Major Changes for NZ Councils from the Local Government (Water Services Preliminary Arrangements) Act 2024 and Local Government (Water Services) Bill
In a significant move to reshape New Zealand’s water infrastructure management, the Local Government (Water Services Preliminary Arrangements) Act 2024 (the Preliminary Arrangements Act) introduces sweeping changes that will impact how councils operate their water services. This legislation, set against the backdrop of increasing water quality concerns and aging infrastructure, aims to ensure safer, more reliable, and financially sustainable water services across the country.
The Local Government (Water Services) Bill (the Bill) is the third piece of legislation in the three-stage process of water reform, and is currently in its first reading. It establishes enduring settings for water services by building on the Preliminary Arrangements Act. The Preliminary Arrangements Act requires territorial authorities to prepare water services delivery plans. The delivery plans provide local water services information and display a commitment to achieving a financially sustainable delivery model that meets regulatory requirements. The plans are a one-off requirement for local authorities, and are to be submitted within 12 months of the enactment of the Preliminary Arrangements Act. The due date for a plan will be by 3rd September 2025.
The Bill informs local authorities on the development of water services delivery plans and the regulatory settings that water services providers will operate under.
Important for councils, the Bill ensures that territorial authorities will have flexibility and discretion to determine the structure and delivery arrangements for their water services. Councils’ flexibility and discretion exists within the parameters of the Bill.
Background
The Government is addressing water infrastructure challenges through a suite of legislation. Local Water Done Well is a three-stage process that recognises local decision-making and flexibility for local authorities to determine how their water services are to be delivered. As opposed to a centrally imposed approach, councils will lead the delivery of water services to recognise each region’s individual needs. The process of reform began with a repeal of previous water services legislation, followed by establishing a framework and preliminary arrangements for the new water services system, and lastly, establishing enduring settings.
Local Government (Water Services Preliminary Arrangements) Act 2024
Water Services Delivery Plans: A New Mandate
At the heart of the Act, is the requirement for councils to develop comprehensive Water Services Delivery Plans (WSDPs) by September 3, 2025. These plans will serve as roadmaps, detailing current water service arrangements and strategies for achieving financial sustainability while meeting regulatory standards. Councils have the flexibility to propose single-council models or collaborate with neighbouring authorities, allowing for more efficient resource allocation and shared expertise.
Streamlined Decision-Making Processes
Recognizing the urgency of water infrastructure improvements, the Act introduces streamlined consultation and decision-making processes. This change is particularly significant for establishing or modifying council-controlled organisations (CCOs) dedicated to water services. The legislation aims to accelerate the formation of new water service entities, enabling quicker responses to infrastructure needs.
The Rise of Water Services CCOs
The Act strongly encourages councils to consider establishing CCOs for water services management. This model is viewed as a potential solution to deliver safe and reliable water infrastructure more effectively. While councils retain discretion over their water services structure, they must ensure financial viability and regulatory compliance.
Economic Regulation and Financial Sustainability
A key feature of the new legislation is the introduction of economic regulation measures. These include financial principles mandating that revenue from water services be reinvested in the sector. Additionally, councils will have access to improved financing options through the Local Government Funding Agency, with higher borrowing limits to support critical infrastructure investments.
Accountability and Implementation
The Act sets a clear framework for accountability. Once approved by the Secretary for Local Government, councils must implement their WSDPs. While amendments are possible to address changing circumstances, they require official approval. Non-compliance could trigger Ministerial intervention, underscoring the Government’s commitment to improving water services.
Local Government (Water Services) Bill
The Bill enables territorial authorities to establish or be shareholders in water organisations. Territorial authorities may also establish a consumer trust for owning a water organisation, with specific requirements for the consumer trust model.
Captured under the term “water service provider”, are territorial authorities, water organisations with transferred authority, and regional councils if they provide water services. “Water services” is defined as water supply services, stormwater services, and wastewater.
Water service providers are subject to a set of core requirements. These include:
- Managing and providing water services in a cost-effective and financially sustainable manner;
- Complying with financial principles, such as revenue received from providing water must be spent on those services;
- Operating within the planning and reporting framework in the Bill; and
- Complying with restrictions against privatization.
Additional requirements apply to water organisations including having an independent and competency-based board restricted to activities related to providing water services. There are exemption pathways for this.
The Bill gives water organisations a range of powers that apply to local authorities, such as the ability to charge customers for water services delivery, to require development contributions for growth-related capital costs, and to propose water services bylaws to territorial authorities.
A new planning and accountability framework requires water service providers to prepare a water services strategy, covering each providers’ strategic, financial and infrastructure planning as well as an annual report that provides transparency about their performance. A statement of expectations is also issued to water organisations by its shareholders.
Regarding stormwater management, territorial authorities must prepare network risk management plans that identify hazards and risks for the district. This responsibility can be transferred to a water organisation. The Bill creates a single standard for environmental performance of both stormwater and wastewater, ensuring that regional councils have a single approach to resource consents. Regional councils will be unable to set additional requirements.
Water organisations will be able to propose bylaws to the relevant territorial authority. The Bill introduces a mechanism for establishing mandatory design and construction standards for water network infrastructure to be made by Order in Council. Lastly, the Bill includes a compliance and enforcement regime, including offences and penalties.
Next steps
There will be an opportunity to submit on the Bill at select Committee, and the Department of Internal Affairs will provide further guidance material to support the Bill’s implementation following the enactment of the Bill. The closing date for submissions is on Sunday 23 February 2025.
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