Local Government (Water Services) Bill

Members, we now come to the debate on Part 4. This is the debate on clauses 197 to 214, “Planning, reporting, and financial management”, and Schedules 3 and 4.

As an accountant, I find this part of the bill particularly exciting—I’m sure the Minister of Local Government does too. There are actually some interesting changes between the bill as reported by the Finance and Expenditure Committee and the Minister’s Amendment Paper 346. The Minister has just been telling us we should have read the bill, which is an interesting thing to say; however, the Amendment Paper, of course, only just arrived on our desks as this debate started, really. I would hope that the Minister isn’t going to be telling us we should have read the entire Amendment Paper as well—I suppose he might.

Look, I want to start on clause 179A, “Responsibilities under this part”. In particular, I do just want to focus on the things that have changed. I want to go to 179A(1)(a), new subparagraph (iv). It says that as a water service provider that is a territorial authority, you’ve got to prepare an annual report directly, through a contract, through a joint water service provider—so these are the people who have to provide a water services strategy, a budget, a water services annual report. There are the obvious ones, but then it says “through another type of arrangement under section 9(1)(f)”, so instead of directly listing in this part of the bill who’s got to prepare this water services strategy, annual budget, and water services report, we’re directed back to section 9(1)(f) of the bill. Going to 9(1)(f), it’s sort of not very clear, because it just says, “another type of arrangement that is consistent with this Act, including receiving a transfer of responsibility for providing water services from the regional council”.

A couple of questions there. One is: why, under 179A(1)(a), couldn’t we have actually had a fuller description of the types of arrangements, and why did we have to refer back to another part of the bill? I could really just do with the Minister elucidating exactly what those types of arrangements are back in 9(1)(f) that are referred to now in 179A(1)(a)(iv). That’s the first question I have to ask of the Minister in relation to this part of the bill that is all to do with planning and reporting and financial management—just some clarification there.

The next bit—and, again, it’s in the same clause where we’ve had a phrase added—is in clause 179A(2) in the Minister’s Amendment Paper. Very roughly, it says that a territorial authority has got to prepare all these reports—the plan, the strategy, the budget, an annual report—but need not prepare these in respect of a minor aspect of the water service. So it’s “responsible for providing only a minor aspect of a water service” and “need not prepare” that minor aspect of the water service. What I want to understand is: what counts as a minor aspect of a water service? The idea here is that clearly it would be ridiculous to go through all these huge documents—prepare them—for what is only a minor part of a water service. I just want to get a sense of what counts as a minor part. It’s just that there’s a little bit of an out here that’s possible for water service providers. To have an understanding of what is a minor part—if the Minister could maybe give some examples, just to help to be sure that we’re not creating a problem here or a loophole here that could be exploited, that would be helpful for the Hansard. I hope it never has to be helpful for a judge one day to try to sort this out, but some examples would be helpful.

Just before I call the Minister, I need to add to the opening of Part 4 that the question is that Part 4 stand part.

Thanks very much, Madam Chair. Questions from the member in regards to clause 179A: the purpose of this clause is to clarify who is responsible for preparing the water services strategy, and clause 179A also clarifies—as the member has asked about—that if a council provider is only responsible for a minor aspect of water services, it doesn’t need to prepare specific documents within Part 4.

The member asked for what a couple of examples of this would be. Well, a couple of examples would be a water supply for a small number of rural homes that are not connected to a water service network. It could also be in the case that a water services entity has a community facility—something like a camping ground, for example, and the waste-water system connected to that camping ground is not connected to the broader waste-water system. Those are two real examples which would be relevant. The primary purpose in this clause is to acknowledge that with these minor aspects, you don’t want to have onerous requirements on our councils in regard to those services.

Look, I’d just like to say thank you to the Minister for that. That clarification is very helpful, and I think it gives exactly the examples I was after.

I want, now, to turn, in the Minister’s Amendment Paper, to clause 181(4). This is on page 167 of the Minister’s Amendment Paper. It’s about what information the territorial authority has to provide and what information it can provide in an impact statement, and so on. But it says, “To avoid doubt, a territorial authority may include information about targeted rates for activities, or a group of activities, relating to water services”.

Now, that’s quite interesting. That clause was introduced in the Minister’s Amendment Paper, so it’s entirely new to the House; it didn’t get a select committee review. I’m interested in that reference to targeted rates. Is this assuming that there is some capacity to charge targeted rates? Is that enabled by this bill elsewhere? Is it enabled by legislation elsewhere? Is this sitting there enabling targeted rates—maybe it’s targeted rates in respect of a particular set of services being provided? Maybe the targeted rates arise because having water services provided to a particular area increases the land value there. I’d like to understand why we’ve had this new clause introduced in the Minister’s Amendment Paper and why it focuses, in particular, on targeted rates. That’s an interesting little wrinkle in here which we haven’t had a chance to look at previously.

In regard to clause 181, the primary purpose of that amendment is to clarify that territorial authorities may continue to include information around any targeted rate activities in a funding impact statement. The primary purpose there is to ensure that there is alignment with the Local Government Act.

Thank you, Madam Chair. I wanted to ask the Minister about a very core part of this bill, and that is clause 187, which is on page 177 of the bill. It goes to the core of the bill, because it is about the content of the statement of expectations that shareholders—i.e., the councils—actually set for these water service entities. I’m really interested to understand much more clearly the objectives of the bill itself and the scope of what can actually be included in these statements of expectations from the shareholders. Now, what is really clear is that the objectives set out a number of aspects when it comes to the provision of water services that are pretty basic—like around reliability and about them being resilient—and there is a clause in there about providing drinking water that is safe for consumers. But what I’m proposing in my amendment—sorry, I’m not sure the number of my amendment, but it’s on page 177, and it’s on clause 187—is to insert a new paragraph (g) and a new paragraph (h).

Now, paragraph (g) is that these statements of expectations should detail how the water organisation actually provides equitable access to water services, including upholding the human right of access to water. What I’m interested in understanding from the Minister is whether that kind of expectation is within the scope of what could be in these statements of expectations. Can it be, essentially, as wide as the shareholders want them to be, particularly when it comes to the equitable access to water? Councils, in terms of being entities under the Local Government Act, have this duty of care to their ratepayers and to their citizens to actually provide for these fundamental things. I’m interested in a response about that aspect.

The second aspect that I’m proposing in this amendment is to do with adverse effects on the environment. This is particularly in the context of the removal of the objective that the water service providers would provide water services that do not have adverse effects on the environment. Now, that was removed at the outset in terms of this umbrella direction for the bill, but I’m wondering about, and proposing about, the statement of expectations setting out how adverse effects on the environment are being remedied, mitigated, or reduced throughout the water service provider area of interest. Again, I’m unclear—and I think a number of councils would be in this predicament as well—as to how wide these statements of expectations could be, and I would really like to hear the Minister’s comment as to what the scope of that involves. Thank you.

Thank you, Madam Chair. When it comes to Part 4, which really is looking at those higher-level considerations, I don’t share the same excitement as Dr Russell in this part, because, well, there’s nothing in this bill that I’m excited about, to be fair.

If I can just turn to clause 179A—and I do acknowledge the Minister of Local Government’s response around what defines a minor aspect of a water service, and note that, actually, when it comes to 17A(3), it is listed there. But I do think it’s really important, Minister, that the committee is able to get an understanding of the context around those two aspects. The two examples that are given there are, firstly, paragraph (a), “wastewater services for a community facility, such as a campground, that is not connected to a … network”. Now, there are many campgrounds around the country. Some of them are publicly accessible; some are privately owned. When one defines a community facility, because that’s the definition rather than the example that’s given, what is the Minister’s expectation around the sort of broad nature of a community facility and how that’s captured?

The second one is around the water supply for a small number of rural homes. I think, actually, Dr Russell hit quite a salient point, in my mind, which is that, actually, you don’t want to necessarily have a situation where a judge has to rely back on Hansard. When you talk about, Minister, “a small number of rural homes that are not connected to a water supply network”—and that’s contained in the bill—what sort of numbers are we talking about, because for some rural communities, a small number could be single digits, and for others it could be in double digits. I do think we need to get an understanding and some scope as to what would apply in this circumstance to fit that particular bill around paragraph (b). I think it is helpful to indicate that it’s, for example, a small number of rural homes, not in an urban area, and they’re not connected—I get that, but what is to be expected as to what that number could feasibly look like?

My other question was following up from my colleague Lan Pham’s question around objectives, but my question comes from Schedule 3, which is associated to this part, because what we have there are some changes in the terminology. If we look at clause 2(1)—this is the strategic matters as they relate to water services strategy—there is the inclusion of “outcomes”. OK, I understand that. Again there, further down, “outcomes”, but for some strange reason “objectives” is removed from what is subclause (1)(b)(ii). Why is it that there is an inclusion or insertion of outcomes everywhere else, but—you know, where are the objectives? Why are the objectives not required to be put into consideration for the purposes of section 15, that’s referred to there? I think it would be very helpful for the Minister to indicate why objectives have disappeared—no issue with “outcomes” being inserted, but, for consistency, why is there a gap there?

Thanks, Madam Chair. In regard to the two questions—one from Lan Pham in regard to clauses 184 to 187, in regard to the discretion around what could be in the statements of expectations, and the Amendment Paper tabled by the member in regard to actual access to water, human rights, etc., for water. I refer the member—and I acknowledge we’ve already passed this—to Part 2, clause 58C(3)(b), which outlines those specific points, so on that basis we won’t be supporting that amendment.

In regard to the points raised in regard to what is deemed small in the context of the examples provided, the primary aspect that drives that definition is the number of connections that are not connected as part of the broader system or network. There isn’t a defined number, but in reality and in practice, generally any of those that aren’t connected into the main system would be a small number, so it is simply whether it’s connected or not.

Thank you, Madam Chair. Also on Schedule 3—also not my favourite part of the bill—I am interested in, again, clause 2, “Water services strategy: strategic matters”. Over the page—and this is about paragraph (f), “factors that water service providers expect will have a significant impact on the provider, including the following:”. There is a list, and there are a couple of things I wanted to ask about. The first one is about paragraph (i), “expected changes to the population”, and this seems like a very sensible thing to include, but I’m wondering how this will happen without a census. That is my first question.

My second question is related to paragraph (g), which is “information relating to a territorial authority’s resource management planning and land use planning in the … area,”. What I’m interested about in this is why both land use and resource management are talked about separately. I presume that most of what would be expected here is what a district plan says in terms of land-use rules, so you wouldn’t normally need to split it from resource management planning; you can have one phase or the other. The role of territorial authorities in resource management is land-use planning. So why do you have both those things set out like that?

Also, and apologies if I’ve missed it somewhere else, I’m particularly interested in what the territorial authorities’ resource management planning is, because, of course, water services—well, there’s issues of where pipes and things go. Water discharge is given by the regional council, so that may be somewhere else. It may also be that perhaps the wider land-use planning is trying to bring in non-statutory spatial plans or other instruments that are looking at future investment in an area.

If the Minister could explain why there is that use of language, which seems quite peculiar, and if it is, in fact, to go well beyond what a district plan and relevant designations might say, or if it is actually about what’s in the current Resource Management Act requirements. Thank you.

Thank you, Madam Chair. I am sure there are others with more questions on Schedules 3 and 4 as well, in terms of the content of the water services strategy and also the content of the annual report.

My question is pertaining to clause 197, and this is “Amending water services strategy: territorial authority”. Understanding, as part of the select committee process, an addition was added, which is subclause (5)—essentially, the territorial authority, when there is an amendment in the water services strategy and the amendment is relevant to the authority’s long-term plan (LTP), it need not have the amendment to the long-term plan audited under section 94. That was one of the recommendations from the select committee. However, two additional exemptions have been introduced by the Minister’s Amendment Paper, which is on the special consultative procedure—which is sections 83, 83AA, and 83A of the Local Government Act, and also sections 93A and 93D. I just want to check with the Minister, in terms of the advice that has been received on why these two particular areas have been included as well alongside the auditing process. I guess, for the benefit of the doubt, section 93A is also in reference to the use of special consultative procedures. Why does the special consultative procedure not need to be used if the territorial authority is amending the water services plan? That’s my first question.

My second question is that it says over here that if the territorial authority amends its water services strategy, an amendment is relevant to the authority’s long-term plan but not moving towards the longterm plan. Relevant just means that it relates to it; it can be either towards it or away from it. If we are opening it up to, let’s say, the territorial authority amending its water services strategy away from the authority’s long-term plan, how would that work then if the territorial authority need not use a special consultative procedure? I think there would be an expectation from the public that they would be consulted if the water strategy is moving away from the LTP. I guess my interpretation is that it is not the intention of clause 197(5) and the introduction of the exemption from the special consultative procedure, but I just want to hear it from the Minister—that that is the intent of the newly introduced clause 197(5)(c)(i) and (ii).

Another thing that I’ve found interesting in the Minister’s Amendment Paper—it’s kind of a tiny-ish point but I think it is interesting, so I want to direct the committee’s attention to clause 191. It’s on pages 172 and 173 of the Minister’s Amendment Paper 346. Again, it’s to do with something that has been inserted by the Minister’s Amendment Paper.

I want to go to clause 191(4A)(c). There’s a very small phrase that has been inserted there: “preparing or relying on”. What is worrying me—well, not worrying me, but I’m intrigued by it, I guess, and I want to understand it—is that doesn’t seem to fit with the other subclauses there. The interim arrangements for a water services strategy may include any of the following: they may include, in paragraph (a), the relevant parts of the long-term plan of each territorial authority. They may include—this is in paragraph (b)—the relevant parts of the water services strategy, and they may include preparing or relying on any other business planning or budgetary documents. Now, Dr XuNan, you will enjoy this. Of course, paragraphs (a) and (b) there are nouns, and paragraph (c) is a verb.

💬 Dr Lawrence Xu-Nan: Yes.

Right. I thought you might have picked up on that one. It’s just a slight change there. Those first two things are specifying documents that may be relied on—they are specifying entities that actually exist—but paragraph (c) says that the interim arrangements may engage in an activity.

Now, those are actually different things, of a different nature, so it seems odd to include them in that kind of list. I want to understand why that particular change was introduced. It’s not just to do with the grammatical pedantry of nouns versus verbs; it’s to do with shifting from relying on documents and strategies that have been prepared or using those relevant parts of those plans to actually performing an action. If the Minister could explain why an action has been included in a list of those things? Perhaps it’s just a drafting nicety. Perhaps there is something more to this. A little bit of clarification there would be very helpful.

Thank you, Madam Chair. I want to pick up on clause 185, and this really details the statement of expectations that an entity would be required to get under way. Clause 185, basically, outlines a range of different steps, including, actually, additional information that should be contained. One of the subsequent changes further on, in clause 188, is basically just combining—the water organisation constitution has been struck out alongside, if they don’t have a constitution, the rules or the various procedures that establish or direct or govern them. That’s been struck out, and basically, there is a fulsome definition being given as “foundation documents”. OK, that’s fine, and what the entity needs to do, as I understand it, in preparing its statement of expectations, is that it can include aspects that, basically, are not in contradiction to the foundation documents, under subclause (4).

The question that I have for the Minister, relative to clause 185, is: how does he intend, or how does the Government intend, that these newly established entities or organisations are not going to be overwhelmed by the immediate nature of the planning obligations? I’m only giving the statement of expectations as one example. What are his expectations that these entities who will be faced with pulling together these foundation documents, as they’re now going to be called, are not going to be initially overwhelmed with the expectations and the requirements around that—only relative to the statement of expectations—and, I guess, also what the Minister’s expectations around the meaningful aspect of engagement would be as well?

When it comes to the specified content, and the items that must be included, they’re contained in clause 187. Now, my question for the Minister, who, through his Amendment Paper—or, actually, what is sought to be inserted there, a change, is a new component there, which is the new paragraph (ba). This states: “expectations relating to the strategic priorities to be included in the water organisation’s water services strategy”. My question is: why is that needed? They need to have a water strategy, absolutely, but why do you need to insert it in there, because isn’t effect to those strategic priorities and documents going to be captured in the other aspects that will, effectively, be needed under what is clause 187 in its current form?

In regard to the question previously, on clause 197, the purpose of that clause is if a territorial authority amends its water services strategy and the amendments are also relevant to its long-term plan, it can consequentially amend the plan and then members do not need to be audited under the Local Government Act. The reason why that amendment is there is because it was identified subsequently that a number of changes were going to be necessary, and as a result of that, if they weren’t audited, then the councils or the entities, in effect, would get a qualified opinion. It is simply reflecting the fact that that, obviously, isn’t the intended outcome of that, and because it’s consequential, then the material level around that wouldn’t be appropriate, so hence why we’ve made that amendment.

In regard to the questions before, as I noted previously in a response, in regard to clauses 184 to clause 187—obviously, including 185 in the middle there—the discretion of these amendments is primarily around what can be concluded in a statement of expectations. The member asked what is my expectation? Well, my expectation is that the organisations’ boards can set and will set their strategic priorities. We’re simply giving it discretion in terms of how they go about it and what information, in that context, they put into that. But, you know, the concern that the member raised around them being overwhelmed, etc.—the purpose of clauses 184 and 187 gives shareholders more discretion in terms of what they can include in that, and that would mitigate any risks, in our view, and give the flexibility required.

I want to turn my attention to clause 196, and the particular subclauses I want to refer to are on page 178 of the Minister’s Amendment Paper 346. These are subclauses (8), (9), and (10). The whole clause concerns itself with the process for making water services strategy and so on, but subclauses (8), (9), and (10) are entirely new. They’re inserted by the Minister’s Amendment Paper. That’s quite a lot of new material. Now, it could be that they have been transferred from elsewhere in the bill as it was reported back from the Finance and Expenditure Committee—that the drafters felt these particular subclauses perhaps fitted better in clause 196 rather than elsewhere in the bill, or something like that. If so, could the Minister direct us to where they came from? That could be one explanation for why we have got three entirely new subclauses, taking up almost half a page.

Then, what these particular subclauses go to are consultation around any proposals that are to do with transferring control of a strategic water asset or receiving a strategic water asset and so on, or making a significant change to the level of service. Now, those are quite big activities for a water services organisation to engage in—acquiring assets. We’re not talking of just any old assets but a strategic water services asset and so on, or making a significant change to the level of service provided in relation to any water service. Public consultation must be undertaken on it. That seems entirely reasonable, but why insert it so late in the process? Why did this come about so late in the process—that we only thought quite late in the process that we might want to do some public consultation on that? That was in subclause (8).

It must be undertaken by the shareholders or the organisation—that’s fine; that’s in subclause (9)—but then subclause (10) is interesting: “A water organisation must ensure that its significance and engagement policy addresses all matters necessary for determining—(a) whether a water services asset is a strategic water services asset; and (b) whether a proposed change to the level of service is a significant change; and (c) how to comply with subsections (8) and (9).” It’s, basically, saying that a water services organisation has got to get its act together and have a wee think about what its strategic assets are and what the level of service is. I want to understand from the Minister what we think might be a strategic water services asset—whether that is elsewhere defined in the Act. If the Minister could give some examples of what a strategic water services asset might be? Again, “a proposed change”, “whether a proposed change to the level of service is a significant change;”—I’d like to have some understanding of what the Minister thinks would be a significant level of change.

I was going to say that I’d like to know what was in the Minister’s mind on that, but I always regard minds as private places. People can have their own thoughts inside their head, but if the Minister could share his thinking around what a significant change could be? I do also want to know why these subclauses ended up in the Minister’s Amendment Paper as quite significant new subclauses at such a late stage in the process.

Well, I’m glad for members that what’s going through my mind right now is not in the scope of this bill, so I won’t be conferring on that. But in regards to clause 196, which is in the Amendment Paper, which covers the process for preparing a water organisation’s water services strategy, primarily the purpose here—and the member asked: why were those new requirements added in there? Primarily, to align with the additions that were made in Part 2, recognising that these policies may include requirements for community consultation on proposals in a draft strategy—that’s why you’re seeing these amendments in this clause, but they link back to Part 2 of the bill, which we’ve already covered this evening.

The other element of clause 196 is relevant to the member’s point around significance etc., around when consulting with its shareholders. It is primarily in this context that where that is owned by the trustees of a consumer trust, then they must also consult with each territorial authority in the district the water organisation operates in. That’s just simply acknowledging that some consumer trusts that own potentially some of these assets may have a wider coverage than one territorial authority.

Thank you, Madam Chair. I actually have a very quick question for the Minister of Local Government. Again, we’re looking at a newly introduced section of this, which is clause 213, “Charges as security”. I’m going to focus on the particular definition that I found intriguing for this, because I understand that under subclause (7) of clause 213 of Amendment Paper 346, three new definitions have been introduced: “incidental arrangement”, “loan”, and “property”. Now, “incidental arrangement” and “loan” have specific meanings within the Local Government Act, but “property”, on the other hand, has a very explicit meaning that is for the purpose, I’m assuming, of this clause 213. However, at this stage I couldn’t, unless the Minister has it memorised—there’s no explicit definition I can see that also alters the meaning of the term “property”.

Now, understanding, under statutory interpretation, that if there is a prior definition of “property” that is introduced under an earlier clause, in statutory interpretation it takes precedence over the definition introduced for the purpose of a specific clause. But over here, when we’re looking at “property” as a definition and also the subsequent use of “property” in other parts, can I just check with the Minister that there is an alternative definition of “ property” that isn’t going to be conflating with the definition of the “property” under “Charges as security”—that, in this case, “property” is only specifically for the purpose of 213 and will not also apply to subsequent clauses.

I want to thank the Minister for his earlier answer acknowledging the role of community consultation, because I did have a question around that, but I won’t ask it, given that he’s answered that—particularly around the shareholders.

I wanted to look at clauses 197, 198, and 199. This relates to amending a water services strategy by either a territorial authority, firstly, in 197, or then, in 198, by the water organisations themselves. Now, what we see there is a proposed addition in clause 197(2A) that basically cites the relevance of the territorial authority’s significance and engagement policy. Councils have this, obviously, all around the country, and its special consultative process is engaged from time to time. What’s interesting there, Minister, is that it talks about the fact that if there was a significant amendment that’s proposed to the strategy, then that significance and engagement policy of the local authority may assist the council in reaching its determination around whether it’s significant or not, rather than must—I would have thought if it was a significant amendment, that that would be a given. The point of difference, of course, is with clause 198, where it’s the water organisation itself. Basically, they do need to consider the organisation’s own significance and engagement policy. My question for the Minister is: is that a requirement for the organisation, whereas it’s a guide for the council? There’s a distinctive difference there, and I think that—well, the Minister is nodding, so I think I’ll leave that there. I think he gets my question.

The other one is on clause 199, which relates to the auditing process—and Dr Russell might be interested in this. I was interested in—and it might be elsewhere perhaps, and, if so, the Minister can cite that—the consequences of failing to comply with the aspects of audit. This is, effectively, where there is a request through to the Auditor-General to undertake some sort of statutory responsibility there, but is that just basically the Minister clarifying the reasons or aspects that would lead to triggering that, and that any consequential penalty provisions are seen as separate, or do you see them working, somehow, hand in hand?

To the member’s question in regard to clause 199, the primary purpose there is intended to ensure that the Auditor-General has sufficient notice of the requests and can manage the associated workload. That is the purpose of that clause, and that’s the intended purpose of that change.

I move, That debate on this question now close.

The question is that the Minister’s amendments to Part 4 set out on Amendment Paper 346 be agreed to.

The question is that Lan Pham’s tabled amendment to clause 187(1) to insert paragraphs (g) and (h) be agreed to.