Speech to LGNZ Conference
Kia ora koutou katoa and thank-you for the invitation to speak to you all today.
I would like to acknowledge Local Government New Zealand President Stuart Crosby, and Chief Executive, Susan Freeman-Greene, Te Maruata Chair, Bonita Bigham, and our host, Mayor John Leggett.
I also acknowledge all the elected members and chief executives here today, and Taituarā Chief Executive, Karen Thomas.
I would also like to acknowledge the passing of the late LGNZ President, Dave Cull. I have fond memories of working alongside Dave and of the vision he had for local government. The only thing I saw him more passionate about was Dunedin. He’ll be greatly missed.
As I was preparing to speak to you today, I reflected on four years in this role.
One of my very early hopes was that as a government, we would build stronger relationships with local government.
In part, that was borne out of a view that we have so much in common in terms of shared challenges, that it just made sense.
But it was also because of the opportunity.
We have heard consistently from local government leaders about the many challenges facing them in making our cities, towns and communities the best possible places they can be for the people who live in them.
These are the same things we are concerned about in Central Government which is why it is essential that we work together on the issues that matter most – and why conversations such as those taking place today are vital.
Key challenges nationally
Today, I first want to set out what we see as some of the key challenges we face as a nation, some of which are very much at the forefront of our mind.
COVID-19 has reshaped how we all live, our expectations, the way we work, the shape of the economy, and how we need to envisage the future.
I am immensely proud of the way our team of five million has come together and responded to this terrible virus. I know there has been a lot of sacrifice and hardship but, when you look around the world, I absolutely believe the approach we collectively took was the right one.
In particular, I want to acknowledge the way in which the sector pulled together through the Central-Local Government COVID-19 Response Unit to support and deliver local solutions and communications.
Responding to this pandemic has taken an incredible team effort.
The work you have all done to ensure the safety and wellbeing of your communities over the past year and a half has been critical. Reaching out to those who were vulnerable, or isolated and meeting wellbeing needs. Ensuring local businesses had the connections and support to get them through.
Thank you, for what you did and for what you continue to do.
But as we transition from response to recovery it is it is important to consider how the decisions we are making and actions we are taking can shape the New Zealand of tomorrow.
That’s why one of this Government’s overarching priorities, alongside keeping New Zealanders safe from COVID-19, is laying the foundations for a better future through our recovery plan. We want to address the challenges of the future in how we build back.
And while the three waters reform that I am mainly here to talk to you about today is definitely part of our economic recovery, its wider legacy will be in the improvements to wellbeing that we leave for future generations of our communities.
A period of change
And you as a sector have a crucial role in how we manage this.
I want to acknowledge the wide suite of reforms impacting on the local government sector at the moment, such as the Resource Management reforms, the Future for Local Government discussions that are currently taking place and of course Three Waters.
They are all enormous, but very necessary pieces of work.
These reforms connect in many ways and collectively seek to shape a system that better enables all branches of government to deliver on the needs of the communities we serve – locally, regionally and nationally.
Three Waters Reforms
Today I want to focus Three Waters services, one of the most important and complex of all our challenges, and how we hope to partner with you as we work through the transformational change the current reforms will involve.
As a government, we are committed to progressing these reforms in a manner that enables local government to continue to deliver on its broader wellbeing mandates and maintains its financial position.
Safe, affordable drinking water and good quality wastewater and stormwater services are critical for the health and wellbeing of our communities and our environment.
These are hallmarks of developed, well-functioning societies.
But more than that. I think we all see water as a taonga for all New Zealanders.
That’s why we now have a water services regulator in Taumata Arowai which has Te Mana o te Wai as part of its founding legislation.
But all the evidence shows that while there are a great many dedicated people around the country working hard to ensure safe and environmentally sustainable services, very significant investment is needed both now and in the future.
We have all seen the evidence of this in headlines including:
- the campylobacter outbreak in Havelock North that made 5,500 people sick, led to the tragic deaths of up to four people and had long-term consequences for an unknown number of others – from drinking public water supplies;
- the no-swim notices on our beaches;
- the frequent and sometimes near permanent boil-water notices for some of our communities from bacterial or protozoal contamination;
- the erupting sewer pipes on some city streets;
- lead contamination in the water;
- consent-breaching sewage overflows into our urban rivers, streams, lakes and coastal environments.
I know this is a situation none of us want.
This current situation coupled with projected population growth, increasing consumer expectations, risks associated with climate change, seismic events and an ageing water infrastructure network in need of upgrades highlight why we need to look at doing things differently.
We can’t keep doing what we’ve been doing and expect a different result. We need to fix this, and we want to fix it together.
Irrespective of the situation for individual councils right now, every community in the country faces significant investment needs over the next 30 years to simply maintain and upgrade services to the basic quality and standards our communities deserve. Everyone.
The question cannot be whether we act on that need, but rather how.
A compelling case for change
As you know, my colleague Nanaia Mahuta has been leading work on Three Waters reform for the last four years.
It is difficult, which is why previous governments, while recognising something needed to be done, had put it in the too-hard basket.
As your President Stuart Crosby wrote in the media earlier this month, LGNZ recently uncovered a letter from 1999 to the Government inviting a conversation on these very matters. So where we are today really has been a long time in the making.
The sector itself, through LGNZ, initiated substantial work on Three Waters policy in 2015.
As so many in this room know these are not new issues, but faced with the evidence that continues to build, the time has come to address them.
Fifteen months ago, senior government Cabinet ministers and I met with your national leadership to agree a process for working together on water reforms.
We formed a joint central/local government steering committee and have also worked with our iwi/Māori Treaty partners, and the water industry to help shape a robust, evidence-based approach. We have always wanted this to be a partnership where everyone’s interests are met.
And if the case for reform was very persuasive 15 months ago when we set up the joint steering committee, it is even more so now.
Last month we released research and modelling showing that local government faces a $120 billion to $185 billion funding challenge over the next 30 years to deliver high quality three waters services to all communities.
Unless we change how we manage these services, there will be two inevitable outcomes:
- unaffordable water services for communities; or,
- deteriorated networks with unsafe drinking water, and the continued degradation of our environment.
I’m sure you will agree that neither outcome is acceptable. That’s why it is time to take the next steps.
Four public water services providers
At the end of June we announced our policy decisions to create four large publicly-owned water entities to take on the role of public water providers.
Minister Mahuta has indicated that we remain interested in continuing discussions with local government and iwi/Māori around the geographic boundaries of the entities to ensure we get the best fit.
There will be trade-offs and it is inevitable that not everyone will get exactly what they want, but the logic behind this approach is clear.
We have landed on four public water providers because it provides the right balance between the economic benefits associated with larger entities, catchment considerations, and the needs and interests of local communities.
The Central-Local Government Steering Committee which has robustly tested the evidence endorses four entities as the best option.
The entities will address the affordability challenges through:
- superior long-term financing arrangements delivered by separating balance sheets from debt-constrained councils;
- the ability to spread costs across larger populations over time; and
- operational efficiencies enabled through professional boards and effective economic regulation, and a single focus on deliver of water services that meet current and future standards.
They will also have the size and capability to build and maintain more sustainable career pathways and expertise in this vital infrastructure and services sector.
Overall this is a positive for the workforce and the economy.
I know that both Minister Mahuta and the Minister of Finance and of Infrastructure, Grant Robertson, will have more to say about this in later sessions.
But this is about more jobs - not fewer jobs.
Continued community ownership, no privatisation
As you all know, at present most water services and assets are owned by communities through 67 councils across the country.
I can assure you that under my watch these assets and services will not be privatised. And we will do everything we can to prevent any future government from attempting it too.
Communities will continue to own these assets through collective council ownership of the four new water services entities.
We will develop legislation specifying that the local authorities that make up each water services entity will be its owners.
And we will take additional steps to protect against privatisation by legislating that any future privatisation proposal would have to be put to a referendum requiring a 75 per cent majority for change.
Mana whenua involvement in the strategic direction and performance of these entities will provide an additional barrier to privatisation.
Given the structure of the entities and the mix of private and public functions, including stormwater, it would also be very difficult for any future government to sell these off. This is important because communities must always retain a say in their local services, now and in the future.
All communities are better off
We are taking a long-term view. These are once-in-a-generation changes.
They need to ensure that what we do now will provide the outcomes we are seeking not just in 10 years but in 50 years and beyond.
The modelling released two weeks ago confirmed that all communities in the country will be significantly better off under the reforms.
It included council-specific information for all 67 councils in the form of a local dashboard.
These showed the projected average costs of providing these services per household in 2051 with reform and without reform.
In every case, all communities will be significantly better off under the reform proposals. And they will have safer, and more sustainable Three Waters services.
While all councils benefit, rural and provincial communities are the biggest beneficiaries.
I hope most of you will have had a chance by now to take a look at that information for yourselves and make your own judgement.
Ultimately the case is clear.
If we do nothing, the average cost per household for essential water services is projected to rise two to five times what it would be under reform.
This is unfair to communities. It is also unsustainable and has knock on effects to other areas.
We would be unable to progress housing builds in high-growth areas because this cannot be done without affordable infrastructure and additional investment capacity.
We would be less able to promote regional economic growth where it is much needed.
We would be more exposed to climate change and seismic events.
We would be more limited in our ability to explore, adapt and deploy new technologies to address problems in our water networks, including leaks and water shortages.
Embracing the reforms will ensure that our communities can have confidence in safe drinking water.
And we will be doing all we can to prevent environmental degradation from the impacts of poorly performing wastewater and stormwater networks.
A huge economic lift
The reform process will also benefit local economies hugely over time.
Stricter water services regulation through Taumata Arowai will require substantial new funding for drinking water treatment.
We will establish new economic regulation to make sure that appropriate investment in wastewater and stormwater infrastructure and services happens.
That regulation will also see that consumers are getting a fair deal. The new entities will be non-profit, and will not be able to pay dividends. Their only job will be delivery of safe and sustainable water services to the communities they serve.
A recent report projected GDP will grow by $14 billion to $23 billion over the next 30 years under the reforms.
It said the reforms could create approximately 6,000 to 9,000 full-time equivalent jobs between 2022 and 2051.
Overseas experience tells us that most of the workforce will be needed where the services are delivered, which is in our communities.
Supporting local government to make the change
I totally understand that some of you will have questions about the details of the reforms. These are big changes and it’s only fair you take the time to weigh the evidence up.
You want to be assured that the needs of your individual communities are met and that you will have other questions about how these reforms will work.
There will be opportunities to explore some of these issues in later sessions, but I want to acknowledge that we have heard some of the most pressing concerns and are open to exploring these with you.
Among others, they include:
- protections against privatisation, which I have already mentioned today and agree with you on;
- how you will be able to influence the entities over key issues of importance to your local communities, including supporting development of housing;
- ensuring effective representation and strong accountability back to communities; and
- control over key decisions about “place-making.”
I know there will be some questions about where the boundaries of the entities are to be drawn, and how the aggregation of water services will impact on the financial position of councils.
Further information on that is being made available to councils this week. It tells a positive story.
These and other matters will be discussed and worked through with the sector over the coming couple of months and I can assure you that on these debates we will approach the conversation with an open mind.
Going forward together
I know and have discussed with many of you, that for the reforms to be successful and to deliver the projected benefits to the country, and for individual communities, we need to work together as central and local government.
We all want the certainty of the jobs, the economic boost to the regions, and the vital security of safe, affordable, and sustainable water services that will accompany the reforms.
Sector leaders who have thought deeply about this, and have considered the evidence, agree.
Indeed, many have approached Minister Mahuta and officials and asked Central Government to provide this certainty.
In the last weeks we have worked hard with your representatives to reach a mutual understanding of how we can go forward together to make sure these critical reforms succeed.
Much of that discussion has been how we can support local government and strengthen your role as we look ahead 30 to 50 years into the future.
We want to support councils to envisage a role that is not about pipes and plants but is about place-making, place-building and wellbeing.
We want to ensure that in tandem with these reforms, we strengthen your role as custodians of, and visionaries for, your communities.
A reform support package
In July last year, the Government provided $710 million for councils to invest in Three Waters infrastructure and services.
I am delighted to hear of the results of that stimulus package beginning to come through, especially in the regions.
In this year’s Budget we signalled $296 million to assist with the costs of transitioning to the new Three Waters arrangements.
Today, alongside your LGNZ leadership team, which has worked long and hard on your behalf, I am very pleased to announce a further $2.5 billion Government support package for the sector.
This funding is intended to:
- ensure that no local authority is materially worse off financially as a result of reform, and the associated transfer of responsibility for water services to a new water services entity; and
- provide a $2b contribution towards the future for local government and community wellbeing, supporting priorities for local and central government investment. This funding is on top of the extra debt headroom that the reforms will deliver for many councils.
With this package we want to acknowledge the significant change that the shift in water assets brings for Council balance sheets, and recognise that the long-term impact of the transition of these services for councils is difficult to forecast.
The $2b investment will be allocated between councils on a nationally consistent formula based on population, relative disadvantage and geography.
Councils will be able to use this funding to support the three waters reform, and focus on other local wellbeing outcomes associated with climate change and resilience, housing and urban design and planning, and community wellbeing.
As Government we are clear that in these reforms we want every council to be no worse off, and that while there are significant liabilities associated the ongoing cost of maintaining three water infrastructure, they can also account for an asset on your books that helps with other aspects of Council work.
With this funding, it’s our hope that we can contribute as councils imagine future possibilities for communities unconstrained by the burden of constantly financing, maintaining upgrading and delivering Three Waters infrastructure and services.
And the financial support package sits alongside the improved services, the better public health and environmental outcomes, and the big uplift in jobs and economic growth that the reforms are projected to bring to communities throughout New Zealand.
I know that you will want some time to continue discussions with your communities and with Minister Mahuta and officials on some of the key questions about the reforms.
We understand that you will want assurance that communities have a voice in the system and influence over local discussions that impact directly on them.
And I know that, working with LGNZ, we all want to get to a position of certainty on all this by the end of September this year.
I am confident that by that time we will be able to sign off on the boundaries of the four entities, along with other key design principles, and with your help begin the serious work of establishing them.
Once again, thank you all for the committed and passionate work that you do on behalf of your communities.
Nō reira, huri noa i te whare, tēnā koutou, tēnā koutou, tēnā tatou katoa.