapped councils which, National claimed, stood to benefit the most from LWDW.

Why they haven’t hitched up with their neighbours is complex, but it’s partially explained by the fact that after decades of underinvestment in water infrastructure, and now having to comply with stricter regulations, councils are being asked to make this most important decision just weeks out from a local government election.

Many, like Stratford District Council, are acceding to the wishes of their ratepayers. In Stratford’s case, 92% were against joining with other neighbouring councils.

Others claim the economies of scale argument has been exaggerated, that the real issue for these provincial councils is economies of density, with fewer households spread over wider areas, costing more in pipes.

Then there are the brutal numbers; the water infrastructure deficit estimated at between $120 billion and $185b over the next 30 years, and rising national water standards that have left councils heavily indebted. Clutha District, for example, with a ratepayer base of 11,835, has debts of $146 million.

As outgoing Clutha Mayor Bryan Cadogan told RNZ’s Kathryn Ryan this week, “What might be sustainable for a council’s books may not be affordable for its ratepayers.”

Right now, councils have only two fundraising levers to pull – rates and debt.

The Local Government Funding Agency, which will finance the CCOs, has increased the debt cap for water assets to 500% but many, like Whakatane and Hastings District, are close to that already.

“If rates go up by 50%, then councils can access more debt,” Cadogan says. “But at what cost? Who’s going to pay for it?”

In short, the answer to that is ratepayers. They now face water charge bills that are hundreds if not thousands more.

All of which presents a political problem of epic proportions for Local Government Minister Simon Watts.

Having sneered about some councils’ lack of fiscal discipline, and threatened a rates cap, he faces the possibility of under-resourced councils going bust on his watch.

His compromised model has led him to make the same compromises his predecessor, Nanaia Mahuta, was forced to make, replacing the carrot with a very large stick.

He has already sent letters to six councils, asking them to reconsider, which, as Stratford District Mayor Neil Volzke said, made a mockery of the Government’s own policy.

But that arm-twisting is producing some results. Last week Tauranga City Council U-turned on its previous go-it-alone decision when Mayor Mahe Drysdale used his casting vote to partner with Western Bay of Plenty District Council in a CCO.

And Watts has other options. He could easily use councils’ water services delivery plans to show councils have insufficiently ring-fenced revenue for the delivery of water services and appoint either a Crown facilitator or specialist to force them into regional entities.

Will these strong-arm tactics make Watts’ claims of localism over centralism, of choice instead of mandated decision-making, a laughing stock? Absolutely.

But the price any government pays for that is relatively small when it’s not footing the bill and it will only lose what’s left of its dignity.

The more urgent issue is that Local Water Done Well is bad policy, which will see those with less being asked to pay more. And will see councils saddled with a mountain of debt which their ratepayers will be forced to fork out for.

It’s a policy that was created not to necessarily bring social, economic, or environmental value, but formulated to provide a political contrast to another policy.

And in trying to solve one enormous problem, it will create many more.