John MacDonald: Come back 3 Waters. All is forgiven

Canterbury Mornings with John MacDonald

Come back 3 Waters - all is forgiven.

You might be thinking that, now the Government has told councils they’re going to have to borrow truckloads of money to sort out their water infrastructure problems. Which could impact their credit ratings, increase their overall borrowing costs and increase rates.

So yeah - that’s how I’m feeling. Because I’m now of the firm belief that it would be way better having the state owning and operating and paying for water infrastructure in this country.

Because I think the increased debt that is going to be coming our way at a local level will only mean one thing - higher costs and higher rates.

Just in case you need reminding, 3 Waters was Labour’s policy for reforming waste, stormwater and drinking water services right around the country.

It fell over after people got fixated on the part of the policy that talked about co-governance with Māori. And, suddenly, it became a race issue instead of an infrastructure issue. So Labour tried to re-brand it, tweak it, but a lot of people still weren’t buying it. So, it went nowhere.

At around the same time, National was promising an alternative that it was calling “Local Water Done Well”. That was as much detail as it gave out pre-election but that word “local” was enough for most people to think it sounded like a much better way of doing things.

And that was what councils like Christchurch were banging-on about too. And I fell for the talk - initially, anyway. But I’m actually thinking now that this obsession with the “local” bit is going to be something we are going to come to regret.

The bit that I initially got all fixated on was the amount of money the Labour government was offering to pay Christchurch in exchange for its water infrastructure.

It was $120 million in exchange for $8 billion of water infrastructure assets. Not that I actually think of underground pipes and things as assets. Because, for me, an asset is something you can make money from.

But I fell for all that and I was more than happy to tell the Labour government where to go with its miserly offer.

But then we found out how cruddy the water infrastructure in Christchurch actually is. Because, remember after the earthquakes, we all assumed —or we were all led to believe— that everything under the ground was being replaced and it was going to be gold-plated blah blah blah.

Which wasn’t and isn’t the case at all. As we discovered earlier this year, things under the ground in Christchurch aren’t so rosy and 38-million litres of water is leaking out of the pipes every day.

Not as bad as Wellington, where 60-million litres is going down the drain every day. But it’s not great either and it shows just how much of a repair job is still needed.

Now, under the approach Labour wanted to take, the Government would have owned the water assets —after paying a bargain-basement price— and it would have been responsible for fixing things. And paying for it.

But, because we got all obsessed with locals owning and running water infrastructure, we’re now in the situation where the realities of ownership are hitting home, and councils are being told to borrow truckloads of money to pay for what needs to be done.

And the money is going to come from what’s called the Local Government Funding Agency, which is 20 percent owned by the Government and 80 percent owned by 30 local councils.

So the councils are going to borrow the money from the funding agency. The benefit of doing that, is that the lending rate is going to be much lower than it would be if they had to borrow from elsewhere.

The thing is, though, tell that to the credit rating agencies which look at local councils and decide what their credit rating is depending on their debt levels, revenue streams —all of that— and they set a credit rating which then determines how much councils have to pay for other borrowing.

So council costs are actually going to go up under this plan of the Government’s and, you know what that means, rates increases are going to keep on keeping-on. Because the councils are going to have to pay for it somehow. Or correction - we’re going to pay for it.

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