Our four territorial authorities (TAs) have now linked arms, unanimously choosing to recommend for consultation a regional approach as their preferred option for managing our water services – drinking water, stormwater, wastewater.

Preferred option: A ‘Regional CCO’ (Council Controlled Organisation)

Public consultation on this matter will commence 12 May and carry to mid-June, to be followed in July by public hearings for those who wish to vocalise.

Comprehensive consultation documents are now being finalized, and from the drafts I’ve seen do a good job of laying out a complex set of issues and choices.

So, I won’t try to get into the weeds here, but just flag some of the key considerations that have led councillors across the region to this shared recommendation.

The ‘givens’

Despite far more investing in the last few years, each of the TAs face daunting future investment in water service infrastructure (not to be confused with ‘water security’ or flood protection, which will present additional costs in the Regional Council’s purview).

For example, having spent $248 million over the last 8 years for water infrastructure, HDC projects spending $656 million over the next 10 years; NCC having spent $111 million in the last 5 years, projects $701 million over the next 10 years.

Meeting this need most cost-effectively and to desired future regulatory standards would place individual councils under severe budget constraint, making the ‘go it alone’ business-as-usual (BAU) path risky at best for some, impossible for others.

The BAU path would add most substantially to ratepayer burdens.

Sharing the burden

The collective approach is seen as offering these advantages (all spelled out in consultation documents):

• Economies of scale – do more and better at less cost, with efficiencies growing over time

• Better access to required professional/specialty expertise

• Cheaper access to capital

• Protection of councils’ borrowing capacity for future urgent needs
  [E.g., HDC’s expected debt would fall to $211 million from $489 million; NCC’s debt /revenue ratio would reduce from 156% to 75%.]

• Less cost to ratepayers (you will still be paying more for water services, but ‘less more’)

Regional CCO

• Participating councils are the shareholders in a new entity – councils continue to own the underlying infrastructure assets, but they are held and managed by the CCO. 

• The CCO manages water services so as to meet the priorities of a Statement of Expectations prepared by the council/shareholders.
  [Similar to the practice with all CCOs our councils currently delegate tasks to.]

• The CCO has an oversight board appointed by council/shareholders; it decides how to meet the priorities expressed in the Statement of Expectations.

• The CCO picks up all operating and capital costs and debt.

• The CCO rates water users directly for the infrastructure development and water services it provides.

Key issues raised

• Will local service priorities be appropriately recognized by the Regional CCO? 
  [That’s the purpose of the Statement of Expectations negotiated by the council/shareholders. E.g. which infrastructure projects are earliest to be implemented?]
  
• Will services in ‘poorer’ jurisdictions be subsidised by ‘richer’ jurisdictions? 
  [What councils say at this point is that if all services and infrastructure can be provided more cheaply across the region, then all jurisdictions will benefit. Anything beyond that would presumably be a matter addressed in the Statement of Expectations.]

• Where do the cost savings actually arise?
  [Chiefly from economies of scale, smarter professional planning/implementation, lower cost of capital]

• Are the projected cost savings ‘worth it’?
  [Each council has done its own modelling on this, each says Yes, and each will provide estimates in its consultation documents. E.g. CHBDC expects to save $20 million over the next 10 years. NCC says ‘going it alone’ would increase costs 85%, whereas the regional approach estimates a potential 65% increase.]

• Will the new structure provide adequate transparency to ratepayers?
  [Since water services are clearly moved to the CCO and ring-fenced, its costs should be readily identifiable. Cost savings to councils from not carrying this responsibility will need to be identified by those councils. E.g., NCC says 17% of its rates go to water matters.]

• Can our water assets be sold/privatized? 
  [No, the enabling legislation forbids this.]

• With the water services burden removed from councils’ books, will they simply commit their newly available borrowing capacity to other ‘dubious’ projects?
  [That will become a political question for future councillors and ratepayers!]

• Are the same pockets paying for water at day’s end?
  [Yes. Ratepayers who are water users will be paying $XX to the CCO for water services and $$YY to their TA for the activities remaining in council’s hands. But the ‘promise’ is that the water share will be less than it would be under any other option.]

Make no mistake. The preferred regional approach would represent a transformational shift in how what has been a core council responsibility will be handled in the future. A responsibility each of Hawke’s Bay’s TAs would admit they have neglected in the past.

After consultation, our four TAs will make their final decision. ‘Unofficially’, critical mass to proceed with a Regional CCO would require the participation of HDC and NCC.

Whatever the councils decide, they must deliver a plan to the Government by 3 September.