In a stark letter sent to the Waitaki District Council in mid July, secretary for local government Paul James warned the council it will face significant barriers to achieving financial stability through a standalone water model.
The letter adds mounting pressure on the council from central government over its decision to establish an in-house water services unit, with household charges expected to more than double by 2034—topping $3000 annually for some residents.
The Department of Internal Affairs (DIA) had previously advised that a joint venture with Central Otago, Clutha and Gore district councils—under the government’s Local Water Done Well framework—was the only viable option.
"Your council would have been significantly better placed to address these barriers as part of Southern Water Done Well," Mr James wrote, urging the council to submit a draft delivery plan for review by July 31. "To help us consider whether further advice to the Minister may be required ... I am requesting that you provide the department with a draft water services delivery plan."
That draft was submitted last week, though Waitaki District Council chief executive Alex Parmley admitted further work was needed. "We’re expecting to be able to share some feedback next week, but we do know that we’ve got more work to do on our water services delivery plan before it is ready to be submitted," he said.
Over the past three weeks the council has been holding weekly workshops to find a way to overcome several difficulties in achieving the mandated government requirements for new water service entities to be financially sustainable long-term.
The financial realities facing the council are sharp. According to the draft plan, average household water charges are projected to rise from $1468 in 2024-25 to $2185 by 2026-27—and escalate to $3146 by 2033-34. Over the next decade, the cost of water services is set to increase by 114%, a rise that would see charges consume 3.3% of median household income by 2034.
"This is an acute shift," the draft plan states, noting the affordability strain. While DIA guidelines suggest these costs remain within acceptable affordability thresholds, they represent a dramatic rise from the current 1.7% of median income.
The council has held weekly workshops in recent weeks to grapple with the financial and logistical challenges of going it alone. While maintaining a balanced budget is achievable, officials said the real challenge lies in ratepayer affordability, not access to borrowing. Most revenue under the plan would be derived from targeted property rates.
Tuesday’s council workshop reiterated the complexity of meeting the mandated requirements for sustainable, locally managed water services. The capital investment required is significant, and with increasing pressure from central government, Waitaki’s decision to reject the joint venture path now comes with heightened scrutiny.
The final plan is expected to be submitted following feedback from the DIA.
