Joint-council option to deliver water services preferred

The Central Otago District Council (CODC) has approved a joint approach to water services delivery with other councils as its preferred option for the Southern Water Done Well consultation in May.

The community will also consider the two other options, similar to the Council’s 2025-34 Long-term Plan (LTP) consultation, which got underway this week. These are keeping water services in-house as a business unit, or a standalone Council Control Organisation (CCO). Each Council in the proposed Southern Water Done Well joint CCO must consult with its community on the various options of water service delivery.

This consultation will begin on 9 May, eight days after the Council’s LTP consultation ends. The future of water services delivery is one of nine items in the LTP consultation, with information and Q&A sessions having begun in Central Otago this week, and will continue until 17 April, finishing with an online session on 22 April.

The four districts councils that have been working together to form a joint CCO, Central Otago, Gore, Waitaki and Clutha to deliver water services across their regions, are also collaborating to produce a joint Water Service Delivery Plan that they are required to deliver to the Government by 3 September.

At Council today (Friday 4 April 2025), CODC Chief Executive Peter Kelly said for the consultation to be effective, each council needed to identify its preferred option to give certainty to the other ‘Group Councils’ prior to those individual councils going out to their respective communities.

“Work is underway to define what a joint CCO would look like and how it compares against the Central Otago District Council continuing to deliver water services in house or setup a standalone Council Controlled Organisation.”

The Morrison Low report on Local Water Done Well, and all the work the councils had done to date was sufficient to inform the decision on a preferred option, he said.

Feedback from engagement with the community and stakeholders would be used to help each council decide which of the service delivery models they wish to adopt and include in a joint Water Service Delivery Plan, he said. It was still open to the 'Group Councils' not to form a joint CCO.

Councillors discussed the estimated cost of setting up a joint CCO – modelled at $13.8 million by the consultant Morrison Low and based on similar set ups around New Zealand. Half the cost would be in establishing a central ERP (Enterprise Resource Planning) system; the purchase of software that integrates and manages assets (estimated at $1 billion across the joint CCO) and core business processes like finance, HR, logistics and invoicing. This would be a capital cost to the project. The other half would be used to cover the cost of establish and transitioning into the new entity.

There was concern that a further consultation after the LTP might cause confusion in the community. One of the issues was the ‘status quo’ option of keeping the water services within Council, which was not considered a viable option for district councils the size of Central Otago District Council, hence the collaboration with other Otago-Southland councils. However, the Government legislation required all councils to include the status quo as an option in the consultation, given the fact that about 20 councils around New Zealand were big enough and had a large enough rate payer base to afford keeping their services in house, and did not have to consider joining with their neighbouring councils in forming a CCO.

Central Otago Deputy Mayor Neil Gillespie said the future of water delivery was likely one of the most complex issues that the Council had seen “and it was going to be hard for people to get their heads around it”: It would be the Council’s role to explain it all the best they could, about the reasons for the need to change, because of the new water regulations and standards.

People might be fearful and might ask the Council about why there was need to change, he said.

“We going have to make decisions that are not going to liked by all, but not everyone’s going to ‘get it’.”

Mr Kelly reiterated earlier comments that the timeframe and cross-over between the two consultations had created a less-than-ideal situation.

"The timeline to submit the Water Services Delivery Plan by September meant that councils still doing their Long-term Plans - and that involves 12 councils around New Zealand - were caught in this position. As we've said before, the timing is unfortunate but necessary to meet the LTP and WSDP timelines."

His report to Council summarised the preferred option.

This option proposes a regional CCO to manage water services for all four councils (Central Otago, Clutha, Gore and Waitaki). The CCO will be jointly owned, with shared governance, financial responsibility, and resource management.

The main advantages include standardised asset management for improved planning and efficiency, shared workforce for increased resilience and career opportunities.

Larger scale enables better access to expertise, specialists and improved systems, and improved contractor attractiveness through larger procurement programmes.

Certainty of long-term funding enables consistent project delivery, and ‘First mover advantage’ for councils forming the joint CCO to design a solution that works for them.

The option allowed for independent professional board appointments via the council process.

Financial separation reduces pressure on council balance sheets.

The preferred option is the least expensive to the customer of the three options presented.

Main disadvantages include investment prioritisation may vary across communities, the joint CCO may independently set charges impacting affordability (potentially offset by regulatory oversight).

There could be potential loss of high-value jobs in small districts, though local presence is likely.

There is a risk of minimum-cost investment decisions rather than enhancing service levels, and a potential reduction in council control (potentially offset by regulatory oversight). Also, less capacity to procure services from individual councils.

The full report is available at: Agendas and Minutes : Central Otago District Council

The meeting recording will be available on: Meeting and Workshop Recordings - Central Otago District Council.