Additional information

Hamilton City Council is proposing to form a joint waters company with Council. The company would be a Council-Controlled Organisation (CCO) governed by an independent Board of Directors.

The company, including all of the water and wastewater assets, would be publicly-owned, with both councils as the only shareholders. It would be responsible for delivering drinking water and wastewater services across council boundaries.

The CCO would build, maintain and operate critical waters infrastructure, based on direction from the council shareholders. Stormwater services and assets would remain the responsibility of each council but would be provided by the CCO. Under New Zealand law, the CCO could not be privatised.

Nationwide, there are big changes ahead for water services. These changes are being driven by the government which acknowledges councils and their ratepayers can no longer afford to keep building and managing costly waters infrastructure on their own. It is too expensive.

In addition to the increased costs, councils are also dealing with increased regulatory rules and costs, higher environmental protection standards, soaring infrastructure and insurance costs and new investment needed to deal with growth and extreme weather. 

Across New Zealand, all councils have been directed by government to consider how they can better, and more cost-effectively, provide waters services in the future. Councils are being strongly encouraged to join with neighbours to create scale (bigger organisations) and drive efficiencies so that, over time, cost increases are minimised. 

Hamilton also has a number of very specific challenges, including building critical waters infrastructure. Without it, there will not be enough houses in the city to meet forecast growth.   Water infrastructure is also needed for businesses to function so our city can thrive.

Like all other councils, Hamilton City Council has considered a number of options. We believe forming a joint water company with Waikato District Council is by far the best option for Hamilton ratepayers.  (Watch this video of a Hamilton City Council meeting where Councillors raise questions and discuss why they think this option is best for the city.)

However, all councils are required by the Government to provide their community with at least one other option to consider. One option must be similar to how we manage water services now (even though this no longer viable in the long-term). To meet this government requirement, a second (but not supported) option is outlined here.

We also considered a third option (but did not include this option in our consultation document, as it is does not meet key criteria).  Detailed information on all three options is in the section below.

Council analysed three options in detail before landing on a preferred option. That analysis is outlined in this Business Case completed in December 2024.

Detailed financial analysis starts on page 28 of the Business Case.

The Business Case is based on nine years of projected financial information (through to 2033/34). That financial information is detailed in Council’s 2024-2034 Long-Term Plan.

The three options considered were:

• Option A: Forming an in-house business unit (enhanced status quo)
• Option B: Creating a new, Hamilton-only water company (a CCO) to own and manage water and wastewater assets and provide stormwater services. 
• Option C: Forming a joint water company (a CCO) with Waikato District Council.  (This is Council’s preferred option).

In analysing the options, key critical success factors were considered, including:

• Regulatory compliance:  How well would each option meet environmental standards, water quality regulations, health and safety protocols and any growth or legal requirements?
• Alignment: Would the options meet end-user customer expectations as well as being strategically aligned with neighbouring councils?
• Ease of implementation: How easily, given organisational capability, could each option be successfully delivered in time to meet government requirements?
• Financial sustainability: Could the option generate enough income to meet its costs and deliver the services needed by a high-growth council (or councils)?
• Operational effectiveness: How well could each option accommodate future growth as well as integrate with other business strategies and plans for the city?
• Three key issues were prioritised.
• Ownership: Maintaining local ownership of assets.
• Environmental and public health:  Keeping the community safe and healthy.
• Communication: Ensuring decision-making was open and transparent.

The Business Case also evaluated how well each option:

Supports Te Ture Whaimana o te Awa o Waikato (the Vision and Strategy for the Waikato River. 

Te Ture Whaimana is entrenched in law to help keep the Waikato River – and its people – healthy. Hamilton City Council has legal obligations under Te Ture Whaimana and wants to ensure the health of the Waikato River remains a priority for the city.

Supports co-ordinated and boundaryless planning and investment. 

We must be able to meet government requirements to support new housing and development.  That means working across council boundaries to get the best, and most affordable infrastructure in place, more quickly and in a way that over time is more affordable for our community. It also means meeting our obligations under Future Proof (a collaborative partnership which helps ensure growth in our sub-region is managed well).

Considers customers

A successful option will create an even playing field for customers irrespective of where they live, will deliver consistent levels of service and will make end-user customers central to all decision-making.

Is financially efficient

We must improve affordability for ratepayers by reducing cost (relative to the status quo) over the long-term and optimising value for money. We need to ensure everyone pays their fair share by spreading costs fairly, over a longer period of time (rather than relying on today’s ratepayers to bear a large proportion of costs.)

Attracts and retains great people

New Zealand has a shortage of waters specialists, and our waters workforce is ageing. We must be able to attract and retain skilled people.

Can work effectively

We need a stable and secure option that supports long-term decision making around water infrastructure. That means insulating decision-making from political cycles, leveraging opportunities for regional collaboration and being able to respond well in an emergency.

Can maximise scale

We want to use the advantages of scale to drive costs savings, appeal to service providers (including contracting companies), and share critical resources.

Make a regional contribution

Any option should contribute positively to the success of the whole Waikato region and strongly encourage regional co-operation.

Based on financial analysis, the evaluation criteria and key success factors, Option C (forming a CCO with Waikato District Council) is the option that Council prefers and is recommending to Hamiltonians.

In summary, the analysis found that forming a joint water company will Waikato District Council will:

Be better for the Waikato River.  This option allows both councils to work together to protect 150k of the river (not just the 16km that winds through the city).

Be better able to support growth. A joint water company will make it easier and more cost effective to work and invest in critical waters infrastructure, across council boundaries. This will have major city and regional benefit.

Be better for water customers.  End-use customers will have a dedicated and specialised water company to liaise with around water issues (rather than dealing with a council which has multiple responsibilities as well as water).

Be more affordable for ratepayers over the long-term.  There is a much greater ability to smooth costs over a longer period time (rather than costs being borne unfairly by today’s ratepayers).

Be better for specialist waters staff. A larger organisation, that only specialises in water, will offer staff better career opportunities, more peer support, and ensure ongoing access to the critical water expertise our community needs.

Be much more resilient, including in natural disasters.  The company would operate independently, free of political cycles and decision-making. It would be solely focused on delivering water infrastructure services across boundaries in a way that is better and more cost-efficient for our communities over the long-term.

Be more strategic in terms of investment in water.  A larger company will maximise scale to get the benefit of streamlined and bundled procurement, integrated planning and greater purchasing power.

Be better able to respond to third parties.  A specialist water company will deal directly with government agencies and work closely with important regional bodies to meet regional and national objectives.

Read the complete Business Case here.

Forming a joint waters company with Waikato District Council would not impact the amount of rates required already forecast in Hamilton City Council’s 2024-2034 Long-term Plan.

From 2026/27 some (non-water related) rates would be charged by either council, and the rest (water-only rates) would be charged directly by the proposed CCO.

Overall, this option would mean the least change to the amount that properties pay for their water services (while still meeting the Government’s new requirements).

Once a CCO was formed, it would raise enough debt from its own funders to settle the existing water-related debt of each council.  That debt would then come off each council’s books. 

Read more about the approach to debt in the HCC-WDC Joint Waters CCO Record of Agreement.

[NOTE: there would be no change to the average rates increase for existing ratepayers in 2025/26. This remains at 15.5%, as per the 2024-2034 Long-term Plan (LTP). There would be some minor changes for individual properties because the proposal would change the way rates are split across property types. Some types of properties will receive a small increase compared to what was proposed in the LTP. Other types will see a decrease as they are not connected to one or more waters services.]

The proposed median % rates for a household has not changed.  The graph above shows the proposed split of the rates increases between water supply and wastewater versus the rest of the council.

To meet increased compliance requirements, meet our growth obligations and ensure the sustainability of our water infrastructure, we need to invest more.

Currently there are limits on how much money councils can borrow – similar to a credit card limit. Many councils, including Hamilton City Council are operating close to their limit. This severely reduces our ability to respond to unplanned events like a natural disaster.

A CCO can borrow more than a council can. By utilising the 500% debt-to-revenue ratio (allowed for with a CCO) and transferring water-related debt to the CCO, we could unlock additional financial headroom. That would allow us to invest in more waters infrastructure , faster, and importantly, spread costs more fairly over a longer period.

This would also enhance our resilience against financial shocks and natural disasters, without the need to escalate our debt to revenue ratio towards the 350% currently available to high growth councils, including Hamilton City Council.  Under this option the residual council debt remains within council prudence limit of 280%.

Not forming a joint waters company with Waikato District Council would not impact the amount of rates required already forecast in Hamilton City Council’s 2024-2034 Long-term Plan.  However there would be a change to how rates are collected.

To meet new government requirements for transparency, Council will introduce separate rates for each of these waters services – drinking water supply, wastewater and stormwater. These rates will appear as separate line items on rates bills. The separate targeted rates would be set in exactly the same way the general rate is set now – by capital value.

From 1 July 2025, there will be three new itemised rates for waters services (drinking water supply, wastewater, stormwater) depending on the waters services each property receives: 

In terms of debt, councils do not have as much borrowing capacity as a CCO. If a CCO was not formed, Council would need to use the additional borrowing capacity available to high-growth councils from the Local Government Funding Agency.  This additional capacity allows higher debt to revenue limits of up to 350 per cent (rather than the previous limit of 280 per cent).

Council could not afford to do all the water projects needed to respond to growth in the city. In terms of levels of service, there would be trade-offs. Some projects (not just for waters) would be delayed or possibly cancelled, and our ability to respond to emergencies would be reduced.

Current ratepayers would pay more than their fair share because the debt could not be shared across future generations (who will also benefit from long-term waters investment).

Under this option, Hamilton City Council would struggle to meet its growth obligations to the government. This option would not be able to support those projects in the city and wider region the Government wants to see fast-tracked.

Read more about the approach to debt in the HCC-WDC Joint Waters CCO Record of Agreement.

Business Unit Option requires Debt-to-Revenue Extension

In the event that Council retains water services within an in-house business unit, we would be compelled to apply to the Local Government Funding Agency (LGFA) for a high growth council extension, increasing our debt-to-revenue ratio from 280% to 350%. This extension would unlock the necessary additional financial headroom for growth and allow us to spread debt over a longer period. This would enable us to maintain rate increases as outlined in the Long-Term Plan (LTP) 2024-34.

While the headroom provided under this extension is greater than that in the current LTP, it remains less than the headroom available through the proposed CCO option, particularly as the demands on water infrastructure increase in the later years of the LTP.

The joint waters company (CCO) would be overseen by an independent, professional board of directors appointed by Waikato District Council and Hamilton City Council.  The company will be managed by a CEO reporting to the Board of Directors. Operational decisions about water services would be the responsibility of the Board, based on clear expectations from both councils.

The Commerce Commission will provide oversight to ensure the CCO is well managed financially and meets its legal obligations in terms of waters charges. It is understood economic regulation will be phased in gradually, beginning with an information disclosure. The Commerce Commission is expected to introduce price-quality regulation for water services, price caps, revenue limits, and quality standards that apply for periods of five years.

Taumata Arowai already requires councils to meet their water quality obligations, and it will require the same thing of a CCO. The CCO would have a direct relationship with Waikato Regional Council in terms of resource consents and compliance.