Forming in internal business unit is not Council’s preferred option.

This option would see Matamata-Piako District Council establishing an internal business unit, within the wider Council organisation. The business unit would be ‘separate’ from the rest of the organisation and would focus only on managing drinking water, wastewater and stormwater.

This model looks cheaper than the alternative for the first few years - but after 10 years, our costs would continue to spike, and the CCO would level out. Maintaining an internal business unit model is likely to lead to steadily increasing costs and does not offer the same advantages as a bigger organisation, such as increased purchasing power or the ability to call on more resources.

There would be limited opportunities for efficiency gains or future savings keeping water services in-house. When looking at the ‘long game’ this option is the least affordable.

As part of preparing for the Government’s Local Water Done Well programme, Council has been exploring the best way to deliver water, wastewater and stormwater services for our community—both now and into the future.

One of the options considered is to enhance our current setup and create what’s known as an Internal Business Unit, or IBU.

An IBU is a dedicated water services unit that operates within Council but is clearly separated from other parts of the organisation. It remains publicly owned and governed by Council, but must follow additional rules and reporting requirements set by central government.

This option would allow us to continue managing our own water services locally while significantly stepping up how we plan, invest, and report on them.

All councils in New Zealand are facing growing challenges with water services:

1. Ageing pipes and infrastructure
2. Tougher national rules for safety, health, and the environment
3. Increasing construction and compliance costs
4. Greater expectations for long-term planning and financial sustainability

The Government now requires councils to show how they will deliver affordable, reliable water services for the next 30 years. That includes meeting strict new standards, improving how assets are managed, and proving value for money.

Doing nothing isn't an option. Councils need to choose a path forward that meets these expectations and protects local services.

Under the IBU model, Council would:

• Keep full ownership and control of local water services
• Create a separate internal business unit focused solely on water, wastewater and stormwater
• Develop a 30-year water services plan to guide future investment
• Produce a separate annual report for water services, including performance and finances.
  • The IBU would be separated financially from the rest of Council and would still be required to generate revenue through separate targeted rates and waters charges. It would need to produce stand-alone financials, a separate waters annual report and a separate waters services strategy (like a long term plan for waters). This would help meet government requirements for greater financial transparency.
• Be subject to regulation by the Commerce Commission, which would monitor pricing and service levels
• Significantly strengthen internal systems and expertise to manage new requirements

While the IBU stays within Council, it would operate like a standalone business unit, with dedicated planning, funding, and accountability.

• Keeps decision-making and service delivery local
• Builds on existing council systems and knowledge
• Avoids the disruption of handing over services to a new entity
• Gives the public greater transparency around water costs and performance
• Aligns with Government expectations - at least in the short to medium term

• Council must significantly lift its internal capability and resourcing, and while this will come at a cost there are other challenges, such as, staff being attracted to new regional water entities that can offer better career pathways and support
• The cost of upgrading systems and meeting compliance obligations is likely to be high
• Council carries all the financial and delivery risk
• There would be trade-offs. We would not have as much borrowing capacity as a CCO and that would mean some projects, not just for waters, would be delayed or possibly cancelled.
• Current ratepayers would end up paying more than their fair share because the debt would not be shared across the future generations that would benefit from the infrastructure improvements (some of which can last 80 – 100 years)
• Limited ability to share costs or expertise with other councils
• New financial requirements may make this option unworkable. If the Council’s water services delivery plan included this delivery model, it may not be accepted by government
• Unlikely to deliver the same longer-term savings or resilience as a CCO
• This model looks cheaper than the alternative for the first few years - but after 10 years it is likely to lead to steadily increasing costs, with limited opportunities for efficiency gains or future savings
• While this model maintains local control, it may be harder to keep services affordable in the long run without support from a wider network

It’s important to note that there probably won’t be the same level of local control in the future. Local Water Done Well is changing the whole waters environment and the control we have now over our water assets will change with it. There will be regulators overseeing, approving and determining what we do. It is unlikely that we will have the same level of control we have now over our water resources.

All councils must submit a water services plan by September 2025 under the Local Water Done Well legislation. The IBU meets the basic government criteria, but councils are encouraged to explore more sustainable options - such as working together through regional or sub-regional models.

For Matamata-Piako District Council, the IBU was considered alongside joining a Council Controlled Organisation (CCO) with other Waikato councils. After careful review, Council has signalled its preference to join the Waikato Water Done Well CCO model.

Council will be consulting with the community on its preferred approach to water services delivery, including why the CCO model is now being recommended over the IBU.

We want your feedback on what matters most to you: affordability, local control, quality of service, environmental outcomes, and future resilience.

Consultation runs from 5 May to 25 May 2025. Join us at one of our webinars or information sessions to find out more.