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Structural change ahead? What the Havelock North inquiry could mean for councils

Structural Change Ahead? - Local Government July 2017 - Featured Image

Water New Zealand CEO John Pfahlert has said that last year’s outbreak of gastroenteritis in Havelock North has raised an “elephant in the room” about the structure of local government. Ruth Le Pla attended the recent LGNZ Freshwater Symposium in Wellington where he presented his ideas.

Water New Zealand CEO John Pfahlert has acknowledged that the future structure of local government is “quite rightly” excluded from the terms of reference of the two-phase government inquiry into last year’s Havelock North incident.
“But, going forward, I notice that buried in the detail of the scope for the second phase of the inquiry is whether water service entities might be a topic for conversation,” he said.
John, who was speaking at the LGNZ Freshwater Symposium in Wellington, questioned whether there might be a different way of delivering water services in New Zealand. “That’s something that the judge obviously wants to have a look at,” he said.
Last August an estimated 5500 people became ill with campylobacteriosis from contaminated water traced to drinking water supplied by two bores in Brookvale Road on the outskirts of Havelock North.
John said the incident raises issues that industry, and regional and territorial local government must address.
Retired Court of Appeal judge Lyn Stevens QC is chair of the contamination inquiry panel which released its Report of the Havelock North Drinking Water Inquiry: Stage 1 on May 10 this year. The report addressed the causes of the water contamination incident and assessed the conduct of those involved.
A stage two report will address systemic issues and lessons to be learnt. This will be reported back to Attorney-General Christopher Finlayson by December 8 this year.

STAGE ONE

John told symposium delegates the first stage of the inquiry identified a number of deficiencies. These include:

  • organisational, in terms of the way in which the councils have managed the processes of water treatment;
  • relationship issues between regional and local government; and
  • some deficiencies in professional training and development.

He said he thought the judge had been fair and “given everybody a good slap when it comes to the blame, as it were, and who has been responsible”.
“We just need to make sure as we go forward that we take that on the chin and do the best we can into the second phase of the inquiry that’s now started.”

STAGE TWO

John said that, without wanting to pre-empt upcoming findings and outcomes in the second phase of the inquiry, it was reasonably clear from the summary of the first phase that some “fairly significant regulatory change” will be recommended. According to John, the report:

  • is likely to focus on issues such as the training and qualifications of the staff that councils employ;
  • will look at technical matters around water sampling and testing;
  • will focus on issues such as water safety plans – what they are and what should be in them;
  • will examine the relationship between regional and district councils and whether they have the most functional dialogue to ensure risks are being managed effectively;
  • will look at the role of the Ministry of Health and whether it is the most appropriate agency to continue administering water management and drinking water standards;
  • will examine whether the devolution of responsibilities to District Health Boards is the most appropriate approach; and
  • will put the spotlight on the role of drinking water assessors.

“It’s also important to look at the standards themselves,” said John. “As I pointed out to another local government organisation meeting some months ago, the standards documents are 250 pages long with a 750-page explanatory addendum.
“If you can be confident as a water service manager or chief executive or member of an elected council that your staff fully understand them then that’s a fairly heroic assumption.”
John suggested these collective changes will cost councils a considerable amount to implement.
“It will involve potentially recruiting more staff and it may well require you investing more money in infrastructure. That’s likely to be in things like water treatment plants and upgrades to your reticulation network.”
He noted that Wellington Water, for example, is in the process of purchasing a new ultraviolet-light water treatment processing facility for Lower Hutt.
John said such changes may also require councils to re-examine how they handle their sources of drinking water as groundwater represents 40 percent of the source of drinking water for most communities in New Zealand and a very significant chunk of that is untreated.
He added that if councils were required to implement all such changes quickly, and if they also want to upgrade their water services, that may well affect contractor rates.

PRIORITIES

John noted that the second-stage inquiry recommendations will “almost certainly affect, in the years to come, councils’ spending priorities on other ‘laudable’ schemes, shall we call them, whatever they might be”.
“Whether it’s building a town hall or a sister city relationship with Guangzhou in China or whatever the latest fad is in your network, I suggest to you that water treatment is going to be an issue that’s going to require councils’ attention.”
He added that once the inquiry reports in December, he imagines it is going to take a number of years to work through exactly what regulatory changes will be necessary.
“The challenge we face in New Zealand is that as councils we all have first-world expectations in terms of water quality.
“But of course your own research as Local Government New Zealand during the 3 Waters project that you ran a couple of years ago, pointed to the fact that at least a third of the councils in New Zealand had static populations, declining incomes or static incomes.
“And with first-world expectations those things don’t go well together. You’re going to have some real challenges in small-town New Zealand about that disconnect between a lack of money and the desire to have a level of water treatment in this country that may not necessarily be one you can afford.
“And if we think central government is going to stand in the wings and say, ‘oh yes, we’ll pay for that’, history suggests they haven’t been as wildly enthusiastic in supporting local government.
“But, historically they have put money into drinking water treatment subsidies. There was $100 million invested over the 10 years up to 2015, and both your organisation and ours have called for a reinstitution of that particular scheme. I’d be quite happy to stand alongside LGNZ and have a conversation with government about that.”
He advised councils to think about how they will manage risk within their own organisations in the future. “One of the issues that the inquiry has come up with is that the development of water safety plans – which are a risk management exercise, in essence – are largely outsourced by local government to contractors and consultants.
“The inquiry has been quite clear that it’s not really good enough for you to simply pass the management of that activity on to a consultant and expect that they’re necessarily going to manage your risks for you.
“So, going forward, you might want to think about as a council, whether you’re across water treatment as a risk management issue. Is it on your risk management register?”
He added that the issues that motivate people to stand for local government are “probably somewhat different from the sorts of things that focus the minds of your water service manager who has engineering training”.
“You’re thinking about electoral cycles, you’re thinking about rates increases, you’re thinking about a whole bunch of other things that your community wants to pay for. And water and sewage and stormwater are simply not very sexy, let’s be honest.
“We take $55 billion worth of water pipeline assets in this country and we bury the bloody things in the ground where the ratepayers can’t see them. Obviously, that’s where they’ve got to go but it’s not a vote winner for the next local body election, is it?”
John said his “one takeaway” from his presentation was that the consequences of a water service failure are far more serious to elected councillors and staff than a failure of any other form of infrastructure that they’re managing.
“Locals ring up and say there are potholes in the road. So you go and fix them. But there’s a very serious potential to make people sick and to kill large numbers of people if you get water treatment wrong.”
He said effective water treatment was not rocket science.
“And yet councils consistently, for political decisions, decide not to purify water simply because they don’t like the taste of the water…  they don’t want to be criticised by their local communities.
“I’m just going to say here, get over it, because one of the issues that the second phase of the inquiry is going to look at is whether water treatment should be mandatory in this country.
“I’m not saying that’s what they’re going to come down to but they are going to ask the question.”
He suggested councils look at the questions raised by the inquiry panel and form a view on whether they think they are good ideas.
“Obviously it has important ramifications in terms of costs for local communities.”


This article was first published in the July 2017 issue of NZ Local Government Magazine.

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