Waitaki District Council’s decision to officially rejoin Southern Waters is being dressed up as pragmatic collaboration. It was closer to a forced surrender. The Department of Internal Affairs rejected Waitaki’s standalone water services plan, found significant gaps, and warned that a specialist would likely be sent in to take over decision-making if the council didn’t rejoin the partnership. Faced with losing their seat at the table entirely, councillors folded.
The episode matters beyond North Otago. It is the clearest signal yet that Local Water Done Well, the government’s supposedly flexible alternative to Labour’s Three Waters, has hard limits on just how much flexibility councils will actually get.
The threat that changed the maths
Waitaki’s original exit from Southern Waters was driven by community sentiment. Ratepayers didn’t want to hand control to a multi-council entity. That preference ran headfirst into financial reality when the DIA assessed the council’s solo plan and found it wanting.
Local Government Minister Simon Watts had already sent cautionary notes to six smaller councils proposing to run their own water services. The message was clear: prove your plan is financially sustainable by September 2025, or the government will step in.
Councillor Frans Schlack was the most direct about why the council reversed course: “An in-house model was ultimately unsustainable. It would fail in the foreseeable future in terms of water services compliance and charges to Waitaki’s water customers.”
Southern Waters will now serve Central Otago, Clutha, Gore, and Waitaki, delivering water services to approximately 84,100 people and managing $684 million in assets including 67 water and wastewater treatment plants. The entity goes live in July 2027.
What solo cost the partnership
Waitaki’s absence was not cost-free for its neighbours. Morrison Low Advisory analysis found ratepayers across the three remaining Southern Waters councils would collectively save approximately $392 million by 2054, some $220 million less than estimated savings with Waitaki included. Scale matters in infrastructure, and removing one partner degraded the economics for everyone.
For Clutha, joining the entity would improve the council’s debt-to-revenue ratio, unlocking approximately $8 million in additional borrowing capacity. Former Clutha Mayor Bryan Cadogan, who described the whole process as “the worst process that he had ever seen a government push through”, still urged his council to join because the alternative was worse.
A $47.9 billion bill behind the politics
The DIA’s pressure tactics make more sense when you see the national numbers. The department forecasts $47.9 billion in water services infrastructure spending over 10 years to June 2034 across drinking water, wastewater, and stormwater. The government has doubled its emergency backstop liquidity facility from $1.5 billion to $3 billion, extended to 2037. That is not the action of a government confident the transition will go smoothly.
S&P Global has warned that water CCOs could leverage up quickly, with potential impact on parent council credit ratings. Meanwhile, the Auditor-General found fewer than 60% of water supply performance measures were achieved in 2022/23, with total council operating expenditure up 23% while revenue rose only 18%. The sector is already underperforming before the big capital spend begins.
Three Waters by another name
The government wanted about 15 regional water providers serving 200,000-plus people each. Instead, 30 councils are still planning to go it alone and more than 40 different water entities are expected to emerge nationally. That is far more fragmented than the government’s stated goal and arguably worse than what Three Waters would have delivered on efficiency grounds.
Retiring Waitaki Mayor Gary Kircher offered the most honest framing: “Some councils don’t want to dance. Some can’t find a dance partner.” He argued for regional-scale water funding as a matter of equity, given the structural mismatch between large geographic areas and small ratepayer bases in rural districts.
Councillor Sven Thelning gave the warning ratepayers and business owners need to hear: “It wouldn’t have mattered even if we’d gone in-house, or whatever option we picked. It’s going to hurt. There’s a lot of work needing done out there, and it’s going to cost.”
He is right. The question was never whether rates would rise. It was whether shared entities can manage the cost trajectory with more discipline than councils improvising alone against a nearly $48 billion national bill. Waitaki tried the solo route and was told its plan didn’t stack up. The DIA’s September sustainability assessments will force the same reckoning on councils that are still holding out. The only question is how many more U-turns it takes before the pattern becomes undeniable.
Sources
- ODT: U-turn complete as Waitaki officially rejoins Southern Waters (2025-06-25)
- RNZ: Waitaki council welcomed back into water partnership it abandoned (2025-06-25)
- RNZ: Waitaki council rejoins Southern Waters partnership (2025-05-14)
- Newsroom: Go-it-alone councils brace for ministerial intervention in water services (2025-08-19)
- RNZ: Southern councils reluctantly agree to jointly deliver water services (2025-01-29)
- NZ Herald: Councils expected to foot a near $48 billion bill for Local Water Done Well (2025-06-22)
- Office of the Auditor-General: Councils’ performance in 2021/22 and 2022/23 (2024)