3 Waters proposed restructure – feedback from readers

Here are some of the emails I have received. My apology for not printing them all but they are all saying similar things.

Here’s one from a very senior public servant:

Continue to enjoy the Tuesday club. Remain stunned with the three waters approach being taken – it would just be great to have some actual evidence that the suggested approach has ever delivered anywhere. Again, the less well-off will wear the consequences of a poorly thought out and poorly evidenced solution to what has been long term under investment by the crown in infrastructure. The labour government appear to be hell bent on following the same well-trodden path of other countries that should be a salutary lesson.

Quote from another: These are “Grand theft-water proposals”

The Green Party – Push Pause

Another quote:

a) For concerned citizens I feel we should hold back on opposing until the legislation is introduced to parliament (which won’t be till December because Nanaia is off overseas till the end on November) and we can see what it says. I feel if we raise points of conflict then DIA will be tweaking the legislation to get around the problem. One I thought of is “Can the 3W legislation just say that section so-and-so in this other piece of legislation will not apply?” just to get around the problem, and it also leaves that section in the other act to still catch the non-water circumstances it was also written for?

b) Could the councils fight back (instead of just moaning) by announcing a group of them (say all ten councils in Canterbury or a just a subset) are investigating ways of selling their 3W assets into an entity that will be owned and controlled by the councils involved. And once the legislation is introduced they will look at how they can tweak the entity’s structure to keep it out of what the legislation can do.

There’s a Russian word, maskirova (or something like that), which roughly means misdirection. An example from WWII was the Russians would put up a large area of camouflage netting and have tracks leading under it. German aerial reconnaissance would spot this and assume there were a whole lot of tanks hiding under the camouflage when in fact there were none. The Germans would move their tanks to counter this threat that didn’t exist and as a result weaken other areas where the tanks actually were.

So announcing the 3W alternative, talking about it and having a small group working on it (let’s not waste too much money) may spook DIA.

Rod Cameron wrote:

This is a summary message intended for you to use in discussions on 3-waters matters, as you see fit.

During the rebuild of pipes and roads in Christchurch following the 2010-2011 earthquakes an unusual approach was taken to the whole $2-3bn, 6-year programme of work. It involved the formation of a virtual organisation that was a collaboration of three funders and eight contractors, forming a governance group and a management team. They oversaw the definition of scope of work, its prioritisation, design, costing and monitoring, all of which was carried out by an integrated services team including staff from the principals and about sixteen engineering and related consultancies. The physical work was carried out in the field by teams led by the eight contractors, using local subcontractors and suppliers, with cost-competitive processes.

The set up and running of the whole enterprise was very successful and is recognised internationally. Refer to SCIRT – Learning Legacy (scirtlearninglegacy.org.nz)

The essentials of SCIRT have been captured by some of us who took part and turned into a concept for getting things done after a disaster, a framework for action which we have named ENGAGE. In the process of talking about ENGAGE with government, local government and industry it has become obvious to us that those principles can be applied in a variety of situations where things need to be done, but where there is complexity from the number of interested or affected parties, the definition of scope of work and the need for engagement of the public.

As you and I have discussed, the current concerns around 3-waters present components that we have learnt to address and manage, including:

There are several funders, many stakeholders and a wide range of interested parties. The future capital works programme and operations are not clear and will require thoughtful definition, prioritisation and careful management by independent, objective parties. The engagement of the consulting and construction communities will require special arrangements to ensure equity and competitiveness. The information management could extend across the nation to ensure integrated common approaches and financial control, informing all stakeholders about plans, commitments, progress and costs.

I feel strongly that addressing the 3-waters challenge needs a special approach and therefore suggest that some of the experts behind ENGAGE could be usefully brought into the discussion to help shape and establish a collaborative approach to governance, management and delivery under an agreed set of arrangements, focussed on best outcomes. I would be happy to talk to you further about this and to bring as many of the ENGAGE founders along as you require.

Here’s a series of questions which have been submitted to me:

• What will the structure of WaterCo be? A company, trust or … If a company who are the shareholders? Who appoints the board?

• Will WaterCo’s founding constitution be comprehensive and limiting, or will it be allowed to do what it’s board wants? Can it buy non water assets e.g. a hotel. Will it be forbidden from distributing profits (if any) to shareholders).

• The water – can excess or normal usage be charged for? Nobody owns the water. And excess usage wouldn’t use-up the pipes.

• Water meters – will WaterCo charge all connections a standard rate? Different for commercial and residential? Is an apartment building one connections or does each apartment need to be metered? Can an existing apartment building be retro-fitted with a meter for each apartment?

• Different prices for different locations? Postcode pricing. Flat rate or based on valuation, or based on valuation but a minimum rate?

• Can smaller communities buy their water reticulation from WaterCo? Somewhere on the West Coast wanted to do this recently. Can WaterCo refuse to supply? i.e. close down small inefficient schemes. Will land owners be told to drill a well for their drinking water, install a septic tank and dig a ditch to drain rainwater into the nearest stream. All at the owners expense of course.

• Climate change and population growth – say a catchment valley is the source of drinking water and through climate change / population growth that source is no longer sufficient. Will WaterCo have the statutory power to buy land to create a greater catchment area?

• If assets are taken by WaterCo (ChCh $6.9b and debts of $1.1b) how does this affect the council’s ability to borrow money (is it based on a percentage of income or on asset values?). This leaves WaterCo able to borrow against the remaining $5.0b. So the CG will in effect not have to put any, or very little, into WaterCo.

• Moral hazard of ownership – will there be an implied guarantee of the loans by the shareholders?

• Will WaterCo “centralise” their maintenance capacity. Will the workers currently employed by the councils be made redundant and a larger centralised team move around doing required maintenance. Will it be cheaper to move a team from ChCh to Timaru for two weeks? Think accommodation, travel, food, movement of machinery … What about all the redundant machinery scattered around the region. Will it just sub-contract work to the former employees? (Pressure on wage rates).

• Or will council’s sub-contract to WaterCo to look after the three waters in their area?

• How do the 4 WaterCo’s report the 9,000 extra jobs. Do they count all workers of a sub-contractor even though they would be doing work for other customers as well?

• Currently there is a complaint that developers can’t do new developments because the councils can’t afford the infrastructure. If there is a WaterCo then the council can just go ahead and do it’s consenting and leave WaterCo to ‘have to’ install the infrastructure. Or does WaterCo get a power to veto / decline new developments?

• Take Ashburton and Tinwald on opposite sides of the Ashburton River. Imagine some other location where you only have a town on one side of a river and a developer wants to build a new development on the other side. Must WaterCo put in three waters for that new development? Pipes across the river to reach the existing sewage treatment works or build a totally new one, or be able to say NO.

• Will ‘commercial sensitivity’ be permitted if there are 4 WaterCo’s that are not competing? Open reporting of KPI’s, etc.

• What added costs will there be that don’t currently exist – Boards, CEO’s CFO’s, HR departments, etc.

• Effect of councillors making decisions based on their political party affiliations when choosing to join the scheme.

• Where is the efficiency and economies of scale of including Nelson and Marlborough in a North Island WaterCo?

• Overlay a map of Iwi areas and Ngai Tahu’s area matched WaterCo #4. Therefore, all Māori appointments will be from Ngai Tahu. In other regions it may be, say, 8 iwi getting to make 5 appointments. Conflict?

• If not legislated will there be 4 WaterCo’s with totally different structures?

• Rates on WaterCo land? Will they be exempted as is for crown land?

• Drinking Water Assessors – with only 4 WaterCo’s is there a risk of ‘capture’. Will WaterCo be given licence by being trusted to do the right thing?

• Legislation vs Regulation. One is much easier to change (for the worse) than the other. Conversely a mistake can be harder to fix.

• Maybe have WaterCo buy the water as it enters the reticulation system (at the exit from the reservoir, bore, etc) and sell it (at the same rate) to the users. Obviously the difference between the buy and sell quantities must be leakage. The money for buying the water is held by a statutory body which will buy back what is supplied to the users, and that hasn’t been sold to the user. i.e. Waterco either recovers the cost of supplied water from the user or the seller.

• The statutory body then uses the difference in sale and re-purchase amounts to … a) buy debt in the WaterCo’s (so they can fix pipes to reduce their wastage). Possibly with a time span after which the debt will be forgiven, with rules around whether WaterCo has actually improved the network. Say the debt is only forgiven if after ten years from acquiring the debt the wastage percentage has dropped by x%). Or b) give the money to CG, or c) give the money to councils or d) give the money to Iwi, or …

• Consumer Guarantees, Fair Trading Acts. And others? Exempt?

• Under the Three Waters proposal the assets will remain with the councils. Who pays for any work post change and how is it recorded? If the WaterCo pays and owns new infrastructure how is this recorded? Half of a street’s infrastructure belongs to the council and half to WaterCo. Who maintains the maps? Is the council component depreciated away in their books and at some point, it is only the WaterCo that owns assets?

• Will WaterCo be charged ‘rent’ for the use of council assets? How is that rent set?

• Who bills the landowner? WaterCo or will it be via the council rates bill? If via the rates bill doesn’t this hide the cost of water and lead to complaints against the council for the size of its rates bill?

• Consents to pollute. Will the WaterCo’s inherit these consents, or must they apply in their own name? To be granted any consents contradicts the benefits claimed such as swimmable rivers. Can any consent holder surrender their consent?

• Map keepers. Who maintains the maps of underground services? Is access to these maps charged for currently?

• Council Controlled Organisations (CCOs). Can one be owned my multiple councils or are they limited to one council owner?

• If a WaterCo were to sub-contract the delivery of drinking water in a city to private enterprise isn’t this in effect privatising the water?