Our challenges - the issues facing Three Waters infrastructure in Dunedin

This section outlines the challenges and opportunities the DCC faces in three waters strategic long-term infrastructure management.

Content is organised by a set of key drivers based on what the DCC plans to achieve within an infrastructure strategy and their alignment with the challenges and issues we face in our delivery of services.

Table 4: Key drivers and challenges

2.1 Looking after our people and place

Drinking water, wastewater and stormwater infrastructure services contribute to public health and environmental outcomes. The DCC must ensure it supplies safe drinking water and manages the environmental effects of water abstraction and discharges from its wastewater and stormwater systems appropropriately. Three waters systems also impact the environment through greenhouse gas emissions from wastewater treatment processes and energy use. Urban form, which is influenced by the availability of three waters services, is also a key contributor to Dunedin’s long-term emissions.

Improvements to our three waters assets are required to keep pace with increasing public health and environmental expectations. Investment is required to maintain current and future service levels, including enhanced protection of drinking water sources, improved water management practices, and new standards for drinking water, wastewater and stormwater services.

The three waters system planning programme will guide capital investment and support the continued provision of safe drinking water to serviced communities and improved environmental outcomes. Objectives developed with the ORC and our mana whenua partners during the project include:

• Regeneration – protecting and enhancing the natural environment, aligning with Tikaka and Kawa, contributing to carbon zero targets,
• Resilience – adapting to climate change, robust, recoverable and flexible response to incidents and natural disasters
• Efficiency – minimising wastage, reducing cost impacts to customers, and providing services in the right place at the right time to support growth.

Under section 125 of the Local Government Act 2002, as modified by the Water Services Act 2021, DCC must assess access to drinking water, wastewater and other sanitary services in Dunedin every three years. This assessment evaluates the adequacy of services from a public health and environmental perspective. A DCC servicing assessment is currently in progress.

2.1.1 Public Health and Environmental Outcomes

The DCC needs to continue maintaining and improving its drinking water supply systems to ensure compliance with drinking water legislative and regulatory requirements and to protect public health. The Water Services Act 2021 sets out the duties of drinking water suppliers. These include a duty to supply safe drinking water, to comply with drinking water standards, and to provide a sufficient quantity of drinking water. The DCC must also comply with the Drinking Water Quality Assurance Rules 2022 (DWQAR):

• The drinking water standards set maximum acceptable values for substances, organisms, contaminants or residues that may be present in drinking water.
• The DWQAR includes monitoring and assurance rules:
  • Monitoring rules must be complied with to demonstrate compliance with the drinking water standards.
  • Assurance rules cover activities that water suppliers need to undertake to manage risks to drinking water safety.

The DCC must also have drinking water safety plans for all drinking water supplies to identify risks to drinking water safety and how they will be managed - from the raw water catchment to the treatment plant and within the distribution network and operate in accordance with those plans. These plans need to be regularly updated and submitted to Taumata Arowai.

Accountability for environmental outcomes is managed within a national and regional planning framework supported by resource consents for three waters activities that impact the environment and people. Objectives, policies and rules set in national policy statements, national environmental standards, the Otago Regional Policy Statement and regional plans manage activities such as discharges to water, air and land, and the taking, damming and diversion of freshwater. These objectives, policies and rules are often put into action through conditions of resource consents.

The provisions of these policies, plans and standards will impact future consenting of discharges from the DCC’s wastewater treatment and water treatment plants. Requirements will also impact future consenting of new and existing water takes. Anticipated impacts on DCC water supply activities include tighter controls on the DCC’s ability to take water from the environment for drinking water supply purposes and a related emphasis on implementation of water efficiency and demand management measures in drinking water supply systems. Current water take consents do not expire until 2038-41. These changes will require major decisions regarding where and how raw water is sourced if surface water takes are reduced, how and where it is stored and used most efficiently.

The DCC holds resource consents to discharge treated wastewater to the environment for each of Dunedin’s seven wastewater treatment plants, except for Mosgiel where treated wastewater is transferred to the Green Island wastewater treatment plant for further treatment before discharge to the ocean. Most resource consents the DCC holds to discharge wastewater are due to expire within the next 10 years. Projects are in progress to investigate practicable options to inform applications for new consents and to address anticipated new standards. Substantial changes to current wastewater management arrangements in Waikouaiti/Karitane, Warrington and Middlemarch are planned to better align with national and regional policy direction and Mana Whenua values, and to increase resilience to climate change impacts. This work relates to renewal of ageing infrastructure and improving outcomes in environmentally and culturally significant and sensitive areas. Wastewater infrastructure on the Northern Coast (eg. Waikouaiti/Karitane and Warrington) is also vulnerable to sea level rise. In addition, work is underway to reduce the volume of solid waste produced by the wastewater treatment process requiring disposal to landfill. These projects are described in section 4 ‘Our Plan’.

The DCC currently has five constructed wastewater network overflows authorised by resource consents. These overflows are designed to manage the public health risk in heavy rainfall events by allowing discharge of diluted wastewater to waterways at specific points in the network, rather than in an uncontrolled manner at low points in the network (including into private property). The consented overflows are signposted to alert the public to the potential risk of exposure to diluted wastewater in the event of heavy rainfall. As wastewater assets are renewed and upgraded, these overflows will activate less often with smaller discharges. The current overflow consents expire within 8 -18 years time. It is anticipated the quantity and quality of wastewater discharges will be subject to stricter requirements under future planning rules.

The DCC holds resource consents to discharge stormwater to the coastal marine area that expire in 2048. Key stormwater discharges are subject to environmental monitoring as part of consent requirements. Stormwater system planning has included a review of historical monitoring data, a broader environmental monitoring programme including the monitoring of freshwater bodies and updates and improvements to computer-based hydraulic models. Data from this and ongoing monitoring will be used to prioritise catchments for targeted improvement works to address stormwater quality and quantity issues. Where practicable, green infrastructure approaches will be favoured. Under the current Regional Plan: Water, most of Dunedin’s stormwater discharges to freshwater are permitted, subject to certain provisions. It is anticipated the quantity and quality of stormwater discharges will be subject to stricter requirements under future ORC planning rules, including requirements for discharges that are currently permitted to require resource consents.

A significant amount of the city is serviced for stormwater drainage by privately owned and maintained watercourses, open channels, pipes and streams. Where these private watercourses have been piped, many of the pipes are 100+ years old and in poor condition. As rainfall intensities increase this private infrastructure can sometimes no longer cope resulting in property damage, flooding, sinkholes and landslips. Developing solutions to complex watercourse problems is often beyond the means of most landowners. The Government has indicated that the Local Government Water Services Bill (expected Dec 2024) will provide new tools and clarification of roles and responsibilities to support stormwater management, including the management of overland flow paths and urban watercourses.

2.2 Looking after our assets - replacing and renewing Dunedin’s ageing infrastructure

As one of the country’s earliest metropolitan centres, some of Dunedin’s three waters assets are more than 150 years old and still operate as essential pieces of the network today. As Dunedin has grown, so have three waters networks, resulting in widely distributed networks with a broad range of pipe materials, diameters and construction methods.

Some three waters assets require replacement based on their age and condition and the likelihood they will not be able to maintain service levels in the future. An example is old, earthenware pipes in our wastewater network that become cracked over time letting in groundwater and causing wastewater overflows, failing levels of service and not responding to climate change or weather events. Without continued spending on renewal of these assets they and their performance will deteriorate further.

The DCC is increasing spending on renewals over time. In some circumstances, ‘like-for-like’ renewals may no longer be enough to meet the needs and expectations of the community and regulators. This means it is likely the proportion of new capital against renewalsI funding will increase to allow for upgrades that provide capacity for growth and resilience to climate change impacts.

The DCC will manage the renewal and replacement of ageing infrastructure by planning to renew assets as they reach the end of their useful lives or are shown to be in poor condition; with an aim to increase the level of renewal delivery year on year. Where feasible pipes will be rehabilitated rather than completely renewed, using techniques such as re-lining. These techniques offer faster, less disruptive works and provide an environmentally acceptable and highly durable solution where appropriate and feasible. This extends the useful life of existing assets at a lower overall cost to ratepayers. Wastewater, stormwater, and water supply pipe networks can be rehabilitated using this approach. However, there may be areas where such methods are not feasible or won’t deliver the desired project outcomes, such as increasing pipe capacity to support growth.

Renewals and rehabilitation are targeted in areas with the highest risk of failure and where possible are programmed to enable efficiencies between three waters and projects being undertaken by other areas within the DCC (e.g. road rehabilitation).

Assets reaching the end of their theoretical life don't always require replacement. Performance or condition may indicate that the asset can continue running beyond its theoretical life within acceptable levels of risk, especially for non-critical assets like the water tobies connecting each property to the water supply.

The DCC’s planning focuses on assessments of asset condition, criticality, and risk, as well as planning and delivery opportunities to provide lasting value for residents, businesses and the environment through long-term asset solutions. Asset management planning is most efficient and effective when considering all options holistically, including renewals and upgrades. This approach can identify opportunities for systemic improvements, extending network life while maintaining service levels, and in some cases, achieving improved levels of service that add value to the community and the environment.

The DCC three waters reticulation, plant and civil assets, valued at $3.956 billion and a current depreciated replacement value of $1.577 billion as at the 30 June 2024 Annual Report. This plan’s renewals spending significantly increases from previous 10-Year Plans due to the ageing asset base, which requires more renewals requirements and poses a risk of not meeting stated service levels as assets deteriorate. Higher capital expenditure budgets allow for a greater rate of renewals. To support this increased programme, the DCC has implemented new delivery models and established longer term contracts with contractors and service providers. Section 4 ‘Our Plan’ provides more details on how we will deliver a capital expenditure programme to replace and renew ageing infrastructure.

2.3 Providing for infrastructure resilience

Flooding, drought, catchment fire, landslides, rising groundwater and ground movement and liquefaction in the event of an earthquake are the natural hazards posing the most significant risks to Dunedin’s three waters infrastructure. It is anticipated that many of these risks will increase over time as a result of climate change.

The DCC is working to improve its understanding of natural hazards and for the resilience of its infrastructure into the future. Natural hazards pose a lesser risk when infrastructure is resilient.

We will manage the challenges posed by natural hazards by ensuring investment in renewals and new capital specifically considers reducing the risk arising from natural hazards, increasing resilience and where possible will consider adaptive planning.

2.3.1 Flooding and landslide

Some parts of Dunedin are susceptible to flooding and landslides during heavy rainfall. These events damages homes, businesses and infrastructure. More extreme rainfall events and storm surges may lead to larger and more frequent slips that can damage three waters infrastructure. As weather events become more frequent and severe the ability of infrastructure and the community’s ability to recover will be put under increasing pressure.

Flood risks are due to several factors including :

• Rainfall events exceeding design tolerances
• Limited capacity in parts of the wastewater network as a result of inflow of rainwater and groundwater infiltration from ageing and cracked pipes and direct stormwater connections into the wastewater network
• Low-lying areas where the groundwater is close to the surface so rainwater cannot drain
• Catch pits can become blocked and creating a flooding hazard
• Roading infrastructure at low elevations can cause roads to be flooded or cut off
• Sea level rise, more extreme rainfall events and storm surges increasing the frequency of flood events in the future
• Manhole surcharging can create a safety hazard in flood events when manhole covers become dislodged.

Work to reduce inflow and infiltration into the wastewater system by replacing ageing pipe infrastructure is critical to building network resilience and reducing flood risk and potential threats to public health in flood events. Inflow occurs when stormwater enters the wastewater network through direct connections like manhole covers, while infiltration refers to groundwater seeping in through cracks or joints in the pipes. Excessive inflow and infiltration can overwhelm the wastewater system, especially during heavy rainfall, leading to overflows and increased treatment costs. Sealing manholes, prevents stormwater from entering the wastewater network, reducing the risk of overflow events.

2.3.2 Drought

Prolonged periods of drought pose a risk to Dunedin’s water supply. Water demand increases during these periods while drier water catchments yield less water and are more prone to large-scale fires. Catchment fires can result in highly turbid water that is more expensive to treat or is unable to be treated by existing treatment processes. Higher mean temperatures increase the risk of algal blooms within raw water reservoirs, which may require expensive treatment. In addition, odour issues at wastewater treatment sites and within the wastewater network are more likely at higher temperatures. Lower water yield in periods of drought impacts raw water reservoir levels. Water use restrictions are used to balance supply and demand on the network and were put in place in Port Chalmers, Outram, Waikouaiti and Karitane during the summers of 2023 and 2034.

2.3.3 Earthquake

Seismic activity can cause widespread damage to infrastructure. Destruction of critical built infrastructure such as dams, treated water reservoirs (dams), treatment plants and displacement of piped infrastructure can render three waters systems inoperable and unable to deliver clean drinking water or to transport and treat wastewater safely. Liquefaction can cause more damage to underground pipes than ground movement and is a significant contributor to pipe failure in earthquakes. Dunedin has several areas with moderate to high likelihood of liquefaction in an earthquake.

Seismic activity could also cause isolation across the transport network if certain areas are cut off due to rubble, slips, liquefaction or land displacement. Dunedin is vulnerable to isolation given the limited number of routes in or out of the city. Dunedin is predominately serviced by a motorway inwards from the north and a motorway inwards from the south with the alternative route from the north on Mt Cargill Road. Dunedin’s Akatore fault has potential to disrupt the network to the south of the City. Disruption of transport links would likely slow the rate at which three waters services can be restored, as suppliers and materials will either not be able to reach Dunedin, or will have to follow alternative routes (e.g. shipping).

2.3.4 Climate change

The effects of climate change are more becoming more evident and more frequently experienced. Climate change impacts include more extreme rainfall events, causing increased frequency and severity of flooding, while experiencing less rainfall overall can impact on water supply. Dry periods increase water demand, the risk of drought and catchment fire (which impacts on drinking water quality).Rising sea levels pose risks for infrastructure located at or near sea level. Managing risks and building resilience within our three waters infrastructure to protect both our assets and the assets and wellbeing of the community is a priority,as is ensuring three waters systems play their part in reducing greenhouse gas emissions to support efforts to reduce the severity of climate change (see 2.5 below). As weather events become more frequent and severe, the ability of infrastructure and communities to recover will be put under increasing pressure. The DCC’s Climate-related significant forecasting assumptions for the 2025-34 9 Year Plan have informed the development of three waters asset management plan and the infrastructure strategy.

Dunedin has significant low-lying areas that are within 0.5m of the current spring high tide mark (estimated at 2,684 Dunedin homes, 116 business and 35km of roads -Source: Parliamentary Commissioner for the Environment (2015) Rising Seas).

Older people and vulnerable populations find it more challenging to manage the impacts of natural hazards. South Dunedin has an increasingly ageing population and one of the highest deprivation index demographics in the country.

Rising groundwater as a result of sea level rise in low-lying areas is a significant risk facing Dunedin from climate change. High groundwater can cause problems such as increased frequency of flooding, boggy ground and surface ponding, damage to infrastructure and buildings, and a risk of liquefaction in earthquakes along with associated social wellbeing issues. This is a factor in flooding in South Dunedin. The DCC 3 Waters Group is working with the South Dunedin Future (SDF) programme in assessing and selecting adaptation pathways for South Dunedin.

2.4 Meeting our changing needs - responding to changes in demand for infrastructure

The DCC is preparing for growth through three waters asset capacity assessments and targeted capital works. Factors such as population growth, economic growth, housing development rates and locations will impact infrastructure demand. Effective asset management involves investments that address both service levels and future capacity while simplifying complex networks to reduce future repair and maintenance costs.

The DCC’s 2025-2034 9 year plan significant forecasting assumptions for economic growth, demographic change and housing requirements have informed the development of our 30-year infrastructure strategy.

Dunedin’s population is expected to grow over the next 10-20 years. The DCC adopted a high-medium growth scenario for Dunedin’s 9 year plan 2025-34, assuming high growth from 2025-34 and medium growth from 2035-55.

Dunedin faces several issues within its three waters networks, including:

• Water availability in summer in some parts of the city due to high demand and drought, resulting in use restrictions;
• Ageing infrastructure causing leaks and overflows;
• Network capacity issues, leading to stormwater flooding in heavy rainfall events.

Significant work is needed to address these constraints and support future development. Projects to upgrade infrastructure are included in the 2025-34 plan, such as replacing and upgrading water, wastewater and stormwater pipelines, and improving pumping stations and treatment plants.

2.4.1 Impact of the National Policy Statement on Urban Development and Dunedin Future Development Strategy

The strategic priorities for urban growth and development over the next 30 years are given in the Dunedin Future Development Strategy 2024 – 2054 (FDS). The strategy was adopted in April 2024. The FDS informs Dunedin’s 9 year plan 2025-34 and the ORC Long Term Plan 2024-2034 regarding Dunedin’s future growth.

The FDS guides future changes to RMA planning documents (such as Dunedin’s District Plan – the 2GP) and other planning decisions that affect the urban environment. It also influences infrastructure planning and funding decisions made by the DCC and ORC in their long term plans and infrastructure strategies, and the Regional Land Transport Plan. It includes policy guidance to help prioritise and plan investment in infrastructure. The FDS identifies three waters upgrades required to service existing development capacity, proposed future urban development areas, and outlying townships and settlements, based on these priorities. They include upgrades that reflect the aspirations and intent of iwi and outlying communities (although the timeframes to deliver these may be longer term).It also includes a clear statement of iwi and hapū values and aspiration for urban development.

Upgrades of infrastructure are required to service development that is provided for under existing District Plan rules.

• Consistent with the priority approach outlined in NPS -UD 2020 Policy 1 (Section 5), we are prioritising these upgrades to maintain or restore minimum levels of service and performance and provide for the development capacity that is enabled by current 2GP rules, considering also the pace and timing of growth.
• Dunedin is also required, at all times, to provide at least sufficient development capacity to meet expected demand for housing and for business land over the short, medium and long term under NPS-UD (Policy 2).

The FDS includes details of the current constraints on growth in the three waters network, and the upgrades required to address these constraints and support a well-functioning urban environment are documented as well as guidance on prioritising upgrades.

The costs to address the constraints in our network are significant, and all problems cannot be addressed immediately. We are prioritising upgrades required to service development that is provided for under existing plan rules and to maintain or restore minimum levels of service and performance.

Works to support expected growth are included in Dunedin’s 9 year plan 2025-34 and will be provided in years 1 to 9. This includes significant replacement of and upgrades to water, wastewater and stormwater pipes, new and upgraded pumping stations, and upgrades to the city’s wastewater and water treatment plants.

Further information about three waters upgrades to support the FDS can be found in sections 6.3.1.3 - 6.3.1.7 of the FDS document which is available on the DCC website: Future Development Strategy-2024-54.

2.4.2 Planned increases or decreases in levels of service

Levels of service describe the standards for management and maintenance of the water supply, wastewater and stormwater systems and are a requirement of the Local Government Act 2002. The DCC sets levels of service in consultation with its community as part of the long-term plan process. This provides transparency and confidence for the public and other stakeholders that the system can support lifestyle and business needs and is well managed. They consist of a service statement, measure, and target.

No changes are proposed to the DCC’s three waters levels of service in the 9 year plan 2025-34. The levels of service for three waters are based on the mandatory non-financial performance measures introduced by the Department of Internal Affairs in 2013 (as updated in 2024 to reflect changes in the drinking water regulatory system). New drinking water standards and drinking water quality assurance rules are already in place and administered within existing service levels.

Core service levels for three waters activities are: providing safe drinking water; reliability of supply; the adequate performance of networks; and the impacts of three waters discharges and overflows on the environment. These are measured by customer and technical performance measures.

There is limited funding in Dunedin’s 9 year plan 2025-34 for upgrades arising from any changes to regulatory standards. Future, unanticipated three waters reform could result in enhanced standards for the quality, quantity and management of drinking water, or require improvements in wastewater or stormwater management. We do not anticipate significant regulatory changes that would required enhanced standards at this time.

2.4.3 Building resilience to natural hazards

DCC has improved its understanding of natural hazards to assist in developing options for resilient infrastructure into the future. The DCC is working in partnership with other agencies such as GNS Science and ORC to further enhance our understanding of natural hazards including groundwater and impacts of sea level rise, particularly in South Dunedin.

The South Dunedin Future (SDF) programme began in 2021 as a response to issues in South Dunedin in partnership with the ORC. The programme involves long-term planning to adapt to the effects of climate change. Aligned with this, the DCC, through its system planning programme has been improving monitoring of flows in stormwater and wastewater networks and improving the accuracy of computer hydraulic models of wastewater and stormwater networks, as well as investigating improvements to stormwater pump stations. The DCC 3 Waters Group will integrate with the SDF programme in assessing and selecting adaptation pathways for South Dunedin and will be responsible for implementing those adaptation options involving three waters infrastructure.

System planning is contributing to building resilience to natural hazards. The programme takes an adaptive approach to investment, planning for natural hazards and ensuring resilient solutions are implemented. System planning outputs have been used to inform the 2025-34 9 year plan, and early work is planned to increase resilience to some water supplies and target metropolitan wastewater treatment plant wet weather flow management in the 2025 -2034 capital programme.

The DCC is an active participant in the Alpine fault quake resilience (AF8) programme. This is a scenario-based planning project, managed by the Ministry of Civil Defence and Emergency Management, with the intention of preparing plans to respond to a major earthquake on the Alpine Fault.

2.5 Delivering on our city and DCC emission reduction targets

In June 2019, the Council declared a climate emergency and adopted the ‘Zero Carbon 2030’ target, which seeks, at a city level, to reach net zero greenhouse gas emissions by 2030 (excluding biogenic methane), and reduce biogenic methane emissions in line with Government targets.

Net zero’ means greenhouse gases that we emit into the atmosphere (excluding biogenic methane) are in balance with the amount of carbon dioxide absorbed by forests. Biogenic methane is methane produced and released from living organisms like plants and animals. The city’s biogenic methane reduction targets are the same as the central government targets as follows:

• 10% reduction from 2017 levels by 2030.
• 24-47% reduction from 2017 levels by 2050.

Council also adopted targets for its own organisation’s activities gross emissions, as follows:

• By 2026/27, a 30% reduction in annual emissions from the 2018/19 baseline of 84,216 tCO2e.
• By 2030/31, a 42% reduction in annual emissions from the 2018/19 baseline of 84,216 tCO2e.

Council’s Zero Carbon Policy adopted in 2022 mandates that the DCC’s activities minimise emissions to help achieve both the city and Council emissions reduction targets. Our Zero Carbon Plan 2030, adopted in 2023, set out the pathway to Zero Carbon 2030 and identifies the city-wide outcomes, changes and the DCC’s actions required to bring about those changes. The Plan focuses on reducing gross emissions where possible, rather than relying on sequestration alone. This aligns with the Zero Carbon Policy, best practice for developed countries, and with what scientists suggest is necessary to avoid the worst impacts of climate change.

2.5.1 Why Dunedin’s infrastructure is important for Zero Carbon targets

Reducing emissions associated with infrastructure is necessary to achieve global climate goals. Infrastructure is associated with an estimated 79% of total greenhouse gas emissions worldwide. Most of these emissions are from energy, buildings, and transport, while water, waste management, and digital communications also contribute. Emissions occur at all stages of the infrastructure lifecycle, including from construction materials, transport of materials and workers, operation of the asset, and use of equipment for maintenance and decommissioning. The long life of infrastructure assets and the high costs of replacing or changing them can mean decisions made today result in emissions for years to come, and existing infrastructure and urban form can lock in long term behaviour and emission impacts for generations.

Three waters infrastructure impacts city-wide emissions in several ways. A significant impact is the availability of servicing in various parts of the city. This shapes urban form, which in turn impacts transport sector emissions.

Urban intensification (particularly around the CBD, urban centres and along public transport routes) supports and promotes low emission transport systems. The DCC’s overall urban form objective of a ‘compact city with resilient townships’ is intended to be achieved through consolidation and prioritising use of existing capacity within existing urban areas. Rules in the 2GP currently restrict development in some new medium density areas due to constraints in the three waters network, and the degree to which additional intensification is achievable is similarly limited in some locations by three waters network capacity.

Three waters infrastructure also directly generates emissions. An emissions baseline for existing plant and network operations has been established. Emissions sources are as follows:

• Biological processes from wastewater treatment were assessed as being responsible for approximately 0.8% of the city’s emissions in 2021
• Some sludge generated in wastewater treatment processes is currently sent to landfill, contributing to solid waste emissions
• Diesel, chemicals and energy used in distribution, treatment and disposal processes associated with three waters networks all contribute to stationary energy sector emissions
• Construction and maintenance processes associated with the three waters network also contribute to the city’s emissions profile.

Emissions have not always been a key consideration in the design of three waters plant and network infrastructure, meaning the existing plant and network configuration is not optimised to minimise emissions. The need to prioritise reactive operational expenditure, to address process challenges and compliance risks, hinders the significant investment needed to minimise emissions.

Biosolids management and disposal, as well as increases in treatment standards for water and wastewater, are likely to result in more intensive treatment processes and to drive increases in energy demand. It is currently unknown how much these requirements may hold up emissions reduction efforts, but this may be significant. However, system planning identified a range of opportunities to manage down emissions while also delivering on strategic goals.

2.5.2 The DCC’s work to reduce emissions associated with 3W infrastructure

Since the 2021-31 10 year plan was adopted, significant work has been undertaken to identify and prioritise opportunities for emissions reduction associated with wastewater emissions. The DCC has also developed policy and processes to ensure that emissions reduction is supported and prioritised as part of business-as-usual.

The Zero Carbon Policy 2022 will assist with reduction of emissions associated with three waters infrastructure projects, including renewals. It sets out key principles that guide the DCC’s emissions management and minimisation practices, including considering and minimising the city-wide emissions impact of a proposed asset/activity early in the project lifecycle, escalating the decision if a proposed activity/asset is identified as likely to increase city-wide emissions; preferring options that contribute most to city-wide emissions reduction targets, minimising whole-of-life emissions; minimising exposure to climate change risks: and clearly reporting emissions considerations in decision making. To give effect to the Zero Carbon Policy, the DCC is integrating emissions reduction considerations throughout its procurement and project management processes.

The Zero Carbon Plan 2030 (an emissions reduction plan for Dunedin) focuses on tools and initiatives proven to work in other cities or suggested through community engagement, because achieving the city’s targets means taking action now. Reducing emissions associated with three waters activity is also a key focus of the DCC’s Emissions Management and Reduction Plan 2023/24-2030/31 (EMRP). Many of the actions in both plans will reduce costs in the medium and longer term, but there will be upfront costs.

Both the Zero Carbon Plan 2030 and the EMRPemphasise reducing emissions from energy use associated with three waters infrastructure, and reducing wastewater processing emissions. A key focus over the next decade will be beneficial re-use of biosolids, which are the main component of DCC three waters-related carbon emissions. A planned upgrade of Green Island WWTP will also help reduce emissions from wastewater treatment processes within the decade. On the water supply side, targeted interventions include process optimisation to reduce chemical use, followed by lower emissions intensity energy sources associated with water supply. Planned water efficiency projects will also have flow on benefits for emissions reduction goals.

In the Zero Carbon Plan, there is an additional focus on supporting a compact urban form for Dunedin. Ensuring three waters infrastructure constraints are resolved for zoned medium density areas close to public transport and centres will assist with this objective.

Continuing to improve data quality for three waters is also necessary to support efforts to reduce emissions.

2.6 Living within our means - Financial prudence and affordability

Establishing an infrastructure strategy and funding programmes of works that are financially prudent and affordable to ratepayers is one of the most challenging aspects of our planning work. This requires managing risk around what is and is not prioritised, what can be reasonably expected to be funded and delivered while remaining affordable to the community, and continuing to deliver a sustainable level of asset management over short and long term planning timelines.

2.6.1 Financial Strategy

The Infrastructure Strategy is closely linked to the Financial Strategy. The Financial Strategy considers affordability for ratepayers and the DCC as a whole. The DCC has attempted to balance the competing tensions of affordability, maintaining assets and investing for the future, while addressing the financial challenges of increasing costs, delivering large capital projects and increasing piped network renewals. The Financial Strategy provides strategic financial limits for rates and debt and discusses other funding sources. The budgets increase rates and debt requirements, but do not exceed the limits over the next ten years. This guides decision making on Dunedin’s 9 year plan 2025-34 funding, establishes the funding envelope or ‘means’ that each DCC activity operates within and the funds available for capital expenditure programmes.

2.6.2 Debt

The use of debt allows the financial burden of new capital expenditure to be spread across a number of financial years, recognising that the expenditure is on intergenerational assets, i.e., the assets have a long life and generate benefits both now and to future generations.

Debt is also used to fund the portion of capital renewals that is not covered by funded depreciation. The gross debt limit for this 9 year plan is set as 250% of revenue. This means that our debt level will be responsive to change and will move in line with the level of our activities. This revised debt limit will allow flexibility to deliver the planned capital expenditure programme, while also having capacity to fund potential unplanned events.

This debt limit is considered financially prudent, as it sits within the lending limits set by the Local Government Funding Authority (LGFA). The LGFA equivalent metric is based on net debt, where net debt is defined as gross debt less liquid financial assets and investments.

2.6.3 Managing within our means

There is an acknowledged nationwide three waters infrastructure deficit in renewals expenditure and replacement of ageing infrastructure. For Dunedin, this deficit is currently estimated at $1,003M.[1] The DCC has developed renewals budgets to proactively and progressively reduce and remove the deficit in Dunedin’s three waters networks across the term of the infrastructure strategy.

The planned renewals expenditure over the life of Dunedin’s 9 year plan 2025-34 is $552.8M[1], and approximately $3.6² billion over the life of the 30 year plan.

DCC three waters assets have a gross replacement valueof $3.956 billion and a current depreciated replacement value of $1.58 billion (as at the 30 June 2024 annual report). Depreciation represents the using-up or consumption of our assets over their lifespan, and is offset by the value of our capital renewals work to replace assets as they reach the end of their service lives. Funding of renewals is stepped up in order to reduce the infrastructure deficit over the longer term. The deficit is shared proportionately between Water Supply 32%, Wastewater 44%, and Stormwater 24%.

Renewals as a percentage of cumulative depreciation across Dunedin’s 9 year plan 2025-34 are Water Supply 82%, Wastewater 95%, and Stormwater 52% indicating a high level of renewals expenditure planned for wastewater. This reflects the higher deficit and the direct risk to public health and the environment from failures in wastewater network pipelines and potential impacts on stormwater in extreme rainfall events. Projected three waters renewals expenditure aims to reduce the infrastructure deficit down to zero by the end of the 30-year horizon of the Infrastructure Strategy.

Where funding is not available in Dunedin’s 9 year plan 2025-34, the DCC will aim to manage risks within available budgets. This will be achieved through an increased focus on the monitoring of critical three waters assets and responding proactively to changes in condition and performance to ensure continued service delivery.

Monitoring and maintenance of older and poor-performing assets will be increased to keep them in serviceable condition for longer, and renewal capital will be targeted toward assets at highest risk of failure. While this approach will reduce the amount of capital expenditure required in the short term, it will lead to increasing operational expenses as repairs are undertaken on assets that would otherwise have been replaced. Additionally, if this approach is retained longer term, asset failures will increasingly begin to impact on service levels. Amendments will be made to the capital programme in this plan over its lifetime as new requirements become known and quantifiable, and capital projects are scoped to address any new deficiencies arising.

This strategy addresses the renewals backlog and seeks to balance asset risk in a pragmatic and affordable way. The planned 30 years phased approach means that there will be a modest reduction in the total backlog (approximately 4%), over the life of the 9 year plan 2025-34. However, our focus in the first nine years will be to prioritise renewals at highest risk such as at our treatment plants. Beyond the 9 year period, a reprioritisation in capital expenditure will be required to address the remaining backlog by the end of the 30-year horizon of this strategy.

Whilst the risk that critical assets may fail during the 9 year period may be high, we believe that this risk is mitigated as we have significantly increased our provision for repairs and maintenance over the term of the 9 year plan. We will also increase focus on the monitoring of critical assets and respond proactively to changes in condition and performance to ensure continued service delivery. This allows our focus to remain on planning for the renewal of critical assets before a deterioration in their condition materially impacts on service levels and the environment. Forward planning will also ensure that the capital needed to fund the work (both debt and rates), and the contractors required to do the work, are in place.

Footnote

1. Please note that the renewal capital expenditure amount corresponds to the allocation within the Council's capital expenditure programme, rather than the allocation outlined in the Funding Impact Statement.

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