Appendix G Current State - 2019 Morrison Low Hawke’s Bay Three Waters Service Delivery Current State Assessment April 2019 Morrison Low 1 Document status Ref Approving Director Date 2418 Dan Bonifant 1 March 2019 2418V2 Dan Bonifant 15 April 2019 2418V3 Dan Bonifant 22 May 2019 © Morrison Low Except for all client data and factual information contained herein, this document is the copyright of Morrison Low. All or any part of it may only be used, copied or reproduced for the purpose for which it was originally intended, except where the prior permission to do otherwise has been sought from and granted by Morrison Low. Prospective users are invited to make enquiries of Morrison Low concerning using all or part of this copyright document for purposes other than that for which it was intended. Contents 1 Introduction 1 1.1 National context 1 1.2 Regional context 2 2 Methodology 3 2.1 Project 3 2.2 Current state assessment 3 3 Hawke’s Bay 5 3.1 General information 5 3.2 The councils of the region 6 3.3 Three waters service 6 3.4 Funding and financing 8 3.5 Human resources involved in three waters services 12 3.6 Governance of three waters 19 4 Water 21 4.1 Assets 22 4.2 Financial 32 5 Wastewater 38 5.1 Assets 39 5.2 Financial 46 6 Stormwater 51 6.1 Assets 52 6.2 Financial 58 7 Further observations 63 7.1 Good practice 63 7.2 Regional opportunities 63 Appendix A Summary of Infrastructure Strategy Key Themes 64 Appendix B Failure Analysis 69 Morrison Low i Tables Table 1 Territorial Authority key statistics 6 Table 2 Region wide summary of three water assets 7 Table 3 Region wide summary of three water customers 7 Table 4 Three waters key financial information 8 Table 5 Council approaches to three waters charges 9 Table 6 Council approaches to funding renewal and depreciation 9 Table 7 Internal delivery of three waters services 16 Table 8 Extent of in-house delivery and outsourcing for three waters operations and maintenance 16 Table 9 Major water issues (as identified by the Councils) 21 Table 10 DIA performance measures: water 30 Table 11 Water revenue and charges 32 Table 12 Water debt 34 Table 13 Major wastewater issues (as identified by the Councils) 38 Table 14 DIA performance measures: wastewater 44 Table 15 Wastewater revenue and charges 46 Table 16 Wastewater debt 48 Table 17 Major stormwater issues (as identified by the Councils) 51 Table 18 DIA performance measures: stormwater 57 Table 19 Stormwater revenue and charges 58 Table 20 Stormwater debt 58 Table 21 Data supplied for failure analysis 69 Figures Figure 1 Summary of project methodology 3 Figure 2 Map of the Hawke's Bay Region 5 Figure 3 Key themes for three waters (from 30-year infrastructure strategies) 7 Figure 4 Region wide summary of three water asset condition (by length) 8 Figure 5 Total three waters debt across the Hawke’s Bay Region (2019/20 budgets) - $000s 10 Figure 6 Three waters debt to asset ratio 11 Figure 7 Three waters debt to revenue ratio 11 Figure 8 Central Hawke’s Bay District Council three waters team structure 12 Figure 9 Hastings District Council three waters team structure 13 Figure 10 Napier City Council three waters team structure 14 Figure 11 Wairoa District Council three waters team structure 15 Figure 12 Number of employees and full-time-equivalent employees in each council’s water team(s) 16 Figure 13 Proportion of employees and proportion of FTEs involved in delivering three waters services 17 Figure 14 Breakdown of three waters expenditure 18 Figure 15 Water supply service key information 22 Morrison Low ii Figure 16 Water pipe length 23 Figure 17 Pump stations and treatment plants 23 Figure 18 Age profiles of water networks (watermains) 24 Figure 19 Network composition by material type 25 Figure 20 Number of reservoirs 25 Figure 21 Reservoir storage 26 Figure 22 Water asset condition (by length) 27 Figure 23 Annual faults normalised by network length (all material types) 28 Figure 24 Cost per cubic metre of water produced and consumed in Hawke’s Bay Region 33 Figure 25 Water asset renewal ratio (long term plan) 36 Figure 26 Planned water capital expenditure per ratepayer (Long term plan, NPV 5% discount rate) 36 Figure 27 Wastewater service key information 39 Figure 28 Wastewater pipe length 40 Figure 29 Number of pump stations and treatment plants 40 Figure 30 Wastewater pipe average age 41 Figure 31 Wastewater asset condition (by length) 42 Figure 32 Cost per cubic metre of wastewater treated in Hawke’s Bay Region 47 Figure 33 Wastewater renewal ratio 49 Figure 34 Planned wastewater capital expenditure per ratepayer (LTP, NPV 5% discount rate) 50 Figure 35 Stormwater service key information 52 Figure 36 Stormwater pipe length 53 Figure 37 Stormwater pump stations 53 Figure 38 Stormwater pipe average age 54 Figure 39 Stormwater asset condition 55 Figure 40 Stormwater renewal ratio 60 Figure 41 Planned stormwater capital expenditure [per ratepayer (LTP, NPV 5% discount rate) 61 Figure 42 Annual AC faults normalised by network length 70 Figure 43 Annual PVC faults normalised by network length 70 Figure 44 Annual steel faults normalised by network length 71 Figure 45 Age distribution by pipe material 71 Morrison Low iii 1 Introduction 1.1 National context The New Zealand Government is currently reviewing how three waters services are delivered across New Zealand. In a Cabinet paper released on 20 November 2018, the Government indicated that alongside regulatory changes there may be major structural reform of the water sector. The Cabinet paper described a system facing significant issues where “the scale of the challenge indicates that the status quo is not sustainable in the long term”. Among the key issues identified were weak regulation, capability challenges (particularly for smaller councils), funding and financing issues for upgrading infrastructure, where the Government stated “for many smaller councils, there is no clear way forward given the scale of the challenges”. The Government has identified the following as the major outcomes it seeks for the reform of the three waters system: • Existing three waters assets and services must remain in public ownership, and the system will incorporate safeguards to protect public ownership of this essential infrastructure, both now and in the future • A sustainable three waters system that operates in the long-term interests of consumers, communities, tangata whenua, and New Zealand generally • Drinking water that is safe, acceptable and reliable • Environmental performance of wastewater and stormwater realise the aspirations of communities in which they are situated, including tangata whenua and New Zealand generally • Three waters services are delivered in a way that is efficient, effective, resilient and accountable, with transparent information about performance, and prices consumers can afford • Regulatory stewardship of the three waters system is fit for purpose, and provides assurance that these outcomes are being achieved and safeguarded. The Cabinet paper identified three high level options for reform. 1. Regulatory reforms only, with voluntary, sector led reforms to service delivery arrangements. 2. A three waters fund to support voluntary service delivery improvements. 3. An aggregated system of dedicated, publicly owned, drinking water and wastewater providers – On a regional basis – 12 providers – On a multi-regional basis, with approximately three to five providers. Through the Government’s consultation process around the Cabinet paper and three waters review generally, it has encouraged stakeholders to put forward their best suggestions as to what that reform may look like. The three options for reform are now expected to be considered progressively with the first announcements relating to the regulatory reform package expected in June 2019. This review does not assume any outcomes of the Government’s reform program. However, as announcements are made providing certainty over outcomes, they will be taken into consideration and adjustments to the project made as required. We also recognise the political environment and growing expectation within the sector that significant regulatory reform will be made. Morrison Low 1 1.2 Regional context The five councils within the Hawke’s Bay Region, including Napier City Council, Hastings District Council, Central Hawke’s Bay District Council, Wairoa District Council and Hawke’s Bay Regional Council (“the Councils”) have collectively commenced this review of the three waters service delivery. The Hawke’s Bay has been a focal point for the three waters discussion due to the 2016 Havelock North water contamination event. Following this, the Councils have collectively worked together to respond to recommendations arising from the inquiry into the Havelock North water contamination event. The region is now one of the few who have joined together to engage with the government on the issues identified by the November 2018 Cabinet paper. The primary objective of this review is to complete an assessment and recommendations of the current and potential delivery models for three waters in the Hawke’s Bay region. It is focussed on the three waters service provided by the Councils, but in doing so needs to acknowledge the broader issues and emerging community concerns relating to water and the management of water within the Hawke’s Bay and more generally across the country. The review is concerned with the three waters services – drinking water, wastewater and stormwater. Issues relating to the wider management of rivers, lakes and harbours for example is not part of this study except to the extent that the three waters services impact on rivers, lakes and harbours. While parts of the Rangitīkei and Taupō District Councils are within the Hawke’s Bay Regional Council area, those areas are not within the scope of this study.