[As published in September/October BayBuzz magazine.]

One of human nature’s worst failings is to fixate on the dangers directly in front of us, rather than looking to the horizon to apprehend even worse debacles. 

This is certainly the case when it comes to local government in Hawke’s Bay. 

And while the region’s ratepayers are rightly furious with the eye-watering rates rises the region has suffered over the past three years – 48.76% for Hastings District, 43.30% in Napier, 42.90% in Central Hawke’s Bay, 39.13% in Wairoa and 35.13% from Hawke’s Bay Regional Council – it’s nothing compared with the head-spinning rate of change they’ll be forced to confront in the next three to five years.

From how you pay for water, and to whom you pay it, to resource consenting issues with housing and land use, to greater regionalisation of local government in general. It’s all being wrapped up in messages about “economies of scale and cost benefits”.

Who’s paying the water bill?

Just who receives those benefits is debateable, as the latest iteration of water reform, Local Water Done Well, reveals.

While Central Hawke’s Bay, Hastings District and Napier Councils have committed to a regional water entity, Wairoa District, the region’s smallest council opted out at the end of July, preferring a single Council Controlled Organisation model. 

Wairoa’s media release announcing this gave some clues as to the council’s thinking. It talked about having seen “the detrimental impacts removing services from Wairoa has historically had” while claiming that there was “the additional risk of unforeseen costs arising” from the regional model. Mayor Craig Little emphasised that he’d received Local Government Minister Simon Watts blessing to go it alone. 

Watts may have given his assent to it, but the Minister has made it clear that he wants councils to work together and he’s even happy to make compromises to ensure it happens. Compromises which, compared with Labour’s much vilified Three Waters model where cost cross subsidisation of each CCO was mandatory, means there’s no requirement to harmonise prices. 

The result is Central Hawke’s Bay ratepayers could potentially pay more than ratepayers fork out in Hastings or Napier. That’s because, in a trend that many other CCOs are adopting across the country, the three councils have effectively ring-fenced their individual financial arrangements to protect each council’s assets.

“If you listen to both our council and Hastings meetings, you will hear their concerns about price harmonisation,” Louise Miller, Napier City Council’s CEO, says. 

And it was that ring-fencing and lack of price harmonisation that led to Wairoa District Council unanimously voting for a stand-alone CCO. 

“From day one, we were told that Hawke’s Bay, especially Napier and Hastings, was going to be our saviour,” Wairoa Mayor Craig Little says, “We’ll be putting our arms around Wairoa and Central Hawke’s Bay. But as we got into it, we found there was actually no harmonisation at all. And so, we’re thinking, gosh, how’s that going to work?”

But for the region’s larger councils, the appeal of ring-fencing lay in its flexibility and the protection of their assets. And while Napier will continue delivering its water maintenance and operational work in-house, for smaller, debt-laden councils it only emphasises the risk that water will continue to be unaffordable.

For Central Hawke’s Bay District Council, the lack of price harmonisation means that while it might be able to divest itself of $40 million of debt to the new water entity, in a worst-case scenario by 2035 its ratepayers could each be paying more than $7000 in water rates. 

In an election year, the inevitable accusations of ‘geriatric poverty’ produced results; at the end of July Central Hawke’s Bay announced it was considering halving its work on water infrastructure, forfeiting $100 million from its planned $210 million, as a trade-off to make rates more affordable.

Which begs the question for the region’s beleaguered ratepayers: is Local Water Done Well actually going to mean lower rates?

“From a practical one-plus-one equals two, yes,” says Central Hawke’s Bay Mayor Alex Walker, “But then in terms of the balance of the rest of the business, not necessarily. The rest of the core services of Council will still need to operate.”

That’s a comment local government leaders echo across the region.

Napier’s outgoing Deputy Mayor, Annette Brosnan says, “I don’t think the modelling shows any savings for Napier ratepayers, but it certainly does for regional rates as a whole.”

When asked if there won’t be as huge rates rises as in the past, Hastings District Council’s CEO, Nigel Bickle chose to deflect. 

“The way that we finance infrastructure in New Zealand is completely broken,” says Bickle. “When you kick the can down the road because you don’t want to actually rate for the real cost of those assets and maintaining them, you just end up with what we’ve done in New Zealand.”

But while there will be some economies the new water entity can achieve, particularly when it comes to procurement, for outgoing two-term regional councillor Martin Williams, “Leaving that cost burden at the door of each of the smaller councils defeats the purpose of the whole exercise.”

“If each district is paying for its own bill”, Williams points out, “I don’t think we’ve got to a place where we can affordably deliver the improvements to water infrastructure, not just this region but the whole country needs. You’ve just shifted the burden to another entity.”

“There’s a lot of talk in central government about increasing borrowing capacity where you separate the balance of the water entity from the balance of the council. But at the end of the day, someone’s got to pay that bill.”

Resource management reform

As well as water reform, there’s wholesale reform of the Resource Management Act facing councils. Public consultation for the national direction Government should adopt for freshwater, infrastructure and the primary sector was released at the end of May and revealed the change of approach between environmental and economic interests.

Martin Williams says that environmentally it’s all about bottom lines.

“The current national policy statement on freshwater now is pretty much a river first, economy second approach,” he says. “Whereas the [Government’s] positive outcomes idea is … yes you could have an impact but if your overall outcomes are more positive for the environment and you do some enhancement work or something else that offsets your impacts, you can still be approved.”

Napier’s Annette Brosnan is an experienced hand in RMA; as the Chair of NCC’s Regulatory Committee and a regional council RMA commissioner she says reform is needed. “Where it comes unpicked, I guess, for councils is that you’ve got to resource the implementation of a new regime.”

But won’t a streamlined process mean smaller operating costs for councils?

“Your fees and charges might go down. What might have cost you $3,000 to get a resource consent over time might now only cost you $2,000, as an example. Or you may not need to deal with council at all if it’s a permitted activity because that barrier has been removed.”

Hastings District’s CEO Nigel Bickle believes that one regional spatial plan would simplify and integrate the planning system. “We should collectively on behalf of our community say, what does Hawke’s Bay look like in 100 years from now?”

Local Government ‘Improvement’ Bill?

Any doubts about the rapidly deteriorating relationship between local and central government is confirmed when speaking to these regional leaders about the Local Government (Systems Improvement) Bill.

Introduced during a fraught Local Government conference in July when Watts and RMA Reform Minister Chris Bishop treated local government attendees as little more than recalcitrant children, the Bill has already passed its first reading, and aims to refocus councils on their core functions.

It removes the four wellbeing provisions of the Local Government Act and introduces new financial reporting measures for councils, including mandatory disclosure of contractor and consultant spending. 

Williams queries, “whether this is more optics and politics than substantive benefit. In other words, is it symbolic?”

He uses the example of the Government awarding Hawke’s Bay Regional Council millions to spend on contractors to clear 2-million cubic metres of sediment after Cyclone Gabrielle.

“So, we’d be putting on our disclosures, oh well, we’ve spent $100 million on contractors. Who else was going to do it?”

But when it comes to the most contentious part of the new bill, rates-capping, leaders are united; all agree that each council more than achieves the 80% provision for core spending and rates-capping would only exacerbate under investment. 

Brosnan recognises that, while rates capping would be appealing to ratepayers it also has unintended, perverse consequences. 

“What it actually delivers is that councils take on higher debt. Lower rates to fund higher debt, rather than paying for things in the appropriate amount of time. You see deferred maintenance and infrastructure backlogs as a result.”

She says it hampers a council’s ability to be flexible and responsive and “hampers growth in fast-growing councils.”

For CHB’s Alex Walker, it’s a philosophical issue. She says the Government is over-reaching. “Should it be Government deciding how much we charge in rates? Or is it actually the job of our voters in a local democracy to create that tension? And I think that it is.”

For HDC’s Nigel Bickle the devil is in the detail. “The trick in all of this, isn’t it, is going to be defining what is core and what’s not core. And what rates capping applies to and what it doesn’t. Because I’d argue that if it’s on infrastructure, then you’re absolutely knackered.”

“It’s capital spend that’s driving our balance sheet, our debt levels, our debt servicing costs. And when rates are the only funding tool you’ve got, you’re pretty buggered.”

All agree vehemently that their present funding and financing tools – largely rates – are inadequate. David Seymour’s promise to give councils half of the GST on new builds was enthusiastically endorsed. Bickle notes that Hastings’ new build investment of $890 million in the last five-years would have given his council $11.5 million a year. “It’s not chump change. But has anything happened with it?”, he says, before questioning if central government would be prepared to transfer that revenue to local government. 

What about amalgamation?

And while the changes to local government over the next three to five years are dizzying, even more is guaranteed. That’s because at this year’s conference, Local Government NZ backed Tauranga Mayor Mahe Drysdale’s call for a review of councils which would require “tough” amalgamation conversations for his region’s councils. 

Minister Watts has claimed he’s open to exploring opportunities for efficiency. 

Hawke’s Bay’s experiment with that ten years ago was a resounding, “No!”. 

Is the time right to talk amalgamation again in Hawke’s Bay? Yes, say the region’s leaders cautiously.

“I think that people in communities in Hawke’s Bay have moved on,” Martin Williams says. “We’re seeing a situation where you’ve got 1500 council staff, you’ve got 60 councillors. And all struggling.”

Williams believes that we should be looking at becoming a unitary authority, which has the powers of both a single territorial authority and a regional council. “And the great benefit of being a unitary authority is that you can both set the policy and you own the assets that that policy shapes and informs. So, you’ve got all the levers at your hand.”

Like a photo coming into focus, the future for how the region will be run is becoming clear. Smart water meters and a new regulatory regime under Local Water Done Well means you’ll be paying more for your water. Reform of the RMA may mean less red tape. 

None of it means that your rates will necessarily go down.

As for amalgamation, while Hawke’s Bay councils are already sharing services, the region’s recent attempts at regionalism such as the Hastings-Napier Future Development Strategy, which identifies housing and industrial growth, or the Matariki Governance Group (MGG), which decides funding priorities, has been as Martin Williams says, “clumsy, clunky, ineffective.”

MGG’s Chair, Alex Walker says that’s because there hasn’t been the structure to support it that is transparent and accountable to voters.

Does the MGG have a future in this brave new world of regionalism?

“If it doesn’t look exactly like that, I think the tenor of it would be similar,” Walker says, “We need a proper structure, supported by legislation that will help us operate better at that regional level.”

Even if that legislation occurs, Hawke’s Bay can’t be certain that the “difficult conversations” Tauranga’s Mahe Drysdale says needs to take place when it comes to amalgamation, will occur. 

The fact that Wairoa chose not to join the regional water entity illustrates that perfectly. 

Janet Wilson has been a journalist in print, radio and TV for the past 35 years. For the past 17 years she has run a small communications company which has provided advice to private sector clients and politicians at both local and central government level.