03/04/2026
LOCAL WATER DONE BADLY
Time for a refresher.
Timaru District Council has spent the past few months deliberating on water reform , I use the word deliberating, though that word suggests a level of clarity and direction that has been notably absent.
What started as a four-council model quickly became three… then effectively one.
Then 3waters became 2waters.
Then, just as things appeared to settle, Timaru “partnered” with Mackenzie, restoring the much vaunted muli-council CCO model.
Now, we discover Mackenzie has also decided to keep "stormwater in-house".
What a tangled web we weave:
- Four councils.
- Three councils.
- One council.
- Two councils.
- Three waters.
- Two waters.
Now… two councils, two waters, split accounting and asset management systems.
At this rate, it’s reasonable to ask: Are they going to drop wastewater next?
Because one thing is increasingly clear, from the outset: anything is acceptable - so long as it isn’t in-house!
What are the costs to get to this stage - 2 different consultant reports that I am aware off , then we factor in:
- staff time
- extra reports
- revised models
- legal reviews
- preparation of the commitment agreement
Council has already borrowed $2.4 million to cover some initial costs, still less than the $10 million estimated.
As this has progressed nobody has asked the simple question:
"What if we had just used all this investigation and setup funding to strengthen the in-house model from the start, a proven, efficient, transparent, simpler solution, that has delivered the goods for years."?
The answer involves the DIA , Council's relationship with the DIA and the funding implications of the LGFA, but that is another story.
Yet - Christchurch, Otago, Ashburton and Waimate can do it alone but Timaru can't .....makes you wonder.
There is avenue for change still - joining with Selwyn, Southern Waters or pressure from the DIA may force Waimate to recant their decision - it won't be settled until the new CEO, the new Board , and the Council representatives are gobbling hors d'oeuvres while supping on champagne at the opening ceremony of the yet to be named water company - any guesses on what the name will be?
THE CONSULTATION DOCUMENT
When Timaru District Council consulted on water reform, the message they attempted to deliver was that any option was better (cheaper) than in-house! The obvious question is "if that is true why didn't they pursue this path decades ago - the answer is very obvious, there is no way can you slap a huge amount of overheads, establishment costs over a prudent operation and expect it to be cheaper.
Their consultation documented presented a number of scenarios - Multi Council CCO, standalone CCO and in-house.
No where in this document did they tell the ratepayers that they would have to borrow a large sum to setup the new company - complete with new software, hardware, new premises, recruitment costs, redundancy costs, executive salaries, chairman and board salaries - a sum likely to be $10 million or more would be paid by the ratepayer just for the privilege of satisfying Councillor's blinkered egos. Was this omission deliberate? They did focus on how much you could expect to save though.
No matter which option you chose, the numbers were broadly similar:
Around $1,500 per connection today rising to somewhere between $1,670 and $1,900 by 2034 depending on the model chosen.
The theory was that scale would deliver efficiency and costs would remain manageable when delivered by a "professional" organisation, with a professional board and of course the obligatory highly paid CEO and CFO.
The reality has turned out quite differently:
- down to two Councils - THIS WAS NEVER CONSULTED ON
- retaining Stormwater in-house, this is not a trivial exclusion - THIS WAS NEVER CONSULTED ON
- joint accounting, Asset Management and GIS Systems (and support staff) - THIS WAS NEVER PRESENTED and/or COSTED
These are not minor changes - they are not the same service, different financial structures and implications - this is a different model to that which was consulted on.
Under s82A of the Local Government Act, Councils must ensure that the final proposal is reasonably foreseeable from the proposal consulted on - not something vaguely similar. The community was not given the chance to comment on the situation that is now being implemented.
This a serious issue that needs to be addressed.
Going against staff recommendations ( meeting on July 27) they made the decision to form an in-house CCO - pressured by the DIA shill Marlon Bridge . They had NO mandate to do this - a standalone CCO was an optyion chose by 4 people - yes 4 - not 40, 400 or 4000. Following this the WSDP was produced and we find that the cost of 3waters per household would increase to $2588 by 2034. That is roughly $700 higher than what was " presented" in the consultation document. You could forgive "an error" of 10% - but 40% - that in my view is misrepresentation.
The reality is that Council opted for a standalone CCO, based on a consultation document which failed to present the options being delivered and grossly under estimated the true costs. This is not a plan; it’s a ratepayer-funded experiment in deception. The “standalone” CCO looks more like an expensive monument to inefficiency, with Timaru residents footing the bill for Council’s obsession with CCO's.
They’re planning to spend $2 million on new IT systems, even as they lose a major part of their workload to the new entity. So we’ll be paying for two sets of systems - one for Council and one for the CCO, along with the staff to run both. In the private sector, that would be called wasteful. In local government, it’s called “strategic planning.”
By moving water and wastewater into a CCO they are effectively transferring 40-50% of their core activities, the question has to be asked is this level of expenditure still necessary and why? Likewise it would not be unreasonable to assume that the "new" CCO will require similar expenditure for it's new systems.
COSTS (taken from Timaru's WSDP)
From 2024 to 2034, the combined cost of running water and wastewater services almost doubles, even though the number of households barely changes.
- Payments to staff and suppliers rise from $8 million to $17 million.
- Corporate overheads climb from $4.6 million to $8 million
- the water rates per household jumps from about $1157 to $2182
- Loans increase to $169 million - that is roughly $7000 (debt) per household
- Interest on the loans is approx. $9 million per year
- $80.4 million will have been paid in interest over the 10 year period
- There appears to be no plan in place to repay the loans
In summary - for every $100 of Water and wastewater rates collected
- $30 goes to staff salaries and suppliers
- $16 pays interest on debt
- $14 gets swallowed up by corporate overheads, Board and Administration
- $40 is left for maintenance and renewals
While this is happening the expected reduction in Council rates is not being realised simply because they have chosen to keep Stormwater and associated support systems in house.
Based on the Council’s 2033/34 projections, nearly 60% of all targeted water rates are consumed by operating costs - staff, interest, and overheads - before a cent goes into infrastructure! The rest of the spending is funded by more borrowing and miscellaneous revenue - this has to be a joke surely?
MacKENZIE COSTS
- Payments to staff and suppliers rise from $1.5 million to $1.9 million.
- Corporate overheads climb from $2.1 million to $3 million
- the water rates per household jumps from about $1043 to $2675
- Loans increase to $56 million - that is a significant sum and is roughly $12,533 (debt) per household
- Interest on the loans is approx. $9 million per year
- $20.2 million will have been paid in interest over the 10 year period
In summary - for every $100 of 3waters charges collected
- $15 goes to staff salaries and suppliers
- $23 pays interest on debt
- $24 gets swallowed up by corporate overheads, Board and Administration
- $38 is left for maintenance and renewals
What can you glean from this - Mackenzie's debt per household is almost double Timaru's and Corporate overheads are high for a small Council (not unexpectedly). What is apparent in both organisations is that the amount spent to maintain infrastructure is low and the majority (rougly 60%) of water charges are spent on staffing and loan costs. The benefit to MacKenzie from joining a CCO is significant.
If you were a savvy commercial operation you would not be entertaining MacKenzie as a partner, but what it does for Timaru is allow them to spread their onerous bureaucratic costs across more consumers - but that is on the assumption that MacKenzie already burdened with corporate overheads can ditch them. We have yet to see a joint WSDP.
PRICE HARMONISATION
Council have been noticeably quiet on this.
Harmonisation is a policy where all households administered by the CCO pay the same price per connection regardless of previous investment, asset condition and future investment.
In practice this will see Timaru, which has historically invested more consistently, subsidising other Councils who have not invested to the same degree.
Given the cost per connection in the figures above you can see that Timaru will be subsidising Mackenzie ratepayers to a large extent.
DID IT HAVE TO HAPPEN?
The short answer is NO. The actual drinking water rules have not been defined. The current law requires safe water and good operational management, not immediate large-scale capital upgrades. The future capital costs relate to rules that are still under development, not yet law.
Not enough has been said about the rising cost of water services and the increasing debt that will be carried by Timaru ratepayers. One point needs to be made very clearly: - most of the major capital investment being planned in the WSDP is not being required by any regulation that exists today.
The law currently in force, the Water Services Act 2021 and the 2022 Drinking Water Standards, requires safe drinking water, proper risk management, and routine testing. These are operational and monitoring standards. They do not mandate the large-scale treatment plant rebuilds, network renewals or wastewater upgrades that are currently being programmed.
The major cost drivers in the WSDP arise from anticipated future rules from Taumata Arowai which are "still in draft form". They have not been finalised, confirmed, or given implementation timelines. In other words, Council is building for rules that do not yet exist.
This has forced Councils into accelerated capital programs resulting in increased debt, high interest costs that are not required by current regulation. If Councils had of been left alone, renewals could have been spread more evenly, the requirement for large loans would have decreased and the interest burden would have reduced. The questionable Improvements in water quality would still have eventuated but in a manner that avoided this CCO requirement.
CONCLUSION
There are some winners:-
The LGFA - guaranteed borrowers forever, paid on time, every time.
The new CEO and CFO - new title, new budget, no history to defend, huge salary
Timaru’s current CEO - same $500,000 salary, less responsibility.
The Council - risk passed off to a CCO, accountability blurred but still costs ratepayers $750,000 per year
The DIA shill, Marlon Bridge will get his annual bonus
The Software and IT hardware companies
Consultants rubbing their hands with glee - knowing this is only the start
And the loser?
You - the ratepayer
You didn’t ask for it, you didn’t vote for it, it isn't necessary and now you’re paying more for something you never wanted in the first place.
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