Part 7: Implementing strategies for meeting the forecast demand

Local authorities: Planning to meet the forecast demand for drinking water.

7.1
In this Part, we discuss whether the eight local authorities were:

preparing the relevant planning documents;
making the necessary financial commitments;
managing risk;
integrating their planning processes;
working with neighbouring local authorities; and
taking a sustainable development approach to meeting the forecast demand for drinking water.

7.2
We expected to see evidence that the eight local authorities were implementing the strategies they had chosen for meeting the forecast demand for drinking water.

Our overall findings

7.3
Of the eight local authorities, most had prepared, or were preparing, the planning documents that we expected to see.

7.4
All of the eight local authorities have budgeted capital expenditure in their 2009-19 LTCCPs that aligns with the main drinking water supply challenges they previously identified. Comparatively, South Taranaki District Council and Central Otago District Council are planning to spend more on drinking water supply, but this is consistent with the scale of upgraded infrastructure they need to address their particular water supply challenges.

7.5
All of the eight local authorities integrated drinking water supply planning into their 2009-19 LTCCPs. In two cases, regional planning initiatives also provided an important integrating mechanism.

7.6
All of the eight local authorities had taken a risk-based approach to managing their drinking water. They had prepared risk management plans for drinking water supply as part of their asset management plans. They were also preparing public health risk management plans.

7.7
Some of the local authorities were working with neighbouring local authorities to supply drinking water. This was largely driven by geographic circumstance – for example, adjacent urban areas for Nelson City Council and Tasman District Council, and for Tauranga City Council and Western Bay of Plenty District Council.

7.8
Although most of the eight local authorities were clearly taking sustainable development into account, the actions chosen tended to be partial rather than comprehensive. None of the eight had a fully integrated approach to dealing with sustainable development and the supply of drinking water.

Preparing relevant planning documents

Most of the eight local authorities had prepared, or were preparing, the planning documents we expected to see.

7.9
We expected the strategies, and commitments to implementing those strategies, to be set out in the following documents:

a water supply asset management plan, which conforms to an appropriate level of asset management as set out in the 2006 International Infrastructure Management Manual;
an assessment of water and sanitary services in compliance with section 126 of the Local Government Act 2002;
the LTCCP for 2009-19, in compliance with the requirements of clauses 2 and 3 of Schedule 10 of the Local Government Act 2002 with respect to water supply as an activity (possibly in the form of a water activity plan);
a public health risk management plan or plans; and
other non-statutory water management strategies, varying according to local authority.

7.10
In this section, we comment on water supply asset management plans and the assessments of water and sanitary services. We discussed public health risk management plans in Part 5 and other non-statutory water management strategies in Part 6. We discuss LTCCPs in paragraphs 7.18-7.30. Appendix 4 provides more information about the eight local authorities' water supply strategies.

Water supply asset management plans

7.11
Five of the eight local authorities had updated their water supply asset management plans as part of preparing their 2009-19 LTCCP.

7.12
Two local authorities (Opotiki District Council and Tasman District Council) had prepared an activity management plan as part of preparing their 2009-19 LTCCP, which was, in effect, a water supply asset management plan. An activity management plan would commonly be a brief summary of an asset management plan. However, these plans had similar levels of detail and content to the other water supply asset management plans.

7.13
South Taranaki District Council advised us that it was preparing an electronic asset management system. This system was not available at the time of our audit fieldwork in September/October 2008.

Assessments of water and sanitary services

7.14
All eight local authorities had completed assessments of water and sanitary services related to the supply of drinking water (see Appendix 4 for more information). Six had done this in 2005 and two in 2006. These assessments covered the matters required by the Local Government Act 2002 (see Appendix 3 for more information about these requirements).

7.15
Six of the local authorities (Opotiki District Council, Central Otago District Council, Kapiti Coast District Council, South Taranaki District Council, Nelson City Council, and Tasman District Council) had published updated summaries as part of their 2009-19 LTCCPs. The other two local authorities had updated the matters covered by section 126 of the Local Government Act 2002 in the asset management plans and drinking water supply sections of their LTCCPs.

7.16
The eight local authorities had taken different approaches to the requirements to assess the risks associated with the drinking water supplies that they did not provide. Some considered that they did not have the resources to assess the risks associated with private supplies. For example, Central Otago District Council had determined that it did not have the resources to visit and assess the risk of all private water supplies. Opotiki District Council had made a similar decision. Of its residents, 47% were on private water supplies and it planned to maintain an advisory and educational role only in relation to these supplies.

7.17
One of the eight local authorities had assessed the risks and was committed to building council-owned water supplies for some of its communities. Tasman District Council had identified a number of communities that were not connected to council-owned water supplies. These communities were made a priority for investment in improved water supplies. Motueka was the highest priority because most residents currently get water from shallow wells that do not have contamination barriers, thus creating a public health risk. Some money had been budgeted in the 2009-19 LTCCP for this purpose.

Making the necessary financial commitments

All of the eight local authorities had budgeted capital expenditure in their 2009-19 LTCCPs that aligned with their drinking water supply challenges. South Taranaki District Council and Central Otago District Council were planning to spend relatively more, consistent with the scale of upgraded infrastructure needed to address their challenges.

7.18
All of the eight local authorities had prepared and adopted LTCCPs for 2009-19, as required by the Local Government Act 2002. The audit reports on seven of the eight local authorities concluded that those plans provided a reasonable basis for long-term integrated decision-making. The audit report for the eighth (Central Otago District Council) concluded that the plan did not provide a reasonable basis for long-term, integrated decision-making. This was because the forecast information and proposed performance measures and targets did not provide an appropriate framework for assessing the actual levels of service, and because future asset valuations had not been included in financial forecasts.

7.19
The level of expenditure committed by any local authority depended greatly on the specific context it operated within. Consequently, we considered expenditure on supplying drinking water in the context of the water supply challenges faced by each local authority.

Planned capital expenditure on drinking water for 2009-19

7.20
The total amount budgeted by each local authority for 2009-19 on capital expenditure for drinking water is set out in Figure 18. We focused on proposed capital expenditure because it is most closely related to meeting future demand. More information on proposed capital expenditure for each of the eight local authorities is set out in Appendix 5, including which projects the expenditure was allocated to. Appendix 5 also shows that proposed capital expenditure is aligned with the drinking water supply challenges identified for each local authority.

Figure 18
Total capital expenditure budgeted for supplying drinking water in the 2009-19 long-term council community plans for the next 10 years

Local authority	Total amount budgeted $m*	Average cost per connection to the water supply for the next 10 years $
South Taranaki District Council	81.1	9,294
Tasman District Council	77.0	6,758
Central Otago District Council	51.3	6,013
Tauranga City Council	227.7	4,578
Kapiti Coast District Council	60.2	3,429
Nelson City Council	46.7	2,424
Christchurch City Council	157.6	1,274
Opotiki District Council	1.1	458
TOTAL	702.6	2,911**

* Figures are rounded to one decimal place.
** Combined average cost per connection.

7.21
The average cost per connection ranged from $458 to $9,294. The pattern of planned capital expenditure was consistent with each of the eight local authorities' need to build or replace water supply infrastructure. The higher figures reflect planned investment in significant amounts of replacement and new infrastructure.

7.22
Figure 18 shows that South Taranaki District Council, Tasman District Council, and Central Otago District Council planned to spend more per connection to the water supply during the period 2009-19 than the other local authorities. This was consistent with all three local authorities having identified that their drinking water supplies required infrastructure upgrades. For example, Central Otago District Council required infrastructure upgrades for nine separate water supplies (see Figure 19 for more information). Tasman District Council was planning to build drinking water supplies for two communities on private supplies.

Figure 19
Case study on Central Otago District Council's challenges to its drinking water supplies, and planned capital expenditure

Central Otago District Council faces several interrelated challenges with its water supplies: Reducing demand, because consumption is currently very high. High consumption is problematic for two reasons. The Council expects the Otago Regional Council to reduce the amount of water the Council can take when some consents are renewed. The size of new infrastructure required is affected by consumption (that is, the more water required, the larger the infrastructural requirements). Complying with the drinking water standards. New infrastructure is required to do this. Affordability and funding of infrastructure upgrades required to comply with the drinking water standards and upgrade its infrastructure. Other challenges include: Energy-intensive water supplies – distribution requires pumping, and therefore electricity, which increases the operating costs. The water supplies were originally designed to pump water in an environment with low operating costs. Pressure management – the distribution system for pumping water from source to reservoir produces very high pressure in some properties, which leads to breaks and leaks. Improving operational staff training levels – through its new asset management plan, the Council has identified a lack of staff training as a key risk for water supply services. In its 2009-19 LTCCP, the Council has budgeted $51.3 million for the period 2009-19 on a large number of projects on its nine separate water supply systems, including new water treatment plants, telemetry, reservoirs, valves and hydrants, tobies, backflow prevention, water meters, investigations, asset management plans, bore redevelopment, and reticulation. For example, it has budgeted expenditure on water meters of $3 million.

7.23
Opotiki District Council was planning to spend a minimal amount on capital expenditure. The Council invested in a new water treatment plant and reticulation for its main drinking water supply to Opotiki within the last 15 years.

Comparing budgeted capital expenditure on drinking water supply between the 2006-16 and the 2009-19 LTCCPs

7.24
For most of the eight local authorities, planned capital expenditure per water supply connection had increased between the 2006-16 LTCCPs and the 2009-19 LTCCPs (see Figure 20).

7.25
Christchurch City Council, Opotiki District Council, and Nelson City Council showed moderate increases. However, planned capital expenditure on drinking water supply by Opotiki District Council was very low in both LTCCPs.

7.26
Central Otago District Council had increased its budgeted capital expenditure on supplying drinking water significantly – by 213%. This was consistent with the preparation of a district water supply strategy in 2007 that identified the need for upgraded infrastructure. Tauranga City Council's capital expenditure had also increased because it planned to build a new water supply within the next 10 years.

7.27
South Taranaki District Council had decreased its capital expenditure for supplying drinking water by $17 million as a result of more detailed planning. Kapiti Coast District Council's budgeted capital expenditure was also decreasing.

Figure 20
The eight local authorities' budgeted capital expenditure on water supply, with 2006-16 LTCCPs compared to 2009-19 LTCCPs (total dollars per water supply connection)

7.28
A comparison of budgeted capital expenditure and actual capital expenditure for 2007/08 (see Figure 21) shows that, for six of the eight local authorities, budgets were higher than expenditure.

7.29
South Taranaki District Council had spent significantly less than its budget. Its annual reports for 2006/07 and 2007/08 noted delays in beginning some major infrastructure works. In addition, some projects were related to accessing new sources of water. Exploratory drilling failed to find useful new groundwater supplies, so these projects did not continue. Most surface water resources were close to full allocation, so the lack of viable new sources of water meant more pressure to reduce consumption.

Figure 21
The eight local authorities' budgeted capital expenditure on water supply compared to actual capital expenditure, 2007/08

Note: Budgeted data was taken from the 2006-16 LTCCPs and actual data from the relevant annual reports.

Planned capital expenditure on supplying drinking water, as a proportion of total capital expenditure

7.30
Figure 22 shows the capital expenditure planned for supplying drinking water, as a percentage of total capital expenditure for the periods 2006-16 and 2009-19. The graph also shows the greater proportion of expenditure planned by Central Otago District Council (about 30%) and South Taranaki District Council (about 40%).

Figure 22
The eight local authorities' capital expenditure planned for supplying drinking water, as a percentage of total capital expenditure for the periods 2006-16 and 2009-19

Managing risk

All eight local authorities had prepared risk management plans as part of their water supply asset management plans. They were also preparing public health risk management plans.

7.31
We expected the eight local authorities to have taken a risk-based approach in managing their drinking water. This would include identifying critical water supply assets and associated risks, and preparing risk management plans (including public health risk management plans) for their drinking water.

7.32
All eight local authorities had developed risk management plans. Their water supply asset management plans generally included risk management frameworks. In addition, the preparation of public health risk management plans for drinking water supplies (see the discussion in Part 5) was further improving the risk management framework. Nelson City Council used a framework consistent with the Australian/New Zealand Standard 4360:1999. Christchurch City Council had intentions to manage its risk in keeping with the same standard.

Integrating supply planning for drinking water with other planning processes

All of the eight local authorities integrated their supply planning for drinking water into their 2009-19 LTCCPs. In two cases, regional planning also provided an important integrating mechanism between water supply planning and other local authority planning processes.

7.33
All of the eight local authorities had integrated their supply planning for drinking water with preparing their 2009-19 LTCCPs. Most had revised their water supply asset management plans in parallel to preparing the LTCCP, ensuring that proposed operating expenditure and capital expenditure was consistent. With the exception of Opotiki District Council, the water supply asset management plans usually described how that integration was managed.

7.34
In two cases, regional planning processes also provided an important integrating mechanism – Smart Growth in Tauranga City, and the Canterbury Water Management Strategy and Greater Christchurch Urban Development Strategy in Christchurch City. Integrating water supply planning within the wider regional planning framework is a way of ensuring that the new or replacement infrastructure is appropriately sized and provided where the growth is expected to occur.

7.35
The Canterbury Water Management Strategy provides an overarching regional strategy for freshwater in Canterbury. It was initiated by central government (the Ministry of Agriculture and Forestry and the Ministry for the Environment) and Environment Canterbury in response to concerns about whether the Canterbury region may run out of freshwater in the future. As a user of the freshwater, Christchurch City needs to be involved to avoid potential threats, such as loss of access to water sources because others are using it.

7.36
Christchurch City Council developed the Greater Christchurch Urban Development Strategy in collaboration with the Selwyn and Waimakariri District Councils and Environment Canterbury. Christchurch City Council used the Strategy forecast data as the basis of financial planning and capital expenditure programmes, enabling future water supply infrastructure to be matched to where development was expected.

Working with neighbouring local authorities to supply drinking water

Some of the eight local authorities were working with neighbouring local authorities to supply drinking water.

7.37
Tasman District Council and Nelson City Council had particularly close links because they had a range of overlapping interests and responsibilities. Both recognised the scope for efficiencies and economies of scale through co-operation on a number of joint projects. The two councils had formal links for water planning, supply, and management. This included agreements to supply consumers in each other's districts (Tasman District Council provided water to some industrial consumers in Nelson City Council's area, and Tasman District Council had rights to access a certain amount of water from Nelson if need be).

7.38
Tauranga City Council had a 2008 Memorandum of Understanding with Western Bay of Plenty District Council for joint actions to develop a drinking water supply in the Western Bay of Plenty district. This will initially focus on drinking water for Papamoa East and adjacent parts of Western Bay of Plenty – known as the third water supply scheme (Waiari).

7.39
Some of the local authorities had informal arrangements with neighbours that involved sharing expertise and advice on an as-needed basis (for example, Opotiki District Council and Whakatane District Council, and New Plymouth District Council and and South Taranaki District Council).

Taking a sustainable development approach

Although most of the eight local authorities were taking sustainable development into account, the actions chosen tended to be partial rather than comprehensive. None of the eight local authorities had a fully integrated approach to dealing with sustainable development and the supply of drinking water.

7.40
We expected the eight local authorities to be taking a sustainable development approach to supplying drinking water, consistent with section 14(1)(h) of the Local Government Act 2002 and encompassing:

the social, economic, and cultural well-being of people and communities;
the need to maintain and enhance the quality of the environment; and
the reasonably foreseeable needs of future generations.

7.41
The eight local authorities showed a range of ways of dealing with sustainable development for the supply of drinking water supply. These included:

trying to reduce demand for, and consumption of, water, as discussed in paragraphs 6.20-6.28 (all eight were doing this, but most used a limited range of the possible options);
explicitly prioritising economic development ahead of other aspects of sustainable development (three of the local authorities were doing this);
defining sustainable development as being equivalent to environmental sustainability (one local authority did this);
improving water supply efficiency (for example, fixing leaks and reducing water loss); and
investigating opportunities for integrating urban water management to include drinking water supply, storm water, and wastewater management¹² (one local authority was doing this).

7.42
Appendix 6 sets out more detailed information on what each local authority was doing to address sustainable development.

7.43
The one aspect of sustainable development that was not considered by any of the eight local authorities was cultural well-being.

7.44
Climate change was another important sustainable development issue. It is expected to produce great variability in the amount of rainfall. This means that, for any given level of demand, there may be an increased risk in future of not being able to meet it. Greater water storage capacity is likely to be required to manage this risk. The eight local authorities considered climate change in the context of their risk management framework as one of a number of potential risks to supply. We did not see evidence of detailed strategies dealing solely with climate change.

7.45
There are a number of tools or strategies that local authorities could use to enhance the sustainability of their supply of drinking water, including:

integrating urban water management to include drinking water supply, storm water, and wastewater management;
active management of the water supply catchment to reduce risks to the quality and quantity of water. The National Environmental Standard (see Part 5) will provide impetus to this but drinking water suppliers could be more active in this area;
reducing demand through metering and charging for drinking water (for those local authorities not already doing so);
developing sustainability reporting to improve transparency and encourage continuous improvement; and
developing and using a framework for assessing the sustainability of alternative options for drinking water supplies (for example, the Sustainability Framework developed by Water Services Association of Australia).¹³

Recommendation 8
We recommend that local authorities integrate sustainable development strategies into drinking water supply management as part of preparing comprehensive demand management plans.

12: This is sometimes called the "three waters" approach.

13: Water Services Association of Australia is an Australian urban water industry representative body. It has 35 members and 30 associate members that provide water and wastewater services to about 15 million Australians and many of Australia's largest industrial and commercial enterprises.

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