Why ratepayers are paying the price for Wellington Water failings

Tuesday, 4 March 2025

Wellington mayor Tory Whanau responds to scathing water report

Andrea Vance is The Post’s national affairs editor

OPINION: For years, the money tap was off. Chronic underinvestment left water infrastructure outdated and on the verge of collapse.

Over and over, we’ve been told that fixing these ageing and deteriorating pipes would be impossible without substantial increases to rates and user charges and investment funded by taxpayers.

Both Labour and National catastrophised this crisis for political ends. Across the region, rates percentage increases were in the double digits.

How galling then for Wellington ratepayers to learn on Monday there was plenty of money sloshing around the system.

But instead of upgrading leaking pipes and preventing the leaking of sewage into the city’s harbour that money was pouring into the pockets of private contractors and consultants.

The details of a series investigations into Wellington Water that emerged on Monday are breathtaking.

Fixing leaks is an expensive business for Wellington Water.

Since at least 2016, less than a dozen preferred contractors — including infrastructure juggernaut Fulton Hogan — have benefited from a loose and weak procurement system.

And what we’ve learned is that Wellington ratepayers were paying three times more for unplanned repairs as other councils.

That flow of easy money has now been turned off. Wellington Water has abandoned its contractor and consultant panels, and scrapped a “maintenance alliance” that essentially embedded one of those contractors, Fulton Hogan, in the utility.

The organisation itself is circling the drain, to be replaced within the year by a new regional water entity that will own all water infrastructure and can raise its own debt.

That makes calls to replace senior leadership, the board chairperson Nick Leggett, and directors rather pointless, and ultimately more expensive. (By way of note, the board is currently two directors short as shareholding councils have dithered for months over replacements).

Should we also replace Wellington Water’s other governance structure ‒ the mayors, deputies and regional councillors who sit on the Wellington Water committee? They are equally culpable. We pay councillors to oversee how ratepayers’ money is spent.

Managing water assets will soon pass from Wellington water to a new entity

For months, elected representatives have been sniping at the utility they control, as they sought to displace blame.

But the reality is, these companies became embedded and expanded into Wellington Water because the shareholding councils didn’t invest properly in the establishment of the utility.

It didn’t have a proper finance system nor an asset management system, a key reason for the budgetary failure that cost councils $51m last year.

It was never right-sized and never had the scale to pony up for the kind of software and data management that's needed.

So, it put contractor and consultant panels and an “alliance” with Fulton Hogan in place to ensure it could deliver services, and never matured away from that reliance.

Like that Spiderman pointing at Spiderman meme, it’s easy to get caught in a council-Wellington Water blame loop.

And that is where the Government would prefer this sits, as it hastily passed the buck back to its favourite scapegoat ‒ local government.

But that ignores the broader lessons from this scandal.

For years, across the local and central public service, internal capacity and expertise has been hollowed by outsourcing.

These types of contracts ‒ where health, education, transport, infrastructure and waste management functions are outsourced to large, international companies ‒ are now commonplace across local and central government. Because they hold the data and the knowledge, publicly-funded organisations are then held hostage by an unelected oligarchy.

To an extent, the Government’s push for cost-cutting has resized the contractor and consultant market. But the spend ‒ and the dependence ‒ is still significant.

This outsourcing is based on the principle that the public sector is inefficient, and private companies with their economies of scale, and competitiveness get better value for public spending.

But when contracts are structured to leave only the largest players eligible to bid or only a few companies who barely compete with one another, and oversight is poor, the legitimate work of the public service is left vulnerable to corruption and profiteering.

And ultimately the bill is higher for the public.