The Government has given an assurance that co-governance will only be applied at the strategic level of Three Waters - not operational.
Three Waters is the Government's plan to establish four publicly-owned entities to take responsibility for drinking water, wastewater and stormwater from 67 local councils.
Under the Three Waters model, local councils will remain the owners of their water assets but will not have control over them. Their influence will be via regional representative groups (RRGs), who will appoint board members to the new water service entities.
The arrangement of the RRGs has been controversial because they will consist of 50 percent council members and 50 percent iwi. It's led to concerns that water service delivery will be 50 percent run by non-elected representatives.
But the Government has confirmed that the co-governance arrangement will only apply to the RRGs and not the water entity boards.
"We maintain that the direct management of and operational oversight of the water entities will be undertaken by a board appointed solely on the basis of skills and expertise," Local Government Minister Nanaia Mahuta said on Friday.
"Appointments to the water service entities' boards will be based on professional skills and competency.
"Joint strategic oversight with local government and iwi Māori will only happen at the regional representative group level which exists to hold the boards to account for delivering better outcomes for communities."
Mahuta said it's nothing new.
"Many councils already have co-governance arrangements in place, and acknowledge the importance and benefit of such arrangements," she said.
"For example the Waikato River Authority set up by the previous Government, established 50-50 co-governance around the Waikato River and is a good working model of shared decision making to improve the health of the river.
"The Regional Representative Group is not about ownership but rather ensuring community inclusion and voices are heard, securing a kaitiaki or guardianship role for the protection of our environment, and maintaining the focus on the long-term planning required for national infrastructure."
Former Deputy Prime Minister Winston Peters is not a fan of the model.
"Make no mistake, Three Waters is the manifestation of Labour's race-based co-governance agenda which is only leading to New Zealand becoming a separatist state," he said on Friday.
ACT MP Simon Court shared a similar perspective.
"The worst aspect of the reforms is divisive co-governance. It's totally inappropriate to give iwi a seat at the table just because of who their ancestors were. All New Zealanders want clean and safe water, not just iwi."
Deputy Prime Minister Grant Robertson said Māori provide a unique perspective.
"At the strategic representative level, councils and iwi Māori can reflect the long-term aspirations of their communities," he told reporters in Porirua.
"I think when people have applied the term 'co-governance' in this particular situation, some people have chosen to make that sound like it's at the operational level of these entities. It's not.
"The working group have strengthened the way the regional representative groups will work in a co-governance way so I think it is important to be clear about that."
Mahuta added: "The enduring nature of the relationship between councils and mana whenua will set in place a more fertile and productive space for making decisions reflecting the wellbeing of their communities, people and environment now, and into the future."
Robertson and Mahuta announced on Friday that the Government will proceed with its working group's recommended public shareholding structure for Three Waters to ease concerns raised by local councils about losing ownership of their assets.
The public shareholding structure will mean that council owners of the entity will need to vote unanimously in support of any proposal to divest ownership in water services, or lose control of significant infrastructure, for it to proceed.
The public in the service area would need to vote with a 75 percent majority in support of any privatisation proposal.
The shares will be assigned to the relevant council per 50,000 people in its district. Auckland, for example, with its population of 1.7 million, will have 35 shares in Entity A compared to Whangārei District Council's two shares due to its population of 99,000.
"We are protecting public ownership," Robertson said.
"Iwi Māori have never expressed a wish to sell water assets and they bring an intergenerational, long-term lens to issues relating to water in their area.
"Having their participation, alongside councils at the strategic level, gives further safeguards that water assets will not be sold off."
Local Government NZ president Stuart Crosby said without reform, many councils will struggle to meet new water standards, which will require significant investment over time. Under the new model, they will face prosecution by the new water regulator if they're not meeting standards.
"Our communities need certainty. They can't afford the huge costs that come with doing nothing and maintaining the status quo."
