Three Waters IT System Project Could Top $500 Million, National Warns
A new project merging local councils’ water utility IT systems as part of the three water reforms could blow past the upper limit of $500 million indicated by officials, according to National.
The project must be feasible by July 1, 2024, when four specially designed entities will take over the management of drinking water, waste and stormwater services for 67 municipalities.
Department of Home Affairs (DIA) chief executive Paul James told a select committee late last month that a business case was being developed to reduce the cost and design of the project.
He said the department is in “trade conversations” aimed at the “high tens of millions” on the low end, but utility projects of this type and size typically cost between $300 million and $500 million.
Local Government Minister Nanaia Mahuta said the business case would be informed by examples such as Auckland’s Watercare.
“We are taking our time to ensure that the business case and evaluation is done to give us the best insight on how to proceed – how to consolidate the architecture needed for the four water service entities,” she said.
“There will be incremental spending over the design period of the feature.
“It’s a lot of money and that’s why we’re doing the business case…the business case would give us a solid base to land on a number. We’re just not there yet.”
The executive director of the DIA’s Tri-Water Transition Unit, Heather Shotter, told RNZ that no decision has yet been made on funding mechanisms, but “ultimately the cost of this investment will be borne by the new water service entities as owners of the assets”.
This means that it will be the residents who will pay the water tariffs under tariff schemes which have not yet been decided by the new entities under the supervision of the water regulator Taumata Arowai.
National’s Simon Watts said it was not fair to taxpayers and costs could rise further.
“There is significant downside risk to these rising IT costs – if the range is what it is right now…it’s not inconceivable to think that 12 months later these numbers could be bigger and that is again a significant concern.”
Watts said the mere fact that the project is still at such an early stage was a “significant red flag”.
“After four years of planning and preparation, the fact that they don’t know what this key element will cost brings up the fact that they are not above the details, that they haven’t done the planning and the preparation.
“This government is clearly driven by an ideology with a drive for centralization – practicality and implementation are always an afterthought. And this is just the latest evidence to show that this three-water reform program has been poorly thought out, not prepared, and has a huge exposure to risk in terms of the costs taxpayers will fund.”
He said it would only add to the government’s previous spending on three-water reform, including $26 million for consultants, at least $3.5 million for a heavily criticized advertising campaign and $2.5 billion. dollars for the government “no worse” and “better”. off” funding for advice.
“At the end of the day, this important reform package from the minister has been sold to Kiwi taxpayers as something that will cut costs – well, they’re already $2 billion in debt before day one,” Watts said.
Porirua Mayor Anita Baker supports the reforms and said she understands why IT spending is necessary.
“I think all taxpayers want everything to go into our assets – so it’s all the infrastructure on the ground that gets fixed – but I understand why they have to.
“If they want to continue with the model as it is, they really have to – they really have no choice.”
Porirua’s three water systems are managed by Wellington Water, and Baker said the council is banking on the entities’ greater borrowing power.
“We don’t face our three waters as they are, and we hope that the investment that can be made by the larger entity – because we can’t, we’re fixed on our borrowing rates so that we cannot borrow more.”
The costs of this project also pale in comparison to government estimates of $120-185 billion that would be needed over the next 30 years to bring Taumata Arowai’s water infrastructure up to new standards and prepare for future challenges like climate change. .
Watts disputes these figures.
“I don’t believe it. We know that the big numbers that were traded – between $120 billion and $180 billion – are unsubstantiated numbers that basically couldn’t be confirmed.”
Time is running out, advice under pressure
Regardless of the cost, there is strong pressure to complete the project within two years. Shotter said the business case had yet to be considered by Cabinet and that while decisions were “still a long way off”, the system needed to be at least minimally operational by the start date of the new service entities. some water.
“The design of these systems will be reviewed on a case-by-case basis, but the key is the requirement to have a minimum IT capacity in place to support operating entities on July 1, 2024,” she said. in a written response.
“Future ICT investment decisions (after July 1, 2024) will be made by water service entities.”
Watts said the project would add pressure on a sector that was already struggling.
“A lot of these councils, their systems aren’t broken today, it’s reform for reform’s sake,” he said.
“There are significant levels of fatigue and burnout across the country in local government and people are leaving because of the resulting pressure and stress.”
Baker confirmed that the councils – and Wellington Water in particular – were struggling to retain staff.
“Obviously they’re moving from Wellington Water to the new water entity, and we’re all struggling to get people on the ground…we already know there’s a shortage in the water business. water and road.”
She also had concerns about the timing of the IT project.
“They also linked this to the local government review… I think residents and councils are on the consultation, and I think it will be difficult for them to meet their deadlines.
“I think 2024 was supposed to be the start but… I don’t know how quickly they can turn things around then.”
She said the upcoming local body elections in October would cause further disruption, with councils unable to make major decisions for three months.
“It’s going to be very tight, I think, for the next couple of years for the boards and the staff – a lot of pressure there.”
Select committee submissions on the first Three Waters Bill close Friday.