One-fifth of national water infrastructure needs renewal   29 Oct 2014

LGNZ values water infrastructure at $35 billion, 20% up for renewal

By Suze Metherell

Oct. 29 (BusinessDesk) - A quarter of New Zealand's $35.7 billion of water, wastewater and stormwater infrastructure is more than 50 years old and up to 20 percent needs renewal or is unserviceable, according to the 3 Waters project by Local Government New Zealand, the first national picture ever published of New Zealand's water assets.

Overall, New Zealand's water infrastructure was sound and performing as needed, but investment to replace and renew existing assets would be needed to keep up with rising standards and ensure ratepayers have the right incentives to use the assets efficiently, the report, written by Castalia Strategic Advisors on behalf of the councils' lobbyist, found. Water assets were split across three areas, with the wastewater network carrying the highest replacement value at $15.8 billion, while drinking water assets are valued at $11.3 billion and stormwater is worth $8.6 billion.

"One of the points from the report is the state of the infrastructure is actually in pretty good shape," Malcolm Alexander, LGNZ chief exeuctive said at a quarterly media briefing. "We know that this renewal curve is coming, so how are we going to manage it and how are we going to finance it, but we're not falling off the cliff. This is not a crisis issue."

Local authorities own and are responsible for the water infrastructure, and will foot the bill for upgrades to the assets. LGNZ expects to make recommendations on the next step, including around expected costs and how to finance upgrades, early next year.

The report comes after the central government's 2011 National Infrastructure Plan noted a lack of information around the country's water infrastructure. A recent report by the Office of the Auditor General found funding for roads and water assets was deteriorating, and if the trend continued by 2022 there would be a funding gap in the local government sector of between $6 billion to $7 billion.

LGNZ is also reviewing the sectors' funding approach, flagging a possible shift away from rate-based funding. It is looking how to tackle imposed costs from central government and sustaining shrinking, less economically viable towns. The final review is due in December.

"At the end of the day I think we're constrained with land-based taxation," said president Lawrence Yule. "Everybody is into this mould that you can't increase the rates by more than the rate of inflation and politicians have gotten gun-shy around that stuff.

"But the risk is that we under-invest. That we build up a bow wave of stuff ahead of us that actually compromises the future of the country," Yule said.

An insurance review and a think piece on how councils manage natural hazards are also underway.

In February 2012, local authorities established the Local Government Funding Agency, creating a borrowing entity with sufficient size to bring down the credit costs of individual councils. In the three months ended Sept. 30 the agency had issued $555 million in new debt, with total debt on issue now $4.25 billion, making it the third largest issuer in New Zealand, after the central government and the World Bank. Of its bonds, it said 19 percent was held by offshore investors.

(BusinessDesk)

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