Simeon Brown, Chris Luxon, and Wayne Brown climbed into a hole and announced a plan to solve Auckland’s water woes. This is how it’ll work.

New Zealand’s pipes are munted. They’re cracked and leaking, and struggling to handle all the extra poos excreted by our rising population. It’s a big, complicated, expensive problem. 

Almost every council in the country knows it is buggered if the current water system continues. The councils responded to this crisis by spending a few years yelling about how much they needed help, then arguing about the help they were offered, then squabbling some more about who was going to get help first. 

The previous Labour government proposed the Three Waters reforms, which most councils hated. Then, it proposed the clumsily renamed Affordable Water Reforms, which also went nowhere. Now, the National-led coalition is pushing ahead with its own scheme, with the equally vague and meaningless name, Local Water Done Well. 

We got our first glimpse of what those new reforms will look like on Sunday, when prime minister Chris Luxon, infrastructure minister Simeon Brown and Auckland mayor Wayne Brown climbed down a big hole in some hi-viz to announce their new plan to save Auckland water. 

What’s the new plan for Auckland water?

Auckland Council and its water provider, Watercare, are getting a divorce. Or really, it’s more of a conscious uncoupling. Except Auckland Council won’t be paying any alimony, and it will get custody of Watercare. This metaphor is already falling apart.

Auckland Council currently owns Watercare and all the pipes in the city. This new deal will split the two organisations apart. It’s what nerds call “balance sheet separation”. Watercare will officially own all the pipe assets, will set the water rates, and will be able to borrow the money it needs to fix the pipes and keep things running smoothly all on its own, instead of having the council borrow on its behalf. The government will pass a new law to make this happen. 

This is important because Auckland Council is getting pretty close to its debt limit (its debt is currently at about 250% of annual revenue, with a limit of 290%). This deal will take water-related debt off the council’s books, which will free up some breathing room for the council. Watercare will be able to borrow more and space the payments out over a longer time. 

Auckland Council will still control Watercare and will be in charge of appointing the people who run it, but it won’t have any financial responsibility. In fact, it has to promise to never give Watercare any money, even if it is really, really desperate. 

That seems good, right? 

Sure. Auckland ratepayers should be pretty happy, at least in the short term, because it means water rates this year will only go up 7% instead of the proposed 26%. 

Auckland Council is pretty happy because it gets to take Watercare’s debt off its books, giving it some more money to spend on roads and even bigger roads. 

It’s nice for Wayne Brown and other councillors too, who won’t have to face as many angry questions about water rates from boomers at bowling club meetings. And Simeon Brown is happy because he got to wear another hard hat. 

What are the downsides?

Compared to the council, the new financially independent Watercare won’t have a very good credit rating, which means it will miss out on the sweet, sweet loan deals that councils and government entities enjoy. That means Aucklanders could end up paying tens of millions more per year in higher interest, according to Bernard Hickey. It could also limit how much Watercare is able to borrow, because investment funds aren’t particularly interested in buying crappy bonds from unproven local water providers. 

There are also some big questions about what will happen if Watercare goes tits up. As part of the deal, Auckland Council has to promise it will never, ever bail out Watercare if it gets into financial trouble. That could cause some problems for Aucklanders, who generally support having access to running water. Officially, the government isn’t guaranteeing to support Watercare if it gets in trouble either – but in reality it almost certainly would. 

How is this different from Labour’s Three Waters reforms?

In a lot of ways, it’s extremely similar. The Three Waters reforms were also about taking pipes and other water assets off councils’ books. The difference is the Three Waters reforms would have created entirely new entities to control and oversee the operations. Those entities would have had separate boards, made up of council and iwi representatives.  

Auckland didn’t need to create a whole new entity, because it already had Watercare – it just gave the existing organisation more power. It’s a trickier situation in the rest of the country where there are 77 other councils, each with different water systems and strong opinions about how they should be run. The Three Waters reforms tried to solve this by creating mega-entities to run water across larger regions. The new government plan will require a similar kind of regional amalgamation, but it’ll be up to the councils to sort that out. 

What will this mean for other cities and regions?

Ever since the announcement inside the hole on Sunday, mayors from around the country have been desperately excited to get amongst it. Christchurch, Clutha, Whangārei, and Timaru have all expressed excitement about the idea. Unfortunately, it’s going to be much more challenging everywhere else than it was in Auckland. 

Wellington has a slight head-start on the rest, because the six councils already have a combined water entity, Wellington Water – although the councils still own their own pipes and set their own rates, which include water costs. A committee led by former Wellington mayor Kerry Prendergast is currently working on a plan to dissolve Wellington Water and create a new entity which will cover all of Horowhenua, Wairarapa and Wellington. Once that is set up, it’s likely Wellington will strike a similar deal with the government.