Working party to recommend keeping city's water services in-house

A working party considering the future management of Dunedin's water, wastewater and storm water network is to recommend the city council keep the service in-house.

The group has been investigating whether a council-controlled organisation (CCO) should be created to run the city's $1.6 billion water network; another CCO, Delta, should take over the network; or the council should keep services in-house and investigate how to run the operation better.

After 18 months, 13 meetings, multiple reports and external expert review, the working party would give a report to councillors next month recommending the "enhanced status quo" option, working party chairman Cr Andrew Noone said.

The option was preferred because, among other things, the council was able to maintain direct control over the operation of the network and asset management; it could retain governance responsibilities, meaning it could directly make decisions about the network's future direction; and it avoided a public debate, when the working party felt there was not enough evidence to justify the change.

Under the preferred option, the council's water services department, which employed more than 100 staff and took up a "considerable chunk" of the council's total operating budget, would continue to be reviewed to find savings, and the creation of advisory an board would be investigated.

A board, which would possibly consist of three experts in the field, was felt by the working party to be a way to bring some commercial thinking into the council's operations, Cr Noone said.

"The general thinking was perhaps we could do better."

The decision to recommend the enhanced status quo was "very much" swayed by a peer review by Australian consultants Morrison Low and Associates, received in June. It concluded a new CCO was the best idea, but was problematic because of the public consultation process that would be needed; the loss of governance and control over asset management and planning for the future; the cost of establishing a CCO; and the council being stranded with the costs of existing pan-council services, such as IT and other support services, minus its biggest department.

Council general manager city operations Tony Avery said there would be some savings in letting go of water services - at one stage, a CCO was predicted to save the council $12 million over 10 years and a Delta option to save the council $2 million to $3 million a year and return dividends of about the same each year - but savings were not the only factor under consideration.

The focus was on the broader city goals, as opposed to a straight commercial result, and a commercial entity might not have the same consideration as the council for things like asset management or planning for climate change.

The council's water and waste services staff, who were directly affected by the report, were yesterday informed of its contents.

The investigation was part of an extensive review of the council's water department that has been ongoing for two years.

Cr Noone said the working party called in a consultant to examine the future management of the network because it did not have the expertise to "really challenge" the numbers it was presented with.

He was unable to say yesterday how much the consultant had cost, or the costs of the whole investigation, but he believed it was a "full and thorough investigation" and worth doing because it focused on how the operation of the network could be improved.

Asked to what extent avoiding the public debate about whether to outsource the water network to a CCO was a factor in the recommendation, Cr Noone said it was not a "game breaker", but it was something the working party was conscious of, and in the end it was not confident the benefits of a CCO stacked up enough to justify that process.

The council's finance, strategy and development committee will consider a report on the working party's recommendations on September 5.

The report and associated documents will be publicly released next week.


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