Water is Life: But Can You Afford It?

If ever there was a core responsibility for council, number 1 must be water. We can’t live without it. This means that ‘they who control our 3 water resources are very, very, powerful indeed’. Therefore, this is an area that must demand the greatest level of transparency and ratepayer scrutiny.

Yet water is an area where major change is being thrust upon us. Council’s failure to properly invest in Hamilton’s water systems has resulted in central government forcing it to move water services into a separate entity. Hopefully that’s good news for the quality and capacity of our water services but I worry about what that might cost.

While the name ‘Water done Well’ suggests improvements we only need to look to the Hawke’s Bay, where household water rates are set to potentially soar to around $7,400 per year in ten years. Yes, that is Just Water. So how will Hamilton City Council manage ‘Water done Well’? Looking at the early indications does not instil a great deal of confidence. The fact that the establishment costs of our local controlled water organisation have already blown out by 20% does not fill me with hope².

On 24th June 2025, a Hamilton City Council website notification titled "Growth driving water investment" outlined the newly announced Hamilton City Council (HCC) and Waikato District Council (WDC) combined waters entity, formed to manage 90,000 connections and invest in water and wastewater services across Hamilton and Waikato.  It tells us of the planned investment totalling $3.6B over 10 years, of which $2.4B will be driven by growth. Growth is forecast as a 22% increase in households or businesses needing water services.

I've done a few sums around that, based on information from both HCC and WDC 2024 Annual Reports, and it makes for very scary reading. My own forecast (with a few assumptions that I have explained below) sees water rates increase by 143% per connection in the first 5 years alone, up from $1,413 to $3,429.

Currently with around 90,000 water connections across HCC and WDC territories, the total funding from rates for Water Supply and Wastewater was $110M in the 2024 financial year. (FY24) 

HCC budgeted 16.5% rates increases and WDC 11.9% rates increases in the 24/25 financial year (FY25). Assuming those increases were consistently applied to Water Supply and Wastewater, the total FY25 funding should be $127.2M, or an average of $1,413 per connection.

Forecast 10-year growth of 22% equates to just 19,800 new connections, let's say 2,000 per year.

Sounds like a lot but can it support the current level of operating expenses and additional investment of $360M per year? 360,000,000 divided by 2,000= $180,000 – a very ugly number indeed.

One of the (so called) ‘restrictions’ placed on the new water services entity is a debt to revenue ratio of 500%. They can owe up to 5 times their annual revenue, so with a starting revenue point of $127.2M they can only have debt of $636M without increasing charges.

We already know that around $300M of HCC debt is being shifted to the Council Controlled Water Organisation (CCO) along with around $190M of WDC debt, so it would appear that the starting debt will be $490M before any of the new $360M a year of new investment is made.   

Funding from Development Contributions (DC) and subsidies allocated to Water Supply and Wastewater, based on 2024 annual reports, shows HCC received $23.3M and WDC $4.4M, totalling $27.7M. It is uncertain exactly what DCs will be for new connections under the CCO, but let's assume a generous (somewhat excessive) $50,000 x 2,000 new connections or $100M a year. Yet as we calculated earlier this is a small fraction of the amount needed to cover costs.

To see what that might look like I have put together a spreadsheet showing one possible scenario, and it is not a good prospect for ratepayers. Clearly their current plans are not going to be affordable.

¹ Alexa Cook, 20^th June 2025, RNZ, Hawke's Bay residents outraged over council's proposed water rate hike |RNZ News

² Stephen Ward, 28^th May 2025, Waikato Times, Hamilton-Waikato waters establishment costs up more than 20% | Waikato Times

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