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Expropriation of 3-Waters by Hook or by Crook

Updated: Jul 17, 2022

Dr Victor Luca

Published, The Beacon, Friday 5-Nov-21

Minister Mahuta finally admitted on Wednesday 27-Oct-21 what she was always hiding in plain sight. She will force councils to comply with her reform agenda. Heavily redacted cabinet papers dated June of this year, and probably written more than a year earlier, suggest to me that the initial option to opt-in or opt-out has been off the table for a long time, and possibly was never really genuine. Perceptions of the disingenuous nature of the engagement with councils and communities seriously erodes public trust. Mahuta’s explanation for the about face is that the more they analyzed the situation, the more they realized there were no options. Give me a break!

Everyone says that there is no choice for reform and yet the only incident that I have ever heard trotted out by government is that of Havelock North which was entirely preventable. Similar incidents are not rare but have generally been so minor in magnitude that they don’t rate a mention.

Estimates of cases of acute gastrointestinal illness (AGI) that might be attributed to drinking non-compliant water that are bandied around are of the order of 35,000 per year. The key word here is ‘estimates’ since it is extremely difficult to attribute a particular case of AGI to a particular cause given the number of possible confounding factors.

Yes, there is always a case for improvement but at what cost? We need to understand however that the cleaner we want our water the higher the costs are going to be. In that regard I have seen no recent cost-benefit analysis.

Government supposedly analyzed 30 financial models and came to the conclusion that only one was viable. That model will require infrastructure to be funded through debt raised on national and international capital markets. I have recently communicated with two preeminent economists that confirm that it is entirely possible for government to pay for the additional infrastructure costs required to bring water up to whatever spec deemed appropriate. The decision is purely political. Government has talked a lot about the benefits of scale in the funding model. Since our government is the issuer of currency (NZD), it has the biggest balance sheet of all. Much of our major infrastructure since nationhood has been direct-funded by government. For two years now I have been espousing these Modern Monetary Theory approaches to funding district infrastructure needs. There is going be a need for more imagination in financing local government as climate change bites and we are forced to respond and adapt. Creating money out of thin air to fuel housing Ponzi schemes to create property bubbles rather than fund infrastructure seems ludicrous to me.

As regards funding water infrastructure, government has chosen to expropriate and consolidate community assets and the associated income to build the borrowing capacity of four water entities. This would result at the same time in the degradation of councils’ ability to borrow amounting to a zero sum game. And let’s be clear, this model is a cross-subsidization model in which Peter is robbed to pay Paul. Those councils that have managed their water affairs well subsidize those that have not. So far our district council has done a relatively good job of providing water over many decades. More direct investment from central government over that time would have allowed us to make necessary improvements without giving up local control.

I have worked in water analysis throughout my entire career and I can tell readers that if government wants to raise the bar on water quality standards, then the costs of regular monitoring, and of course enforcement of the drinking water standards for every water scheme will be astronomical. For people who are not actually in the water analysis game it may seem easy to analyze low concentrations of metals, organics and radioactive elements in water. I can assure folk that it isn’t.

The Health Act of 1956, which was amended by the Health (Drinking-Water) Amendment Act in October 2007, aims to protect public health by improving the quality of drinking-water provided to communities. However, these two pieces of legislation place no hard legislative requirement for suppliers of drinking water to comply with the New Zealand Drinking Water Standards (NZDWS). Suppliers instead must take “all practicable steps to comply with the drinking-water standards”. Moreover, water safety plans have only been required if a scheme supplies more than 500 users. Thus, water regulation is absolutely necessary as a first step in fixing water.

You might ask why it is that the NZDWS were simply not made mandatory and enforced at the outset. The answer is likely to be that they couldn’t be because of the enormous cost of monitoring, enforcing and upgrading infrastructure. The country simply never had the competencies and capabilities to do it and it still does not.

Governments of all colors have stood on the sidelines and watched this situation unfold and not stepped in to assist councils by injecting funds from their balance sheets which they could easily have done over decades. Instead, they endlessly promoted growth so that their GDP numbers would look good. For some reason, these folk simply don’t seem to understand that you can’t have infinite growth in a finite New Zealand.

Mahuta says districts will continue to be owners. It seems to me that our district and other small nearby districts will be owners with little or no control and little or no voice.

It is clear to me that having failed to effect improvement in housing affordability (think Kiwi build) and in other areas so far, the government I voted for wants a win with water. Meanwhile, everything seems to be under reform including local government, education and health. Reform fatigue is starting to set in.

In my opinion central government has essentially run roughshod over communities and local government. We either lie back and think of England or find a way to resist. Let us not forget that this is a central government reform. In the first instance, displeasure should be directed to our local MP. That is, if you can get through to her.

Finally, I can’t emphasize enough that it is all very well to improve water infrastructure, but if the source water (the 4th water) is not protected, then the investment needed will be limitless. And the 4th water is not really being talked about!


[1] To read more of what I have had to say on 3-waters reforms so far read here.

Luca - on 3-waters
Download PDF • 2.30MB

[2] PETER WILLIAMS FULL SPEECH ON STOP 3 WATERS. This video premiered 19-Jun-22 significantly after this piece was published. I agree with much of what is said.

RNZ, Russell Palmer, 3-May-22. From this recent reporting it is clear that the financing issue I addressed above is far from resolved.

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