Local Government Minister Nanaia Mahuta hopes the co-governance model for Three Waters will help "councils and mana whenua work together for the benefit of catchments".
But the National Party is not keen on the idea and neither is ACT, with leader David Seymour describing it as "one of the most backwards steps any country can take".
Three Waters is the Government's plan to establish four publicly-owned entities to take responsibility for drinking water, wastewater and stormwater from local councils.
Under the Three Waters model, local councils will remain the owners of their water assets but they will not have control over them. Their influence on the water entities will be via regional representative groups (RRGs) who will be 50 percent council members and 50 percent iwi.
The proposed arrangement is "a significant opportunity for councils and mana whenua to work together for the benefit of catchments", Mahuta said.
"When we think about sourcing water for drinking and returning water back into the receiving environment, the perspectives of Māori can contribute and add to those in council who are thinking about the ongoing supply of drinking water but also providing for growth and development within their region."
National Party deputy leader Nicola Willis is not convinced.
"We know that iwi play a role already in existing water decision-making. There are ways of achieving that. But local government have been very concerned to date with the models that the Government has put forward," Willis said.
"The core issues for us have always been: will you actually achieve the efficiencies you're promising? We are very doubtful about that and we continue to be concerned about the governance arrangements.
"What's really important is these water entities must be accountable to local communities and we're not convinced that the proposals the Government's put forward will achieve that."
ACT wants the co-governance model dropped.
"I want all New Zealanders to be born with the same democratic right. That's what people have fought for all through history," Seymour said.
"I think the idea that we are proactively trying to introduce different sets of political rights for people based on ancestry has got to be one of the most backwards steps any country can take."
Te Pāti Māori co-leader Rawiri Waititi has warned Three Waters could become the next foreshore and seabed issue, referring to 2004 when Māori protested against proposed legislation to vest ownership of New Zealand's foreshore and seabed in the Crown.
"If you're not going to recognise the Māori proprietary rights to water, and acknowledge the many Treaty claims for freshwater, and the buying and the shipping of water off Aotearoa and overseas, it's going to end terribly and this could actually be the foreshore and seabed issue for this Government."
The Green Party in October called on the Government to hit the pause button on its Three Waters reform to fully address concerns raised by councils.
But Three Waters spokesperson Eugenie Sage has stressed the importance of both public ownership and meaningful iwi Māori involvement in the governance of the new Three Waters entities.
The Government has struggled to appease councils who last year expressed concerns about losing control of their water assets and potential privatisation.
Mahuta in October announced that the Government would force Three Waters reforms on local councils, despite initially pitching it as voluntary.
She then confirmed in December that the reforms would be delayed until 2022 to hear the concerns and wait until its new working group had finished consultation.
The working group released its advice earlier this week and the main recommendation was a public shareholding structure to maintain public ownership of water assets.
However, it was noted that Auckland Mayor Phil Goff had dissented because Auckland would lose effective control over $11 billion worth of Watercare assets.
The working group acknowledged the "dissenting view from Mayor Phil Goff with respect to Auckland's position", and proposed a "bespoke" arrangement for Water Service Entity A, which includes Auckland.
Auckland would get greater representation. It suggested four Auckland Council representatives, four Tāmaki Makaurau iwi representatives, one representative each from Northland councils and three iwi representatives from Te Tai Tokerau.
The Green Party's Sage said: "Now I think is the time for further engagement and we hope the Government will seriously engage with the recommendations and also work with Auckland and Mayor Goff and the issues raised there around Watercare."
Asked if Auckland could be left out of the arrangement, Sage said: "That is one model but the issue is how you ensure there is iwi co-governance, which you don't have in Auckland Council at the moment, and I think that's one of the key issues that is needed further discussion on".
Mahuta said she was pleased the working group identified concerns about privatisation as the primary concern to be addressed rather than the co-governance model.
"I'm so encouraged by the majority recommendation that actually, the major concern that we must address is not privatising the assets of which there was a fulsome level of agreement there," she said.
"They also discuss how this isn't about ownership - this is about service delivery, this is about security for communities big and small being able to have the investment into the infrastructure to deliver better water."
Mahuta said the Government will consider the proposals before finalising reform plans and introducing legislation.
The Government is under pressure to get it right. A Newshub-Reid Research Poll in November found that about 48 percent - almost half the country - didn't support the reforms.
But the working group said it "received an overwhelming message from the sector that the status quo isn't working, and reform is needed".
A report by the Water Industry Commission for Scotland estimated that New Zealand needs to invest $120 billion to $185 billion in water infrastructure over the next 30 years to meet standards and provide for future population growth.
The Government has tried to make the reforms easier for councils by announcing a whopping $2.5 billion package in July to ensure they were not only "no worse off", but "better off" from the restructure of water assets.
The four water service entities are expected to begin operating in July 2024.
