3 Waters reform would take on $120m of council debt

The first lot of debt to be transferred off the Dunedin City Council’s books if Three Waters reform continues is set to be about $120 million.

The next year’s round might be about $60m and then one more tranche could transfer to a new water entity due to start operations in July 2024.

However, the tradeoff is the council would essentially lose control of $1.6 billion of assets.

Councils losing direct control of assets has been one contentious element of the Government’s reforms and it has not been clear how debt will be treated.

It emerged at a Dunedin City Council meeting last week the Department of Internal Affairs had agreed in principle the council’s Three Waters debt at the end of the 2022 financial year was about $120.9m.

A figure for 2022-23 has yet to be firmed up, but it is understood to be likely to be in the order of $60m.

The final amount would then depend on where the council lands on its 2023-24 annual plan, which has yet to be approved.

The council increased its debt this financial year by more than $100m and then raised the debt ceiling by a further $35m, largely because of Three Waters spending.

Replacing ageing pipes has been a key focus in recent years.

The council also bolstered its Three Waters programme in the past year, boosting its planning capacity ahead of the expected transition of activities to a regional entity.

The National Party promised to scrap such entities if it gained power at this year’s general election.

The Government has argued significant spending is needed to upgrade infrastructure and the entities will benefit from economies of scale to make it happen affordably.

Cr Carmen Houlahan said she was worried city residents could effectively end up subsidising ratepayers from other councils that had under-invested in their networks.

Households are set to face increased bills and Cr Jim O’Malley is one councillor who has doubted the touted efficiency gains arising from the reform model.

He expected the new entities would have a worse credit rating than councils.