Joint CCO best water option: Infometrics
At a recent meeting of Southern Water Done Well (SWDW), political leaders and senior staff heard from Infometrics chief executive Brad Olsen and his views on water reforms.
Southern Water Done Well project leader Andrew Strahan said Infometrics was provided with documents to review.
Those included the latest Morrison Low report, which included work last year for the group of eight Southland and Otago councils, a peer review of the benefits, briefings for elected members and consultation documents.
SWDW's four partner councils — Waitaki, Gore, Central Otago and Clutha district councils — are consulting on three options for the future delivery of water services to meet the government's Local Water Done Well legislation.
Their preferred delivery model is a jointly owned council-controlled organisation (CCO).
The Infometrics chief executive and principal economist agreed, saying it provided a strategic, carefully considered approach to meeting future water services challenges.
"Status quo is just not going to cut it any more. And if it does, it'll become so expensive that the community won't tolerate it ... the government clearly isn't tolerating it already.
"So, effectively, things needs to change."
One of the most compelling advantages of SWDW's preferred model was the leap in bargaining power it delivered.
Individually, the four councils each represented just 1% to 2% of the South Island's population, placing them 13th to 18th out of 23 South Island councils, in terms of scale.
By forming a jointly owned CCO, they collectively moved into the fourth-largest position, representing 6.6% of the South Island's population.
"That shift in scale is transformative," said Mr Olsen.
"It gives councils and their communities far greater influence when negotiating with contractors, accessing skilled staff and securing funding. In a tight infrastructure market, scale gives you options and leverage."
Even greater efficiencies would be gained if other councils were accepted into a jointly owned CCO at some point in the future.
Mr Olsen noted SWDW's deliberately conservative approach to financial modelling for the jointly owned CCO and emphasised the importance of looking long-term.
While short-term financial gains might be modest, water assets were long-term (20 years+) and by year 20, modelling for other joint water services delivery entities had shown potential savings of up to 20% compared to going it alone, he said.
Just as significantly, the joint approach improved resilience, attracted talent and helped councils meet more demanding compliance standards without overburdening local ratepayers.
Mr Olsen believed there was potential for even greater gains beyond initial projections.
"We've reviewed the assumptions, and they're conservative. That's appropriate, given the significant changes that have to happen, but even under these conservative assumptions, the numbers still stack up."
The conservative modelling still projected 15%-16% operating and capital efficiencies being achieved over "roughly a decade", which was "a similar timeframe to achieve efficiencies as seen in other spaces".
Morrison Low's modelling of the benefits of a jointly owned CCO shows SWDW consumers would save $44 million by 2033-34 compared to where costs would otherwise increase to. In its first 10 years, the jointly owned CCO would deliver $82 million in savings to consumers.
Olsen also highlighted that the proposed model retained community ownership while delivering greater long-term benefits through scale and co-ordination.
Southern Water Done Well's preferred delivery model gave councils the scale, flexibility and financial sustainability they simply could not get on their own while retaining community ownership and voice, Mr Olsen said.
Southern Water Done Well consultation closes this Friday.
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