New Zealand's local authorities face a $100 billion-plus to replace ageing water pipes, drains and sewers and will need central government assistance to meet the bill, says Local Government New Zealand, the lobby group for the sector.

At its quarterly briefing on Tuesday, LGNZ president Lawrence Yule – also a National Party candidate in the September general election – said a swathe of essential underground infrastructure installed by towns and cities in the 1960s was reaching the end of its life and would need replacement in the next few years.

Back then, such infrastructure had been co-funded by central and local government but the responsibility had moved exclusively to local government in the interim and could place a huge strain on some communities’ finances, especially where populations were shrinking or ageing.

“We don’t want the government to take responsibility,” said Yule. “We want to take responsibility (for the so-called ‘three waters’) but want to make sure it’s done holistically. The current funding mechanism won’t work, so we are starting the conversation.”

LGNZ has promoted a co-regulatory structure for water infrastructure for some time, akin to the shared way local and central government currently fund roading.

“This renewals curve is not a surprise,” said LGNZ chief executive Malcolm Alexander. “Now it’s here.”

Among ways to fund replacement proposed by local government are the ability to earn revenue from new sources other than property rates and to use off-balance sheet ‘special purpose vehicles’ that would allow infrastructure projects to be debt-funded without blowing out local councils’ balance sheets.

Maintaining current strong credit ratings was essential for the New Zealand local government sector, the head of the Local Government Funding Authority, Mark Butcher, said.

Mr Yule also called for decisions “sooner rather than later” on whether or not to make users pay for their water allocations or to use a non-market, administrative method to allocate freshwater. A Technical Advisory Group is due to report on the long vexed issue in December.


By Pattrick Smellie