'Virtually all' new water providers expected to pass financial test

Monday, 8 September 2025

Local Government Minister Simon Watts says “virtually all” new council water providers will pass the Government’s financial sustainability test.

And, according to Watts, it was “positive” some councils planning standalone water providers had indicated they may enter regional models, in years to come.

The deadline for councils to produce their 10-year water service delivery plans, under the Government’s Local Water Done Well regime, passed on Wednesday. All but Tasman District ‒ granted a delay due to recent flooding ‒ handed their homework in.

Plans reviewed by The Press show household water bills are expected to increase significantly across the country in years to come. Concerns about affordability, particularly in rural centres, have been raised.

The plans also show more than 40 water providers are set to emerge across the country, including 12 multi-council providers, and six single-council controlled water providers.

Despite urgings from the Government that regional entities be formed to make use of an advantageous debt funding arrangement, 24 councils have decided to keep water services in-house.

The Department of Internal Affairs (DIA) will now scrutinise the plans to ensure they are financially sustainable.

MartinJenkins consultant Nick Davis has called the programme a “partial success” and a stepping stone toward a more sustainable industry.

But Watts disagreed, as due to the consolidation of water service providers, 76% of the country’s population would be served by a regional entity.

While expecting virtually all entities would be financially sustainable, DIA was still to confirm this.

“Will there be, and could there be further consolidation in the sector? Well, absolutely, but that's a good thing. But you know, these councils and communities have got to where they are today off their own back.

“People can argue the detail on, you know, ‘could have been better, should have been’ ‒ look, the facts are the facts, versus status quo. This is an unprecedented consolidation.”

Watts said the Government would not be “writing cheques” to councils unable to form sustainable plans, or to incentivise consolidation.

Whether he would intervene by appointing a Crown facilitator or water specialist to compel consolidation would be determined by DIA’s work, he said.

Water NZ chief executive Gillian Blythe, who represents 3400 members of the water sector, said the outcome of Local Water Done Well so far was a “first step”.

“I think the next step is that we continue to have a conversation about what that means for your bill and my bill in terms of affordability,” she said.

“I would hope that all parties across the supply chain continue to look to see whether there are more cost effective ways of delivering water services to communities.”

Debt problem won’t go away for all

Multi-council water providers will be able to leverage debt from the Local Government Funding Agency at advantageous rates, off their owner councils’ balance sheets.

But high levels of council debt could remain an issue for standalone councils, however.

Credit rating agency S&P on Wednesday had a briefing on the New Zealand economy, and director of international public finance ratings Martin Foo said councils were in a “very tenuous position”.

“They’re trying to balance these competing priorities. One is to catch up on this historic water infrastructure deficit, which is going to take a lot of new spending.

“Secondly, they’re trying to reign in debt … and thirdly, there’s the political imperative to try bring down rate increases.”

New Zealand councils were “extremely highly indebted by our metrics”. The average debt to revenue ratio was greater than sub-national governments in China, Canada, Japan, Australia, Germany, and Mexico.