Hon Simeon Brown
Minister of Local Government
 
Hon Andrew Bayly
Minister of Commerce and Consumer Affairs

New water service delivery models that will drive crucial infrastructure investment have been approved by Cabinet, immediately providing improved access to finance for water council-controlled organisations (CCOs), Local Government Minister Simeon Brown and Commerce and Consumer Affairs Minister Andrew Bayly have announced.

“The Government has today set out the enduring components of water services delivery in New Zealand under our Local Water Done Well plan. This is about providing local government with the certainty it needs to deliver water services, while minimising costs on ratepayers,” Mr Brown says.

“Councils and voters overwhelmingly rejected Labour’s expensive and divisive Three Waters reforms. This Government has swiftly repealed those policies and restored local control over water assets. The key details announced today will enable new models for financially sustainable water organisations and increased borrowing from the New Zealand Local Government Funding Agency Limited (LGFA) for water services, reducing the burden on ratepayers.

“LGFA has confirmed it can immediately begin lending to water CCOs that are financially supported by their parent council or councils. LGFA will support leverage for water CCOs up to a level equivalent to 500 percent of operating revenues – around twice that of existing councils – subject to water CCOs meeting prudent credit criteria. This will enable councils to better manage debt and make essential infrastructure investments without drastic rate hikes.”

Using debt to spread the costs of long-term assets means that councils can invest for long term growth and pay back their debts across the lifetime of new assets, ensuring the costs of those assets are paid for by those who use them, rather than simply pushing up rates today.

“The new water service delivery models will also ensure sustainable water services across New Zealand by providing councils with the flexibility and tools they need to meet their unique needs. By working together, councils can achieve greater efficiency and access the borrowing they need to keep water services affordable for their communities

“Our expectation is that councils will now use this certainty and the additional borrowing capacity to reduce pressure on ratepayers while being able to invest in the critical water infrastructure New Zealand needs.” Mr Brown says.

Commerce and Consumer Affairs Minister Andrew Bayly emphasised that the new economic regulation regime will promote better investment into water infrastructure.

"The economic regulation regime will provide ratepayers with peace of mind that revenue collected by local government water services providers, through rates or water charges, is spent on water infrastructure,” Mr Bayly says.

“These changes will ensure water revenues are ring fenced for water services and aren’t siphoned off for other council priorities or pet projects, with little transparency for the ratepayer.

"The Commerce Commission will oversee the economic regulation of these water services and will have a range of regulatory tools, including mandatory information disclosure, to promote value for money for New Zealanders and ensure investments are made where they are needed most.

"Local Water Done Well not only keeps water in local ownership and control but also provides a pathway for significant infrastructure upgrades. We are committed to supporting councils to deliver high-quality, financially sustainable water services," Mr Bayly says.

Additionally, the Government and LGFA are working together to explore whether debt limits for high-growth councils can be prudently increased beyond the current ceiling, potentially up to 350 per cent of revenue. LGFA lending to water council-controlled organisations which are not supported by their parent councils is also being explored.

The legislation to implement the new water service delivery models and other enduring settings for Local Water Done Well is expected to be introduced in December 2024 and passed by mid-2025.

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