Three Waters Review Rural & Provincial LGNZ Thursday 7 June - - PowerPoint PPT Presentation

Three Waters Review Rural & Provincial LGNZ

Thursday 7 June 2018

Department of Internal Affairs

Agenda

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• Background
• Issues
• Considerations
• The task in front of us
• Options
• Where to next
• Engaging and being involved
• Contacts

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Three waters

• Aotearoa New Zealand’s drinking water, wastewater, and stormwater

services are collectively described as the “three waters”.

• A social and economic enabler, fundamental to the wellbeing of our

communities and the quality of our environment.

• The need to recognise Te Mana o te Wai – the cultural value of water and

water bodies to mana whenua.

• A vast and diverse sector, large number of providers, large number of

assets across a wide geographic spread, heavily influenced by topography and natural features such as drinking water sources and discharge options.

• Primarily owned and provided by local authorities.
• Multiple Ministerial portfolios and government agencies. Key

departments include: Internal Affairs, Environment, MBIE and Health.

• One of NZ’s core infrastructure sectors – very large investment: the

combined local government assets have a $51.4 billion replacement value, with $12.8 billion planned expenditure from 2016 – 2025.

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History

• National Infrastructure Plan 2011
• LGNZ Three Waters Review 2013
• 2015 Position Paper

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Getting to today

• Three Waters ‘look’ commissioned

under previous government

• Havelock North Inquiry - 2016
• Review reported to new Minister of

Local Government – Nov 2017

• Cabinet paper – April 2018

agreeing to the work programme and report back later this year

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Capacity, capability and sustainability challenges – particularly outside large scale organisations Affordability issues, driven by a range of funding pressures and financial challenges Lack of protection, transparency and accountability for consumers, compared with other infrastructure sectors and overseas water systems Risks to human health and the environment in some parts of the country Low levels of compliance, monitoring and enforcement of drinking water and environmental regulations Minimal central oversight and poor connections Variable asset management and governance practices, and a lack of good asset information to support effective decision making

What we found was a sector facing considerable challenges

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Summarise as

• Capability and capacity – holistic asset management

and governance

• Affordability
• Regulation

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Department of Internal Affairs 8 CONVERSATION - NOT GOVERNMENT POLICY The New Zealand Treasury: Asset Management Assessment Tool - origins in IIMM 2015, updated 2017.

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Capability and capacity

• Holistic cycle.
• About 45 percent of the potable and waste water networks are

categorised as “ungraded” (52 percent for stormwater)

• “Relevant and reliable information about assets remains a

challenge for local authorities.”

• “We continue to be concerned that local authorities might not be

investing enough to ensure ongoing delivery of services. … This trend is most concerning in some of the local authorities’ core infrastructure assets, such as water supply and flood protection assets.”

• Systemic underspend of capital expenditure, in 2016/17 capital

expenditure was $3.8m, 78% of the budgeted $4.8bn.

OAG: Local government: Results of the 2016/17 audits, March 2018

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Department of Internal Affairs 10 CONVERSATION - NOT GOVERNMENT POLICY OAG: Local government: Results of the 2016/17 audits, March 2018 – Figure 1

Department of Internal Affairs 11 CONVERSATION - NOT GOVERNMENT POLICY OAG: Local government: Results of the 2016/17 audits, March 2018 – Figure 3

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• Looking at the broad risk for councils … it is clear there is a capability and

capacity gap. … there appears to be a marked difference between larger urban councils where there are greater resources …. and smaller councils …

• Our assessment is that there is a large variation within the local

government sector to all of the questions posed. In general there is better appreciation of the hazards/risk research knowledge and better risk management processes in larger, better resourced councils.

(Workshop report: Local Government Risk Understanding, GNS Science Consultancy Report 2015/91)

• “There is varied risk management practice among local authorities and in

some cases it is poor”

–

• Approx. 25% of respondents do not have a formal risk register or risk management
• framework. Approximately 50% of rural respondents do not have either one.

–

30% of the risk registers are not reviewed annually. The risk management framew

• rks are reviewed even less.

(LGNZ Survey: Understanding Risk Management – Key Findings, 2015)

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Risks and hazards management

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Asset management maturity generally correlates with council scale/size

• Auckland Council / Watercare and Wellington Water are more advanced in asset management maturity, and are continuing to advance
• Other larger / metro councils score at least ‘upper intermediate’ and demonstrate the benefits of scale through their level of maturity
• Differences at ‘tactical’ and ‘operational’ levels are driving the differences in asset management maturity across councils
• Other infrastructure sectors (roading; electricity) are more mature, overall, than 3 waters, though there are variations across council

roading services and across electricity distribution businesses

• Best international practice correlates with scale; e.g. Scottish Water has a highly advanced level of asset management

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This capability issue is not new … “The variability of data is reflected in the differing levels of asset management maturity across the sector with a number of local authorities lacking foundational practices such as documented risk profiles of critical assets (fundamental from a resilience perspective) and renewal profiles or, where renewals profiles have been prepared, they are not fully funded.”

National Infrastructure Unit: Urban Water Evidence Base, March 2015

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… and it is not going away “We expect the demand for specialised skills in many aspects of asset management to continue to increase. Because New Zealand is a relatively small country, finding specialised staff will be a challenge, and it is a risk that needs to be managed.”

OAG: Reflections from our audits: Investment and asset management, July 2017, para 5.26

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Relates to governance capability

Looking here at processes, tools and ways of interaction, decision-making and monitoring.

• The standard of governance is variable (especially regarding understanding of technical

issues) – but strength of governance generally correlates with scale

• The separation of governance and management is generally blurred, which weakens

accountability

• The governance agenda is often driven by council officers, rather than elected

members

• Councillors are elected to represent community interests, not for their governance skills

– therefore, they may not have the mix of skills and experience to deliver best practice governance of these complex, critical water assets

• Professionalisation of governance of 3 waters is below that of other infrastructure

assets (such as electricity and gas) despite equal or greater challenges

• The standard of governance matters less in a stable context with few critical decisions

and risks to manage – but councils are facing a range of challenges and risks, placing a increasing emphasis on effective governance and decision making

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Affordability - what are the some of the main funding pressures?

• Community expectations and regulatory requirements for

water quality, treatment and management

• National directions on fresh and coastal water quality
• Providing infrastructure to support housing and development,

especially in high-growth areas

• Replacing ageing assets
• Responding to climate change
• Infrastructure resilience issues
• Declining rating bases in some areas
• High seasonal demand on infrastructure due to tourism

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What do we know about costs so far?

Drinking water

National costs to achieve two Havelock North Inquiry recommendations (if implemented): mandatory compliance with drinking water standards, and mandatory treatment of drinking water from bores:

Capital costs: $305m - $567m Ongoing operating costs: $11m - $21m per annum

Number of affected drinking water treatment plants:

BECA report is available at https://www.dia.govt.nz/Three-waters-review

Council owned: 569 Non-council owned (e.g. community organisations): 225

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$36 per annum = $0.69c a week per household (if spread nationally)

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What other work is underway?

Wastewater costs

• Research to better understand the nationwide cost pressures
• n wastewater infrastructure
• Aiming to identify a nationwide estimate of costs to comply

with the National Policy Statement for Freshwater Management

• Boffa Miskell and GHD are undertaking the research in

partnership with Water New Zealand

• Work is due for completion in the next month

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What else do we need to know?

• More information about drinking water and wastewater

infrastructure costs

• More about stormwater – there is still work to do to

understand the nationwide costs and what is driving them

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• Costs for all three waters associated with

climate change, growth, tourism pressures, resilience

• How funding pressures differ across the

country and across metropolitan, urban and rural communities

• Data from long-term plans on planned

investment and initiatives

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Regulation

• Multiple legislative systems and agencies deal with different aspects of the 3

waters service delivery without a clear or unifying overall purpose/objective.

• Under the current model, ratepayers/residents are both the owners and

consumers of three waters infrastructure services.

• There is a reliance on local government mechanisms (e.g. consultative and

democratic processes, information provision and reporting) to ensure that consumer needs and expectations are met.

• While New Zealand is not an outlier internationally in having many small-scale

locally-owned monopoly water providers, it is unusual in that they are not subject to independent regulation to safeguard consumer interests.

• In New Zealand, such regulation occurs in other core infrastructure sectors

such as gas, telecommunications and electricity.

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Compliance, Monitoring & Enforcement

• Compared to other countries, New Zealand is unusual in devolving three

waters CME (compliance, monitoring and enforcement) responsibilities to regional agencies.

• It is difficult to establish an accurate and comprehensive picture of the extent

to which local authorities and district health boards effectively exercise their compliance, monitoring and enforcement responsibilities.

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• There appears to be a relatively high

tolerance for low compliance with the drinking water standards and other requirements on suppliers (e.g. approved water safety plans).

• No formal enforcement action has

been taken by DHBs since the current drinking water regime was introduced in 2007.

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• 18 per cent or almost 1 in 5 wastewater treatment

services were operating on an expired consent (2015/16)

• Councils monitored 60 per cent of all resource consents

under the RMA that were subject to conditions and required monitoring. 21 per cent of these monitored RMA consents were noncompliant (2015/16)

• “the responses in 2014 suggest that less than half of

provincial and rural councils always meet resource consent conditions.”

LGNZ/Castalia 2014 Issues paper, p18

• Local authorities had 374 full time equivalent (FTE)

compliance and monitoring staff in 2014/15. Thirty-one local authorities had one or less FTE; 10 had none.

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Transparency & accountability

• The current system requires only rudimentary public

disclosure of information …

• Fragmentation in the information collected and

published by different agencies and organisations ...

• Much of what is available is published in annual

reports or technical compliance/ monitoring documents, and is not interpreted for consumers or presented in a form that is easily accessible to them.

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A hands-off central government

• Central government has been relatively

hands-off in supporting local authorities to implement national directions and

• ther centrally-set requirements …
• Multiple Ministers and government

agencies … no single lead agency or formal coordination mechanism.

• Lack of feedback loops to ensure

planning and investment decisions are informed by relevant information and assessments re standards and

• utcomes.

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Ministerial portfolios with a core interest in three waters: Climate Change Commerce and Consumer Affairs Environment Finance Health Housing and Urban Development Infrastructure Local Government Māori Development Regional Economic Development Rural Communities Transport

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THE TASK IN FRONT OF US

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What Cabinet has directed us to do

• Cross-agency work programme (led by DIA) to develop

the options and recommendations needed to create a strong and sustainable three waters system.

• Involves four inter-related work streams:

– Effective oversight, regulatory settings and institutional arrangements … – Funding and financing mechanisms … – Capacity and capability of decision-makers and suppliers … – Information for transparency, accountability and decision making …

• Report back to Ministers in October.

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Requires answering some tough questions

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How can we achieve our housing aspirations and meet the increasing demand for water infrastructure driven by urban growth? How can communities with small or declining rating bases fund renewals of ageing infrastructure? Or cope with the pressure placed on water services by tourists? How do we ensure communities and visitors across the country have access to safe and affordable drinking water, and swimmable rivers and coastal waters? How much will it cost to meet national directions and community aspirations for fresh and coastal water quality – and how can communities pay for this? How do we respond to big issues like emergencies and natural hazards, climate change, and infrastructure resilience? How do we meet increasing community expectations relating to drinking water quality, and wastewater and stormwater treatment and management?

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Evidence suggests we will need to address regulatory and service delivery arrangements to achieve system-wide improvements

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Regulation,

• versight &

disclosure Funding & financing Capability

Water service delivery arrangements

Public health Environmental Economic

Regulatory arrangements – for all three waters

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We need to start talking about how to address these challenges

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A system-wide problem requires a system- wide, collaborative solution

Can we do things differently – to deliver improvements across the country, and benefit all of our communities?

Continuing the status quo is not sustainable – the scale of the challenge is too great Continued public

• wnership of existing

infrastructure assets – as the basis of any options for reform

If we recognise and take up the opportunities for change – what might this involve?

Larger urban populations helping smaller areas

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“localism” – continued local government and communities involvement

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The HNI recommended moving to a system

• f aggregated, dedicated water providers

Regional, publicly-owned water providers? A small number of cross-regional, publicly-owned water providers?

Or something else?

If we were to consider a new model, what might the options look like?

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What fills the gap?

• Not sure, but our Minister has started this

conversation.

• Will be talking openly about this over the next few

months.

11% Place-making Social outcomes – homeless, housing, health, education … The four well- beings

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Inclusive, liveable and safe neighbourhoods

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Central government

Large group of Ministers with a broad range of interests in water infrastructure are leading this work

Local government

Opportunities for sector leaders to work with government on this

Other experts and interested parties

Ministers are meeting regularly to discuss this work Many Government priorities are dependent on a well-functioning three waters system For example, a sector reference group is being set up with LGNZ to work with officials on

• ptions and issues

We also want to engage with iwi and Māori, water infrastructure experts, and consumers throughout this process

What next?

Identifying the right approach will require leadership and collaboration

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• We are still at the conceptual policy stage – lots of work needs to

happen to identify, discuss, and develop options

• There will be ongoing engagement – including a dedicated

reference group, discussions at sector events, iwi and Māori engagement, and meetings with technical experts

• Due to report to Ministers on high-level options and

recommendations in October 2018

• In 2019 we will signal the direction of reform and work through

detailed design of options – possibly followed by legislation

Indicative timeframes

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• Looking for comprehensive engagement with the sector.

– Utilise existing networks e.g. LGNZ forums, CE groups etc. – Through the new LGNZ Three Waters Review Reference Group. – With the DIA Review Team – happy to come to you.

• We need your views on:

– Information to help refine or clarify the problem. – The key issues or questions that need to be addressed in developing

• ptions.

– The viable options to create a strong and sustainable three waters

system.

With you

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Department of Internal Affairs

www.dia.govt.nz/three-waters-review threewaters@dia.govt.nz Allan Prangnell 021 865 809 allan.prangnell@dia.govt.nz Richard Ward 021 826 149 richard.ward@dia.govt.nz

Contacts

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