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A tentative agreement has been reached between the Queenstown Lakes District Council and the Government for $9.48 million to improve water quality.
The money would come from central government to improve drinking water, wastewater and storm water management.
Councillors agreed to sign a memorandum of understanding during an extraordinary meeting on Thursday, but several raised concerns over the Government-led Three Waters Delivery Reform Programme.
In July, Government announced a national $761 million funding package to maintain and improve water infrastructure, in recognition of the fact local authorities may have depleted resources following Covid-19.
The proposal was to explore use of "larger scale providers" to realise "significant economic, public health, [and] environmental" benefits, the council paper said.
Queenstown council is entitled to $4.74 million local funding and a share of the wider $20.6 million regional funding, which the Government has suggested is another $4.74 million.
However, the money would only be given to QLDC if a funding agreement and delivery plan could be finalised by September 30.
Several councillors raised concerns over QLDC relinquishing valuable assets to an outside agency, especially after the council had only just approved its own "three waters" bylaws.
Cr Niamh Shaw was concerned the new bodies paved the way for "privatisation".
The council paper said the "Government’s starting intention is for publicly-owned multi-regional model", but a final decision would be taken after discussion with local and regional councils.