3 waters

Another good article by Graham Adams.

The sooner the average punter gets to grip with Te Mana O Te Wai, the sooner this mob of social engineers can be resigned to the history books.

theplatform.kiwi/opinions/labour-s-three-waters-refresh-is-a-tragi-comedy

Labour’s Three Waters refresh is a tragi-comedy

The government’s disdain for democracy is a gift to National and Act.



Graham Adams

Contributing Writer

April 24th, 2023

Last week, we watched the Prime Minister rebrand the contentious Three Waters project with a name so banal it is surprising he didn’t fall asleep while announcing it. “Affordable Water Reform” is, in essence, a Post-It note to stick on your computer while you struggle to come up with an arresting title. If you suggested “Affordable Water Reform” to your colleagues in an advertising agency they’d assume you were joking.



There’s a lot that is risible in Labour’s ongoing attempts to find a Three Waters arrangement the nation might even grudgingly accept. The Water Services Entities Act was passed in December — and within hours a second bill that included extensive amendments to the first was introduced to Parliament. In fact, that bill is as long as the Act it seeks to amend. Now, the government will introduce and pass further legislation to implement the changes Hipkins announced last Thursday — as well as “associated matters” — all before this year’s election.



At the press conference held inauspiciously in a car park in Greytown, Hipkins also attempted to amend his own party’s history. Apparently, everyone has misunderstood all along what co-governance actually means. The Regional Representative Groups — which have now metastasised from four overarching strategic groups to 10 — aren’t examples of co-governance after all, according to the Prime Minister. This despite the extremely inconvenient fact that he, and Labour’s most influential ministers — including Nanaia Mahuta, Kieran McAnulty, Grant Robertson and the recently departed Jacinda Ardern — have repeatedly referred to the RRGs, with their 50:50 split of mana whenua and council representatives, as examples of co-governance.



Inevitably, this bid to magic away co-governance has resulted in a glorious muddle, with a Newshub headline declaring “Hipkins rejects [that the] new water reforms include co-governance” while 1News announced “Three Waters reset: McAnulty explains why co-governance stays”.



The Prime Minister and McAnulty faced the media together in the car park. Hipkins promoted him from Associate Minister to Minister of Local Government in late January because it was clear that Nanaia Mahuta’s handling of Three Waters had become electorally toxic. She retained her portfolio of Foreign Affairs, however, and, despite her well-known aversion to travel, has barely been seen since. It appears the minister has suddenly developed a taste for long flights, high-level meetings and foreign hotels. Rumours that she has been locked in the basement of the Beehive until after the election are entirely mischievous.



McAnulty has shone brightly in comparison with his predecessor — not least because he actually answers questions rather than answering a question that hadn’t been asked, which Mahuta had turned into an art form.



Lean and wiry as a whippet, McAnulty stares unwaveringly ahead while speaking without moving his lips any more than is strictly necessary. You get the impression he’s happy to be seen as a hard man. Certainly, his cultivated persona of a cross between good keen man Barry Crump and mixed martial artist Conor McGregor lends itself to the perception of him being capable of tough in-fighting, which won’t do him any harm. No doubt he will be hoping against hope that most voters won’t see him and the Prime Minister as having slavishly kowtowed to the demands of the Māori caucus.



That hope would have been more plausible if Waikato-Tainui grandee Tuku Morgan had managed to contain his effervescent glee and had not immediately performed a victory dance for media, declaring he was “over the moon” and that iwi were “euphoric” with the changes to Three Waters.



Morgan was happy to boast that when he and other iwi representatives had met ministers Kieran McAnulty, Willie Jackson, Kiritapu Allan and Kelvin Davis a week earlier and presented their immovable demands, they had been warmly received. Their three bottom lines concerned “Partnership Boards”; the preservation of Entity A incorporating Auckland and Northland; and the status of Te Mana o te Wai statements. All these demands were met.



Morgan crowed: “Those are the three points we debated with the ministers and we got what we wanted. I am very, very happy.”



Act’s David Seymour characterised the situation as — Māori caucus 1; Hipkins 0. He said: “Co-government remains part of Three Waters because the Prime Minister was either too scared to stare down the powerful Māori caucus, or he did and he lost.



“This shows how powerful the Māori caucus is and that Chris Hipkins has no control over them. If Hipkins had control over of them, he would have at least dropped the unpopular and divisive co-government element of Three Waters. Instead, Māori MPs are riding roughshod over him.”



If this view becomes widespread, it will be disastrous for Labour. After Hipkins sent Mahuta tumbling down the Cabinet rankings from No 8 to 16 in late January, his apparent willingness to keep the Māori caucus on a much tighter rein than Jacinda Ardern ever managed was an important factor in his surge in popularity. And after his announcement there would be imminent changes to the Three Waters programme, many had high hopes he would deal decisively with the most controversial aspects of Three Waters, particularly co-governance. Those hopes have been shattered.



A perceived victory by the Māori caucus will have ramifications far beyond the popularity of Three Waters (to use its dead-name, as most will). It will signal to voters that if the Labour Party is re-elected with Hipkins at the helm of a coalition it will continue to give way at every turn to the Māori nationalists — not only in its own caucus but also in the Greens and Te Pāti Māori (if either or both make it back into Parliament).



John Tamihere — a former co-leader of Te Pāti Māori and now its president — did nothing to allay such fears when he told Newshub Nation in the weekend that the debate around co-governance was simply misguided. “The right to the asset called water is still a customary entitlement to all Māori,” he said. “Māori rightly say, ‘How do we get co-governance when we own 100 per cent of it?’ The real issue is how do the Pākehās get into the room [via co-governance]?” Evidently, for Te Pāti Māori, co-governance is simply a way station towards full control of water at every level.



And any lingering hopes that Labour might defend democracy disappeared when McAnulty was interviewed by Jack Tame on Q&A on Sunday. Asked whether he agreed that the RRGs, with their equal numbers of iwi and council representatives, are “not strictly a one-person, one-vote model”, McAnulty said firmly, “Yes”. In his mind, democracy with equal suffrage seems to be an academic concept that is incompatible with honouring the Treaty.



Voters, of course, have never been asked to approve such a profound constitutional shift. Yet it is clear that we now have “democracy with New Zealand characteristics” sanctioned at the highest levels of government.



All this opens a clear path for National and Act to legitimately damn any prospective Labour / Greens / Te Pāti Māori coalition as the sworn enemies of democracy — at least of the traditional “one person, one vote of equal value” kind that New Zealanders have cherished since suffrage was extended to women in 1893. It’s obvious now that a win for any combination of the three main parties of the left will further embed the mechanisms and policies of an ethno-state.



Although McAnulty told Newsroom’s Jenna Lynch that while he didn’t think Three Waters would be an election issue, he also said voters have “a clear choice at this election”. National’s proposed water management model, he said, “doesn’t have mana whenua representation; our one does”. A general election is rarely fought on a single issue but this is so important to the nation’s future it will undoubtedly be pivotal.



One consequence of Hipkins’ and McAnulty’s clumsy attempts to diminish the importance of “co-governance” in Three Waters is that it invites a focus on the power and scope of Te Mana o te Wai statements. These are edicts that only iwi and hapū can issue and — as Mahuta and the Department of Internal Affairs have affirmed — the Water Services Entities are obliged to give effect to them. They give Māori untrammelled power over freshwater and coastal and geothermal water. Although many believe the statements only relate to the purity and health of water, that is far from the truth.



Anything an iwi or hapū thinks is relevant to Māori wellbeing — whether in employment opportunities, investment or spiritual matters — can be the subject of a Te Mana o te Wai statement. In fact, the last category may even include accommodating the presence of a taniwha. When Act MP Simon Court asked Mahuta last October: “Are spiritual beliefs — such as the existence of a taniwha on a bend in the river — permissible subject matter for Te Mana o te Wai statements?”, she did not deny that possibility.



Former mayor of Kaipara Dr Jason Smith, who was appointed to Mahuta’s Working Group on Three Waters in late 2021 and has been a consistent critic of the statements’ undemocratic nature, responded to Hipkins’ and McAnulty’s announcement last week by drawing attention once again to their role.



Describing the edicts as “the very core, the citadel at the heart of the Three Waters programme”, he wrote: “Te Mana o te Wai statements are in a league of their own within the Three Waters reforms, far removed from the already-controversial co-governance arrangements, or entity size and shape….



“Te Mana o Te Wai statements are legislated to cover every square centimetre of all the land, including under every home, farm or place of business as well as many kilometres out to sea. Simple and powerful, whatever these statements contain must be put into effect, no questions asked. The problem is only some parts of society are allowed to write them, though they affect us all. There is no co-governance in the simple truth that Māori only may write Te Mana o te Wai statements. There is nothing “co-“ about this, it’s a different type of constitutional arrangement from anything we’ve seen before.”



Dr Smith predicted the undemocratic and divisive nature of the statements “sets up everyone for civil unrest in the future”.



Given that the statements have been almost entirely ignored by mainstream journalists, it was surprising that Hipkins felt the need to mention them in last week’s announcement. Discussing co-governance, the Prime Minister said: “There is also an ability for Te Mana o te Wai statements [to be issued by iwi]. And we’ve introduced an equivalent for other significant interested parties in water use to also have a say in that.”



The operating principles of the Water Services Entities, which manage day-to-day operations on the ground, already include engaging with the communities they serve but they are under no obligation to act on their recommendations.



Tuku Morgan made it clear, however, that no matter what legislative amendments are introduced, Te Mana o te Wai statements will lose none of their force. He told the NZ Herald: “Even though there’s a provision for communities to have a priority status, it will not in any way shape or form, overshadow, minimise, or compromise the standing of Te Mana o te Wai statements being provided by iwi and hapū.”



The fact Hipkins referred to Te Mana o te Wai statements, albeit briefly, means news has reached his ears that they are an issue that needs addressing publicly. But he’ll have to do a lot better than glossing over them — or offering a sop to the 84 per cent of the population excluded from issuing them — if he hopes to placate the growing number of voters who are aware of their scope and deeply undemocratic nature.



Labour strategists should be very worried. Co-governance is already electoral dynamite but Te Mana o te Wai statements are thermonuclear devices in comparison.

What is missing in all of this is the fact that it is not who owns water. The issue is who is to control water treatment/processing ,reticulation and control of pricing, profit and levies to maori. That's all its about no matter how you disguise it. Based on the fact that 50% voted for them they have assumed that NZer's are stupid enough to swallow a (water) rat ...again

Here is something that is a fairly big deal but has only been lightly touched on by the MSM.
Waste Management want a Resource Consent for the new Dome Valley Landfill. It must be worth a billion dollars or so, being the only landfill in Auckland over the next 50 yrs or so (maybe a billion is a low estimate?)

Anyway, local Iwi, Ngati Manahuri, have been steadfastly opposed.
Then, Waste Management are giving Ngati Manahuri 1,000 hectares of land, including with mature pine (planted pre 1990, so they can harvest it).
After one of the biggest backhanders in history, Ngati Manahuri now support the Resource Consent for this landfill they so steadfastly opposed.

Money, money, money...

Now, these Te Mata O te Wai statements. What is to stop a Tribe doing the same thing? Holding the wider community ransom for cash or benefit in kind (i.e. land), or just outright asking for money for the use of natural resources?

A good writeup by Muriel about Tamihere and Morgan.


NZCPR WEEKLY:

HIDING IN PLAIN SIGHT – THE REAL AGENDA

By Dr Muriel Newman



Last week, Waatea News talkback host John Tamihere interviewed the Chairman of the Waikato-based Tainui iwi, former MP Tuku Morgan, about the future of freshwater.



It was clear from their on-air ‘chat’, that as far as iwi leaders are concerned, Labour’s Three Waters reforms are just a stepping-stone towards Maori ‘ownership’ of freshwater.



John Tamihere: “We own the water.”



Tuku Morgan: “Clearly, that’s the next issue to be addressed… The ownership of water is probably the most important issue of our time… There are two ways we can do it. Litigate in the courts or go head-to-head in a set of negotiations in terms of the Crown and its Treaty partners – iwi and hapu around the country. We are preparing right now for that… As we settle Three Waters and work with the Crown to manage waterways and get certainly and confidence going forward, then we’ll push on with the most important issue to face Maoridom – the ownership of water.”



They plan to go after the electricity companies, with John Tamihere questioning the timing: “To what extent do you have a conversation with the generators on the Waikato to say, ‘times up, there’s got to be a levy here’?”



Tuku Morgan acknowledged that time was coming – and he went on to mention meeting the Chair of Ngai Tahu and discussing their legal claim for freshwater ownership: “So they are in the Courts now… We will get there, there is no doubt about that… If one of the iwi make up the ground we are pushing then all of us will benefit.”



In other words, a win for one iwi over freshwater rights will become a precedent for all iwi.



Ngai Tahu lodged their High Court action against the Labour Government for the effective ownership of South Island freshwater just after the 2020 election. According to their website, the ultimate objective of the case is to establish “Ngai Tahu title” over South Island freshwater, along with “regulatory authority”, and “Ngai Tahu fiscal authority”.



This week’s NZCPR Guest Commentator retired Judge and Law Lecturer Anthony Willy has been examining the case - which he describes as a prime example of Maori tribes seeking common law remedies for cases which are written partly in English and partly in Maori - and explains:



“In it the plaintiff the Ngai Tahu tribe seeks a declaration ‘as to their rights in relation to wai maori (freshwater) that are grounded in tikanga – or in the Ngai Tahu dialect tikaka – specifically their rangatiratanga and their entitlement to exercise such rights pursuant to putake-mauka / rangatiratanga entitlements’.”



He believes the case is baseless: “This spurious claim is based on a fictional reinvention of the terms of the Treaty of Waitangi. Those seeking in effect to own our economy now rely on rights they say were guaranteed to them in 1840. This is patent nonsense, and leaving aside that, any constitutional status the document might have once had has been fully performed. That said it is being increasingly relied on by a small group of greedy tribalists to secure ownership of assets which are crucial to the survival of our democracy, our market economy and the Rule of Law.”



Nevertheless, the case, which became bogged down in preliminary matters, appears to have been parked, no doubt awaiting the outcome of the election.



In effect, Three Waters delivers much of what the iwi is seeking through the Courts, especially as the territory of the Southern Water Entity was drawn along Ngai Tahu boundaries, and tribal control of freshwater will be delivered through co-governance and Te Mana o te Wai Statements.



Furthermore, in order to better influence water allocation decisions, Ngai Tahu persuaded the Labour Government to legislate two permanent seats on the regulator – the Canterbury Regional Council – in addition to two existing Council advisory positions. In their oral submission on the Canterbury Regional Council (Ngai Tahu Representation) Bill, they admitted that the two seats were just a first step towards securing greater influence in the future.



John Tamihere concluded the interview with speculation about October’s election.



According to Tuku Morgan, “The Maori Party are in a very powerful position in terms of determining the face of the next Parliament and how Maori issues are to be addressed… This is probably the most competitive election this country will see… Once the Maori Party becomes the kingmaker of the next government you will see a more favourable climate for Maori… The Maori Party will be at the vanguard of change in this country.”



And he warned, “If we get a right leaning government we’ll get killed.”



If the Maori Party is positioned as kingmaker on election night, there are no two ways about it, Maori will gain ownership of New Zealand’s freshwater.



This is not the first time, of course, that iwi have tried to seize control of freshwater. Back in 2001 they approached Helen Clark’s Labour Government demanding ownership and control of water. To her credit, Helen Clark resisted their advances explaining that water is a public good that is owned by nobody but controlled and managed by the Crown on behalf of all New Zealanders. And that’s how it would stay under her watch.



Iwi leaders tried again in 2014. Assisted by the Maori Party, with its confidence and supply agreement with John Key’s National Government, iwi leaders put together a long list of demands. They included title to freshwater; the vesting of all Crown-owned lake and river beds along with the water column in local hapu or iwi; free water infrastructure for all marae and marae housing, along with a guaranteed allocation of freshwater; tribal participation at all levels of freshwater decision-making including tribal representation on councils, joint management agreements, and co-management of waterways; and a $1-billion fund of public money to build the capacity of tribal groups to implement freshwater management and control.



While they did not achieve these ownership goals, they nevertheless persuaded National to “give effect to iwi and hapu values” in the management of freshwater through the inclusion of the highly problematic concept of ‘Te Mana o te Wai’ in a National Policy Statement on freshwater.



The 2014 NPS stated: “Te Mana o te Wai is the integrated and holistic well-being of a freshwater body. Upholding Te Mana o te Wai acknowledges and protects the mauri of the water. This requires that in using water you must also provide for Te Hauora o te Taiao (the health of the environment), Te Hauora o te Wai (the health of the waterbody) and Te Hauora o te Tangata (the health of the people). Te Mana o te Wai incorporates the values of tangata whenua and the wider community in relation to each water body.”



The danger of including spiritualism and culture in water quality controls can be seen in a saga that has unfolded in the Bay of Plenty, where a local iwi in 2018 opposed a resource consent issued by the Regional Council to a water bottling company to expand its operation on the basis that it would significantly damage the mauri, or life force, of the water.



Although the planned expansion would create 50 local jobs and provide the iwi with a shared-governance role to enable them to undertake their ‘cultural guardianship’ activities, Ngati Awa wants their consent revoked. Since they have been unsuccessful in three courts, they are now heading to a fourth – the Supreme Court.



But in a recent article in the Herald referring to the case, journalist John Roughan wonders whether the ‘Te Mana o te Wai Statements’ in the Three Waters reforms – which he describes as ‘revolutionary’ – will be able to be used by the iwi to stop the project: “So far the runanga has failed to convince the Environment Court, the High Court and Court of Appeal that putting water into recyclable plastic bottles damages anything but under ‘Affordable Water Reform’ it might not need to contest resource consents, it could simply state the case to its water entity.”



Is that going to be our future? Will Te Mana o te Wai Statements give tribal groups veto rights over all water-based activities? Will iwi and hapu have the power to effectively hold the country to ransom over any proposed use of water?



Similar concerns were expressed in an opinion piece by the former Minister of Finance Stephen Joyce, who wondered whether Te Mana o te Wai Statements could be used to block Auckland’s access to water from the Waikato River: “The current reforms are a recipe for discord and disharmony. When more people work out that their access to water is effectively controlled by one part of society who have the right whakapapa, then the proverbial will truly hit the fan. Also, nobody knows how a water services organisation will be required to respond when the first mana whenua group declares, for example, that Auckland should take no more water from the Waikato River.”



Both columnists accuse the Government and the media of deliberately keeping the public in the dark over the extent of the power over freshwater that’s being given to iwi.



John Roughan blames Chris Hipkins for doing his utmost “to keep the public poorly informed, never acknowledging the directive power of these statements”, and “denying” co-governance: “The public remains unaware, for example, that the empowerment of Maori in water reform goes further than ‘co-governance’… iwi and hapu under the legislation passed last year will be able to issue ‘Te Mana o te Wai Statements’ to which the entity must ‘give effect’. The Government never mentions this — not a word of it appeared in its recent announcement of minor changes to the unpopular reforms — and not a word appeared in the news coverage I received.”



So, who exactly are these groups that are attempting to seize ownership and control of New Zealand’s freshwater?



They are mega-rich iwi business conglomerates that appear to hide behind charitable status to pay little or no tax.



A TDB Advisory report that assessed the 2022 wealth of the country’s largest Maori businesses puts Ngai Tahu at the top of the iwi rich list with a value of $2.3 billion. Tainui comes a close second with $2 billion. So, when Tuku Morgan speaks out, it’s on behalf of a multi-billion-dollar business development corporation – one of the richest private business operations in the country.



Third on the rich list is Auckland’s Ngati Whatua, which is worth $1.7 billion, followed by Ngati Toa on $811 million. Tuhoe, the iwi involved in the disastrous co-governance of the former Urewera National Park is worth $441 million. Then there’s Ngati Porou on $280 million, Ruakawa on $228 million, and Ngati Awa, the iwi that’s trying to stop the water bottling company, on $174 million. Ngati Pahauwera is worth $113 million, and the northern iwi Ngapuhi, which hasn’t yet negotiated their treaty settlement, is worth $86 million.



Securing ownership and control of freshwater will clearly bring significant rewards.



Back in 2016, the Ministry for the Environment valued freshwater at almost $35 billion a year. Clipping the ticket would provide already wealthy iwi with a perpetual income stream of immense proportions.



Last year, Victoria University’s Dr Bryce Edwards described Labour’s co-governance arrangements for iwi as ‘privatisation’: “The co-governance model is a form of privatisation. The new companies will be half controlled by private organisations – iwi, which are increasingly highly corporate in their business operations.”



Let’s make no mistake – Three Waters will deliver control of freshwater to Maori if Labour is returned to power in October.



But that will not be the end of the matter for Maori.



Tuku Morgan and John Tamihere have made it very clear that if the Maori Party is the kingmaker after the election, they will not settle for anything less than full ownership of New Zealand’s freshwater.

Thomas Cranmer has to be one of my favourite 'reporters'.


Three Waters Amendment Bill before Parliament

The new Three Waters amendment bill is intended to increase the number of water services entities to ten and introduce a Funding Agency but only makes a bad policy worse.

CRANMER

JUN 22




The Three Waters legislation was back before Parliament yesterday in the form of an amendment bill which is intended to implement changes to the reforms announced by Prime Minister Hipkins and Local Government Minister, Kieran McAnulty in April.



Those changes came about as a result of the new Prime Minister’s “policy refresh” which asked McAnulty to consider options for reform of the Three Waters proposal, including timing and sequencing, the number of entities and boundaries and alternative approaches for Māori representation and involvement.



The relevant Cabinet Paper from February suggested that alternative approaches for Māori representation could include replicating in the Regional Representative Groups the structure proposed for the Regional Planning Committees in the Resource Management reforms, ie imposing a minimum level of Māori representation but leaving it to individual entities working with their constituent councils to redesign the RRG in the way that works best for their entity.



Ultimately McAnulty decided to leave the issue of Māori representation within the structure unchanged, telling Q+A that it was “the right thing” that there was 50/50 representation of mana whenua and councils on each RRG. Indeed the minister went so far as to claim that the highly divisive co-governance component had been retained partly due to the Crown’s Treaty obligations.



Primarily the bill increases the model from four mega-entities to ten water services entities that are more closely based on existing regions, and also introduces a new mechanism called community priority statements.



Community Priority Statements

At the end of last year, as the Water Services Entities Bill was being rushed through Parliament under urgency, there was a growing sense of concern amongst the public and some in the media about the power and scope of Te Mana o te Wai statements. Described at the time by Minister Mahuta in the House as a “robust mechanism”, the intention of Te Mana o te Wai statements was to give iwi and hapū direct involvement in the management of water by the water services entities.



When Hipkins and McAnulty announced the new changes to the reforms in April, the Prime Minister acknowledged Te Mana o te Wai statements and added, “we’ve introduced an equivalent for other significant interested parties in water use to also have a say in that”.



In his speech to the House yesterday, National’s Chris Bishop captured the concerns about Te Mana o te Wai statements when he stated:



This has flown under the radar. The co-governance stuff gets much of the attention, but, actually, it's Te Mana o te Wai statements in the Act, now, that I think many people are waking up to. Only mana whenua can issue them—only mana whenua can issue them—and the water services entities must reply to them. So that actually creates an interesting situation. Only one group can issue them. They're not mandatory. But I just went and looked it up before: the Act says they can issue them for mana whenua of particular rohe. But the water services entities must respond. The scope of those statements is quite breathtaking, or at least potentially quite breathtaking in its enormity. I think many people are waking up to what that does, and I think people think it is wrong, and we agree.



The key point about Te Mana o te Wai statements is that pursuant to section 144(2) of the Act, a response from the relevant water services entity must include a plan that sets out how the water services entity intends to give effect to Te Mana o te Wai, to the extent that it applies to the entity’s duties, functions, and powers.



By contrast, the new community priority statements are provided to the relevant RRG which is required to simply forward them to a new consumer forum that will be established under the Act. Beyond that, the only obligation of the RRGs is that they may consider these statements when they prepare their statement of strategic intentions. This is what Hipkins had described in April as “an equivalent” to Te Mana o te Wai statements.



In reality this new mechanism is little more than a sop to the public. It will cost time and money but add nothing to ensuring the smooth running of a nationwide infrastructure upgrade.



The new Funding Agency

One of the major consequences of increasing the number of RRGs to ten is the need to introduce shared service arrangements as a means of achieving scale and efficiency gains under the enlarged model. This includes debt funding and management through a new Funding Agency.



Under the old model, each of the four mega-entities would borrow debt for their region, and each entity would cross-guarantee the borrowings of the other three entities so that each entity was liable for the full amount of borrowings under the Three Waters reforms.



Under the new model, some of the entities will not be borrowing amounts large enough to directly access the international debt markets. As a fix, the new bill introduces a Funding Agency which will be a financing subsidiary owned by the 10 water service entities. The Funding Agency will borrow the full amount of the Three Waters debt financing. Each WSE will guarantee the full amount of the Three Waters debt, and the Funding Agency will on-lend the relevant amounts that it borrows to each WSE in the necessary proportions.



The new funding model has the same effect, in so far as borrowing and guarantee liabilities, as the old structure however it does introduce more risk. Previously, there were four mega-entities that needed to be managed properly. Now there is ten, and if one of those entities suffers cost overruns, labour disputes or upgrade delays that negatively impacts its debt financing, it will also affect the debt financing of the other entities. In other words, under the old model a problem in one of the four WSEs could trigger a financial restructuring of the entire debt package. Under the new model, one of the ten WSEs could be the trigger.



The bill also sets out the parameters of Crown financial support in more detail. There is now an express provision that the Crown can lend money to the Funding Agency if it is in the public interest to do so.



There is also an express statement that the Funding Agency debt will not be guaranteed by the Crown. As an aside, in the explanatory notes to the bill, the government incorrectly states, “The Crown may also guarantee debts of the Funding Agency”. No-one tell Grant! Luckily the position in the bill itself is correct.



In general terms this is the same position as prior to Christmas, ie there is no legal guarantee from the Crown but there remains an expectation that there is an implicit Crown guarantee given the importance of these water assets to the country. The fact that the bill also includes a very clear mechanism by which the Crown can lend money to the Funding Agency also illustrates that it is within the contemplation of the government that it may, under some circumstances, inject additional funds into the structure.



It will be interesting to see how Standard & Poor’s views these amendments, and whether they consider that the likelihood of Crown support in the event of financial distress has decreased.



The increase in the number of water service entities undoubtedly increases the structural risk, and S&P has already commented on the political opposition to the reforms. It’s likely therefore that the ratings agency and potential institutional investors will, like the New Zealand public, remain unconvinced about the overall reform package. That will be reflected in higher pricing of the debt to reflect the risk profile (ie a higher interest rate paid by the water services entities/Funding Agency) if these reforms were ever to be implemented.



As I have detailed in previous articles, the high levels of leverage makes the proposed debt financing very risky and entirely unsuitable for such a critical infrastructure upgrade that also incorporates a complex and novel management structure.



As Chris Bishop concluded his speech yesterday, “So do we need water reform? Yes, we do. Do we need confiscation? No, we don't. Do we need mandatory co-governance? No, we don't. Do we need Te Mana o te Wai statements in the way they are formed? No, we don't. Do we need balance sheet separation? Yes. Do we need economic regulation? Yes. Do we need water-quality regulation? Yes. Do we need more regionalised solutions that we let local communities come up with? Absolutely, yes we do.”

Will this ever get into the MSM?