Government to provide support for water reforms, jobs and growth

Prime Minister Local Government

The Government today announced a $2.5 billion package to support local government transition through the reforms to New Zealand’s drinking water, wastewater and stormwater services. The package will also stimulate local economies while creating jobs and unlocking infrastructure for housing.

“New Zealand’s water systems are facing a significant crisis and will continue to do so without major transformation. Overhauling our drinking, waste and stormwater services will benefit all New Zealand communities, no matter where they are in the country,” Prime Minister Jacinda Ardern said.

“The support package announced today will ensure that no council is worse off as a result of the reforms. $500 million is set aside to provide certainty for local authorities that they will be supported through the transition process, and to ensure the financial impacts of reform will be managed.

“We also want to acknowledge the significant change that the shift in these assets means for Council balance sheets. So the remainder of the package seeks to ensure Councils are better off despite this change to their asset base.

“To do this we have set aside $2 billion for councils to invest in the future for local government, urban development, and the wellbeing of their communities,” Jacinda Ardern said.

Local Government Minister Nanaia Mahuta said that Central and Local Government had very similar goals and it was important that the two tiers of government approached these challenges together.

“New Zealand’s water system is one of the country’s most significant infrastructure sectors, touching every aspect of our lives. Our communities will need to invest between $120-185 billion over the next 30 years to maintain, replace and upgrade ageing assets and to provide for growth,” Nanaia Mahuta said.

“We acknowledge the significant pressures that all councils are facing with considerable change on the way. The water reforms have provided an opportunity for Government and local councils to work together to ensure the reforms are fit for purpose. We are pleased to be working closely with Local Government New Zealand not just on these reforms, but on other challenges and opportunities” said Nanaia Mahuta.

The Government has signed a commitment to work together with Local Government New Zealand to engage and consult with councils and other stakeholders over the next 6-8 weeks and beyond. 

“The reforms are about acting for the greater good, with significant benefits to all communities. But they will have the best chance of success if all councils participate. We are working with the sector to ensure everyone understands the reform-related information, and to explain the policy proposals, the benefits of reform, and the details of the support package,” said Nanaia Mahuta.

“All of our water assets will be retained in local ownership; that has been a bottom line for us. We have added a public referendum provision to provide the ultimate protection against privatisation. There will be mechanisms to ensure a strong community say in how the assets and services are run and how planning will be managed,” said Nanaia Mahuta.

The $500 million “no worse off” component of the support package seeks to address the costs and financial impacts that councils would incur such as the transfer of water assets, liabilities, revenue and staff to a new water services entity. The funding also ensures councils will be able to continue to sustainably perform their non-water related roles and functions.

But we also know that calculating the long-term impact of the transition of these services for councils is difficult.

The “better off” component of the support package, which comprises $1 billion Crown funding and $1 billion from the new water services entities is allocated to councils on the basis of a nationally consistent formula. Councils will be able to use this funding to support the three waters service reform, and focus on other local wellbeing outcomes associated with climate change and resilience, housing and urban design and planning, and community wellbeing

The funding package comes on top of the $761 million committed to the reform programme in 2020, and $296 million announced in Budget 2021 for the costs involved with the establishment and transition of the new water entities.

The reforms will grow GDP by $14 billion to $23 billion over the next 30 years and create an estimated 6000 to 9000 jobs.

Note to Editors:

The Government and Local Government New Zealand joint statement can be found here.

Further information relating to the detail and allocation of the support package can be found here.