A bridge over troubled waters could be the theme song for the Central Otago District Council this month.
While funding bridges is a constant thorn in the council’s side, water delivery is becoming complex, as political changes are signalled but not enacted, while residents still want to drink water, flush their loos and have stormwater disappear from their properties.
Funding water delivery and maintenance in Central Otago could lead to councils having to join together to borrow enough money under the recently elected government’s proposed changes to Three Waters legislation.
At yesterday’s Central Otago District Council (CODC) monthly meeting, council Three Waters director Julie Muir presented a report to council asking it to extend the existing Three Waters operation and maintenance contract with Fulton Hogan for a further year.
Three Waters for the council refers to drinking, waste and stormwater.
The previous government’s plan to take water activities away from councils was set to be reversed but the cost of infrastructure meant regional council controlled organisations (CCOs) might be needed to access long-term borrowing for infrastructure, Ms Muir said in the report.
CCOs are a company with a majority council shareholding, and can be made up of more than one council. CODC chief executive Peter Kelly has described CCOs as ‘‘complicated’’ and taking significant time to set up.
Ms Muir said in her report even if a shared CCO with other councils was viable, the Fulton Hogan contract would likely still have to be retendered because of the time it would take to set up.
There had been several performance failures by Fulton Hogan in the past 18 months and that showed the council it needed to take more ownership and leadership rather than contracting it out.
Fulton Hogan and CODC had both put more experienced people in leadership and support roles and were working more closely together.
Council staff were carrying out audits to ensure the contract was being fulfilled.
Fulton Hogan were working with council staff to provide greater transparency over costs and were open to changes. CODC had some leverage through allocation of its wider work programme, she said. Budget limitations and lack of transparency over costs and value for money had created tension between CODC and Fulton Hogan and affected staff wellbeing.
A full day workshop between the two had improved the relationship.
Changes to legislation — including increased levels of monitoring to meet the legal requirements for drinking water quality and environmental impacts from wastewater — meant there was now more work required than CODC had budgeted for.
Additionally, to minimise annual rates increases, the Three Waters operational budgets from 2022-24 had not provided for inflation.
The CODC was discussing improving productivity with Fulton Hogan and looking into doing some work itself.
The Fulton Hogan contract would expire at the end of June.
Under the Local Government Act councils have to review the cost-effectiveness of arrangements within the two years before a contract expires.
With the prospect of water being transferred out of council hands, it was decided in September a review was not needed.
The change of government meant it would have to be done, Ms Muir said.
Calling for a tender would also be a long process. It had been 10 years since the contract had gone out to the market.
A minimum of nine months would be needed to give a genuine opportunity for a different contractor to tender and set up.
However, extending the contract until June 30, 2025 would allow a potential new contractor that time, allow the political changes to be better understood and provide time for the Local Government Act review.