Navigating new waters: We must catch up on investment that spans generations

The new coalition government’s 100-day plan has confirmed the repeal of the Water Services Entities Act and kept the future of fresh and wastewater in focus. It’s created uncertainty around the future funding of water infrastructure, and it’s left local councils trying to squeeze water infrastructure into their budgets.

But, amid the questions, I am optimistic the energy and vision of the new government will align with the need for clarity of funding.

While Auckland is managing better than most, the systemic failure of freshwater, wastewater and stormwater systems across the country is a harsh reality for local councils and New Zealanders who were pinning their hopes on a new structure.

Auckland Council is particularly impacted. The new entity Wai Tāmaki Ki Ti Hiku was due to go live July 1, 2024. The city now has less than seven months to finalise the next 10-year long-term plan and its associated funding.

And yes, it’s as challenging as it first appears.

This precariousness also presents an opportunity for Auckland Council and Watercare to rethink future funding models and build financial resilience that matches our development plans.

This change is critical in the face of growing challenges from historic underinvestment, rapid urban growth, and the devastating impact of climate change we have witnessed.

As New Zealand's largest water entity, we recognise our responsibility and are engaging with Auckland Council to explore solutions.

While we await more information from central government, we have been planning how to deliver for Aucklanders in the most sustainable way.

As we see it, there are two main paths ahead.

On one hand, we can persevere as a council-controlled organisation. This means we continue to be dependent on the council’s ability to secure debt for everything required over the next 10 years in Auckland.

Alternatively, we can borrow off our own balance sheet, separated from council’s.

If we continue under council’s umbrella, it is highly likely we will face a situation where we must cut planned infrastructure investments, or significantly increase our prices – potentially by 30%.

This is a harsh reality despite our plan to achieve a $100m cost reduction in our annual operational spend over the next decade.

On the other hand, gaining financial independence would enable us to stick to, or lower, our current projected price path of between 7% and 9% annual increases, while still delivering our 20-year infrastructure plan for Aucklanders.

We’re at a fork in the road where one path leads to Aucklanders of today paying massively more for a multigenerational investment. The other path creates an ability to borrow money and spread the cost over future generations – those who will benefit from the legacy of resilient water infrastructure.

We’re exploring the options. However, we cannot do this alone. Alongside separating Watercare’s balance sheet from council’s, these options also include new government debt guarantees.

Each option has implications. But without sustainable long-term funding for Watercare, our aging network will continue to struggle.

The scale of our operations is substantial. We manage more than 16,000 hectares of catchment across 28 water sources, 18 water treatment plants, 84 water pump stations, and 87 water reservoirs.

Each day we efficiently deliver 440 million litres of water to 460,000 homes and businesses, through a pipe network spanning nearly 9500 kilometres.

We also manage 410 million litres of wastewater every day through a similar

sized network, with 528 pump stations and 18 treatment plants.

But despite having $17 billion in assets, these resources are not enough to keep pace with Auckland's growth and the demands of a changing climate.

Our priority is the efficient delivery of water to aid public and environmental health.

Incidents like the Parnell sinkhole, and flood and cyclone damages, underscore the urgent need for significant capital investment to address climate-related extreme weather events.

We cannot meet these challenges with a funding model limited by Auckland Council's financial constraints.

We need the ability to borrow enough money to deliver for Auckland now and into the future.

Our ideal is achieving balance sheet separation by July 1. This would enable us to effectively address the mammoth quest ahead, without needing to increase water prices beyond our current pricing plan.

But we will work our 20-year infrastructure plan to whatever funding model best enables it.

In decades to come, Auckland’s success will be measured not only by its economic prosperity, but also by the wellbeing of Aucklanders and the impact we have on our environment.

With the right funding model, Watercare is well-positioned to deliver an affordable $18.5b capital programme aligned with council’s growth plans for Auckland.

We can stop delaying the roll out of critically needed infrastructure and start laying down future-focused infrastructure.

We know how to build and maintain this future-focused infrastructure for Auckland. What we need now is the financial certainty to make this multigenerational investment in our city.