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General
A CCO is a council controlled organisation owned by a council but operating at arm’s length from the council. A CCO has a Board of Directors who focus on achieving what their council owners expect of them. What their council owners expect of them is set out in a Statement of Expectations.
Southern Waters will be a joint CCO delivering water, wastewater and stormwater services on behalf of each of the shareholding councils – Central Otago, Clutha and Gore District Councils.
Southern Waters will have independent, qualified directors who are appointed by the shareholding councils.
It will take over the 3 Waters assets and liabilities of the shareholding councils and start delivery services on 1 July 2027.
Details of Southern Waters will be outlined in the Shareholders’ Agreement.
The Board of Directors ensure the CCO achieves its strategy and objectives and meets all statutory responsibilities. They do this on behalf of the shareholders (the councils).
The Board is made up of directors who focus on making the CCO “successful” – success being defined in the Statement of Expectations.
Directors are people who are experienced in governance/leadership in commercial, strategic and business activities. They cannot be current elected members or staff of councils.
Elected councils ensure community interests are represented in the Statement of Expectations (and through them the CCO remains locally accountable).
CCOs have the ability to borrow significantly more, via the Local Government Funding Agency, for water infrastructure investment and service delivery than they would if water services were retained in-house. Councils won’t have to consider the three waters debt as part of their total debt profile when borrowing from the LGFA. This frees up their borrowing capacity for other projects, should they wish to.
Yes, water costs are rising nationwide due to stricter standards, infrastructure upgrades, and impacts from climate change. The key question is how we manage these rising costs. Southern Waters will ensure increases won’t be as high as if water services delivery were in-house or a stand-alone CCO.
This is achieved by
- Economies of scale – by working together, costs are spread out, and operations become more efficient.
- Strategic procurement – buying in bulk and establishing longer-term contracts.
No, water assets will remain publicly owned. The law prevents councils from privatising water assets.
Bringing together the drinking water, wastewater and stormwater services of three councils into a new entity is complex.
The budget to set up Southern Waters is still being worked through. Modelling completed by Morrison Low Advisory estimates the indicative costs will be $8.8 million.
This figure is about 1.5% of the combined 10-year capital works programme for Southern Waters of $560m. It equates to about $690 per connected property spread over 30 years – about $23 a year, based on approx. 25,000 connections and establishment costs being loan funded.
Establishment costs will be loan funded. The debt will be transferred to the entity when it’s set up and shared equally across the Councils.
Establishment costs will be captured within the overall borrowings for the entity. They are offset by the efficiencies gained over the first 10 years of operation. These medium-term efficiencies add up to $390m over the next 30 years.
Southern Waters will be responsible for charging for its water services. This will no longer be part of your council rates. Water bills may become a separate charge, similar to your power or internet bill, paid directly to Southern Waters, or the Council might collect them on our behalf. This is still to be determined.
An economic regulator (Commerce Commission) will monitor pricing to ensure affordability and fairness.
Local Water Done Well
Local Water Done Well is the Coalition Government’s plan to address New Zealand’s long-standing water infrastructure challenges. This includes stormwater, wastewater and water supply infrastructure. It replaces the previous government’s Three Waters reform proposals.
It aims to:
- Tackle New Zealand’s long-standing water infrastructure challenges by enhancing the quality, sustainability, and affordability of water services nationwide.
- Introduce new economic and quality regulations to improve service standards.
- Ensure water services are future-proofed and financially sustainable.
- Make water services delivery more effective and efficient.
There will be new rules for investment, borrowing and pricing and new options for how councils deliver water services.
Councils throughout New Zealand are required to formulate a plan (Water Services Delivery Plan) to show how they will deliver water services that meet these new water quality and infrastructure standards while being financially sustainable in the long-term.
The Water Services Delivery Plan must specify the service delivery model we propose to use in the future. It must also show that the delivery of water services will be financially sustainable and meet new regulatory and environmental standards by June 2028.
Financial sustainability means revenue from water services (the charges residents and businesses pay) is sufficient to meet the costs of delivering water services. This includes meeting all regulatory standards and making long-term investments in water services.
How councils approach achieving financial sustainability can differ depending on local circumstances. Councils need to consider the balance between three key factors.
These factors are:
- Revenue – is there sufficient revenue to cover the costs (including meeting debt repayment and interest charges) of delivering water services?
- Investment – is the projected level of investment (in new treatment plants, replacement pipes etc) sufficient to meet levels of service, regulatory requirements, and provide for growth?
- Financing – are funding and finance arrangements sufficient to meet investment requirements?
Transformational change is mandated because water services in much of New Zealand are suffering from longstanding, serious challenges, mainly due to insufficient investment over a long period.
Councils need significant and sustained investment over the coming decades to fix water networks, which are at risk of critical failure in places. Urgent attention is also needed to enable new housing growth, provide safe drinking water, improve environmental water quality and enhance resilience.
Our existing resources are not enough to meet future water service demands and evolving regulatory requirements. An in-house model would require substantial investment to comply with new regulations and wouldn’t meet financial sustainability rules without significantly increasing charges.
Plans are a requirement under the Local Government (Water Services Preliminary Arrangements) Act
The plans are a ‘one-off’ way for councils to reflect on their current approach to the delivery of drinking water, wastewater, and stormwater services and demonstrate their commitment to a future model that is financially sustainable and meets quality standards.
Water Services Delivery Plans:
- Must include detailed information about water services operations, assets, revenue, expenditure, pricing, future capital expenditure, and how councils plan to finance and deliver their preferred delivery model.
- Are for a minimum 10-year timeframe but can be up to 30 years. The first three years must be detailed.
- Must demonstrate how the water services will be financially sustainable by June 2028.
The Government can reject plans if they do not meet legislative requirements. If it’s not satisfied with a council’s water services delivery proposal, the Government can also direct what councils should do.
Yes, all territorial authorities must prepare a Plan. This includes all district and city councils, and unitary authorities. It excludes regional councils. Councils can develop plans individually or jointly with other councils if they propose to deliver water services through a joint arrangement.
If a CCO is created, councils appoint a board of directors to run the company. The Board will appoint a CEO, who will be responsible for the day-to-day management of the CCO. The shareholding councils may appoint an interim CEO to help set up the organisation.
The shareholding Councils will provide the CCO with a Statement of Expectations, which will set out the CCO’s expectations, priorities, and strategic direction. Ultimately, the Board will make decisions about water services, but it must affect the statement of expectations.
While the Council will no longer directly manage day-to-day operations, it will be involved in setting expectations for the organisation and monitoring performance against those expectations