Nerd Sunday: Wai oh wai! What's next for our water?

I will never be anything but a small town girl.

From my little house, my teenage son makes a ten minute walk to school, slouching there and back on spindly legs below his shorts. When I come home from my job in the city at night, stepping off the carriage and onto the platform, there is a man with a little dog in a little jacket. They sit and watch the trains come and go together, even when it’s dusk and the air is sharp and cold. My weekends are a list of chores done in unfussy clothes, errands and groceries; maybe a movie at the tiny local theatre, or a walk in the bush or by the river. I cherish the comfort and the rhythm of my life in this place.

Te Awa Kairangi Upper Hutt is the place I call home. But Upper Hutt is in the shit. And this shit could be literal.

Any provincial town likes to think of itself as different from the rest, but Upper Hutt is winning the kind of prize nobody wants. This week’s community newspaper set it out starkly, warning readers to prepare for the worst case scenario.1 In a wider region where all the water infrastructure is dire, Upper Hutt’s is the leakiest - an astonishing 52% of our water flowing from decrepit pipes into the ground beneath our feet.

With a hot and dry summer on the cards, the likelihood of water shortages is obvious.2 Less obvious is what could happen next. When a shortage is severe enough, pressure is lost across the water network. Contamination may flow in, and it can include sewage: human waste flowing through your taps into your bathroom and kitchen. If you’re lucky, you end up with a ‘boil water notice’. If you’re not, you - your town - end up with a ‘do not drink water notice’ or a ‘do not use notice’.3 The latter is issued when your water is unsafe even for washing, because touching it could damage your skin or your eyes or your lungs.4 These kinds of notices can take months to resolve. The fate of my town, if that happened, is difficult to imagine.

OK: you know the story so far. Around the country, our water infrastructure is in crisis. Many roads led to this multi-generational cock-up, some of which I’ve written about before.5 Labour pushed Three Waters and lost the election. National - who campaigned on greater local control of local water assets - decisively won.

I want to say from the outset, this isn’t a smarty-pants, I-told-you-so type of post. Yes, I preferred Labour’s solution. But plenty of people didn’t, and their votes carried the day. Some of these folks were just racists and cranks. But for others, there was something else. Something struck them, an unease about central government taking something from their communities - and maybe I don’t get it, but I figure I need to listen. Because as a country, we need to get our act together. If we don’t people will suffer, and some will die. It’s just that simple.

It’s been a lovely sunny weekend, and another person might have spent it enjoying life, but apparently that’s not my thing. Instead, I’ve been combing through National’s water policy and other documents, trying to piece together what’s going on - and, depending on coalition talks, what could happen next. There were too many words and it was hard and I wanted to cry. With no easy explanation available, I’ve tried to create one, posing questions where I don’t understand stuff.

Here goes. Any shortcomings should be attributed to me, and also our entire democratic system.

How exactly did we get here?

To understand where are now, we need to go back to Labour’s Three Waters. I’m sorry. Really, I am.

Havelock North is another small town, not so different from my own. When its water supply was contaminated with sheep shit in August 2016, it wasn’t even the first time.6 But this time, campylobacter made 5000 people seriously ill, killed four people, and left an unknown number with ongoing health complications or disabilities. Our national pastime - cognitive dissonance in the face of dramatically failing infrastructure - was no longer tenable. An inquiry was kicked off, and it reported back with a bunch of recommendations.

What happened next? Well, between 2020 and 2022, some important stuff was set in place. The Labour Government created a new organisation called Taumata Arowai (which gets referred to in National’s water policy as ‘the Water Services Regulator’).7 The Labour Government also created a bunch of new standards for water quality. As a regulator, Taumata Arowai’s jobs include encouraging water suppliers to meet those standards, growling them if they don’t, and helping respond to public emergencies involving water.8

So Aotearoa now had some clear standards for water, and a way of enforcing those standards. Were we done yet?

No, we were not done yet.

This is where I feel a bit stink for local government, who’ve copped a lot of flak for their management of water assets. Sure, some are more interested in banning karakia, but most local government folks I know are highly conscientious, knowledgeable, and in it for the right reasons.

The thing is, local government makes its water decisions in a really tricky context. Like the Labour Government acknowledged at the time, local government can be pretty cash-strapped. The smaller a council, and the fewer ratepayers to get money from, the more of a problem it’s likely to be. (Councils also can’t borrow money the way central government can - something we’ll come back to.) On top of that, clever-water-fixing people aren’t that easy to come by. Some councils struggle to get the skills they need.9 It’s a double whammy.

Whatever the rights or wrongs, Labour decided these were problems that central government needed to fix. This is, of course, when the proverbial started to hit the fan - some people felt central government was overreaching into their communities, and they used terms like ‘confiscation’ and ‘asset grab’. So why did Labour plough ahead? Bernard Hickey offers great explanations.

Our water infrastructure needs a shitload of investment - up to $185b by 2051, depending on who you ask.10 Hickey explains how our political attitudes to tax and borrowing constrained Labour’s room to move. Did they want to hike up tax or rates to pay the infrastructure bill? Nope. Then did they want to pay by central government borrowing instead, increasing our national debt? Also nope. You can see how the options were narrowing.11

And so the main proposal we call Three Waters - putting council water assets into water service entities - was born. Again, Hickey explains why Labour did it. First, there was scale. The bigger an organisation, the cheaper it can typically do stuff, not like some of our teeny tiny councils. That scale was intended to lower costs for us water users. Second, there was something called ‘balance sheet separation’.12

What in tarnation is that?

Slide with me between the balance sheets and you’ll find out.

OK, this bit is proper technical, but I’ll do my best because it’s really important. It’s time for my third form economics education to shine.

A balance sheet describes an organisation’s assets (what it owns) and its liabilities (money it owes, or responsibilities it’s entered into that will carry a cost). Why put councils’ water assets in water service entities, with their own balance sheets?

Well, if the councils didn’t have direct control over the assets, and the water service entities did a cracker job of running them instead, the entities would have a stronger credit rating. That would allow them to borrow the shitload of money needed to fix our water infrastructure - something that councils typically can’t do. The debt could be paid off over time, rather than councils having to find all the money in a rush through giant rates hikes or user chargers. Cha-ching.13

But the problem with borrowing is that you have to pay it back - balance sheet separation or not. Under Labour’s plan, instead of people paying for water through their rates, they’d be billed by their water service entity instead.14 That prospect irked a whole new group of people. (At this point it’s worth noting that, as part of the Three Waters wrangling, Labour announced a $2.5 billion fund for local governments, intended to help them through the transition to the new water regime, and to do local wellbeing stuff more generally.15 It didn’t seem to help much. By the time the election rolled round, it felt like almost everyone in Aotearoa was confused, angry, or both.)

Finally, we’ve made it to today.

Okey dokey, team. Thanks for hanging in there.

We’ve seen how a lot of shit-quality water has gone under the bridge. We now have a new government, conducting coalition negotiations as we speak. With bums not yet allocated to seats, we don’t know exactly how water policy will play out. But we do have National’s water policy, from its election campaign, and we can expect it to be influential.16 It’s a little thin in places, but let’s work through the key bits. Why? Because whoever you are, and wherever you live, what happens next is critical.

1.Repeal Three Waters and scrap the four co-governed mega-entities

I guess this bit starts out obvious. National’s said they’ll repeal the existing Three Waters legislation (the bit that sets up the water services entities) in their first 100 days of office, before the entities actually start. They haven’t been specific about what they’ll replace this law with, or when.

They want to tinker a little bit with Taumata Arowai (the Water Services Regulator), but they’re not going to get rid of it - or mess with the new water quality standards, which they support.

2.Restore council ownership and control

With the water services entities out of the picture, councils will be back in the boss seat. But National recognises we can’t just go back to the way things were. They want Councils to up their game.

What does this mean? After the law’s repealed, each council will have a year to make a plan. The plan will show how the council will sort out its water infrastructure, meet water quality standards, and become financially sustainable.

National won’t force councils to adopt any particular model for delivering water services, or push them into organisations - something they see as central government telling communities what to do. If councils want to club together to try and borrow money, maybe in things called Regional Council Controlled Organisations, they’re welcome.

All this begs the question: what if a council simply can’t come up with a workable plan, because no other councils want to join up with it, or it can’t attract clever-water-fixing people, or it’s just too broke? National proposes the government has ‘step in powers’ to act as a backstop. That could mean one-off funding to get the council on its feet. Importantly, though, there’s no discussion of timeframes. Plans are due a year after the law is repealed - but some of our infrastructure may not make it that long.

3.Set strict rules for water quality and investment in infrastructure

We’ve covered the water quality bit - National’s in favour. What about the rules for investment in infrastructure? National has pledged to set up a Water Infrastructure Regulator in the Commerce Commission (different from Taumata Arowai, which worries mostly about water quality). The Water Infrastructure Regulator will get the job of checking councils are keeping their infrastructure up to scratch and looking out for the future.

4.Ensure water services are financially sustainable

This is where it gets tricky. You saw above, councils’ plans will need to show they’ve achieved financial stability. The government won’t tell them how.

Councils will be free to charge for water, charge for new connections, or wrap water costs into rates - although they won’t be able to privatise their water assets. The policy doesn’t commit to stopping big price or rates increases, although it says the new Water Infrastructure Regulator will make sure prices are ‘fair’.

There’s more. Councils’ plans will need to show they can access borrowing to invest in infrastructure. The implication is that if they can’t do this alone, they’ll be forced into joint arrangements with other councils.

And there’s more again. Councils will be forced to ringfence money for water infrastructure, because ‘Councils shouldn’t underinvest in water infrastructure to fund other services’. The implications aren’t clear, but this seems to mean that water infrastructure gets first dibs - and if that means ceasing to fund other council services, then councils will have no choice.

Every one of us has a place we call home.

I said before I didn’t get it - how some people reacted so deeply, thinking central government was trying to take something from their communities. But maybe I do get it, just a little.

Entities and balance sheets, regulators and legislation, these things are just so abstract; wordy-words that clog the mouth and run circles around the brain. Most of us live lives that are more tangible, more practical. We fill the jug for a cuppa, boil the spuds, take the kids to the river or the beach, put them in the bath later.

We cherish the comforts, the rhythms, of the lives we live in the places we love.

And that’s the thing, isn’t it? This looming disaster, for all its wordy-words, will affect us in the most intimate and daily of ways. That’s what I think about, when I imagine what summer might bring to Upper Hutt, contaminants leaching into our pipes. A river dwindled and fouled, so dogs can’t drink or they’ll be poisoned. Elderly people, disabled people, immunocompromised people, afraid to turn on the tap. Businesses unable to open; jobs lost. Bottled water cleared from supermarket shelves by those who can afford to buy. Desperation for those who can’t.

Whoever ‘owns’ our infrastructure, it’s still ours. Tātou. So is the moral responsibility for it, and for each other, and to our generations to come. The ones we elect, whatever their stripe, they are only there to safeguard what is ours.