The future of our water services - Local Water Done Well

They are simply total revenue required divided by the number of connections. The number is not an average property as we do not know what the final basis of charging will be for residential vs commercial.

Tinui scheme costs are ring fenced currently, largely paid for by connected Tinui properties, but there is some subsidy by the rest of the rural general rates. We can only assume that under the CCO regime they will continue to recover costs from the users of discrete the schemes.

These schemes are currently ring-fenced and paid for by the connected properties. We have assumed that will continue in the flat fees they pay. We have not modelled any future charging decisions that the CCO could make.

Correct, however there are 155 rural properties connected to Masterton water supply who will be affected. Wainuioru water scheme will transfer to the new CCO, if that is the preferred option.

The rates currently include water, wastewater & stormwater charges. These will eventually be removed from the rates invoices and be charged by the CCO. The CCO will base some of that charging on water usage and some on flat charges per property.

GWRC have a rate for water catchment management (rivers). They do not charge properties or have any direct involvement in the delivery of water & wastewater services in Wairarapa.

Council have followed the central government run process meeting all legislated deadlines and requirements to date.

Water reforms were initiated by the government following the 2016 Havelock North water crisis that exposed major concerns regarding water managing in New Zealand. Under Labour this was known as Three Waters Reforms. Following the national election in late 2023 the new government revised the approach and reforms are now known as Local Waters Done Well.

Timelines have been driven by the repeal of the previous act and new legislation

The Local Government (Water Services Preliminary Arrangements) Act 2024 (the Act) outlines Council’s legal obligations when consulting and making decisions on the proposed options.  You can access that legislation here:

Key points include:

Council must (at least):

• Identify the existing approach for water service delivery (for MDC this is the Masterton-only model) 
• Identify the proposed option for water service delivery (for MDC this is Wairarapa-Tararua model) 
• Assess the advantages and disadvantages of all options considered and make this available when consulting.  

The Act also provided for three additional models that were not progressed as the costs did not outweigh the benefits.  The other models were:

• Establishing a single council-controlled water organisation;
• Establishing a mixed council/consumer trust owned organisation;
• An independent consumer trust.

MDC was part of the project team that considered a Wellington regional option which incorporated 10 councils. The Council made the decision not to proceed with that option on 13 November 2024. The report to Council regarding that is report 7.1 in the agenda.

Very much integrated, WSA is focused on compliance re safe drinking water and monitors impacts of wastewater and stormwater (these last 2 are new), historically Taumata Arowai (Water Services Authority) was just potable water. Commerce Commission is focused on efficient, high quality water services and fair pricing. Protecting consumers across the three waters. Regional Council is responsible for environmental standards and oversees land use to protect drinking water. Monitors performance under RMA, manages water allocation and enforces.

The Government requires councils to submit a Water Service Delivery Plan by 3 September 2025. This is a legislatively set date under the Local Government (Water Services Preliminary Arrangements) Act 2024. Change at pace was set by coalition, hence WSDPs within 12 months. The plans need to outline how the service provider will be financially sustainable by 2028.

There are many variables i.e. material type, where located etc, but water pipes are generally engineered to last 50 – 100 years.

Diligent management of funding infrastructure has held Masterton in good stead, we don’t have a big back log of leaks but we do tend to do a lot more reactive work than desirable. Optimal asset management means we spend more on planned work than reactive because reactive is more expensive. However, it is a balancing act because we don’t want to be spending money too early. In addition, Masterton are similar to many other councils in that we need to improve our knowledge of the actual condition of our assets other than age. We are working hard to increase our level of knowledge and deploy asset management techniques to inform this, i.e. visual inspections, pipe condition assessments, cctv work, taking pipe samples and testing, pressure testing etc.

Water reform and LWDW is fundamental to intergenerational change which is designed to address this exact issue raised. If the sector does not address the many years of underinvestment then the next generations will be left to.

Regarding debt: Borrowing for capital projects is not unusual and is one way of reflecting intergenerational equity – i.e. rather than current ratepayers fully funding an asset that will last many years, the cost is spread over a period that more closely aligns with the life of the asset. That way users over the life of the asset help fund the cost.

As above.

The recommended proposal was adopted as part of the adoption of the Statement of Proposal for Consultation. The Council voted to adopt this on Wednesday 19 March 2025. There were six votes in favour of adopting the Statement of Proposal for Consultation and two against.

The ability for a Water Services CCO to borrow up to 500% of revenue has been set by the agency that lends Councils money (LGFA) and has been factored into central government’s plan to separate waters from Council in the LWDW legislation. As noted above, borrowing for capital projects is not unusual and is one way of reflecting intergenerational equity – i.e. rather than current ratepayers fully funding an asset that will last many years, the cost is spread over a period that more closely aligns with the life of the asset. That way users over the life of the asset help fund the cost.

The rating agencies recognise that the projected increased debt that Councils and their CCOs will take on will reduce their creditworthiness, but not to an extent that it should be a concern for ratepayers. There will be safeguards and governance oversight of the CCO entities as well as central government economic regulation.

Under legislation Council must include the existing approach for water service delivery. For MDC this is the Masterton-only model.

The numbers are high-level averages, taking projected revenue required divided by the number of connections. They will not be the number that any one property pays in the future. They are the output of a financial model that is designed to allow comparison of options.

None of the 4 Councils in the Wairarapa-Tararua option have a credit rating – it cannot be justified given the low levels of debt each has.

The CCO will need to get a credit rating. The cost of interest, including the credit margins paid on debt, have been factored into the financial modelling.

There is little flexibility in what constitutes ‘meeting’ drinking water standards. As a supplier of drinking water, the Council or the CCO will always be aiming for full compliance with the standards set by the regulator. Going beyond those standards is not factored into budgets.

In the wastewater service, compliance is with resource consent conditions around the operation of the wastewater treatment and disposal plants. Again, going beyond compliance may come at additional cost, which would need to be paid for by existing users.

There will not be a duplication of existing process as Councils will need to choose the best service for its community.

The Local Government (Water Services Preliminary Arrangements) Act 2024 (the Act) outlines Council’s legal obligations.  Council must (at least):

• Identify the existing approach for water service delivery (for MDC this is the Masterton-only model) 
• Identify the proposed option for water service delivery (for MDC this is Wairarapa-Tararua model) 

The Act also provided for three additional models that were not progressed as the costs did not outweigh the benefits.  The other models were:

• Establishing a single council-controlled water organisation;
• Establishing a mixed council/consumer trust owned organisation;
• An independent consumer trust.

The $5m is the estimated cost of a project team, IT needs, headquarters establishment and associated external costs over a 21 month period, to stand up a CCO entity. The figure is a ballpark estimate. The $2.8 million of operational costs is based on estimated costs to set up corporate support systems and services including financial, billing, compliance with the financial reporting requirements of the economic regulator, asset management systems and regulatory monitoring and compliance systems.

There is further information on financial assumptions under question 9 of the Questions and Answers above.

Here are the consultation documents for Carterton, South Wairarapa, and Tararua.

Under the CCO model Rates invoices will reduce and eventually they will no longer include the charges for the 3 Waters services.  The new CCO will send out the invoices and water meter usage will be key to their charging. There may be a number of years of transition with Council still charging until the CCO establishes its billing systems.

Around 40 per cent of the rates collected from Masterton urban properties funds the Three Waters services. The amount each property is paying varies as a portion of the waters rates are based on property value. The average value Masterton urban residential property is paying approximately $117 per month.

Yes, the only asset which is in question at this time is the Opaki water race, however that will be either closed by Council at the time of the new entity forming or another party may have the consent.

If the shareholding councils decide to not have pricing standardisation, then this will be spelt out in a shareholder’s agreement.

The CCO is a limited liability which means it is subject to the same legal requirements as any company. In addition, this CCO will have some specific reporting requirements back to shareholding councils. The CCO is also required to undertake a 6 monthly and annual report to shareholders if requested.

The financial modelling has been done in order to compare the cost impact to consumers (of the three services) of the CCO model and each Council’s stand-alone in-house.  The comparator of ‘average cost per connection’ has, for both options, used as the divisor, the number of connections to the water and wastewater services.

For the stand-alone delivery options, each Council’s LTP numbers for capital, debt funding and operating costs were used and projected for a further ten years to produce a 20 year view. The large projected investment in Homebush in 2034-37 falls into that second ten years.

For the Wairarapa Tararua CCO model the financial modelling has used a series of assumptions, including that it will operate as a utility network operator and be subject to financial levers that prioritise the prudent use of debt to hold price increases to consumers. It is one methodology, others could result in different financial outcomes.  A key assumption is that MDC-only non-standardised pricing is able to be maintained through the course of the 20 years. Different assumptions will result in different results.

For more information about the financial model please refer to the FAQ “How do you know that the financial modelling being used is accurate?” and the Water Services Delivery Plan Financial Template.

Costs of transition will be tracked and managed by the dedicated project team in place.

Ongoing operational costs and performance will form part of the 6 monthly and annual reporting from the CCO.

The decision around where the head office may be located will be agreed to by the shareholding councils, if the proposal goes ahead. There is further information on financial assumptions under question 9 of the Questions and Answers above.