Simon Watts has put a rough number on the infrastructure hole and it lands like a rates notice nobody wanted to open. Councils have pencilled in $38.6 billion in three waters capital spending over the next decade, up 57% from the $24.6 billion they forecast just one planning cycle ago. The nationwide 30-year liability sits somewhere between $125 billion and $185 billion. And the minister has been unambiguous: central government will not provide financial assistance.
Somebody pays. The only question is how.
The debt spiral is already accelerating
The Auditor-General’s 2025 analysis of 58 councils’ long-term plans reveals the structural stress beneath the headline figures. Forecast interest expenses hit $21.5 billion over 2024-34, 108% higher than what councils projected in their previous plans. That interest bill alone now represents 17% of forecast rates revenue. Total operating expenditure is set to grow from $16.2 billion in 2024/25 to $23.2 billion by 2033/34, 38% above previous projections.
This didn’t arrive overnight. Council debt grew 226% between 2009 and 2022 while revenue grew just 42%. The Auditor-General flagged years ago that forecast renewals were already falling below depreciation, meaning councils were planning to fall further behind on maintenance even as they promised to catch up. Fewer than 60% of water supply performance measures were achieved nationally in 2022/23.
The infrastructure didn’t rot suddenly. Councils chose not to maintain it, and ratepayers are now inheriting the compound interest on decades of deferred spending.
Wellington shows where this ends
Wellington’s new water entity Tiaki Wai, formed by five councils and taking over from July 2026, is the sharpest preview of what’s coming. It inherits $9 billion in water assets and $1.7 billion in existing debt, with a $6.8 billion capital programme over the decade.
The price tag for households: approximately $2,400 per year in year one, potentially reaching $6,800 by 2036. Initial increases are forecast at 14.7%, with potential 28% jumps in 2027-28.
Porirua Mayor Anita Baker was blunt: “At those sort of prices, who’s going to be living here? I can’t pay $6,000 in water, and $6,000 in rates.” Minister Watts was equally pointed, telling Tiaki Wai that “we received a plan from you which outlined a profile of cost increases, and as a result the entity has now published a price which is not in the plan, which is much higher.”
Auckland’s Watercare, meanwhile, has outlined a $13.8 billion 10-year capital programme with water bills rising almost a fifth. It already operates as a standalone consolidated entity, which is essentially the model the rest of the country was told it didn’t need.
Voluntary consolidation is failing
The government’s target was roughly 15 water providers. The country is on track for 37. Twenty-seven councils are planning to go it alone despite evidence that providers serving 200,000-plus people deliver the best efficiency outcomes.
The maths for small councils is brutal. Kaipara has 12,000 households sharing $80 million in operating expenditure. Queenstown expects to spend $1.47 billion on water over a decade. These self-described ‘orphan’ councils can’t find merger partners. Hutt City Mayor Campbell Barry suspects that’s the point: “Some councils are being set up to fail, and when they fail, the Government will then step in and take action, to force them to join other entities.”
If Barry is right, the government is delivering Three Waters through attrition rather than legislation, with ratepayers absorbing years of inefficiency in the interim.
Rates are the pressure valve
Average rates rises nationally hit 15.3% in 2024, the highest in more than 35 years. LGNZ president Sam Broughton called that a “mature approach” and noted that historically, 6% was considered high, but is now the floor.
For businesses that own or lease commercial property, rates are the fastest-rising fixed cost on the P&L. Water infrastructure is the single biggest driver. The Productivity Commission identified the structural pressures clearly: growing areas need capacity investment, declining areas can’t spread costs, environmental standards are tightening, and infrastructure is reaching end of life simultaneously.
None of those pressures are easing. The only open question is whether the pain arrives via rates, via separately billed water charges, or via both at once. The government killed Three Waters promising something better. What it delivered was the same bill, split into smaller envelopes, with less scale and higher overhead. Ratepayers can do the arithmetic.
Sources
- Newsroom: Councils caught between the water and a hard place (2025-06-05)
- Auditor-General: Trends in councils’ financial and infrastructure strategies (2025)
- Newswire: Wellington water bills set to triple as Commerce Commission scrutinises new entity pricing (2026-04)
- 1News: Wellington’s water entity scrutinised over proposed bills (2026-04-11)
- RNZ: Wellington water woes – a price which is not in the plan (2026)
- Newsroom: When it comes to rates bills, the only way is up (2024-04-10)
- NBR: Watercare to splash out $13.8b, water rates to spiral
- Auditor-General: How councils manage their assets (2022)
- Auditor-General: Councils’ performance in 2021/22 and 2022/23 (2024)
- RNZ: Council rates hikes ‘mature approach’ to help pay for billions needed for infrastructure
- NZ Productivity Commission: Local government funding and financing (2024-05)