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Thomas Cranmer: The Three Waters select committee reports back

On Friday, Parliament’s cross-party Finance and Expenditure Committee reported back after five months’ work on the Water Services Entities Bill. As expected, it rearranged some deck chairs.



On Friday, Local Government Minister, Nanaia Mahuta issued a press statement welcoming the proposed recommendations to improve the workability of water reform legislation which had been made by the Finance and Expenditure Committee.


“I thank the committee for its careful consideration of more than 80,000 submissions and welcome its recommendations. As the result of listening to public submissions, extensive changes have been proposed,” said Minister Mahuta.


Like so much of the Minister’s rhetoric, it bore only a loose association with reality. It was left to National to make the observation that the committee received some 88,383 submissions but only heard 227 oral submissions. Of the over 16,000 submissions administered by the National Party, over 1,600 requested an in-person submission, and the committee offered less than 12 this opportunity.


In other Bills with similarly high public interest, special efforts have been made to ensure as many submitters could be heard as possible. For example, the End of Life Choice Act heard 1,350 oral submissions from 39,159 written submissions.


As for the “extensive changes” to the Bill referred to by the Minister, even the media could not bring themselves to describe the amendments in those terms. National’s Simon Watts told RNZ “the bill that has come back from select committee shows the government still isn't listening. The government hasn't made any significant changes to improve its broken Three Waters model”.


Regional Representative Groups


In response to wide-spread criticism from councils and iwi that the mega-entities do not allow for enough local representation, some small changes of debatable value have been recommended to the composition of the Regional Representative Groups.


The select committee report noted that the Bill in its original form would require each regional representative group to be made up of no fewer than 12, and no more than 14, regional representatives. Many submitters (particularly local councils) recommended that this number should be higher. They suggested that having a greater number of territorial authorities represented on each regional representative group would enable better local voice in decision-making.


Thus the recommendation that the Bill receive a minor change in this area to allow for more seats on a representative board if permitted by a constitutional amendment. National considers the change to be inadequate as even in a slightly expanded board, some councils will still miss out on representation. Additionally this expansion is not automatic, and upon establishment, the arrangement of seats at the representation boards is as it was when this Bill was first introduced.


Under the Bill, any constitutional amendment requires the approval of the Local Government Minister so in reality nothing yet has been conceded by Mahuta in this respect.


The select committee has also been recommended that the Bill be amended to include a requirement that each RRG must have procedures to ensure that “appointed representatives achieve equitable and reasonable representation of relevant metropolitan, provincial, and rural authorities”.


This really amounts to no more than a sop which will not come close to addressing the serious concerns that councils and iwi have about the lack of local representation. Indeed, this is one issue that saw Ngāti Whatua come out in support of Mayor Brown’s alternative proposal. In an interview last week, the deputy chair of Ngāti Whatua Orakei Trust, Ngarimu Blair stated:


… [when] you’re trying to squeeze 70 hapū and iwi into one mega entity, the people miss out and it’s turned out that we’ve missed out, so the iwi of central Auckland with the densest population and arguably the worst pollution, we haven’t got a voice at the table …


In response to the alternative proposal from the Mayors of Auckland and Christchurch, Mahuta initially said she was “really pleased that [the mayors] signalled an opportunity to commence a dialogue, and we’ll consider, certainly, [the] matters that they have raised. Some of the areas we’ve traversed already, but the most important thing is that the dialogue on this particular challenge remains open”.


However, despite a motion from the National Party to extend the committee process to allow for proper consideration of the mayors’ alternative model, the committee decided not to do so.


National’s Simon Watts commented, “It shows that Jacinda Ardern and Nanaia Mahuta's promise of consideration and dialogue with mayors and local communities about the alternatives is just talk.”


Te Mana o te Wai statements


By contrast, the select committee has taken the opportunity to further expand the scope of the Te Mana o te Wai statements so that they can apply not just to freshwater but also to coastal waters and geothermal water.




As the former Mayor of Kaipara, Dr Smith, notes in his tweet above, this is an extraordinary new development - probably the most significant recommendation to come out of this select committee process, and yet not a word about this has appeared in the media.


In addition, it has been recommended that these statements can now also be given by mana whenua whose interests in the entity’s service area are recognised in a Treaty settlement Act.


This would seem to suggest that an iwi or hapū does not need to be in a relevant rohe to issue a Te Mana o te Wai statement over water in that service area if it has an interest in water in that service area which has been recognised by a Treaty settlement.


National noted that these Te Mana o te Wai statements allow mana whenua “to impact water services entities’ actions and policies significantly. Mana whenua are one group alongside others with a relevant voice and we feel that restricting Te Mana o te Wai statements exclusively to mana whenua shuts out other voices.”


Act stated, “The Minister said that ‘Te Mana o te Wai’ statements can benefit other communities such as farmers, but she has failed to explain why only mana whenua are allowed a say and other communities directly affected are unable to do so. There is no rationale for continuing to have co-governance at the centre of water reforms.”


I have already written about the scope and power of the Te Mana o te Wai mechanism within Three Waters here and here. These new proposals only exacerbate the serious concerns that myself and others have raised.


Financing


On financing, National notes, “The C4LD model had an analysis showing it could match the capital expenditure of the mega-entity model without increasing water bills or changing council debt caps. Castalia advisors provided this analysis contained in their submission … We remain unconvinced that a mega-entity model solves funding and financing issues. The alternative models, as presented, would solve these issues far better than a mega-entity model.”


Act was more explicit and detailed in its criticism of the current financing proposal. They note (with my own emphasis added in bold):


The Government has cited balance sheet separation for the four proposed entities as a key outcome for the reforms, which means that debt raised by the entities will not be registered against Government or council books. However, the Standard and Poor’s report provided by the Department of Internal Affairs to the committee states that should the proposed entities achieve balance sheet separation they will be highly leveraged and have a high-risk rating.


Standard and Poor’s states that unless the entities have Government backing, their rating will be B+, equivalent to investment-grade debt. Councils currently have an A+ rating through the Local Government Funding Agency (LGFA).


So the case made for balance sheet separation as a means to raise debt at similar cost to the Crown is not supported by evidence, and is in fact undermined by the Standard and Poor’s report.


Act is, of course, correct in its criticism of the financing proposal, and in particular of the so-called ‘balance sheet separation’ which the government holds out as one of its four bottom lines in these reforms. The government’s own documentation acknowledges the high likelihood that the Crown will provide extraordinary financial support in the event that a WSE becomes distressed.


I have written about the high risk nature of the financing here and here.


National’s conclusion


National’s conclusion to the select committee report is an accurate one and must surely reflect the views of the vast majority of the country:


Despite the numerous issues raised by National members and the public, the bill received few changes, none of which will address the problems with its structure. In addition, the shape of this legislation is fundamentally broken and could not be fixed even if it received extensive amendment by the committee.


The existence of preferable alternative models and the overwhelming public opposition means that the National members cannot support the select committee recommending the passage of the Water Services Entities Bill.


It has been suggested that the Bill could receive its second reading in the House next week.




Thomas Cranmer is a pseudonym. You can read his work here.

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