Cabinet Approves New Water Service Delivery Models to Enhancing Infrastructure Investment

“The Government’s Local Water Done Well plan outlines the enduring components of water service delivery,” said Mr. Brown.

The New Zealand Cabinet has approved new water service delivery models aimed at driving critical infrastructure investments and improving access to finance for water council-controlled organisations (CCOs). Local Government Minister Simeon Brown and Commerce and Consumer Affairs Minister Andrew Bayly announced that these measures would provide local governments with the certainty needed to enhance water services while minimizing costs for ratepayers.

“The Government’s Local Water Done Well plan outlines the enduring components of water service delivery,” said Mr. Brown. “This initiative is designed to offer local governments the stability required to manage water services effectively, while keeping costs down for residents.”

The new approach follows the widespread rejection of the previous Labour government's Three Waters reforms, which were deemed costly and divisive. The current administration has repealed these policies, reinstating local control over water assets. The newly approved models will facilitate the creation of financially sustainable water organisations and allow increased borrowing from the New Zealand Local Government Funding Agency Limited (LGFA). This move is expected to reduce the financial burden on ratepayers by enabling councils to manage debt more effectively and invest in essential infrastructure.

LGFA has confirmed its readiness to begin lending to water CCOs supported by their parent councils. These loans can leverage up to 500 percent of operating revenues—twice the existing level for councils—provided the CCOs meet prudent credit criteria. This will help councils spread the costs of long-term assets, invest in growth, and ensure that expenses are covered by users over time, rather than through immediate rate hikes.

The new models aim to ensure sustainable water services nationwide by granting councils the flexibility and tools needed to address their specific needs. Collaboration between councils is expected to drive greater efficiency and facilitate affordable water services for communities.

Mr. Bayly highlighted that the new economic regulation regime will enhance investment in water infrastructure and ensure that revenues collected for water services are used appropriately. “This regime will safeguard water revenues, ensuring they are dedicated to infrastructure and not diverted for other purposes. The Commerce Commission will oversee the economic regulation, ensuring transparency and value for money for ratepayers.”

Additionally, the Government and LGFA are considering raising debt limits for high-growth councils and exploring lending options for CCOs not supported by their parent councils. Legislation to implement these new water service delivery models is anticipated to be introduced in December 2024 and passed by mid-2025.