31/07/2025
INFORMATION ABOUT LOCAL WATER DONE WELL
The Corporatisation of Water
Local Water Done Well?
Glen Crowther
Jul 31
On Monday 5th August 2025, Tauranga City Council (TCC) will decide whether to put its Waters assets into a Multi-Council Council Controlled Organization (CCO). This is a special form of council/s-owned corporation that could own and operate all our water and wastewater (sewerage) infrastructure from July 2027 onwards.
That same day, Western Bay of Plenty District Council (WBOPDC) will also be asked to make the same decision: to approve a 3-council Waters Organisation CCO with TCC, WBOPDC and Thames-Coromandel District Council (TCDC).
Currently, elected councillors have direct control and set your water and wastewater rates. If we choose a CCO, the CCO’s Board of Directors will be in charge.
We can also transfer some or all of our stormwater assets into the Waters Organisation, in which case the Board will also set the annual stormwater charge.
The key legislation that is forcing NZ councils to make this decision before 3rd September this year has not even been passed. However, the Draft Bill states:
“A water organisation established under section 36 must be (a) a company incorporated under the Companies Act 1993”.
It goes on to state that the company “must be wholly owned by—
(a) 1 or more local authorities; or
(b) 1 or more local authorities and the trustees of 1 or more consumer trusts; or
(c) the trustees of 1 or more consumer trusts.”
This corporatization option is being pushed as a ‘sustainable’ way forward that will deliver “efficiencies”, “lower charges” and “better governance” by Boards of Directors – most likely ‘fly-in, fly-out’ directors that don’t know the local area very well.
Remember the Electricity Reforms?
At the start of the 1990s restructuring of NZ’s electricity assets ownership, the public were told that putting our electricity lines (natural monopolies, just like water pipes) into companies would improve long-term decision-making by Boards of Directors, and it would increase efficiency and reduce prices. We got the opposite.
People were also promised ongoing community control, no privatization and more sustainable energy outcomes. Again, many New Zealanders got the precise opposite, with monopoly assets being privatized within the decade. The places that rejected the government’s preferred model were the ones that retained local community control, while those areas (such as Tauranga) that embraced it got privatization and a worse outcome for their communities.
Financial Sustainability
The CCO option in the 5th August Council Agenda is projected to add $161 million to Tauranga’s waters debt by 2034, a 22% increase on our current $719 million debt in just its first seven years! Tauranga’s current debt is already the highest per capita of any NZ city, so this would add to the already-significant burden on future generations.
There are also many unanswered questions about the interfaces between all the key players involved if there is a CCO, which will lead to additional complexity, overheads and costs. These include:
1) The Waters CCO itself
2) Each council who is a shareholder of the CCO
3) Any other CCOs or councils that have shared services agreements with our CCO
4) Taumata Arowai (the water regulator)
5) Commerce Commission (the economic regular)
6) Department of Internal Affairs (the lead government agency)
7) Ministry of Health (lead health agency – and currently in charge of fluoridation)
8) Regional Council/s (environmental protection role)
9) Other neighbouring councils that are not shareholders in the Waters CCO
10) Iwi and hapu (a key partner, especially in regard to resource consents)
11) Developers (who directly pay significant amounts towards waters infrastructure)
12) Ratepayers (who’ll get the bills)
We also have very little information about the impact on the remaining council’s finances if we put Waters assets into a CCO. The current assumption of no ‘stranded costs’ (overheads remaining with council) after the first few years seems unrealistic, as council staff, consultants and councillors will still need to put time, money, and other resources into their interactions with the CCO.
Looking to the Future
We are being asked to approve the CCO before:
- waters legislation is passed
- critically important new planning legislation is finalised
- decisions are made about the future of Regional Councils
- we have even had discussions with our prospective partners
We are proposing to double the number of chief executives that ratepayers fund, double the number of executive teams, and add an expensive new layer of corporate governance. So at the same time that some prominent politicians are talking about cutting the number of councils and CCOs, we are planning to do the opposite!
The evidence shows that bigger councils are not better, but smaller entities aren’t necessarily better either. Turning two council bureaucracies into three right now seems a bit nuts.
What’s more, we have undertaken no scenario planning. What other large business or entity would determine its long-term structure before doing that?
One scenario is if regional councils remain as now, with planning undertaken at a regional level instead of the current City and District Plans. In that case, if we join a CCO with Thames-Coromandel, we’d need to deal with two Regional Councils and two Regional Plans – a significant issue for the CCO that will add further costs.
A second scenario is that regional councils cease to exist by 2028. If that happens, the other BOP councils will likely need to restructure to take on “unitary council” roles. Would we end up with six BOP Unitary Authorities? Or should we consider whether TCC and WBOPDC should amalgamate or at least work closer together when combining those Regional Council functions?
If we rush into setting up a Waters CCO now, it will ‘muddy the waters’. The inevitable argument would be: “Don’t scrap the brand new CCO, as that required expensive setup costs and would result in lots of expensive redundancies.”
The irony of that is that if we launch a Waters CCO now, then even if Tauranga and Western BOP Councils amalgamate in the future, it’s likely we’d end up with the same number of entities in the subregion as we have now!
On the other hand, if we wait to make our final decision until we see the Waters legislation and Resource Management legislation, we’ll have a much better understanding of the ‘lay of the land’ after the upcoming council elections and government reforms.
An ‘Arranged Marriage’ (with a ‘Divorce Off-ramp’)
Our August 5th decision is framed as signing a Commitment Agreement with ‘off-ramps’ to withdraw from that Agreement if due diligence shows up any major problems. We are told that due diligence can only begin after we sign the Commitment Agreement - a bit different to standard practice, when due diligence happens before the commitment.
I’ve likened it to an arranged marriage, as we haven’t even sat down with our prospective partners. We are being asked to commit before we spend any time with them. What’s more, we knew Thames-Coromandel Council (TDCD) was a favoured option when we consulted, but we didn’t tell our iwi and hapu, let alone the general public, that TCDC was even being considered.
The off-ramp (divorce) is an option, but it would leave all three councils with a major problem and ‘egg on our faces’. I struggle to imagine TCC publicly committing to a 3-way CCO and then our Mayor telling the Minister of Local Government a few months later that we’ve changed our mind and are now going it alone.
Moreover, it seems unlikely that our due diligence process will throw up anything so surprising that it forces us to change our decision. We already know from its own documents that Thames-Coromandel Council has aging pipes in its towns, resource consents expiring in the next 10 years, significant natural hazard issues, and historical underinvestment in its capital programme.
Any decision to change course will be far more subjective – and in my view, unlikely to result in a 180 degree turn if we’ve already told the government Ministers that we’re proceeding with a collaborative model that they favour.
Ultimately, the only reason TCC is looking to go with Thames-Coromandel Council is its low debt and high debt ‘headroom’. So it’s an attractive partner if we wish to borrow lots more debt - which is exactly what our staff have recommended – but that will change by early next decade.
More importantly, in the long term, Tauranga will continue to have a much higher population density than Thames-Coromandel - and it is density, not the overall number of customers, that is the critical factor in determining cost per household. Putting it simply, TCC has far more people paying to maintain shorter and newer pipes, while TCDC has fewer people paying to maintain longer (and in many cases older) pipes.
Why the Rush?
Some of us in Tauranga and the Western Bay been pushing the ‘Rotorua Option’. Rotorua Lakes Council will keep direct control of its waters assets for the next three years, and then form a Multi Council Waters CCO in time to meet the government’s final deadline of July 2028.
However, it will only do so after due diligence shows that is the best option for the people of Rotorua - otherwise it will retain direct council ownership and control.
As Mayor Tania Tapsell put it, that decision “will give the council sufficient time to properly investigate the Council Controlled Organisation (CCO) option and to engage with the community and iwi before a final decision in three years about whether that is the most appropriate model for the district. We need time to take the community on the journey and to consider the potential benefits.”
A similar approach is being taken by Whakatane District Council. If TCC and WBOPDC do the same, it will allow us time to do our due diligence first, and then work together with other BOP councils, iwi and local communities to determine the best structure for our region.
This approach makes good sense and puts the interests of local people first, the region second, and any preferences of the Minister third.
A Stormwater Sting?
Stormwater manages rain runoff to prevent flooding. Under the current legislative framework, TCC’s proposed plan to put Council’s stormwater services into a CCO will likely result in the ‘rich’ paying much less and the ‘poor’ paying lots more.
The draft legislation states:
…the water organisation may…
(a) charge a fixed or variable charge:
(b) charge according to water usage or wastewater flow:
(e) charge on the basis of an hourly rate or any other rate of service or by any other method...
A charge set under this section—
(b) must not be based on, or take into consideration, a property’s rateable value
If stormwater goes into a Waters CCO, the CCO won’t be able to levy a stormwater charge via property rates. That would result in a $5 million Marine Parade property paying a much lower stormwater charge than now, whereas the owner or renter of a $700,000 home will pay a much higher stormwater charge than now.
That’s a financially unsustainable outcome for many of the lowest socio-economic families, whanau and elders in our city.
That doesn’t mean we need to employ a separate stormwater team in council. A CCO could still maintain our stormwater pipes via a shared services agreement with the Council, but TCC would remain in direct control. There is little downside and lots of upside from keeping stormwater out of a CCO.
Let’s Do Our Waters Well
My hope is that we don’t rush into a forced marriage, but rather look at the big picture and take a collaborative approach with the rest of our region. That could be via a bigger Waters CCO, but it could also be through an alliance of BOP water entities and/or councils via a shared services agreement.
I’d like Tauranga City Council to support the rest of our Bay of Plenty councils as best we can, while protecting the needs of our own residents and ratepayers. The ‘Rotorua option’ best allows that, as other Bay councils don’t want a Baywide multi-council three waters CCO right now, but they’re very open to an alliance between BOP councils around water and wastewater services, especially if it helps them to be more financially sustainable.
Please keep sharing your views with friends and your elected representatives, as you can help people to stay informed and help us to make an optimal decision that delivers affordable, efficient, sustainable, and locally controlled waters services.
Glen Crowther
Tauranga City Councillor
Email: [email protected]
Phone: 027 3297959
