The future of our water services - Local Water Done Well

Local Water Done Well is the Government's reform of the system for delivering water services (drinking water, wastewater, and stormwater). There will be new rules for investment, borrowing, and pricing, and new options for how water services are delivered. This reform requires councils to prepare a water services delivery plan by 3 September 2025, to demonstrate how water services delivery will meet new water quality and infrastructure standards, support growth and urban development, and be financially sustainable by June 2028.

Councils have several options for delivering water services, but they must meet the requirements of new legislation and be financially viable.

Masterton District Council is consulting on a proposal and an alternative option:

• Our proposal: To join with Carterton, South Wairarapa, and Tararua District councils to form a Wairarapa - Tararua council-controlled water organisation owned by the four councils.
• Our alternative option: A Masterton-only approach, where MDC continues to deliver services but with enhancements to meet new regulatory standards set by Taumata Arowai, and economic regulation by the Commerce Commission.

A council-controlled organisation (CCO) is jointly owned by its shareholder councils, but is financially separate and would have an independent board.

It would operate outside and independent of other council activities.

Financial sustainability means the revenue received from water services charges covers the costs of delivering those services. The costs of delivering water services include meeting all regulatory standards, and long-term investment in water services.

No. No matter what option is adopted by Masterton District Council, your drinking water will be coming from same place – treated at Masterton District Council’s Kaituna water treatment plant. And your wastewater will still be treated at the Homebush wastewater treatment plant.

That depends on the option adopted by Masterton District Council. If a council-controlled organisation is formed by Masterton, Carterton, South Wairarapa, and Tararua district councils, as proposed, water services charges would not be part of rates bills. You would receive water services bills from the new organisation. Your rates bill will decrease accordingly.

If the alternative option is adopted, these charges would continue to be funded by rates and included in the Council’s rates invoices and proposed metered water charges.

Assets would continue to be wholly owned by the council if a Masterton-only approach to the delivery of water services was adopted or council owned through shareholding of a council-controlled organisation for the option of Wairarapa-Tararua.

Councils are free to make their own decisions on the option they choose. The councils that choose the Wairarapa-Tararua option would need to consider the impact of the one council deciding not to join on financial viability and other modelling. If required, councils can request that a Crown Facilitator be appointed to assist with the identification and development of solutions that address financial sustainability or affordability issues. This could include working with a group of councils to facilitate or negotiate a joint Plan if those councils would benefit from someone external to help ‘broker’ and coordinate this during the water services delivery plan process.

National Infrastructure Funding and Financing (NIFF) and the Local Government Funding Agency (LGFA) have provided input and oversight throughout the development of the financial model.

The financial forecasts developed for our proposal and alternative option are made up as follows:

• The forecasts assume the commencement date for a joint CCO is 1 July 2026.
• Both options assume additional regulatory charges will take effect from 1 July 2026 for the two regulators involved: the Water Services Agency - Taumata Arowai and the Commerce Commission.
• Both the Masterton-only and CCO option forecasts have used the 2026/27 financial year as Year 1.
• The Masterton-only forecast uses Masterton District Council’s financial strategy, including policies for depreciation and debt funding, as prescribed in the Local Government Act 2002 (LGA 2002).
• The CCO’s financial model forecasts funding all capital investment from debt. Debt servicing costs are recovered via revenue charged to water, wastewater and stormwater users. The CCO model anticipates using the greater debt leverage that will be available and managing the funding needs with a utilities infrastructure funding model.
• The forecasts for both options use inputs from our Long-Term Plan operating and capital expenditure, extended to 20 years. These forecast calculations are based on a ‘steady state’ of operating and capital expenditure beyond year 10, with the exception of:
  • Masterton District Council additional capital spend of $60 million (plus inflation) for a major wastewater treatment plant upgrade from 2034.
  • Carterton District Council additional capital spend of $20m spread evenly across wastewater and water supply.
• Capital investment in the CCO option has been focused to the early years of the entity’s operation. This reflects both the capacity of debt funding available and the ability of contractors to complete a high tempo work programme without compromising quality or increasing price.
• The CCO option anticipates scale economies and efficiencies in growth and level of service capital investment and maintenance expenditure on the networks. The efficiency assumption begins from year 3 and runs until year 11. Cumulatively it amounts to 12.2% of savings against direct operating costs and capital investment provisions (not renewals). Growth in the number of connections is also anticipated, in MDC’s case at 1% per annum.
• The CCO option includes an estimated $5m for set-up costs, and a further $2.8m for operational costs, over and above existing costs. The Masterton-only option includes an estimated $0.7m additional operating costs per annum.
• The financial forecasts have been developed using the best information available at the time they were prepared and are based on a set of assumptions, all of which will be subject to variability.

The inflation rate chosen and applied for 20 years will significantly impact on the projected average connection charges and is a significant unknown today. We chose to use uninflated numbers consistently across the modelling to make it as easy as possible to compare options.

Elected members will adopt an approach to the delivery of water services at the council meeting on 21 May after the consultation process is completed. Once the decision is made, the water services delivery plan will be developed. The plan must be submitted to the Secretary for Local Government by 3 September 2025.

We're at the beginning of public consultation, the key dates and activities you should know are:

• Tuesday 22 April: Community consultation closes
• Wednesday 14 and Thursday 15 May: Submission hearings
• Wednesday 21 May: Council decision on model
• By Wednesday 3 September: Council adopts Water Services Delivery Plan and submits to Government
• By Saturday 1 November: Advice from Government
• From 2026/27: Establishment of joint CCO or Masterton-only approach
• Friday 30 June 2028: Joint CCO or councils must prove financial sustainability