Just when DCC thought no-one was watching

Evidence Jim’s last hurrah . . .



Dunedin City Council
Media Release

DCC Water and Wastewater Services – A Council Controlled Organisation?

This item was published on 14 Jan 2011.

Following a series of workshops and reports over the past two years, the Dunedin City Council will next Thursday consider creating a new Council Controlled Organisation to run water and waste utility services on behalf of the city.

A Council Controlled Organisation (CCO) is one that is owned by and reports to Council, but operates independently, governed by a board of directors appointed by the Council. It would be commercially disciplined while being funded by the same mix of rates and charges currently funding the services.

About 100 existing Council staff would be directly affected by the change if the CCO is established after consultation. Their positions would be transferred on existing terms and conditions to the new organisation.

Two years ago the Council asked outgoing Chief Executive, Jim Harland, to report on how best to deliver water and waste services into the next 50 years, making it clear that privatisation was not an option as it would be contrary to the existing policy (W101/7) which states that; “Water and sewerage systems should remain in the ownership of the Council either directly or as part of the Council’s operations or through an entity owned by the Council and that the Council is opposed to the privatisation of the city-wide water and wastewater services”.

After consideration of three options – the enhanced status quo, a CCO or a Council Controlled Trading Organisation (which would be required to provide a return on capital) – staff and consultants have recommended the CCO as being the most efficient option. It is expected long-run reduced costs to ratepayers for water services would be about $20 million over 10 years.

This would be achieved through more efficient, commercially focused, processes along with reduced overhead and financial efficiencies.

If the Council approves, the community will be consulted using a special consultative procedure, as defined in the Local Government Act 2002, in the first half of this year. If finally approved, the CCO would be established with a three-year transition period during which it would continue to use Council services such as IT, finance and HR, for example.

Water and wastewater services are currently provided to about 47,000 Dunedin homes and businesses, operating on a budget of about $58 million in 2010/11, a capital budget of $31 million and managing water assets valued at $1.6 billion.

For more information, please contact:

* Dave Cull, Mayor of Dunedin City Council
* Cr Andrew Noone, Chairman Infrastructure Services Committee
* Cr Syd Brown, Chairman Finance, Strategy and Development Committee

Contact Mayor Dave Cull on 477 4000.

DCC page link

Posted by Elizabeth Kerr


Filed under Economics, Geography, Politics, Project management, Urban design

21 responses to “Just when DCC thought no-one was watching

  1. Elizabeth

    ### ODT Online Sat, 15 Jan 2011
    Council to consider water body
    By Chris Morris
    Establishing a new council-controlled organisation (CCO) to manage Dunedin’s water infrastructure could save the city $20 million in a decade, the Dunedin City Council says. The figure was contained in a report to be considered at next week’s council 2011-12 pre-draft annual plan hearing.
    Read more


    Report – Council – 21/01/2011 (PDF, 7.0 MB, new window) Water and Waste Services Review

  2. Anonymous

    I am struggling to see where the $20m savings figure comes from over a decade. The table on page 10 suggests “POTENTIAL net annual savings” of $1.0M per annum, with $0.3M establishment costs, which equates to $9.7M over 10 years. Potential net. Where’s the other $10.7M – what have I missed?

    $20M savings on an operational budget of $58M over 10 years is 3.5%, which isn’t a lot. I’ll assume from the blog previously posted that operating and staff costs have been cut to the bone (and a little bit past). Staff costs are roughly 1% of this total operating budget.

    The other advantage of a CCO is that it can separately raise debt based on its (considerable) assets.

    • Elizabeth

      Anonymous says:
      “The other advantage of a CCO is that it can separately raise debt based on its (considerable) assets.”

      Bingo to that. Will we ever get DCHL et al, under control.


      ### ODT Online Sat, 15/01/2011 – 11:11am.
      Comment by Robert Hamlin on How predictable
      I was expecting this. The water supply is the only asset this city has that is capable of generating significant revenue and profit and that has not either been sold or hocked to the hilt in one way or another.
      The new CCO will be created, it will run for a year or two, and then be sold to pay down Council/Stadium debt – most likely to our secret band of ‘habitual investors’ who are already well in the habit of getting good deals at this community’s expense.
      Read more

  3. Richard

    Just to keep the discussion ‘on track’. What is proposed is a CCO (a council controlled organisation) not a CCTO (a council controlled trading organisation). Accordingly a CCO would be outside the DCHL group and would be appointed by and directly responsible to council.

    That is how it stands anyway, council may have a different idea.

    And I suppose it is relevant to note that under current law, water companies or departments cannot be privatised. I do so because I see Robert Hamlin has continued his lack of understanding of the LGA and its provisions (as evidenced here recently on the Jim Harland thread) on ODT Online today.

    Note: the ODT got it right except in one instance about 2/3rd of the way through when an inadvertent reference is made to a CCTO.

    • Elizabeth

      No offence, but whose track Richard, DCC’s? The slippery slopes.
      Besides, if Robert distrusts DCC you can hardly blame him – look at the track record of the last elected council. Wouldn’t trust the dealings behind this one as far as I could kick it. A very sound debate will ensue in the full public eye – it ain’t going to be pretty at all.

      (next we’ll hear Malcolm or Stuart or Bill or the flowerpot men are the directors)

  4. Richard

    And there should be ‘sound’ debate. And I hope it is an informed one given that the future costs – capital and operational – for water and wastewater warrant are significant – and always will be.

    There is a good basis/model for what is being proposed based on what the former Manurewa City did. (I stand to be corrected on that but it is one of the former South Auckland councils).

    Robert’s understanding of the LGA is sadly anything but given his recent post here and at ODT Online today. (And I am assuming he is the same Robert Hamlin who was part of STS, my apologies if not).

    As for directors, they could comprise the members of Infrastructure Services or have a majority of councillors. Just one of the options.

  5. Anonymous

    There would be roughly $200K annual governance costs (6 directors at $30K fees each). It would be a good thing if these were drawn from outside the pool of DCHL directors.

    In brief, my opinion is that (if it does spin off) a CCO is appropriate for waste/water rather than a CCTO, mostly due the the expectation of no dividend. A scenario which doesn’t work for Aurora even though it is a different form of utility provider.

    I would expect to see a proposal for one more utility CCO to come forward in 2011.

    • Elizabeth

      Frankly, as well as talking about the (joke) possible cost savings we should all be GRATEFUL for – a morally bankrupt approach and trivialisation of the community asset(s), in my opinion – we had better be looking to the moral principles and business ethics of this CCO proposal.

      No skimming, no avoidance, straight to the neck on these.

      I’m sure we have some well equipt people in the community who would want to sharpen their teeth and pens on it.

  6. Richard

    I don’t know which way Council may decide and nor, as far as I know, does anyone else. So let’s wait and see what happens next week when they discuss the DAP.

  7. Robert Hamlin

    Dear Richard,

    Thank you for your comments. I suppose none of us are perfect. For example, I have never been a member of Stop the Stadium. My position is whether the proposed restructure is a CCO CCTO TYPO or whatever, the provision of clean potable water to the community at an affordable price – a basic necessity of both health and life – is perhaps the primary responsibility of Council, and should be controlled by the community’s elected representatives rather than by any other groups of individuals however they are sourced and to whoever they (occasionally) report. I stand by my comments made in the ODT post. I can see no good reason for removing this core service one step further from democratic accountibility. But I can see the potential for quite a few bad ones.

    I also stand by my comments concerning gray papers. It appears that Councillors have a difficult time getting a handle on what is going on within the constellation of organisations for whch they carry legal liability. I do not envy them, given the situation the LGA puts them in by allowing Councils to write their own codes of conduct, rather than spelling this out in the Act itself. If the US Congress can conduct its affairs entirely in public, and without systematically gagging democratically elected representatives, I cannot see why the Dunedin City Council finds it impossible to do so.

    Tell me Richard: If a Councillor is presented with a gray paper from ‘Dunedin City Council’ (an organisation which we are told is under the total control of the Council’s ‘only’ employee); where are they to go to get a second expert opinion on the proposal contained therein if they are not happy with it? If they are constrained by the code of conduct relating to such gray papers it seems to me that they are utterly helpless. They have no more right than an ordinary citizen to ask questions of the officers of the Dunedin City Council than an ordinary citizen, and the CEO can tell them to take a running jump if they feel like it. Access to outside expert opinion on the technical aspects of such reports is also denied to them by the confidentiality requirements of the DCC’s code of conduct.

    One has to develop a thick skin and a degree of patience in this game. However, it all tends to pan out all right in the end if your basic analyses are sound. Did you know Richard that my estimate of the Stadium’s seated capacity at 17,500 (described as ‘rubbish’ on the front page of the ODT by Farry the day after it was published last year), is within three percent of the currently admitted seated capacity?

    Also did you know Richard, that my cost of construction estimate of $12,500 per seat, presented to you some three years ago (also described as ‘rubbish’ all round at the time) is now within 3% of the current estimated cost for the Stadium, if the current 17,000 (plus some) seating capacity and the current estimated $212 million cost of construction remain in place?

    I have considered this situation with some care. For some time my expectation has been that this City will try to privatise its water supply – which is why this opening move came as no surprise to me. Rome wasn’t privatised in a single day, or in a single move, as you may well know. You may well disagree with me, as you have done in the past. We will find out who is right sooner rather than later I suspect, if the suggested timetables in the report in the ODT are adhered to.

  8. Calvin Oaten

    Robert Hamlin’s response to Richard is both timely and informative, based on a sound understanding of the way things work. Pity that Richard, for all his years on council, has, even now, only a vague comprehension of the threats of the LGA. The capitulation by elected councils, and the handing over to a single employee the full control of all process has been the worst thing that has happened in recent times. It would be bad enough if the employee was in some way competent, but the structure that has been created by the departing Jim Harland has removed from elected council any means of oversight. Worse, he has dumbed the existing staff down by removing most, if not all in-house expertise, thus placing the city in the hands of outside consultants and advisers. These have railroaded ideas and agendas through with frightening consequences for the city with elected councils virtually consigned to a vote here, sign here role. The stadium would be the classic example. Huge public opinion running against, but council riding roughshod over all protest, while at the same time being almost oblivious to the real costs and effects of their actions. Nor caring it seems. The result, several heads rolled at the last election, and several others hanging by a thread. The concern now is as Robert says, watch the water proposals get promoted by careful conning of the current lot. Let’s hope someone opens a window in the place and gets some oxygen in.

  9. Richard

    Good Morning, Robert:

    The so-called ‘grey papers’ are those which are placed in the non-public section of an agenda. The CEO makes the initial call within the requirements set out in the LGA but the council can determine whether or not an item should be moved into the non-public part.

    Procedures including the matter of confidentially, “grey papers” et al, are provided for within Standing Orders which has statutory authority. The Code of Conduct is something councillors are required to adopt in regard to their own conduct. So, when it comes to procedures, it is the Standing Orders which carry “weight”.

    The CEO is the principal advisor to council. Council is entitled to ask for any other advice it deems appropriate.

    Providing council has taken advice, individual councillors when making a decision are protected from individual liability making their position quite different to that of a company director whose liabilities are covered by The Companies Act. This was, with respect, something you got wrong when you spoke to your DAP Submission on the Stadium (I think) in 2009.

    Elected members do have more rights than an ‘ordinary citizen’ to ask questions of the officers of the Council. The very fact that they are ELECTED members gives them that right. Technically, questions should go through the CEO but, in practice, that is not how it works as most – if not all – councillors committed to their role develop working relationships with management and senior staff at various levels. Chairs of Committees are also very much part of the networks that develop. The council would not just function if this did not occur.

    That has been my experience and it is one aspect that has, in fact, improved following the reforms of 1989.

    So, some five years ago, I was absolutely flabbergasted when former Cr Leah McBey, used the OIA to obtain information on the Carisbrook Working Party/CST which she was not only entitled to as a councillor but could readily access as the then Chair of Finance and Strategy.

    As for the CEO telling a councillor “to take a running jump”, well there is a procedure in the Code of Conduct to deal with that situation if it should ever arise.

    I am unsure why you have an expectation that this city would privatise its water system given firmly entrenched policy and, of course, the law. This is not the UK or the USA and New Zealanders have clearly demonstrated that have no desire to surrender control of natural resources to privately owned companies whether NZ or foreign-owned. It has been that way for a long, long time and I cannot see it changing. Indeed it would be ‘political suicide’; at national or local level and, I suspect, that Rodney Hide for all his utterings, knows that.

    Finally, I am sorry but I do not accept your view of the way the US Congress conducts its affairs as one a council – or indeed the NZ Parliament – should adopt. Sorry!

  10. Anonymous

    The relevant parts of the Local Government Act 2002 with respect to water services are:

    The Dunedin City Council Policy is W101/7 but I cannot find an online copy on the DCC Website.

  11. Richard

    By the way, Robert: I meant to add that I really have no time at all for the ‘Code of Conduct’. I said so several times around the council table. It is an uneccessary requirement of legislation and so, once complied with, is one of those things best put in ‘the bottom drawer’.

    • Elizabeth

      ### ODT Online Mon, 17 Jan 2011
      Water plan fear voiced
      By Chris Morris
      A proposal for a new council-controlled organisation (CCO) to run Dunedin’s water assets has been roundly criticised by two city councillors.
      Read more

  12. Robert Hamlin


    I note your comment “Providing council has taken advice, individual councillors when making a decision are protected from individual liability making their position quite different to that of a company director whose liabilities are covered by The Companies Act.”.

    If this is the case, and as the advisors mentioned would carry no legal liability, then nobody woud be liable and Councillors could do what they like, regardless of the consequences – Just as long as they took care to get ‘advice’ first.

    This is clearly an absurd situation, and as a result, I would, until recently, have stated that no court would make judgments that favoured such a defence. However, given that the Feltex directors recently and sucessfully used a similar defence, thereby setting a significant legal precedent, you are probably right as of now – Unfortunately.

    While this judgement was made under the Companies Act I have no doubt the ‘advice’ defence that you mention would now be used (successfully) if similar action was brought against any ‘advised’ Councillor under the LGA – thus effectively legalising negligence, recklessness, and thereby corruption disguised as the one or both of two preceding conditions, for both Councillors and their advisors – God help us all.

  13. Richard

    Sorry, Robert. I disagree. You are clearly not familiar with the Local Government Act which is firmly rooted in the principle of acting “in good faith”. It has been that way for many years and has been reaffirmed by any number of legal opinions over the years. The most recent (as I recall) followed the assertions in you made in your submission to the DAP two years ago. The Act certainly does not legalise the things you refer to.

  14. Calvin Oaten

    Richard: “Acting in good faith” Huh???

  15. Robert Hamlin


    You are correct that this is spelled out in the LGA. The responsibilities of Directors are also spelled out in the Companies Act. It all should be clear enough. However, bringing what appears to be a clear cut case under either Act and actually winning it, given the said precedent and others are likely to be two completely different things. This makes the provision of either Act not only useless, but positively dangerous as they create a false sense of security among those that they are supposed to protect.

  16. Robert Hamlin

    My apologies for the state of the previous posting. It suddenly posted itself without warning before I was finished. Not quite sure what happened.

    {We have made edit changes to your last comment. -Eds}

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