Mayor of Central Hawke’s Bay, Alex Walker, has written an open letter to Local Government Minister, Simon Watts, urging the Government to consider the challenges of small rural communities in their implementation of Local Water Done Well (LWDW) reform.
“Thank you for your continued work on water reform in Aotearoa New Zealand. There is clear consensus across the country that the current system is not fit-for-purpose and change is essential,” the Mayor wrote.
“Central Hawke’s Bay District Council (CHBDC), along with our wider Hawke’s Bay whānau, have been proud to lead and champion change. However, implementing Local Water Done Well (LWDW) is not easy for small rural communities like ours.
“We, in Central Hawke’s Bay (CHB), remain aligned to the LWDW principles: scale that unlocks vital system improvement, regulation creating a successful utility environment for this type of network infrastructure, and ensuring the decisions on how to move forward sit with our communities.”
The Mayor shared how “silence” in policy, legislation and the broader regulatory environment on issues of affordability was creating challenges for the region.
“Our community is suffering from several decades of poor leadership decisions and a significant lack of investment in our local water infrastructure. This means that even with a bare-bones approach to operations, capital renewals and improvements, the next 10 years is a perfect storm of costs for our households,” she wrote.
The Mayor said that catching up on this historic underinvestment, combined with the significant investment required for wastewater treatment upgrades, in particular, results in an “intimidating investment profile” for the next decade.
“Even with the scale of a Regional Water Services CCO (RWSCCO), this 10-year hump of investment creates an unaffordable cost for the 4,450 connected household ratepayers in CHB,” she said.
“For context, a median valued residential property in CHB will pay $3,200 for three waters services this year. These costs are projected to increase to $7,000 by 2034, even with the scale and benefits from being part of a RWSCCO. Our community has a median household income of $82,100 and a deprivation index of 7-8 across several parts of our district (in particular in urban areas connected to water services). These costs represent a significant chunk of household expenses.
“In addition, by 2034, over 25% of our population will be aged over 65, with many attempting to cover all of their living cost from superannuation alone. The combination means it will be impossible for many of our senior citizens to afford to live in our small towns if water charges are this high. One of our local communities has been vociferous on this point.”
The Council has held a series of community meetings across the district, discussing the LWDW policy and its impacts on CHB in some detail, with more than half of submissions choosing the option of accessing scale through a Hawke’s Bay RWSCCO.
“However, the overwhelming and consistent feedback was that even with these system changes, affordability is not being adequately addressed,” said the Mayor.
“We understand that the new RWSCCO is assumed to provide the best platform to address these affordability challenges. But it is hard for our isolated, rural communities to trust that regional and national levels of planning, investment, regulation and policy will service them well, in a way they feel connected and can trust that affordability challenges will be addressed. Other rural districts are voicing similar concerns.”
Mayor Walker suggested the Minister consider the following policy changes and refinements to assist rural communities to navigate the next steps of the water reform program:
- A nationally defined approach to what “affordable” means for access to clean water and sanitation. Affordability is not currently described in the LWDW legislation, an omission that we think creates a challenging flaw. The World Health Organisation and others consider benchmarks for equitable access to water services – in particular, drinking water and wastewater. Current international thinking is that 2-5% of household income is an equitable and realistic level. Water NZ has published some additional thoughts on this, but we think there is a role for Government to consider what is right-sized and appropriate for New Zealand. The way that DIA interprets affordability will be part of how officials review and assess our Water Service Delivery Plans (WSDPs) but without consistent policy frameworks on what is meant by ‘affordable’, we are putting communities like ours at some risk. For context, the $7000 per year in 2034 for CHB, quoted above, will be 7.1% of median household income (assuming 2% per annum CPI) – well above current international and national benchmarking.
- Consideration of how affordability and price paths will be more transparently considered by the Commerce Commission as the economic regulator of water entities.
- Expanding the Government’s Rates Rebate Scheme to include an additional component for a hardship rebate of Water Services charges. This would need to be in addition to the current rates rebate structure.
- One-off capital injections into RWSCCOs to support rural communities to address their backlog of investment, especially for wastewater treatment upgrades. With the importance of the rural economy to New Zealand Inc, and the considerable burden that our rural farming communities take on in the current property tax model of local government, this would give a strong vote of confidence for our local rural economies. This alone has the potential to halve the projected increases in water charges.
- Financial support to RWSCCOs which take on harmonisation policies to soften the perceived impacts on the larger councils/communities that would assist smaller ones like ours through the tough times. We all know that over 30-50 years, investment and pricing needs will gradually even themselves out as infrastructure renewal cycles turn over. But it is the early years, as we deal with the aforementioned humps of historical underinvestment and non-compliance, that we will need assistance with.
Mayor Walker said assistance from the Government and regulators on at least some of the above points would assist the Council to move forward with more trust and confidence in the larger system.
“This would provide critical support to the actions we, CHBDC, are already taking to reduce the impacts at a local and regional level,” she said.
Those actions include the re-phasing of its investment pipeline to a ‘no regrets’ approach, taking on more infrastructure failure risk and delaying renewals investments; and utilising the (yet to be confirmed) new wastewater treatment standardised approach from Taumata Arowai to reassess our Wastewater Strategy.
“This will result in CHBDC taking on further regulatory risk to operate non-compliant treatment for longer and to consider potentially cheaper options for treatment and investment.
“Reducing impact of our 10-year investment hump by advocating for the Hawke’s Bay Region to create a joint 30-year investment strategy urgently through the transition phase to a RWSCCO and ensuring affordability considerations are part of the direction to the new RWSCCO.
“For clarity, these last three points are not enough to reduce the price path to an affordable level on their own. We will need further assistance. Our initial modelling shows that this may further reduce the price path to between $5,000 and $6,000 by 2034, which is still not affordable for our connected ratepayers.”
The Mayor’s letter ended with an invitation for the Minister to visit the region and discuss the Council’s concerns further.
