What is a CCO?
A Council Controlled Organisation (CCO) is an organisation that is owned by a council / councils but operates 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 agreed via a Statement of Expectations.
What is the two-waters Northland CCO?
The two-waters Northland CCO (NCCO) will be a new organisation that will deliver drinking water and wastewater services on behalf of each of the shareholding councils – Whangarei District Council, Kaipara District Council and Far North District Council. It will do this from July 2027 when it becomes operational.
Stormwater assets will remain with their respective councils in terms of decision making and costs, however, a shared service arrangement may be made with the CCO for operations. This is because many critical parts of the system are shared across other council services too. For example, roads drain stormwater during heavy rain, and green spaces in parks and reserves are designed to capture excess water where possible.
The NCCO will have an independent, competency-based board, as required in Local Water Done Well legislation, which will be appointed by the shareholding councils.
How will the CCO be governed? Who makes the decisions?
Local Water Done Well legislation requires the appointment of a competency-based board of directors. Board members will be selected for their expertise in areas such as strategic planning, financial management, governance, leadership, risk oversight, and water industry experience.
The board will work to ensure the CCO achieves its strategy and objectives and meets all statutory responsibilities. They do this on behalf of the CCO’s shareholders (the councils).
The NCCO will have a ‘shareholder council’, including two representatives from each founding council, of which at least one will be an elected member. The shareholder council’s role will be to represent its shareholders and hold the CCO to account via a Statement of Expectations.
How will shares in the CCO be divided?
This is yet to be confirmed, however, legislation provides five options for how shares can be allocated across councils. These include:
- Population allocation: Shares are allocated based on the proportionate population of its service area and updated as these figures change over time.
- Connections allocation: Shares are allocated based on the number of water connections and updated as these figures change over time.
- Net asset allocation: Shares are allocated based on the total net value of the council’s assets transferred to the CCO at the time of establishment.
- Equal proportion allocation: Shares are allocated to each council equally.
- Combination: Shares are allocated through a combination of the methods above. For example, 50% of the shares could be allocated based on number of water connections and 50% based on net asset value.
Will there be a ‘lead’ Council?
There would not be a ‘lead’ council, however legislation requires a secretariat role, which could be fulfilled by a participating council, or the CCO itself. The secretariat role is yet to be determined.
What will it cost to establish the two-waters Northland CCO?
A forecast of establishment costs based on the likely scope, timeframes and resource costs to deliver is tentatively estimated at $8m to $15m. This consists of approximately $5m to $8m in establishment costs alongside $3m to $7m in IT costs (both implementation and licensing costs). The final establishment budget would need to be refined based on stakeholder expectations.
Will Whangārei residents be cross-subsidising water costs for the other districts?
The short answer is no. With Whangarei’s water services in comparatively good shape and its assets carrying very little debt, a key concern for Whangarei District Council and the community was that Whangārei may end up cross-subsidising water costs for neighbouring districts if a CCO was formed.
To start with, the CCO will use a financial model that recognises the different starting points of each council in terms of water assets, debt levels and infrastructure investment needs. The CCO will see financials ring-fenced for each district and water charges will be non-harmonised, meaning water charges will be different for residents in each district. This will be reviewed within the first three years of operations.
With many details still to be worked through, further measures are being explored to ensure the CCO will be equally beneficial for each district, prevent subsidisation of costs between districts and set the right path towards harmonised water charges.
This includes exploring options to transfer debt from other Whangarei District Council assets to the CCO. Doing so would significantly reduce Whangarei District Council’s overall debt levels and ensure that CCO balance sheets are better aligned from day one.
Will water get more expensive for Whangārei residents?
The cost of delivering water services is expected to increase in the future, no matter how they are delivered. This comes down to increasing regulatory requirements, the rising costs of maintenance and renewals, and the need to invest in infrastructure to ensure we prepare for future growth and respond to extreme weather.
Today, Whangarei District Council covers water costs almost entirely with funding from ratepayers with very low levels of debt on our water assets. To help manage the expected rise in water costs in the future, it is proposed that the CCO would use debt to fund some assets and therefore share the assets’ costs between current and future users. Using this approach means all the people using an asset end up paying for it over its lifetime, and water charges for Whangārei users could come down, or increase at a lesser rate.
The NCCO will also use a model that recognises the different starting points of each Council in terms of water assets, debt levels and infrastructure investment needs. This will be achieved by keeping financials ring-fenced for each district and having non-harmonised water charges to begin with. Non-harmonised water charges mean water charges are different for ratepayers in each district. For Whangārei, this means water charges would not increase more than they would if services were kept in-house.
As the economic regulator for water services under the Local Water Done Well regime, the Commerce Commission will also oversee the CCO to promote consumer interests and help ensure customers receive value for money for the services provided.
Will the rest of the Council be impacted by water services being separated?
Financially, Whangarei District Council is in a strong position to absorb the changes brought about by water services being separated from council. Our Long Term Plan and Financial Strategy laid the groundwork for changes under Local Water Done Well and there is headroom to incur debt if it were required due to the loss of revenue generated from water services.
It is likely there would be impact on some staff as Council adjusts to service a slightly smaller operation and some staff may transition to the water CCO. The CCO will be established in July 2027 and a transition period will take place after this, so we will use this time to work through options.
Will there be any impact to Whangārei’s levels of service?
No. We anticipate the new CCO will maintain the same high level of service delivery our district enjoys today.
Will Whangārei’s current or planned water projects be deprioritised?
While current projects will continue under the new CCO, projects will need to be prioritised based on the need across the region, as opposed to one district. Prioritisation will consider health and safety, compliance, renewals, environmental impacts and growth as we do today.
What is the timeline for Local Water Done Well?
- March 2025: Modelling of different water service delivery options is finalised
- 27 March 2025: Councillors vote on preferred option
- 2 April to 2 May 2025: Consultation period
- July 2025: Councils adopt preferred option
- July to September 2025: All three district councils work together to prepare a water services delivery plan and must submit it to Central Government by 3 September 2025.
- October to December 2025: Central government reviews the water service delivery plan while councils define partnership terms and key documents, including legal and foundational agreements.
- January to March 2026: Foundational documents are ratified, council technology systems are reviewed, the implementation plan is finalised and approved by central government, and a potential trading name is identified.
- March to June 2026: Trading name is confirmed, key leadership and governance structures are established, the implementation team is onboarded, an office location is secured, and compliance is assessed across councils.
- July 2026 to June 2027: Transfer agreement is executed, the water services strategy is approved, and transition period begins.
What is a water services delivery plan?
A Water Services Delivery Plan (WSDP) is a one-off plan councils are required to submit under Local Water Done Well.
It 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 model.
It needs to demonstrate how the water services will be financially sustainable by June 2028. This means water services revenue is sufficient to meet the costs of delivering water services.
Water Services Delivery Plans are for a minimum 10-year timeframe but can be up to 30 years.