John MacDonald: Come back 3 Waters. All is forgiven

Come back 3 Waters - all is forgiven.  

You might be thinking that, now the Government has told councils they’re going to have to borrow truckloads of money to sort out their water infrastructure problems. Which could impact their credit ratings, increase their overall borrowing costs and increase rates. 

So yeah - that’s how I’m feeling. Because I’m now of the firm belief that it would be way better having the state owning and operating and paying for water infrastructure in this country. 

Because I think the increased debt that is going to be coming our way at a local level will only mean one thing - higher costs and higher rates.    

Just in case you need reminding, 3 Waters was Labour’s policy for reforming waste, stormwater and drinking water services right around the country. 

It fell over after people got fixated on the part of the policy that talked about co-governance with Māori. And, suddenly, it became a race issue instead of an infrastructure issue. So Labour tried to re-brand it, tweak it, but a lot of people still weren’t buying it. So, it went nowhere.  

At around the same time, National was promising an alternative that it was calling “Local Water Done Well”. That was as much detail as it gave out pre-election but that word “local” was enough for most people to think it sounded like a much better way of doing things. 

And that was what councils like Christchurch were banging-on about too. And I fell for the talk - initially, anyway. But I’m actually thinking now that this obsession with the “local” bit is going to be something we are going to come to regret.  

The bit that I initially got all fixated on was the amount of money the Labour government was offering to pay Christchurch in exchange for its water infrastructure. 

It was $120 million in exchange for $8 billion of water infrastructure assets. Not that I actually think of underground pipes and things as assets. Because, for me, an asset is something you can make money from. 

But I fell for all that and I was more than happy to tell the Labour government where to go with its miserly offer.  

But then we found out how cruddy the water infrastructure in Christchurch actually is. Because, remember after the earthquakes, we all assumed —or we were all led to believe— that everything under the ground was being replaced and it was going to be gold-plated blah blah blah. 

Which wasn’t and isn’t the case at all. As we discovered earlier this year, things under the ground in Christchurch aren’t so rosy and 38-million litres of water is leaking out of the pipes every day.  

Not as bad as Wellington, where 60-million litres is going down the drain every day. But it’s not great either and it shows just how much of a repair job is still needed. 

Now, under the approach Labour wanted to take, the Government would have owned the water assets —after paying a bargain-basement price— and it would have been responsible for fixing things. And paying for it. 

But, because we got all obsessed with locals owning and running water infrastructure, we’re now in the situation where the realities of ownership are hitting home, and councils are being told to borrow truckloads of money to pay for what needs to be done. 

And the money is going to come from what’s called the Local Government Funding Agency, which is 20 percent owned by the Government and 80 percent owned by 30 local councils. 

So the councils are going to borrow the money from the funding agency. The benefit of doing that, is that the lending rate is going to be much lower than it would be if they had to borrow from elsewhere. 

The thing is, though, tell that to the credit rating agencies which look at local councils and decide what their credit rating is depending on their debt levels, revenue streams —all of that— and they set a credit rating which then determines how much councils have to pay for other borrowing. 

So council costs are actually going to go up under this plan of the Government’s and, you know what that means, rates increases are going to keep on keeping-on. Because the councils are going to have to pay for it somehow. Or correction - we’re going to pay for it. 

See omnystudio.com/listener for privacy information.

Episode Transcript

Speaker 1 (00:06):
You're listening to the Canterbury Mornings podcast with John McDonald
from Newstalk ZB.

Speaker 2 (00:12):
Come back three Waters, Come back, three waters all is forgiven.
You might be thinking that now the government has told
counsels that they're going to have to borrow truckloads of
money to sort out their water infrastructure problems, which could
impact their credit ratings. Well, let's face that it will
impact their credit ratings, increase their overall borrowing costs and

(00:34):
increase rates. So yeah, that's how I'm feeling. Come back,
three waters all is forgiven because I'm now of the
firm belief that it would be way better have in
the state owning and operating and paying for water infrastructure
in this country because I think the increased debt that's
going to be coming our way at a local level
will only mean one thing, high costs and higher rates. Now,

(00:58):
just incas you need reminding. Three Waters was Labour's policy
for reforming waste, stormwater and drinking services right around the country.
This the three Waters waste, storm water and drinking and
it fell over after people got unnecessarily fixated on the
part of the policy that talked about co governance with

(01:19):
Mari and suddenly it became a race issue instead of
an infrastructure issue, and the horse had bolted once you
got to that. Once we got to that point, Labor
tried to rebrand it, tweak it, but you know a
lot of people still went buying it, so it went nowhere.
At around the same time, National was promising an alternative

(01:39):
that it was calling local water Done Well. That was
as much detail as it gave out pre election. As said,
I was going to be local water done Well. But
that word local was enough for most people to think, well,
sounds like a much better way of doing things, much
better than that bloom and three waters. And that was
what Council was Like Christ's for example, were banging on
about as well. And I fell for the talk. I

(02:03):
fell for it initially anyway, but I know actually thinking
that this obsession with the local bit is going to
be something that we are going to come to regret,
something that's going to bide us in the backside. The
bit that I initially god all fixated on was the
amount of money the Labor government was offering to pay
Christ Church in exchange for its water infrastructure. You might

(02:24):
remember this. It was one hundred and twenty million in
exchange for eight billion worth of water infrastructure assets. Not
that I actually think of underground pipes and things as assets,
because for me an asset there's something you can make
money from. But I felt for that, and I was
I was more than happy to tell the Labor government
where to go with its misily offer. Things changed though,

(02:46):
we found out, didn't we how cruddy the water infrastructure
in christ Church actually is. This isn't just a christ
Church thing, by the way, this is all councils. But
we found out how cruddy the water infrastructure in christ
Church actually is because remember after the earthquakes, remember we
all assumed, or we were all led to believe that
everything under the ground was being replaced and it was

(03:07):
all going to be gold plated blah blah blah blah.
But it wasn't and it isn't. As we discovered earlier
this year, things under the ground and christ Church aren't
so rosy. And thirty eight million leaders of water is
leaking out of the pipes every day, thirty eight million
letters lost every day. Not as bad as Wellington, as

(03:28):
the christ Church may I like to point out, pointed
out at one point they have sixty million letters going
down the drain every day. But it's not great either,
our thirty eight million and it shows just how much
of a repair job is still needed now. Under the
approach Labour wanted to take, the government would have owned
the water assets after paying sure a bargain basement price,

(03:49):
and it would have been responsible for fixing things and
paying for it. But because we got all obsessed with
locals owning and running water infrastructure, when are in the
situation where the realities of ownership are heading home and
councils are being told to borrow truckloads of money to
pay for what needs to be done, and that money's
going to come from what's called the Local Government Funding Agency,

(04:09):
which is twenty percent owned by the government, eighty percent
owned by thirty local councils, including christ Church, Selwyn, Weymak Redi.
So the councils are going to borrow the money from
the funding agency. The benefit of doing that is that
the lending rate is going to be much lower than
what it would be if they had to borrow from elsewhere.
The thing is, though, tell that to the credit rating
agencies which look at local councils and decide what their

(04:33):
credit rating is depending on their debt levels. Revenue streams
all of that and they set a credit rating and
the importance of that is that determines how much councils
have to pay for other borrowing. So council costs are
actually going to go up under this plan of the governments.
And you know that, you know what that means. Rates
increases are going to keep on keeping on because the

(04:55):
councils are going to have to pay for it somehow
or correction, we're going to have to pay for it.

Speaker 1 (05:01):
For more from Canterbory Mornings with John McDonald. Listen live
to news talks It'd be ch Church from nine am weekdays,
or follow the podcast on iHeartRadio