August - September 2021
WATER
Auckland Mayor Phil Goff does not believe the model proposed will benefit Aucklanders Aucklanders have invested heavily in building up Watercare’s more than $10 billion worth of assets, with a further $11 billion invested in water infrastructure in our current 10-year Budget. Control over those assets, and our ability to ensure that Aucklanders’ needs are put first, is undermined by the reform, which proposes that Auckland Council could have less than 40 per cent of the representation in the governance of the new entity. This is despite the fact that 92 per cent of the assets of the new entity would come from Auckland, and Auckland would have approximately 90 per cent of the population served by the new entity. The proposed governance structure lacks accountability, and therefore responsiveness to Aucklanders through their elected representatives. This risks the entity not responding to public concerns and its senior management paying itself inflated salaries. Auckland Council has taken steps to both improve accountability and reduce exceptionally high salary levels previously paid to executives. The new body will be more susceptible to privatisation as has occurred in the United Kingdom. Safeguards put in place against this by the current govern-
ment can be easily repealed by a future government. According to the WICS report, Auckland is already by far the most efficient and effective water supplier in New Zealand. It has already achieved the scale and professionalism in water supply that the government is seeking for the country as a whole. The supposed benefit of cheaper water costs, projected to be half the costs of an unreformed sector by 2051—30 years out—simply cannot be relied upon as being real. And it ignores the measures Watercare is currently taking to improve efficiency, which will lower costs. The government’s own analysis by Farrierswier—the firm it paid to analyse the reliability of the WICS report—states explicitly that the claimed lower costs under the three waters reform should not be relied on. The basis of improving productivity appears to largely rely on a huge increase in borrowing, with a three-fold increase in debt. This means significant risk with debt to revenue ratios increasing from 340 per cent to 700 per cent. It is hard to imagine that this will not incur higher credit risks and cost of borrowing.
Christchurch Mayor Lianne Dalziel finds it difficult to see a compelling case for change
Until we get the full package and have all the pieces of the puzzle in front of us, it is difficult to judge whether it is in Christchurch’s best interests to be part of the new entity. Once we have that information, we will then need to engage with our communi100infrastructurenews.co.nz
ties and get their feedback on whether they want us to continue with the reform process or opt out. It is positive to see the Government seeking to facilitate iwi partnerships and we are very mindful of the significance of our decision to others in the takiwa.
affordable household bills (when compared against the likely outcomes ‘without reform’). Farrierswier independent review of WICS findings Farrierswier find that the overall approach WICS takes to its analysis should give reasonable estimates in terms of direction and order of magnitude. They note that there are certain limitations associated with the analysis which decision-makers should be mindful of, which relate to estimating the level of future investment requirements and potential efficiency savings that could be realised, particularly given differences in the nuances of the New Zealand regulatory and policy context. While their review highlights several limitations associated with the analysis, they note that these are inherent and to be expected in modelling of this kind. Farrierswier also find that WICS’ approach to addressing these limitations appears reasonable. Farrierswier notes that the approach WICS takes to assessing the potential efficiency gains appears reasonable but care needs to be taken in translating overseas experience into a New Zealand context. They agree with WICS on the factors that will promote efficiency gains in the water sector, including the quality of management, clear policy priorities, and an appropriate economic regulatory regime. Farrierswier also explored the relevant literature to test whether any concerns arise that amalgamation might lead to water entities becoming large enough that diseconomies of scale may emerge. Their view
