Hundreds of millions of dollars could be saved over the next 30 years by creating a joint water services organisation for the Eastern Bay and Rotorua, according to a consultant’s report.

Whakatāne, Kawerau, Ōpōtiki and Rotorua Lakes district councils commissioned an investigation into whether a joint council-controlled organisation (CCO) could provide better outcomes for communities than each council continuing to deliver the services separately.

The report by Martin Jenkins consultants was discussed at a Whakatāne District Council briefing recently.

Cumulative cost savings across the four districts between 2029 and 2054, are calculated to be $185 million in capital expenditure and $145m for operating expenditure.

Other benefits of being part of a larger organisation include greater borrowing capacity for asset renewals and replacement, and access to more specialist capability through greater hiring power.

The report says cost savings would not begin for about the first five years after the formation of the CCO, but by 2054, costs were expected to be 11% less than if the councils delivered services separately.

Rotorua and Whakatāne districts would experience the greatest efficiencies, with about $5600 and $5560 respectively in cumulative savings per connection over the same period.

Ōpōtiki and Kawerau districts could expect more modest savings of about $1710 and $1650 respectively.

Ōpōtiki District Council wastewater treatment plant is one of its three waters assets needing renewal. Image supplied

However, the report states all ratepayers would benefit through transfer of council water services debt to the new entity and lowered finance costs.

While councils have varying levels of debt, concerns that ratepayers in low debt areas would have to take on much higher levels of debt from other councils could be managed through “cost-to-serve” pricing.

The pricing structure would require each district to bear its own cost burden, until such time as these debts equalised.

Whakatāne and Ōpōtiki districts are shown in the report as being at greatest risk of not being able to deliver fit-for-purpose water services if going alone, and the greatest benefits to joining a CCO.

Assessments of the current states of the four councils show Ōpōtiki has the highest proportion of assets rated as in poor or very poor condition, which the report says reflects a legacy of underinvestment.

These include 24% of drinking water assets, 41% of wastewater assets and 30% of stormwater assets. Growth in the Hukutaia area would add to the demand for investment.

Ōpōtiki also has the poorest history of being able to deliver capital projects, having delivered only 41% of projects over the 2019 to 2025 period.

Whakatāne district has a “significant renewals backlog”, with about $96 million in renewals required, not addressed in its Water Services Delivery Plan.

There are some major renewals and infrastructure upgrades required, increasing affordability pressures and limited financing headroom for future needs.

The biggest and the smallest of the districts, Rotorua Lakes and Kawerau respectively, are in comparatively good shape, according to the report.

Kawerau has no assets rated as being in poor condition, though the report acknowledges the accelerated deterioration of assets because of being in a geothermal zone.

Another consideration for Kawerau is its reliance on a small number of large industrial customers to support water revenues, sitting alongside high levels of socio-economic deprivation limiting its ability to absorb loss of these industries.

Rotorua Lakes district, which has assets greater than the three Eastern Bay councils combined, is in the best position to manage its own water services.

However, it would also benefit from the largest per-connection savings of the four districts and other benefits of being part of a larger organisation.

The councils are expected to make a final decision about whether to progress a joint CCO for water services delivery in December.

The investigation was born out of the Government’s Local Government (Water Services Preliminary Arrangements) Act 2024, in which councils had to submit Water Services Delivery Plans to the Secretary for Local Government for approval.

The four councils had plans approved to continue providing services in-house until July 1, 2028, with the requirement that a joint service be investigated.

The report was commissioned in February, before the May announcement of the Head Start reform programme, in which councils are intended to form joint unitary councils to deliver both district and regional council services.

The report noted that this and other legislative and regulatory changes could affect the outcomes as stated in the report.

LDR is local body journalism co-funded by RNZ and NZ On Air.