Tuesday, 29 November 2016

Will HBRC Score an Own Goal?

It's time for me to get more coherent in my looks at the Inquiry into Havelock North Drinking Water. If the Inquiry identifies some holes in the complex web of regulation around drinking water that will be useful for the whole country. Even better if they draw some lessons about the overall approach to regulation.

A good place to start is the multiple ways Hawkes Bay Regional Council and Hastings District Council work together to deliver safe drinking water to the public. The picture below is a schematic showing how the different activities in each organisation fit together for the purposes of providing drinking water. It's not the total picture as the Ministry of Health play a very important role too.

For the purposes of the Inquiry HBRC and HDC interact in three ways to deliver drinking water to residents. 

1. Water Supplier

Starting with the main sequence at the bottom note that, in effect, HBRC supply source water to HDC. It's a natural resource but HBRC have total control over who gets to use it. So HBRC are continuously updating their knowledge of the water resource of the region: how much there is and how good it is. Using this knowledge they update their regional plan which tells them, essentially, what consents they can issue for water use.

Little known is an additional legal requirement, the National Environmental Standard for Sources of Human Drinking Water. This forces HBRC to operate its plan in such a way as to ensure clean enough water gets to HDC for drinking purposes. Because HDC wasn't treating the water it extracted in Havelock North, HBRC had to ensure uncontaminated groundwater was available at the bores. This standard also required HBRC to include emergency situations in its consenting decisions.

2. Science Provider

The second relationship is the science that HBRC supplies to HDC to help them in their planning and management of the water supply. District councils don't do their own hydrogeology, they rely on regional councils to provide them with the information they need to understand the risks of operating their supplies. 

The key decisions HDC made about where to source water, how to treat it and how to manage the risks around their system - remembering all of these decisions have big price tags attached to them - were based on the information provided by HBRC.

3. Regulator

Finally, HBRC issues the consent to HDC to allow them to take water for a public water supply. And they monitor compliance with the consent. 

HBRC's regulatory role is restricted to the elements of the water take that impact water quantity generally and that could impact downstream water quality. They have no role at all in regulating the delivery of safe drinking water.

In the original 2008 consent issued to HDC, HBRC attached 21 conditions. 20 of them covered issues to manage the amount of water taken. The final condition required HDC to secure its wellheads. HBRC has to try to manage all activities - not just public drinking water supplies - to ensure that human activity does not pollute or degrade the natural water resource. So this condition is not attached specifically because it is for a source of drinking water.

Is Hawkes Bay Regional Council About to Score an Own Goal? 

Having decided to prosecute HDC for a breach of consent conditions HBRC presumably will argue in court that HDC failed to comply with this condition:

21. All works and structures relating to this consent shall be designed and constructed to conform to the best engineering practices and at all times maintained to a safe and serviceable standard.

What any of those general requirements might mean in practice is defined by the Ministry of Health who are, in fact, the primary regulator in this case. But Ministry of Health are not a party to this prosecution. So HBRC are on their own, not alleging that the condition of the well-heads was the cause of the gastro outbreak only that HDC didn't maintain the well-heads properly.

If HDC decide to defend themselves they will question how enforceable such a vague condition is. They will ask HBRC to clarify what these practices were intended to be, how they were communicated to HDC, and why HBRC ticked off these structures as compliant year after year. HDC can point to the fact that MoH didn't have any security issues with the well-heads when they issued HDC with a water supply grading.

HDC also have a good case that whatever they did or didn't do was reasonable in the context of how HBRC was carrying out its regulatory function. In particular - and this will crop up again in the inquiry - whether HDC could reasonably rely on regulatory approval given year after year by HBRC.

The spotlight could well turn onto how well HBRC carried out its regulatory duties and should spill over - whether in court or in the inquiry - to how well HBRC carried out its statutory obligations to protect the water source for Havleock North drinking water.

I suspect HBRC would have been better off going through the Inquiry in a collaborative manner hoping that not too much attention would head their way. Too late now.


Saturday, 26 November 2016

Mexican Standoff in Hawkes Bay

Last week Hawkes Bay Regional Council laid a prosecution against Hastings District Council for failing to comply with conditions attached to their consent to take water for the Havelock North water supply. It is a petty act given that all this information would have come out anyway in the government's inquiry into the water contamination. The inquiry deliberately excludes any determination of criminal or civil liability. Maybe we could have kept the tone non-adversarial and could concentrate on learning lessons for the benefit the whole country. But now we can pretty much kiss that hope goodbye .

Anyhow, court cases have a way of forcing information into the public domain, sometimes very inconvenient information. For HDC to breach a consent issued by HBRC that consent first has to be lawful itself. I hope that attention will also turn to HBRC's compliance with the Resource Management (National Environmental Standards for Sources of Human Drinking Water) Regulations 2007. 

I wasn't quite right when I previously said that HBRC only had a general obligation to maintain and enhance the quality of ground and surface water. It turns out they have very specific obligations under these regulations to protect the water being used by HDC for its water supply. In its regional plan and consenting HBRC is not allowed to consent any activity that would contaminate the source of the Havelock North water(1). The only reason I have for querying HBRC's performance in this area is that their own press release referred to current investigations into "water pathways in the local environment". We need to be sure that HBRC had already mapped these pathways eight years ago. If they weren't sure about how water flowed in the Tukituki River catchment then they had no way of implementing the regulations.

It would be useful - either through the Inquiry or the court - to find out just how thoroughly HBRC went about implementing these mandatory standards. It really is premature to be finding fault with Hastings District Council until we know they were definitely getting the quality of water they expected from HBRC.

(1) It's way more complicated than this but you get the general idea.

Thursday, 24 November 2016

HBRC Leader Cut Out of Prosecution Decision

It's jaw-dropping stuff but Hawkes Bay Regional Council's Chair was not consulted on his council's prosecution of Hastings District Council.

The NZ Herald are reporting Rex Graham's public dissatisfaction with his own staff over their unilateral decision to prosecute. Unfortunately the Herald have missed some subtle but very important points in their own story. Yes, councillors were informed of developments during the investigation but they were not asked to approve the prosecution itself.

This is a major blunder by CEO, Andrew Newman. To understand why you have to turn the clock back to 1989. The Reorganisation of Local Government at that time introduced the separation of governance and operations. Elected members were supposed to restrict themselves to policy matters and let the staff, under the Chief Executive, get on with implementing policy and operating the council. Tidy though the concept is, in real life there are many grey areas. Prosecution happens to be one of them. Sometimes its OK for staff to just get on with it and sometimes they really need elected member involvement.

The problem for councils is that generally they are not respected, trusted or liked. In that context a prosecution has a good chance of making a council look bad even when they are in the right. It's no surprise, then, that prosecution is often a last resort. And, given the almost inevitable risk to the reputation of the council, why the elected members need to be sure that they are doing the right thing and are prepared to deal with any negative outcomes.

I take from this report that Graham was happy for the staff to conduct investigations in preparation for the government's inquiry into the Havelock North gastro outbreak. And the elected members appear to have been receiving reports on the process by email. What he is miffed about is that when staff decided a prosecution was warranted they did not get the go-ahead from the elected members. Clearly he assumed that would happen and did not see the need to spell out his expectations to Newman. Newman should have known better than to simply exercise his delegation in this matter.

This incident has deeper ramifications. It's a quirk of local government that no one person is genuinely in charge: the CEO cannot make policy and policy is made by committees (with the Mayor or Chair only having one vote same as everyone else). Councils work best when the Mayor/Chair and CEO work as a team exercising a kind of informal leadership over the whole organisation. Obviously this is not happening in HBRC. And when staff start ignoring the elected members and that relationship breaks down it can only end in tears. Usually the CEO's.

Monday, 21 November 2016

Hawkes Bay Regional Council Cuts Inquiry Off at Knees?

Update: Inquiry delayed (23/11/16)

Stuff are reporting that the inquiry has now been postponed until late January. It is really hard to understand why HBRC have taken this action. They may try to introduce evidence about how HDC's breach of its consent to take water lead to the gastro outbreak but the court will not be particularly interested. So the country is going to have to wait two extra months before we hear what went on. When we do finally assemble the tone of the inquiry will be adversarial diminishing the quality of the evidence provided.

The DomPost version of this article is not quite right when it says HBRC have responsibility for water quality in the region. That is only true for surface and groundwater. Once it has been extracted for treatment and reticulation it is the Ministry of Health who are the regulators. So this is a minor sideshow that simply puts off the full inquiry. And I, for one, was looking forward to hearing how well HBRC discharged its statutory duty to maintain and improve the quality of all water in the Tukituki catchment.

Last week Hawkes Bay Regional Council announced it had laid charges over consent breaches related to the contamination of drinking water in Havelock North. As I noted here it is likely the press coverage exaggerated the importance of this action. But now, having read HBRC's own press release, I am way more concerned that HBRC are undermining the inquiry due to get underway next week.

Cities are great inventions - for lots of reasons. But they only work if the public health problems that come from so many people living so close to each other are prevented. In practice this means vital things that we all take for granted today: supply of clean drinking water and removal of waste (sewer, stormwater, and rubbish).

We do a good job of those things in New Zealand with our standards - especially in waste disposal - rising considerably over the last 25 years. We really can take it for granted that the fundamentals of public health are well managed here. Or, at least, we could until the contamination of the Havelock North water supply.

This is why the government inquiry into the incident is so important. We really need to know whether there was a simple operational error or whether we have a systemic problem that could be a time-bomb for the whole country. When the inquiry is complete we may know whether somebody did something they shouldn't have or didn't do something they were supposed to do. This would satisfy the public appetite for "accountability" - i.e. someone to blame and demonise. That may happen but way more likely we will find weaknesses in our regulatory systems that allowed this event to occur. We may not have the pleasure of putting the guilty party in the stocks but it is way more important that the country learns lessons and finds ways to prevent an outbreak like this happening again.

Who are the parties to this investigation?

On the operational side Hastings District Council is the prime entity although owners of private bores upstream from the HDC intakes will also be investigated.

Of more interest to me will be the web of regulatory interests. Here it gets more complicated:

  • Ministry of Health has primary responsibility for all public health matters. It sets the standards for public water supply (Drinking Water Standards 2000) and monitors national performance
  • MoH delegates some of its responsibility to the public health units in each DHB (to monitor local public supplies) and to territorial authorities (not regional councils) to monitor private supplies
  • Regional councils have some responsibilities around water quality in general and consent the water take by territorial authorities and private land owners for water supplies but have no role in regulating the quality of water supplies

HBRC's press release says:
HBRC has undertaken an extensive investigation into the source of the contamination and the condition of water supply bores in the area in accordance with its statutory responsibilities under the Resource Management Act.
 A regional council's statutory responsibility, in this context, is (RMA s30(1)(c)):

the control of the use of land for the purpose of—

the maintenance and enhancement of the quality of water in water bodies and coastal water:
So their investigation is vital but they neglect to mention that their investigation stops at the wellhead. We need as much solid information we can get from HBRC about how runoff from ruminants contaminated a supposedly  sealed aquifer and, thence, entered a public water supply. But that is where it ends.

They go on to say:
HBRC is very keen to see the cause of the contamination identified and to ensure it does not happen again
Let's again be very clear it is not HRBC's responsibility to ensure it doesn't happen again unless it proves that their (mis-)management of the Tukituki River catchment was a significant contributor to the contamination.

I was left with the clear impression from the press release that HRBC has appointed itself as the investigator above the fray. Nothing could be further from the truth. The degree to which they have ever monitored all water consent conditions will be inquired into; the degree to which they have investigated water quality in the river catchment; and, in particular, the degree to which they have controlled land use in that catchment to maintain and enhance water quality will also be in the spotlight. In making decisions on whether to treat Havelock North water HDC are completely reliant on the information provided by HBRC; did they get it?

For this inquiry to be a success and deliver benefits to the whole country each one of these parties has to present in good faith bringing as many facts to the table as possible. And they should leave it to the Inquiry to form its own judgments. What we don't need - before the inquiry even starts - is one party slurring another party by innuendo and claiming to the public it has a role and a moral high ground that it doesn't have.

If a party to the inquiry appears to be gathering evidence for the purpose of putting another party in bad light what value can be placed on any of their evidence? And, if the Inquiry has doubts over the integrity of the evidence given to it, what use will their final recommendations be?

Friday, 18 November 2016

Glorious S*&t Fight in Hawkes Bay

Stuff are reporting that Hawkes Bay Regional Council have laid charges against Hastings District Council "after Havelock North gastro investigation". So now we know who is to blame for one death and thousands of cases of gastroenteritis? Not even slightly. Hysterical headline writing but totally misleading.

To date no cause for the water contamination has been found. And this report doesn't even hint that such a cause has been found.

Regional councils have no role in regulating the supply of potable water. HBRC have a general responsibility for protecting water catchments but it is the Ministry of Health that is the regulator in this case. So HBRC cannot charge HDC for any water supply contamination offences.

So what the hell are they up to?

Generally a consent to take water is about quantity of take. It is regional councils' responsibility to manage water sources with an eye to sustainability. (As an aside it is Canterbury Regional Council's sluggishness in exercising this responsibility that lead to commissioners being appointed there.) But they have another responsibility for managing water quality (in broad terms) meaning that a consent can also seek to ensure that the taking of water doesn't also lead to polluting of water sources. So HDC have been charged with breaches of their consent to take water (for whatever purpose - it's not really the regional council's business). And those breaches are related to measures to protect ground water from surface water pollution via the well. These could be actual failures or they could be a failure to maintain adequate records - we don't know yet. We don't know which bores these charges relate to; they could be completely unrelated. And we don't know whether the "maintenance failure" could have lead to the contamination or not.

This is an extraordinary step by HBRC for two reasons. The first is that the hearing of these charges will take place on the same day the government inquiry into the water contamination starts. The second and more prosaic reason is that breaches of water consents rarely lead to prosecution; most regional councils nudge offenders towards compliance with prosecution being a last resort for repeat offenders.

My take is that HBRC are very sensitive. The water source for the Havelock North water scheme is in the Tukituki River catchment. This is the same river that HBRC is planning to dam and sell irrigation water from. They have been severely criticised on a number of fronts for this plan not least because they are both the commercial promoter and regulator of the same activity. Other have criticised HBRC for allowing intensification of agriculture (especially dairying) in the Tukituki when it is a source of drinking water.

All in all, Hawkes Bay Regional Council are highly incentivised to direct attention away from themselves because they are hopelessly conflicted over that whole catchment. 

If Canterbury Regional Council's minor sin of sloth was worthy of sending in the commissioners I do not understand why there is not an army of government officials heading north today to take over the Hawkes Bay Regional Council.

Sunday, 13 November 2016

The NPS-UDC: could it lead to higher house prices?

The heart of the National Policy Statement on Urban Development Capacity is the requirement for every council to maintain a buffer of three-four years of developable land at any one time. While my gut feeling is that this won't do much for improving the supply of land for development and, therefore, getting house prices to where they should be in Auckland, I still want to dig a little deeper and see what the outcome could be. My preferred place to start when thinking about how this will play out in real life is to think about what it will take for a council to actually do this; the mechanics, if you like.

Councils are going to have bring together two groups, engineers and planners, who not only operate under completely different statutes but who, culturally, are planets apart. When they develop or revise a District Plan, planners are basically creating a design for a district to evolve into. These designs contain next to no idea of the sequencing that may occur for that design to become reality. So you can read a District Plan but it will not tell you which specific places will grow first, second or third. As you would expect, the engineers are almost the exact opposite. They have inherited infrastructure that has already been around in one form or another for more than a hundred years. Their job is to maintain and grow that infrastructure as required. They do not have a target design or end point in mind. The engineers' asset management plans set out their intentions for the next ten years or so. They include the specific projects year by year that will underpin growth and development.

Although it sounds as though the engineers are deciding on the sequencing its not quite true at the moment. The Local Government Act makes councils write Ten Year Plans in which the first three years are supposed to be reasonably firm. Councils can, quite reasonably, change their minds according to what happens in the real world. In years two and three of a Ten Year Plan councils can present a revised plan as long as they clearly explain what they are doing and why. 

The point is that the current system allows councils some flexibility to adjust their development plans in line with external events and market demand. Although you might expect to see councils adopt a specific growth strategy detailing exactly where and how their district will grow it turns out they don't. The planners create a hierarchy of plans with non-statutory structure and outline development plans providing more detailed guidance as to how they see a specific area being developed. But these have no time-frames attached to them. The engineers - as I noted above - do put a stake in the ground as to sequencing of growth-related projects but those projects can be rescheduled year by year so they should always be read as indicative.

The NPS pretty much removes all that flexibility. The council process for taking a bright idea for a new asset through to physical completion is generally about three years. Having to deliver a three year buffer of developable land means that councils will have to be continuously planning six years ahead. Although it only adds three years (closer to four in Auckland) to the development cycle it's enough to tip councils over to a very rigid approach.

Councils really don't want to carry the costs of all that idle infrastructure any longer than they have to so I expect that some councils will opt to make the developable zones fewer in number and possibly smaller in size. As these zones fill up they will then start to open up new zones and begin servicing them. If it turns out that councils decrease the quota of places where building dwellings is permitted at any one time that may have the result of sustaining prices at current levels or even squeezing them higher.

Monday, 7 November 2016

Does the NPS mean Affordable Housing?

The National Policy Statement that the government recently inserted into the RMA is designed to ensure our cities grow efficiently and effectively. The one thing it does not promise is affordable housing. Not in so many words anyway. So can we expect house prices to come back to sane levels? In most places the NPS will either be overkill or contribute to holding prices down. In Auckland it may be too late; we may need some other circuit-breaker before this measure has any effect.

As a matter of definition, affordability is an attribute of the whole market. Demographia defines housing affordability as a market where the median house costs three times the median household income. In Auckland that ratio is currently about 13. The problems caused by unaffordable housing do not go away when authorities insert a small number of "affordable" houses into a market (usually only affordable when compared to what everyone else has to pay). So we should be looking at the housing market as a whole.

Those eye-watering house prices in Auckland are not the fault of a taste for McMansions or inefficient construction or even a duopoly in the building supplies industry. It is purely because of how much it costs to buy developable land off someone who already owns it. A developer cannot survey sections, build streets and footpaths let alone sell sections for building without first buying a block of bare land. The problem in New Zealand is that there isn't very much of that land available so landowners in some markets have learnt they can hold out for a very high price for their land. Hold on, you say, there is open land as far as the eye can see. That is true but one property right you don't have is to convert your land for another purpose without the express permission of your local council. They specify very small areas where land is allowed to be converted from rural to urban uses. Unsurprisingly landowners within those tiny areas have discovered they hold all the market power and are happy to refuse to sell until they are offered top dollar. This is what the NPS might be trying to break.'

It would be great if the NPS did break that practice but there are some very high barriers:

  • existing expectations - whether farmers or professional land-bankers the current owners have deeply rooted expectations of financial return
  • the net is still not spread wide enough - Auckland has to have almost four years of developable land available at any one time; if not enough landowners agree to sell in any one year then the backlog will get higher and prices will be supported
  • demand will remain low - this is counter-intuitive but true. As land prices rise the cost of any house built on a section rises and the number of people who can afford them get fewer. Although there is a real demand for more houses out in the real world the actual size of the development and construction market is way smaller. This market is clearing and sustainable at current levels and it doesn't really care what happens to those who are priced out.
The chances are that both insufficient demand for bare land and high expectations among sellers will conspire to keep prices high.

Wednesday, 2 November 2016

Urban Development Capacity 2016: A First Look at the new National Policy Statement

The current government has struggled for years to come up with a meaningful response to the housing crisis in Auckland. The latest attempt is the issuance of a National Policy Statement ("NPS") to form part of the Resource Management Act. In effect it tells councils to get ahead of the curve in terms of ensuring enough land is available for residential and commercial development in the short, medium and long term.

At first glance what's not to like about this? Some councils are notoriously slow at rezoning land or, instead, for promoting development in areas where the market doesn't want to go. Setting councils' first priority as housing their population over the prettiness of their city is not a bad idea.

At the heart of the NPS is the requirement to ensure that sufficient "development capacity" exists to meet predicted demand. This capacity includes not only land zoned for (re-)development but also "the provision of adequate development infrastructure to support the development of the land".

It is that last bit that will cause no end of problems.

Providing infrastructure is not a function or responsibility of a council under the RMA. In fact, as far as I can tell, it isn't a statutory responsibility of a council at all. We are used to the idea that councils operate water systems and roads but, technically, they do it voluntarily. All over New Zealand you can find examples of properties that opt out of those systems and there really isn't a rule that says that councils must be the provider.

So this NPS seems to be imposing a statutory obligation on councils that doesn't currently exist.

Minister Smith placed great weight on a decision of the Supreme Court (EDS v NZ King Salmon) to legitimise the use and power of an NPS. The majority opinion certainly reinforces the power of a NPS to "over-ride" the RMA. But I suspect that he glossed over para 88 in which the Court allowed for the possibility that an NPS can be invalid or unlawful. In this particular case that possibility was never raised.

Not being a lawyer I will have to leave it to others to speculate on the validity of the NPS. But it is possible that, like Minister Smith's idea to develop housing on Crown land in Auckland already promised to others, this idea will be a non-starter.

Update 13:38:

I have had some feedback from public law experts who assure me that this is all perfectly kosher. None of the lawyers who submitted on the draft NPS raised any questions of validity. 

Strangely, I am more worried now than I was. Before, I thought the whole thing could get struck down in court; now it seems the Minister for the Environment has wide-ranging, self-granted powers to intervene directly in our councils' core business. And this process sets a precedent for further unilateral controls being imposed over local government in the future in which Parliament will have no say.

Tuesday, 1 November 2016

Mayor Goff Doesn't Need BFF's Like These

Labour are promising to co-fund light rail from the Auckland CBD out to Mt Roskill. Others will debate the merits or otherwise of that investment. But, at the moment, Phil Goff does not need that kind of distraction. 

As the new Mayor of Auckland, Goff's feet are barely under the table and he is now facing the unenviable task of getting his head around the task ahead. The Auckland Mayor has the statutory responsibility to "lead" the budget process. Hard though it is to believe, the 2017-18 budget is likely already well on the way to being drafted. Goff will get some chances to do some nudging if he already has clear thoughts already on where the budget should go. And he doesn't have long to do it.

Remember that the budget still has to go to the full Council and then to the public before it gets finalised by the full Council in June next year. The realities of the process of pulling together such a massive budget (probably 1,000's of spreadsheet pages) mean that Goff has only a couple of months to put up any significant changes to what was signalled in last year's Ten Year Plan. And then he has has to start the political process of getting a majority of councillors to support his plan.

While it's lovely that Goff's former colleagues (isn't six weeks a long time?) are willing to promise him lots of taxpayer money, Goff also has councillors such as Cr Quax pushing hard for a massive release of new building sites to lower the price of houses in the city. Realistically, that can only happen if new transport links are built around the outer suburbs as a matter of priority.

So, Goff has some serious work to do to get his head around these issues and, then, take a position on the best priorities for the city. The last thing he needs is his old friends blowing the vuvuzela in his ear.