An update from LGNZ on their Water 2050 project
and outlines the release of their third piece of work.
There are five key workstreams
to the Water 2050 project: allocation, water quality, infrastructure, cost and
funding, and governance. To date, the following papers have been released:
Today, LGNZ has released its third paper in our work
programme to members, Water 2050: Cost and funding – Meeting the costs of water infrastructure; a stocktake and analysis of actual and potential funding options for local authorities . This discussion paper considers
funding – that is, who ultimately pays for the infrastructure. It
outlines and analyses a range of existing funding options and also comments on
attributes that future funding options will need to consider.
These reports and our future work have been undertaken in
order to inform discussion between LGNZ members and with central government on
water and, in particular, to feed into the Government’s current review of the
delivery of three waters services. Funding is one of the four workstreams
in the Government’s work.
Water 2050: Funding options
In determining which options to
use to fund infrastructure to meet rising standards, climate change impacts and
population changes, as well as essential maintenance and renewal, this report
identifies several considerations:
- Cost. For many districts and cities, the cost of investing
in three waters infrastructure, including any additional costs resulting from
higher standards and new regulation, will be significant. Central and local
government policy development must consider both existing and new funding
options to ensure every community can successfully balance its investment
principles to achieve outcomes that benefit their communities and the
country.
- Economic equity. If economic equity is considered – where charges
reflect the costs of providing services – as a high priority, then those
options where users pay based on the extent to which they benefit, and where
charges reflect the cost of provision, will be preferred.
- Social equity. Social equity addresses affordability to
residents and is based on the premise that no one is priced out of the market.
Importantly, improving social equity is not only a local issue, but a national
one. In the context of water use, local government should not be expected to
carry the full cost of contribution for national benefit, particularly where
there may be measurable improvements. Central government should work closely
with local governments to determine the fair and appropriate sharing of costs
for improvement and expansion, and to also share in better outcomes.
- Simplicity and implementation. For a successful funding
programme to be supported, it must be easily explained and understood by all
levels of governance, management, stakeholders and the public.
- Conditions and context. While user-charging and local
targeted rates are often considered suitable for urban areas, in rural areas
these approaches can result in per-person funding requirements that are
considered unaffordable. There may be merit, for example, from a wider
public good perspective, in spreading the costs of rural infrastructure beyond
the relevant local council, while at the same time applying more economically
efficient approaches in urban centres.
- Time. Infrastructure costs can be recovered over
different periods, depending on the funding option adopted. Recovering costs
over relatively short time periods reduces funding risk and minimises overall
debt requirements, but it pushes greater funding requirements onto the early
users of long-lived infrastructure.
Next steps
We intend for this report to
feed into policy development on the funding workstream under the Three Water
Review. It will be followed next month by a report that quantifies water
infrastructure costs, including an estimation of the costs to upgrade and renew
infrastructure across New Zealand’s councils under various scenarios, allowing
for increased capacity for resilience.
We look forward to keeping you updated on LGNZ’s policy work
on water under its Water 2050 project.