By Leo Lui: Council Candidate Hamilton East
As New Zealand embarks on restructuring water services into council-controlled organisations (CCOs), the challenge is clear: how to harness commercial expertise without spawning unwieldy bureaucracies. CCOs like the proposed three waters entities are designed to operate at arm’s length, yet past experience—most notably with Auckland’s Watercare Services Limited—shows that independence can blur into opacity and unchecked cost escalations if governance, procurement, and staffing protocols aren’t rigorously enforced.
Watercare’s structure exemplifies the CCO model. It is 100 percent owned by Auckland Council yet functions as a limited liability company under the Companies Act, funding itself entirely through user charges rather than council rates or central government subsidies. This arrangement aims to encourage efficiency and innovation; however, it also distances decision-making from elected representatives, raising questions about democratic oversight and ratepayer protection.
The risk of “managerialism” is particularly acute. When CCOs recruit executives and directors without clear merit-based criteria, there’s a danger of cronyism and inflated salaries. Watercare’s former CEO was reportedly the highest-paid executive among Auckland’s CCOs, even as it approved substantial, decade-long water bill increases without direct council initiation. To prevent similar outcomes in the three waters entities, appointment processes must be transparent, meritocratic, and publicly verifiable. As public sector expert Roger Partridge observes, when “anyone can do anything,” deep technical knowledge is devalued in favor of generic management skills, leading to flawed decisions and costly U-turns. In the three waters context, executives should be appointed for demonstrated water-sector expertise, with transparent selection panels and publicly published appointment criteria to eliminate cronyism.
Procurement practices within the new CCOs will determine whether ratepayers get good value. Best practice dictates open tendering, clear evaluation criteria, and robust conflict-of-interest policies. Embedding these principles in the three waters’ procurement frameworks will minimize inflated contract awards and ensure services—from treatment plant upgrades to stormwater pipe replacements—are delivered efficiently. Regular audits by independent bodies, with findings published in accessible formats, can reinforce trust and expose any procedural shortcuts. When firms know they’re bidding under a spotlight, cost savings naturally follow, leaving more funding for critical infrastructure upgrades.
Accountability mechanisms cannot rely solely on the election cycle. While councillors appoint CCO boards, day-to-day operations rest with the board of directors, not elected officials. The mantra “no rates without representation” rings true: user charges set by CCOs ultimately flow from ratepayers, yet the democratic link is indirect at best. Incorporating statutory obligations for regular performance reporting to councils and the public—complete with cost, service quality, and innovation metrics—will tighten the feedback loop between CCOs and communities.
Innovation need not conflict with fiscal discipline. A competitive framework, where multiple CCOs pilot novel solutions—such as adaptive stormwater management systems or energy-efficient wastewater treatment technologies—can spur creativity. To prevent siloed R&D, the establishment of a shared-learning platform is vital. Each CCO should document and disseminate successful approaches, fostering sector-wide improvement without duplicating costly pilot programs.
Key performance indicators for the three waters entities must reflect both cost efficiency and innovation. Cost metrics should cover unit prices, overhead ratios, and capital expenditure per kilometre of network, benchmarked against best practice internationally. Innovation indicators might include the number of new processes adopted, reductions in greenhouse gas emissions, or digital monitoring platforms implemented. Publishing KPI dashboards annually will allow stakeholders—council members, ratepayers, and industry peers—to track progress and hold CCOs accountable.
Staffing the three waters organisations on expertise rather than political affiliation is non-negotiable. Clear job descriptions, external recruitment panels, and independent reviews of hiring decisions can reduce the influence of patronage. Embedding these checks within governance charters, coupled with whistleblower protections, will ensure that technical competence underpins service delivery and strategic planning.
Finally, to avoid the cost-inflating duplication seen with standalone corporate functions in CCOs, shared services agreements between councils and water entities can strip out redundant layers of HR, finance, and communications. This streamlining preserves the benefits of arm’s-length management while keeping overheads—and, by extension, water charges—under control. As the three waters reforms roll out, adherence to these principles will determine whether New Zealand’s water future is marked by sustainable innovation or smothered by bureaucratic bloat.
References
1. NZ Herald, “Landlord and tenant water bill confusion,” https://www.nzherald.co.nz.
2. Interest.co.nz, “Brian Easton on three waters accountability,” https://www.interest.co.nz.
3. Watercare Services Limited, “Our Organisation,” Official Website, https://www.watercare.co.nz.
4. Auckland Council, “CCO Governance FAQ,” Official Website, https://www.aucklandcouncil.govt.nz.
5. Greg Sayers, “Auckland Transport is not truly controlled,” Public Statement, 2021.
6. NZ Herald, “Wayne Brown plans to reform CCOs,” https://www.nzherald.co.nz.
7. NZ Herald, “Watercare decision to double water bills,” https://www.nzherald.co.nz.
8. NZ Herald, “Tenants pay landlords’ water charges,” https://www.nzherald.co.nz.
9. Watercare Services Limited, “Who is responsible?,” Official Website, https://www.watercare.co.nz.
10. Kapiti News, “Three Waters and local voice,” https://www.kapitinews.co.nz.
11. Stuff, “Watercare CEO highest-paid CCO executive,” https://www.stuff.co.nz.
