17 March 2005

Proposal to turn Manukau Water into a stand-alone company

Manukau City Council is to consider a recommendation from its Strategic Directions Committee to consult with residents and ratepayers on a proposal to turn its water and wastewater services provider, Manukau Water, into a stand-alone company in order to lower costs and save an estimated $5 million over three years. The proposed new structure would be a Council-Controlled Organisation or CCO and the Council would retain 100% control and ownership.

A number of options for improving the way the Council delivers water and wastewater services were presented to the Committee, including returning Manukau Water to a Council department or enhancing its operations as a business unit. The Committee favoured creating a Council-Controlled Organisation because of the savings possible under a company structure.

The Council's analysis shows that the savings to ratepayers would be substantial and amount to the equivalent to a 3% reduction in the Council's total rate requirement. Mayor Sir Barry Curtis says, "This option is the best choice. It will provide cost effective and high quality water and wastewater services and be the best vehicle to promote Council's wider strategic, community and environmental goals.

"Although Manukau Water has performed well and is consistently providing the cheapest prices in the Auckland region, there are opportunities for financial savings and improved performance".

"I must stress this is definitely not privatisation, which is illegal under local government legislation. The Council would retain full ownership and control of all assets, as we have now, and continue to determine how prices are set to consumers." The recommendation proposes that the Council-Controlled Organisation operate with the intention of not making a profit in order to ensure lowest prices consistent with business viability.

The assets of Manukau Water would transfer to a company with its own balance sheet, independent board of directors reporting to the Council, and appropriate financial structure. The Council would set performance targets which the company would be required to deliver.

Should the Council endorse the proposal, there will be public consultation to seek the views of ratepayers and the community. This will take place as part of the draft Annual Plan consultation in mid-April. Manukau Water serves about 315,000 people living in an area covering 552 square kilometers and has infrastructural assets worth more than $1 billion and an annual turnover of nearly $80 million. Manukau City Council will consider the Committee's recommendation at its meeting on March 23, 2005.

ENDS

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