Local Water Done Well – Government announces new water infrastructure plan for Auckland

7 May 2024

The Government has unveiled its first Local Water Done Well plan for a new “financially sustainable, locally delivered” model for Watercare in Auckland. It is designed to provide a long-term affordable solution to maintaining and investing in water infrastructure by achieving balance sheet separation, whilst maintaining local control of water assets.

This article is the first in a series relating to the introduction and implementation of the Government’s Local Water Done Well water infrastructure policy. Subsequent articles will be published as more announcements are made and the legislation giving effect to such policy is introduced.

Making good on an election promise, in its first 100 days, the Government repealed water services legislation giving effect to the previous Labour Government’s water reform programme that would have transferred ownership and control of storm water, wastewater and drinking water assets from local councils to four water services entities (known as “Three Waters”). 

At a high level, the Government’s replacement water policy, Local Water Done Well, aims to:

  • ensure that local councils continue to own and control storm water, wastewater and drinking water assets, but with some government oversight;
  • prescribe rules for water quality and investment in water infrastructure; and
  • introduce measures to ensure water services are financially sustainable.

On 5 May 2024, Prime Minister Christopher Luxon, Local Government Minister Simeon Brown and Auckland Mayor Wayne Brown jointly announced a new model for Watercare, Auckland’s drinking water and wastewater service provider.

Watercare will be able to borrow more money for long-term investment in water infrastructure and spread the borrowing over a longer period, thereby reducing the impact on ratepayers in the short-term and improving intergenerational equity. As a result, the Government has stated that water rates in Auckland will increase by 7.2% this year, preventing a previously projected 25.8% increase. 

Watercare will continue to be owned and operated by Auckland Council but will be financially independent, with its debt no longer being on Auckland Council’s balance sheet. Auckland Council will not be able to provide any financial support to Watercare, and if Watercare did face any financial difficulties, then neither Auckland Council or the Crown will be required to intervene and provide assistance.

The Government has indicated that it will introduce two bills to give effect to its Local Water Done Well policy. 

The first, the Local Government Water Services (Transitional Provisions) Bill (Transitional Bill), is expected to be introduced later this month and will include provisions for the new Watercare model. Minister Simeon Brown has also previously signalled that:

  • the Transitional Bill will contain provisions relating to council service delivery plans, transitional economic regulation, and provisions for establishing council-controlled organisations for the delivery of water services under the Local Government Act 2022;
  • the second bill will provide for a long-term regime and contain provisions relating to financial sustainability, an economic regulation regime, and a new range of structural and financial tools, including a new type of financially independent council-controlled organisation. This is expected to be introduced in December 2024 and passed by the middle of 2025; and
  • all legislation to support the implementation of Local Water Done Well is expected to be passed by the middle of 2025, ahead of local government elections in October 2025.

Whether the plan proposed for Auckland will work for other councils throughout New Zealand remains to be seen, but this new plan for Watercare demonstrates that the Government is finding ways to implement its Local Water Done Well Policy. We will keep a watching brief on developments over the coming months.  As with many areas of major reform, the detail of the arrangements will be important to work through, once available.

If you have any questions about the matters raised in this article, please get in touch with the contacts listed or your usual Bell Gully adviser.

Disclaimer: This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.