Frequently asked questions

Keeping our water services in house would see Council retain direct control of its water assets and services and provide the lowest average cost to households until 2047, when cost differences between the options are projected to level out. 

Council discounted a Wellington region option because of the major and immediate challenges faced by the metro councils that would overshadow our priorities. The modelled cost to our customers was twice that of other options.  

We also decided not to proceed with a Kāpiti-only water services council-controlled organisation because of the high set-up cost and lack of economies of scale and other efficiencies or resilience. A joint council-controlled arrangement with Horowhenua was discounted for the same reasons. 

A consumer trust model (like Electra) was discounted because of the setup and operational costs and because it would not be able to access Local Government Funding Agency funding. 

All councils have to submit a ‘water services delivery plan’ to government by 3 September 2025. To do this, we need to decide what our water services delivery model will look like.  

The previous government proposed four organisations to manage water across the country. It then changed to ten. This version of water reforms (‘Local Water Done Well’) lets councils choose whether to keep water assets directly council-owned, or indirectly through a shareholding arrangement in a council-owned water services organisation).

The new legislation requires us to consult on a minimum of two options. We have explored others, including: 

• a joint council-owned water organisation with the Wellington region - discounted due to high set up and operational costs, and the modelled costs to Kapiti Coast ratepayers were more than double when compared to the two options we are consulting on 
• a Kāpiti-only council-controlled organisation (different to our Option 1 in that we would be the shareholder, but it would be independently run) – discounted due to the high set up costs and no benefits of scale therefore no advantage over the in-house model 
• a Kāpiti and Horowhenua joint council-owned organisation – discounted because it offers no significant advantages in terms of economies of scale but still has significant set-up costs 
• a consumer trust (like Electra) – discounted because we would have to transfer our water assets, and the trust would not be able to access preferential lending rates.

The legislation prescribes how we must operate, monitor and comply. We can continue to deliver services in-house we do now, but we have to make changes including ring-fencing our water operations, finances, and assets from the rest of our services and show how we are meeting stringent regulations and standards.

We're continuing to talk to each other as our elected members consult with their communities and make final decisions. It may be that one or more councils will opt out of ‘The Four’. If this happens, we’d need to decide whether we would want to still go ahead with this option.

We estimate that it will cost around $14.2 million to establish a joint council-controlled water service organisation.

The proposed legislation has embedded strong protections against privatisation of water assets, keeping water services in public ownership. Any new water services organisation will have to be the direct provider of water services – they are not allowed to enter into franchise or concession agreements.

Kāpiti is in a relatively good situation due to strategic investment and management of our three waters. Water meters (introduced 2014) enable us to detect and fix leaks early, charge people only for what they use, and reduce water use by more than 26%, so we’ve not had to have water restrictions since.  

Our infrastructure is middle-aged so will start to need significant upgrades and renewals from 2040 on. To do this we need to plan well and budget for maintaining it into the future.

We got an independent consultant to model the average cost to our customers in the next 10 and 30 years under each option. Currently (2025) in Kāpiti consumers pay, on average, $1645 a year for water.  

In 2034, this is expected to be $2023 under Option 1 and $2656 for Option 2 (including inflation).  

In 2054, the cost under Option 1 is modelled to be $2749 and $2594 under Option 2. We expect the costs to harmonise (equalise) for both options in 2047. If we go with Option 2 (a four council-owned water organisation), it will be for the governance board to decide if all customers or districts should be charged the same. 

If we go with Option 2, the new water services organisation would bill you directly (like your power company). Council would still charge property rates, but you wouldn’t get a water rates bill from us unless we go with Option 1 (an in-house model) in which case you’ll notice very little change. 

We can’t yet confirm what the total combined charges would be, but you won’t be charged twice for the same thing. Government regulation would set limits on what the organisation could charge, and how much it needs to invest in the future.  

Whichever option we choose, the reality is that water is going to cost more in the future due to the need to comply with new standards (e.g. for drinking water), the need for increased resourcing to respond to the new economic regulations, mitigating and adapting to climate change, and the need to plan for and respond to population and industrial growth, and replacing or upgrading aging infrastructure.

Costs will be borne by councils / ratepayers. Under a joint council-owned model, the organisation will have access to higher debt limits (up to 500% of revenue) from the Local Government Funding Agency, compared to the 280% we can borrow under current settings or if we keep our water services in-house.

In both options, the Commerce Commission can regulate levels of service in the interests of the consumer.

Council's three waters borrowings make up around 68% of current debt, due to the high level of investment in these assets. Our Long-term Plan 2024-34 includes a debt reduction strategy aimed at actively reducing Council debt by a total of $153 million by 2033/34. No further reductions from our debt reduction strategy have been assumed beyond 2033/34, with a corresponding reduction in revenue and therefore the debt/revenue limit at that point.

If we choose to retain our water services in-house (Option 1), Council's debt forecast is as shown in the graph below. Total debt, after allowing for the debt reduction strategy is represented by the green line.

If we choose to join the four council-owned water organisation with Horowhenua, Manawatū and Palmerston North (Option 2), our three waters debt and revenue will transfer to the new organisation. Council's debt forecast for the remaining non-water activities is shown in the graph below. It is assumed that the LTP debt reduction strategy remains in place but is scaled in proportion to reduced revenue levels without three waters. Total debt after allowing for the debt reduction strategy is represented by the green line.

Water assets make up over two thirds of Council debt because of our high level of investment in them over the years. We invest for many good reasons such as to:

• create world-class water supply and treatment facilities
• cope with the growth of our district
• make us more resilient to water shortages and have enough on hand for firefighting, or
• keep up levels of service by carrying out maintenance due to the assets’ age and deterioration.

We fund these improvements through debt so the costs are spread across everyone who will benefit from them, including future generations.

We don’t have the same level of debt for other big-ticket items like roading, for example, largely because roading investment is subsidised by NZTA (generally about 51%).

In addition, fixed assets (i.e. property, plant and equipment) are regularly revalued to give us an understanding of what it would cost if they had to be replaced at today’s value (rather than what we paid when we took on the debt). Our Annual Report 2023/24 shows Council’s fixed assets are valued at about $2.3 billion but $1.3 billion of that is through revaluations, which has no bearing on debt.

Under Option 2 targeted rates for water, wastewater and stormwater will transfer to the new entity. This means they’d no longer appear on your property rates notices and you wouldn’t receive a water rates invoice from council. Non-water rates would remain unchanged. Instead, all water charges would be billed to you by the new water entity. 

An estimate of total revenue by service in 2034 for each option compared with 2023/24 actual is shown in the following table:

 
We went back to Morrison Low to help estimate the 2034 Four Council comparative for Kapiti district. Their model projects the entire entity forward rather than its component districts so does not naturally produce a district breakdown. They have however done further analysis and have provided the $78 million estimate for total Kapiti revenue across the three water services. They consider this estimate is most reliably viewed at the total revenue level so have not provided the breakdown for each service.

At the time we were preparing our LTP we didn’t have clarity about what would happen with our three waters (see pp7-8 of the LTP under ‘Our Key Decisions’). Council consulted with the community on whether or not to rates fund our water service expenses on the information available to us at the time. The Government had been signalling that decisions over water services delivery would be for local communities to decide, but there was still little specificity on what, when or how. The decision was taken to rates fund it by taking the moderate (middle) option for paying down debt over ten years. This is where the average rates increase of 7% per year from 2025/26 to 2033/34 came from (as opposed to 6% or 8% per year).

As discussed in the LWDW webinar (and posted in the FAQs), the new water arrangements are not expected to come into effect until 2027/28 to meet the Government’s deadlines. The LTP (including our financial strategy, which affects rates) is reviewed and consulted every three years with our community. The next LTP is in 2027. The Annual Plan is another mechanism for reviewing rating levels.

All water services providers will be required to comply with the requirements of economic regulation from the Commerce Commission.  The Commerce Commission has issued a discussion paper as the first step in engaging with the water sector to get views on how it could develop a new performance reporting regime (known as ‘information disclosure’ or ‘ID’).  This consultation closed on 26 March 2025.  The final details of the information disclosure requirements are yet to be set by the Commerce Commission; however, the Council expects to be able to meet all requirements based on the discussion document and will absolutely fully comply.

More about the discussion document here: Commerce Commission - Economic Regulation of Water Services - Information Disclosure

We’ve subsequently done further analysis that provides an estimate of total revenue by service in 2034 for each option compared with 2023/24 actual as shown in the following table: 

We went back to Morrison Low to help estimate the 2034 Four Council comparative for Kapiti district. Their model projects the entire entity forward rather than its component districts so does not naturally produce a district breakdown. They have however done further analysis and have provided the $78 million estimate for total Kapiti revenue across the three water services. They consider this estimate is most reliably viewed at the total revenue level so have not provided the breakdown for each service.

 The future requirement for, or extent of the debt reduction strategy would be a matter for Council to consider as part of future LTP deliberations. Under option 2 the new CCO would decide on its approach to servicing debt.

The debt reduction strategy rates for a surplus to repay debt. If the debt reduction strategy was discontinued, it is estimated that the 2034 rates requirement would reduce by around $39 million. Under option 1 the Council would make any decisions associated with debt repayment and under option 2 the new CCO would make those decisions.

Please refer to the table in the earlier response. This provides total revenue by service as opposed to average cost per customer, however this should allow an understanding of the relative values.

We set each of the three water services revenues (water, wastewater and stormwater) with the objective of funding the long term cost of operating the services (including interest and depreciation expenses).  This is something that is currently audited as part of the Long-term Plan and supported by asset management planning and the Council Infrastructure Strategy (30 years).

Council will ensure these are clearly visible through our rating and or billing process, with those costs and associated revenues highlighted and ringfenced for all costs associated with the 3 waters (under option 1.)  Proposed future regulatory requirements for water services will require a greater level of operational and financial disclosure, including publishing a Water Services Delivery Plan and a Water Services Strategy. The Commerce Commission and Taumata Arowai will also have greater independent regulatory oversight as part of the proposed changes.

The legislation proposed under the Local Government (Water Services) Bill, the third bill, sets the details for reporting on each water activity separately. The accounts and underpinning ringfencing requirement will require auditing and disclosure to the Commerce Commission. It is clear that transparency associated with the 3 waters costs and revenues is an important issue and Council ensure that this transparency is provided.

The consultation documents are based on the Preliminary Arrangements Act (2024) and not the soon to be enacted Local Government (Water Services) Bill. (This is required by the New Schedule 7 Commerce act 1986 )

Yes. Including (WS) charges, interest on WS debt, WS policy, WS planning, WS governance, operational WS staffing, and anything related to WS.

Water service revenues are set to fund the cost of those services and will be fully recovered.