Surviving the conversation

Dr Eric Crampton
Insights Newsletter
23 November, 2018

Unless we are good friends, my picking the restaurant when you are paying the bill can be a recipe for trouble. Central and local government are not always the best of friends. And when central government sets the water quality standards, local government foots the bill.

In places with high water-treatment costs, residents might reasonably prefer the occasional boil water notice to hefty rates hikes. Central standards then amount to an unfunded mandate on local councils. And central government help in meeting those compliance costs would be a reasonable solution.

Central government this week launched a ‘conversation’ about drinking water that could resolve the problem of the unfunded mandate in a rather different way: a central government takeover of local water delivery.

Minister of Local Government Nanaia Mahuta suggested service aggregation, whether to a super-regional council level or to central government, to manage drinking water infrastructure. A complete takeover of the water system would be one way of ending unfunded mandates – if central government covered all the costs and owned the system. But that would mean central government usurping tens of billions of dollars of assets.

Minister Mahuta pointed out success stories like the Wellington region’s shared drinking water supply in her case for greater reliance on amalgamation.

But Wellington’s amalgamation model works because local councils saw the advantages of working together within a fairly compact region for shared water services. The same reservoirs and treatment facilities can serve the broader region. Nobody had to compel Upper Hutt and Porirua to join Wellington and Hutt City’s amalgamated management regime. Pointing to successful marriages among consenting councils does not make a convincing case for forced marriages elsewhere.

Moreover, amalgamating water supply across regions too dispersed to reasonably share facilities does not reduce the cost of upgrading facilities in small communities. It just spreads those costs over a broader region. It can also punish councils doing a good job of maintaining their assets by requiring them to cover the costs of councils that have not.

Lastly, the property rights issues involved need closer attention. Councils own their water pipes. Central government should not simply be able to take them, whether outright or through regulatory impositions that amount to taking them.

On a positive note, Infrastructure New Zealand’s Stephen Selwood suggests this discussion opens the conversation about what local government is really for. We just hope local government survives the conversation.

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