The government is preparing to overhaul the rules around water use.
The multi-agency Three Waters Review has been investigating the state and performance of New Zealand's drinking water, wastewater and storm water systems.
The review was initiated in mid-2017 alongside the Havelock North drinking water inquiry.
Local Government Minister Nanaia Mahuta said discussions would be held between local and central government about how to ensure communities had access to clean and safe drinking water.
She said it would be important to address the increasing cost of waters infrastructure as part of the review but reiterated that continued public ownership of water assets was the government's bottom line.
"We need to address the issues creating pressure and impacting on council balance sheets and that's the burgeoning cost of waters infrastructure as citizens seek higher assurance about safe, reliable drinking water and higher environmental expectations around urban and freshwater.
"Our three waters system faces critical funding and capability challenges in delivering this.
"With pressures such as aging infrastructure, population changes, increased tourism numbers and the need to build in resilience against climate change and natural events, the situation will get much worse if we do not address it."
Ms Mahuta will take detailed proposals on the shape and form of the arrangements to Cabinet in June next year.