Decoding New Zealand’s Water Reform: A Castalia Perspective

In New Zealand, the “Local Water Done Well,” policy is set to replace the “Three Waters” regime. The Local Water Done Well policy is based on an alternative water reform put forth by “Communities 4 Local Democracy”, whom we advised.  

The New Zealand Herald recently published a column written by Andreas Heuser, Managing Director at Castalia, about the Local Water Done Well policy. 

Mr. Heuser outlines the key components of the Local Water Done Well policy, emphasizing its potential to address financial challenges within the water sector. Mr. Heuser dispels misunderstandings, particularly regarding the separation of balance sheets, and explains the policy’s focus on decentralization and community involvement. 

The proposed framework involves creating separate corporatized water service providers (WSPs) owned by individuals or groups of councils. These WSPs would maintain independent accounts, subject to regulation by the Commerce Commission to ensure efficient expenditure. This approach, globally tested and successful in other utility sectors, aims to make WSPs credit-worthy entities, attracting capital and positively influencing credit ratings. 

Heuser addresses concerns about financing challenges and explains the suggested mix of standard utility financing and targeted government support. The new policy encourages a case-by-case approach, with the government providing technical assistance to WSPs or councils facing financial challenges. Innovative solutions, such as a Ratepayer Assistance Scheme, revenue bonds, conventional LGFA finance with relaxed debt limits, and Crown support with equity finance, could be explored based on local needs and preferences. 

Highlighting the importance of local involvement, Heuser stresses that communities should play a pivotal role in overcoming challenges. The column underscores the flexibility of Local Water Done Well, allowing local communities to shape its design based on specific circumstances. The example of Auckland is presented, where tough choices, like separating Watercare from Auckland Council, are best decided by Aucklanders themselves. 

Mr. Heuser highlights the potential of the Local Water Done Well policy to be a major advance in New Zealand’s water services. Castalia looks forward to supporting this proven and adaptable method.