Water Services Entities Amendment Bill

Members, we come now to Part 2. This is the debate on clauses 28 to 44—amendments to other legislation. The question is that Part 2 stand part.

Point of order, Madam Chairperson. I’m just seeking clarification. My understanding is we only were referring to Part 1 up to clause 15, or new Subpart 1A, in the last portion.

CHAIRPERSON (Hon Jacqui Dean): Sorry, could—I’m not following the member. We’ve just voted on Part 1.

SIMON WATTS: In its entirety? OK.

I’ll put the question again, otherwise—Simon Watts.

Thank you very much for the opportunity to take a call on Part 2 of the legislation. My question in regards to this portion of the legislation—in particular I want to go to clause 40, which actually refers to the aspect in regards to the arrangements for the Chatham Islands, actually. Because it’s interesting that while right from the start of this reform programme, the option of being able to opt out was never afforded to any councils—any councils.

Simeon Brown: Say that again.

SIMON WATTS: The opportunity to opt out. Remember the option to opt out if you wanted to opt out of this legislation?

Simeon Brown: That was a phantom, wasn’t it?

SIMON WATTS: Well, interestingly enough it might have been. But, what seems to have snuck its way into the Water Services Entities Amendment Bill in clause 40 is a clause in regards to the fact that the Chatham Islands Council is not subject to the specific clauses in this bill. So the Chatham Islands are now, literally, an island by themselves. And that’s no disrespect to the Chatham Islands, because it is a wonderful part of our jurisdiction. But interestingly enough, none of the clauses in the legislation now apply to the Chatham Islands. It doesn’t appear in Schedule 2 in regards to the 10 entities—it’s not part of that. They are excluded. They have their own model in regards to the provision of water services. They have been given and afforded the rights to be able to choose their destiny in regards to this aspect.

Joseph Mooney: Eight hundred people.

SIMON WATTS: Eight hundred people, is that right? Well, there you go, Joseph Mooney. There’s a little bit of contribution. So how could it be that what’s good for the goose is not good for the gander? As the saying—

Hon Scott Simpson: Ask the people of Waiheke. What about the people of Waiheke?

SIMON WATTS: Yeah, well, what about the people of Waiheke? What about the people of Great Barrier? What about that? What about the people of—

Hon Scott Simpson: Stewart Island.

SIMON WATTS: Stewart Island—the good people of Stewart Island. I’m going to do a little call out to a good couple of friends down there. One’s running the pub and one’s running the school on Stewart Island. Why are they cut? Why can’t they choose their own destiny in regards to how they manage their water services, and yet the Chatham Islands can?

So that is interesting. So I’m really interested and intrigued on what occurred and what has occurred through the deliberations and the engagement by this Minister that has led to the insertion of this clause and the fact that that jurisdiction, that territorial authority, is not part of the Water Services Entities Amendment Bill. It won’t be subject to any of the obligations in regards to these entities. I guess that’s one saving in terms of not having an 11th water services entity with a new CEO and a new number of bureaucracy and all of that. But how could it be, after all the significant submissions from councils across this country saying, “Actually, you know what? We can manage our water infrastructure just fine. It’s not broken. We’re quite capable of doing that. Can you just let us get on and do our job.”? But for some reason, the Chatham Islands have been given special treatment by this Minister, and they are excluded in regards to this piece of legislation. That’s a little detail that I don’t think too many people would have picked up on—the fact that there was one council or one territorial authority that has been given the choice to opt out of the three waters reform programme. What is going on—what is going on? I wonder why.

Hon Scott Simpson: It’s not a choice for them, they are statutorily excluded.

SIMON WATTS: They are excluded. And have the people of the Chatham Islands been asked—do they want to be part of this? There must be one person—

CHAIRPERSON (Hon Jacqui Dean): Order! Order! Look, I’m just going to bring the member back. I’ve just lost my Standing Orders but I just want to direct the member to cast his eye over Standing Order 108: “Member to address Speaker. A member on being called to speak addresses the Speaker and, through the Speaker, the House.” There’s a couple of good reasons for that. One is obvious: what would I be doing otherwise? And the second reason is that if the member wishes his dulcet tones to go out through the airwaves, he would be wise to speak into the speaker.

SIMON WATTS: Thank you very much, Madam Chair.

For those residents in the Chatham Islands that are listening this evening to this, I’ll just go back and repeat what I was just saying. [Interruption] No, there are calls for me not to do that. OK, well, I won’t repeat everything that we’ve said. But that’s simple. Let’s just have an explanation around what is so special—why have the good people of the Chatham Islands been excluded and what is the rationale for that? And just intrigue us with a little bit of rationale in that regard.

It would be incorrect to compare the situation of the Chatham Islands with Stewart Island, because, of course, Stewart Island aren’t their own council. I’m surprised the member, as local government spokesperson, didn’t know that.

The Chatham Islands are their own council. There are 660 people on the island. The council has a longstanding unique relationship with central government, where they are directly funded. They are directly funded because rates alone can’t cover the basics. So there is a record amount of investment from this Government around the wharf, but they also need funding for roading, for simple, basic provisions that other councils can do, but with a small isolated population of 660, the Chatham Islands can’t.

The reason why they haven’t been included in the entities is because, after seeking advice on whether it would actually just be simpler to continue and extend the existing direct funding relationship that the Chatham Islands councils have with central government, I deemed that it was actually better for them to just continue that. I put it to them and they agreed. They didn’t ask to be excluded.

Thank you, Madam Chair. Minister McAnulty, I wasn’t entirely sure whether it was worth continuing to labour the point with you, but you seem to have an enormous appetite for responding to challenges to this legislation, so I’m going to offer you a couple more. I’ll offer you a couple more.

Now, I understand that the Hon Kieran McAnulty has been known to offer odds, and I’d be interested in hearing what the Minister’s odds are that this legislation will survive past Christmas. But before we get to the wagering part of the night, Minister: clause 35, inserting clause 31 into Schedule 1AA, “Long-term plan to take effect for all or any of 2024/2034, and related documents”. So, for context, local government—councils—are required to develop a long-term plan, a 10-year plan, of which ACT would say it’s probably not long enough. In fact, what ACT would say is, actually, future Government needs to adopt ACT’s proposal for 30-year infrastructure plans. But at the moment it’s a 10-year long-term plan.

One of the problems that councils identified, Minister, was that when trying to make provision for 2024-25, 2025-26, and so on—because this bill provides for an uncertain transition time frame to one of the nine water service entities, there are councils up and down New Zealand who won’t know how long they’re going to have to provide maintenance contracts, or whether capital works are required to upgrade plant and equipment, replace pipes and manholes, maybe re-sleeve sewer networks so that rather than digging them up and replacing the pipes they repair them from the inside. All of this work needs to be budgeted and planned, but they don’t know on the day that a water service entity will be created by the Department of Internal Affairs. They’re told to jump in now, no matter what their long-term plan, no matter what their budgets, no matter what their procurement arrangements are with their contractors and with their professional service providers.

I mean, it really goes to show the complete lack of understanding of this Labour Government, its Cabinet Ministers, even its myriad backbenchers, some of whom have even worked for local government. They have failed to understand how to operationally implement infrastructure reform. But, Minister, don’t worry. All of the effort, all of the submissions that we’ve heard at select committees over the past few years of three waters reform won’t be wasted. That is because the ACT Party has listened, and we’ll be prepared to deliver ACT’s infrastructure plan—30-year infrastructure agreements, set out in this document, ACT’s solutions for building New Zealand and conserving nature.

Minister, question: what on earth are councils supposed to do with the lack of certainty and timing, which inserted clause 31 alludes to? They’re going to have to make plans, long-term plans, but they won’t actually know on which date their assets go into a three waters entity.

Then, Minister, I want to come to “Infrastructure strategy”, clause 37, inserted into Schedule 1AA by clause 35. It says a local authority is no longer required to include water services in the infrastructure strategy. Can you imagine any other developed country in the world where a local authority, responsible for planning; responsible for land-use planning and consenting; responsible for the interface between landowners, people seeking to develop land and wanting to know what is it that council and asset-owners are doing, “Where do I go to find the information?”—the local authority infrastructure strategy won’t include water services? What kind of infrastructure strategy is that? How on earth, during a water infrastructure reform process, did the policy intent result in water being separated from local governments’ infrastructure strategy?

I mean, what would be helpful, what we’ve heard from councils, what we’ve heard from the Infrastructure Commission, Infrastructure New Zealand, operators, professionals, Taituarā association of local government, Local Government New Zealand—honestly, all the submissions, Minister; you should read them, you really should. What they said was that a coherent infrastructure strategy that combines land-use planning with an infrastructure pipeline—that actually goes some way towards giving certainty, not just to landowners and property owners but also to the industry that is supposed to deliver all of this infrastructure, that is supposed to fund and finance all of this infrastructure. Yet here we have an infrastructure strategy, Minister, that’s supposed to be broken out—water is not to be included in local government infrastructure strategies. Please explain, Minister.

In response to Mr Court, I did read the submissions, and that’s why I can say with absolute confidence that the provisions that he referred to in the first part of his contribution have the backing of the majority of the local government sector. They are happy with this, so I don’t see what the problem is. The member has expressed a concern on behalf of the sector, but the sector’s happy, so I consider that all good.

In regards to his second point, that’s dealt with by the inclusion of the requirement in the first two years of the long-term plan moving forward.

Thank you, Madam Chair. I want to pick up, actually, on a little bit of what Simon Court over in the ACT Party was talking about with regard to subpart 4, amendments to the Local Government Act. I’m fascinated by the wording of new clause 31 in Schedule 1AA, inserted by clause 35(8), where we’re talking about the long-term plan “to take effect for all or any of the 2024/2034”—and related documents. Particularly in new clause 31(1): “(a) water services are to be transferred from the local authority to a water services entity during [that period] … 2024/25 and 2025/26 financial years; (b) the implications of, and any significant risks associated with, the transfer” and also the council must report “(c) how the council is planning to deal with the implications of, and any significant risks associated with, the transfer”.

I don’t think anyone’s talked much this evening about “entity I”, and that is my part of the world. It takes in Canterbury and the West Coast in it. It is approximately at this point in time and it may well change about 14 councils in the regional representative group. As we know, there’ll be 14 representatives on that regional representative group and, of course, 14-ish mana whenua.

The Minister’s talked a lot this evening about balance sheet separation. I just want to submit to the Minister that there are vast differences in this entity. In particular, if you look at the wide deep rate base that is enjoyed by Christchurch City Council, and indeed by the Selwyn District Council, collectively I think we’d be close to 700,000 residents across both those and I’m not even including Waimakariri, Ashburton, and further south.

But, to the Minister, when we’re talking about how councils are now going to be mandated to outline to their communities matters like the financial implications and risks of this merger, this mega merger, what does the Minister say to the likes of the Selwyn District Council or the Christchurch City Council—how are they supposed to be able to communicate to their residents, to their ratepayers about the risk when they are quite clearly going to be subsidising councils on the other side of the main divide in Buller and West Coast - Tasman, in that lovely part of the world that Maureen Pugh does such an excellent job in? These are light and day, literally, on two sides of the South Island. These councils have light and day between their balance sheets, so how can the councils on the eastern side of the divide communicate to their residents in good faith about the risks and financial implications that they will be having to deal with because of being forced into this merger?

The boundaries of course were debated in Part 1, but in terms specifically around communication and risk, there is significantly more risk to these individual councils if reform does not occur. There are savings for each ratepayer in each of the councils in every entity that is proposed.

Nicola Grigg: That’s simply not true.

Hon KIERAN McANULTY: It is true. We can back it up. We’ve provided numbers. We’ve asked the National Party to provide numbers on numerous occasions over many months and they haven’t done it. They’re not doing it because their numbers don’t stack up. Our numbers have been peer reviewed on two occasions. They’ve been reviewed again by rating agencies. Yet again, we can prove that these reforms will save ratepayers money. That’s the end of the story.

Thank you, Madam Chair. Part 2 of the bill deals mostly with amendments to other legislation, and I want to refer to clause 36, which is an amendment to the Local Government (Rating) Act 2002.

Clause 37 provides an amendment to Schedule 1AA of that principal Act. So there’s quite a long and detailed inclusion there that is headed up on page 43 of the bill that’s on the table. It’s headed up “Provisions relating to Water Services Entities Amendment Act 2023” and it applies to a rating mechanism for water services. It says that at subclause 4(1), “This clause applies if—(a) a territorial authority’s district is wholly or partly in the service area of a water services entity with [the] establishment date (under section 6A(3A) or (4)”. Without wanting to go through and just read out the whole page—because it’s quite detailed—I want to just ask the Minister some questions around his interpretation of the words in that amended part. I’m not an accountant, but looking—

Nicola Grigg: You’re way too fun.

Hon SCOTT SIMPSON: Nicola Grigg says “way too fun” to be an accountant.

Nicola Grigg: Simon Watts is an accountant.

Hon SCOTT SIMPSON: Oh, Simon Watts is an accountant? There you go. There you go. But look, just coming back to the amended Part. As I say, it’s quite long. It creates a formula for rate collection and calculation and there is an example that is prepared on page 44 of the bill on the table. Frankly, I’m at a loss—as I say, as a layperson, not as an accountant—to understand the example that is put forward.

I’m wondering whether the Minister can advise me and maybe other members of the committee, what’s his interpretation of the example that’s given there? It looks to me to be an example that’s probably been prepared by officials, and it’s quite involved. At one point, in subclause (5)(b), it says “(A + B) / E <= 30%”. Now, I only did school certificate mathematics, so I find that a little bit daunting. But I’m sure the Minister will be able to—given his background with numbers and odds, and sums of money—provide some insight into a layperson’s understanding of what the example provides in that piece.

I thank the member for the question. It’s not my job to provide interpretations of the bill. As Ministers, we introduce bills; we provide legislative statements to outline the intent. I understand it. If the Minister doesn’t, perhaps he wants to ask an accountant in his caucus.

What a delightful response in regard to what I think was a reasonably genuine question! But I think that personifies the mannerism in which this Government listens so attentively to feedback and the way in which it responds so eloquently to such feedback. But I’m not going to labour the point—well, maybe we could, actually, because it’s such a lovely formula, isn’t it—looking there, on page 44, at the example. Let’s go through it, eh? Let’s play along and let’s go through the detail, because I’m quite interested in the numbers as well.

So we’ll go through—no. Actually, no, I’m not. I’m going to go to clause 38. In the interests of sanity, we’ll just stay on a few other clauses before we get into that detail. Let’s take a look at clause 38(8), which inserts new clause 38, “Budget, and unapplied rates revenue, for water services”, into Schedule 1AA of the Local Government Act 2002—the clause that we’ve all been waiting for this evening because it’s a very important clause. The subpart around this in regards to new clause 38(3) is “As soon as is reasonably practicable after the establishment date”—so this is a clause that allows the territorial authorities the mechanism to be able to transfer to these newly created water services entities the unapplied rates revenue that has been collected in that financial year.

I guess the point of the question here is: what is the fiscal quantum that the Minister foresees that this new clause 38(3) will actually be dealing with, and, in particular, whether there are any territorial authorities that, through the process, have been identified that potentially may have a significant amount of unapplied rates revenue? I guess, in layman’s terms, what is the problem that the Minister is trying to achieve or fix as a result of this ability to, in effect, apportion that rates revenue?

Rates are collected, obviously, by territorial authorities to service costs that are very wide ranging, not just in regards to water pipes or stormwater or waste-water pipes but, actually, a wide-ranging aspect of local government services. So one would consider, probably rightly, that any unapplied rates revenue would need to be apportioned for the elements that relate to the elements of water services, and the other aspects that aren’t related to water services would, therefore, not be applied and would not transfer. So I’m interested to hear from the Minister in regards to how that process will work in terms of, first, the quantification of what is that value; secondly, what, if any, apportionment is going to be undertaken in regards to splitting up the rates revenue that’s relevant to the three-waters infrastructure and the elements that are not; and, thirdly, what is the overwhelming driver in regards to having this here, other than potentially the complexity that I’ve summarised in my contribution?

I think I do feel like I might go and have a look at that other clause in regards to the calculation that the Hon Scott Simpson was referring to, because I think his questions were quite reasonable in regards to what that element refers to. We find ourselves on the example that is on page 44, in new clause 5, which is to be inserted in Schedule 1AA by clause 37, just above the clause relating to our good colleagues in the Chatham Islands, at new clause 6—which was covered at length. But I want to go to that example that’s under subclause (5) there. It talks about “A”, “B”, “C”, “D”, and “E”, and it’s got a lovely formula there, which is “(A + B) / E ˂= 30%”. So it is quite straightforward, isn’t it, I say to the Hon Scott Simpson, when you look at that formula.

Hon Scott Simpson: Nicola Grigg knows the answer.

SIMON WATTS: Yeah, it gives you a rate of “29.6%”. So I’m interested in terms of what that is representing in regards to those different subclauses.

Thank you, Madam Chair.

Hon Member: Oh, the suspense.

Hon SCOTT SIMPSON: Yes, the suspense. Thank you, Madam Chair. I want to raise a matter that relates to the schedules—is that part of Part 2, am I permitted to speak to the schedules or not? Not at this stage. Oh, well, in that case, I’ll speak to another clause.

CHAIRPERSON (Hon Jacqui Dean): Those matters were dealt with in Part 1.

Hon SCOTT SIMPSON: Sorry?

CHAIRPERSON (Hon Jacqui Dean): In Part 1—those schedules were dealt with as part of Part 1.

Hon SCOTT SIMPSON: In Part 1. OK. Well, that’s OK. So I do want to come back to this question relating to the Chatham Islands, because that seems to be something that is quite separate and new, that wasn’t a part of the original, principle legislation, Water Services Entities Act 2022, that was passed—what, is it only seven months ago? Something like that—

Hon Member: Eight.

Hon SCOTT SIMPSON: —seven or eight months ago. And so this question relating to the carve-out for the Chatham Islands—now, just this evening, we had the valedictory speech of the member of Parliament who has responsibility for the Chatham Islands, Paul Eagle, and, notwithstanding his very staunch advocacy for the Chatham Islands, this does seem strange. Now, the Minister for Local Government mentioned earlier on that the reason that the Chatham Islands had been carved out is simply because they have their own council. Well, there are many other parts of the country that have their own council. I would argue that there are some parts of the country that could equally be separated out because of geographical reasons or distance or matters of simple democracy.

I want to point to an area in my own electorate of the very beautiful Coromandel. So the Thames-Coromandel District Council, for instance, has been lumped in with the Waikato Water Services Entity, and yet that is part of the Hamilton City Council, the Matamata-Piako District, Ōtorohanga, South Waikato District, and Taupō District. And I’d argue that, notwithstanding those very good councils, they have almost nothing in common with the issues and the concerns and the matters that are foremost of the thinking at the Thames-Coromandel District Council. The peninsula is largely covered by the Thames-Coromandel District Council. In many respects, it is—although not separated by water like the Chatham Islands—literally a different geography, a different set of communities, and a different set of issues, needs, and demands, not the least of which is the cyclical nature of peak water demand over the normally good summer periods that we have in the Coromandel. Not that we’ve had that for the last summer. We’ve got some severe issues that the Minister, wearing another hat, is, of course, very aware of.

But, notwithstanding that, I’d argue that there is a good argument for actually excluding an area like the Thames-Coromandel District Council in the same kind of principled way that the Minister has taken in terms of the Chatham Islands. As I say, not separated by water, but geographically separate, having very little in common with Ōtorohanga or the Taupō District Council or, indeed, Hamilton City. And there are many people—there are many people—in the Thames-Coromandel District area that think already the regional council, for instance, that operates in the area, the Waikato Regional Council, is far too Hamilton-centric.

So I’m interested to know, if the Minister can make one carve-out for a geographic area that, just in this particular case, happens to be separated by water rather than solid geography but is still a separate community of interest, different needs, demands, desires and peaks in terms of tourism and water demand, why can’t that necessarily happen in an area, for instance, such as the very beautiful and desirable part of my electorate in the Thames-Coromandel District Council. I’d be happy if the Minister could give us some insight, please.

Thank you, Madam Chair. Mr Simpson’s contribution in reference to boundaries—as I said earlier boundaries were dealt with in Part 1. I answered Mr Watts’ question around the Chatham Islands as a courtesy to him, but actually the bit that deals with the Chatham Islands’ bespoke arrangement is also in Part 1. So the entirety of that contribution isn’t actually relevant to Part 2.

In regards to Mr Watts’ question around the wording, that’s worded appropriately because it adds adequate flexibility to reflect the fact that there are different ways in which rates are collected across the country. So if you were too prescribed in the way in which that was dealt with, then you would come a cropper with some councils. It is up to the councils and the relevant water services entity to determine what is reasonably practical and how the transfer will be made depending on their individual circumstances.

I move, That the question be now put.