Three waters: Govt agreed to mandated strategy before four entities announced

Local Government Minister Nanaia Mahuta. Photo: RNZ
Local Government Minister Nanaia Mahuta. Photo: RNZ
The government kept councils guessing for months about whether they would be forced into Three Waters reforms, despite having already agreed to pursue such a strategy, papers show.

The National Party says it is clear Local Government Minister Nanaia Mahuta made the decision from the outset and consultation with the sector was just a box-ticking exercise.

RNZ has been asking for an interview since Tuesday but her office repeatedly said she was not available.

Mahuta had consistently refused to rule out making the reforms mandatory, but did not confirm the move until late October.

That was after the government had already secured agreement from representative group Local Government New Zealand not to actively oppose a possible mandatory approach.

However, Cabinet papers now show a strategy to pursue a "legislated all-in" approach was agreed to in June - about two weeks before the government's four-entities model was even announced.

The 102-page paper from July, quietly released last month, refers to decisions made in June.

"Achieving the full benefits requires comprehensive participation by local government, and there are risks to achieving this outcome under a voluntary 'opt-out' approach," it said.

It noted Cabinet had already agreed that "a new reform strategy will be pursued", which would involve:

-A staged approach to the release of information and policy announcements (in late June, mid-July and September 2021);
-a legislated 'all in' approach to reform.

It was referring to another paper presented to Cabinet on 14 June, titled A new system for three waters service delivery. That paper has also been released, but any details about a legislated all-in approach appear to have been redacted.

The July paper said although the strategy had been agreed, it would not be finalised until September - to help build support with councils.

"I am proposing to seek final decisions confirming the legislated 'all-in' approach in September 2021, following a short period of socialising the policy proposals and final support package with the local government sector."

National's Local Government spokesperson Simon Watts. Photo: Supplied via RNZ
National's Local Government spokesperson Simon Watts. Photo: Supplied via RNZ

'This decision was made from the outset'

National's Local Government spokesperson Simon Watts, fresh to the role vacated by the party's new leader Christopher Luxon, said it was clear Mahuta had a pre-conceived idea of how the process would operate.

"I absolutely believe that this decision was made from the outset in terms of what the outcome they wanted," he said.

Indeed, Cabinet minutes from the meeting in October said previous papers had "explained the preferred approach is to enable all communities within New Zealand to access the benefits from reform".

"In practice, achieving this would require every territorial authority district to be included in the new water services entities, and for this to be provided for in statute - without the ability to 'opt out'."

In August and September, councils carried out an eight-week period of engagement with the proposed reforms. During that time, the Internal Affairs ministry's website stated:

"Councils are not expected to make any formal decisions regarding the reform through this period. This period does not trigger the need for formal consultation."

Watts said eight weeks of consultation with the local government sector was inadequate, and so was the response to councils' largely negative feedback.

"They've made a decision on this and the consultation is just, yeah, to tick a box. And this is a real disappointing fact because this is going to affect every single ratepayer in this country," he said.

"Everything you've seen in terms of the consultation has basically been to sort of backtrack back into that position.

"So what you'd expect from any reasonable minister is to review the feedback and say 'let's go back to the drawing board', this minister instead decided 'no, we're not going to do that, we're going to go all in'."

Whangārei District Council was the first to opt out of the Three Waters reforms, the day before the four-entities model was announced.

The Government confirmed in October that the Three Waters reforms would be mandatory. File photo
The Government confirmed in October that the Three Waters reforms would be mandatory. File photo
Mayor Sheryl Mai said a mandatory approach had been signalled as a possibility, but that did not match up with the messaging to councils.

"Sort of flies in the face of the assurances that this was always going to be a voluntary approach - the opting in, opting out was always the option for councils until we'd received all of the information - so if it was a planned approach I think we should have known that," she said.

"To be fair it was indicated that if sufficient councils didn't opt in that that could be an option that could be pursued, however when we entered into the process ... we were encouraged because we had the option to make our own decision on behalf of and with our communities."

"We were always told that the reform strategy would maintain the opt-in, opt-out until the Water Services Bill was put to Cabinet."

She said the discussions would have been "quite different" if they had been told about the mandated plan from the outset.

The introduction of the legislation has now been delayed until next year to give the governance working group time to recommend changes.

Trying not to muddy the waters

The problem for the government was they wanted to remain in the good books of local councils, as shown in the Cabinet papers.

"The sector's support for reform is critical for ensuring the water services entities are set up for future success, for managing costs and risks through the transition period, and for maintaining good faith participation by local government in other large reform programmes, including resource management," Mahuta's July paper said.

The Cabinet papers noted the government was working with Local Government New Zealand (LGNZ) - a representative group of elected mayors that advocates on behalf of councils with central government - in June and early July to build support and discuss the reforms.

It noted discussions were close to reaching a conclusion - namely a "heads of agreement" - with the group.

Primarily this agreement was to support the case for change but if the government decided to go ahead with a mandatory approach, LGNZ would also agree to accept the decision on the basis that it would be necessary to realise the benefits of reform:

If, after the end of the period referred to in clause 3.2(b), the Government decides to adopt an "all in" legislated approach to the Three Waters Reform then LGNZ agrees that it will accept such a decision on the basis that:

-(i) "all in" participation of local authorities is needed to realise the national interest benefits of the reform;
-(ii) such acceptance does not imply that LGNZ supports such approach;
-(iii) LGNZ will not actively oppose such approach; and
-(iv) LGNZ may publicly express its disappointment that the Government has considered it necessary to adopt such approach.

Some details of the discussions between LGNZ and the government remain secret, with both having signed a non-disclosure agreement before the Heads of Agreement.

Meanwhile, announcement of the mandated approach was delayed. It had been planned for September after the eight-week consultation period but - perhaps with an outbreak of Covid-19 getting in the way - Mahuta in the end would not announce it until the end of October.

In Parliament on 26 October however - just a day earlier - Deputy Prime Minister Grant Robertson, speaking on Mahuta's behalf, was busy rejecting rumours the government would take that approach.

"On behalf of the minister, the government continues to work with local government around making sure that we involve as many councils as possible as we can in this proposal, and when it comes to rumours, if I believed all of the rumours that I've heard around Wellington, the member [National's Nicola Willis] would already be the leader of the National Party," he said.

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