Southland amalgamation - financial model

Environment Southland has developed a financial model that compares relative costs and savings of local government restructure options for Southland. Read more in the report that underpins this financial modelling here.

The aim of the model is to help inform Southlanders about the financial implications of different reform options.

The model is not designed to recommend a preferred structure or predict the final cost of reform. Rather, it provides indicative, comparative financial information, which should be considered alongside wider evidence about representation, local voice, statutory responsibilities, deliverability and implementation risk.

The model is primarily based on the 2024-34 Long-term Plans of Southland Councils – Environment Southland, Invercargill City Council, Gore District Council and Southland District Council; water services information, and annual reports. Its assumptions and data inputs have been tested and refined with senior financial staff from all four Southland councils and audited by independent financial advisors.

LG restructure option for Southland	Annual savings from 2034 (note, no further amalgamation costs)	Annual savings %	Cumulative savings to 2034 (taking into account amalgamation costs)
One Unitary council (for all of Southland)	$9.8 million	3.4%	$23.0 million
Two Unitary councils (1 urban and 1 rural)	$2.2 million	0.8%	-$15.1 million
Two Unitary councils + Regional Business Unit	$4.8 million	1.7%	$2.4 million
One Unitary council + Regional Business Unit	$9.0 million	3.1%	$19.3 million

Further information

Report: Understanding the Financial Model

Media release 1/07/2026: By the numbers: comparing Councils’ restructure options

Media release 23/06/2026: Testing the numbers on Council restructure options

Insights

The model highlights that the biggest pressure on rates sits not in operating costs, but in ongoing infrastructure investment and asset renewal.
Within that context, savings from amalgamation are likely to be modest and realised over the longer term, rather than immediately.
Transition costs, such as aligning systems and workforce changes, are likely to be significant and front-loaded.
The results are sensitive to assumptions, particularly around how regional functions are treated.

Primary assumptions

The model is based on costs, both operating and capital. It is not revenue or asset based.
Interest and depreciation have been excluded because these costs do not materially change as a result of council structure.
Base principle: Each council offers its current services efficiently.
Base principle: The representation of each council's services is the 2024-34 Long-term Plan.

The options being modelled

Currently, four restructure options are being modelled and we are working with the other councils toidentify any further options for testing.

The four restructure options currently being tested are:

One Unitary (single unitary authority – Environment Southland, Gore District Council, Invercargill City Council, Southland District Council combined).
Two Unitary councils (urban (Invercargill City Council), and rural (Southland District Council & Gore District Council)) each with regional council functions (Environment Southland) e.g. flood resilience, catchment management and biosecurity).
Two Councils + Regional Business Unit (urban (Invercargill City Council), and rural (Southland District Council & GDC)), + business entity delivering regional functions (Environment Southland) e.g. flood resilience, catchment management and biosecurity).
One Council + Regional Business Unit (Gore District Council, Invercargill City Council, Southland District Council combined + business entity delivering regional functions (Environment Southland) e.g. flood resilience, catchment management and biosecurity).

Defining the problem

The key issue isn’t inefficiency – it’s a fragmented system trying to deliver coordinated outcomes for the region, while facing a growing infrastructure funding challenge. Southland councils collectively manage $7.6 billion in assets (replacement value) and there are large upcoming investment requirements (water, roading, flood resilience).

Functions are a key consideration

An understanding of regional council functions and how these could potentially work under different scenarios underpin the model. Functions such as flood resilience, catchment management and biosecurity don’t stop at district boundaries. To be delivered effectively, they need to be managed and responded to, at scale – catchment and regional. Together these functions build resilience and are essential for the Southland economy and lifestyle.

Regional functions behave at a system scale:
Flood modelling, hydrology and river engineering/management work at catchment scale
Environmental monitoring networks and data, along with GIS and natural hazard information, rely on regional systems and continuous datasets
Biosecurity, coastal/marine operations and incident response do not respect council boundaries

Note: The tool Environment Southland has created is an indicative model built from the published long-term plans, funding impact statements and water service delivery plans of the four Southland councils. It is transparent by design, and is intended to test assumptions, not pretend to already know a final answer. Environment Southland acknowledges that regional councils have no decision-making role in the Government’s Head Start process, but we can support the process in Southland with our regional perspective, analytical expertise and knowledge of our functions.

Page updated July 2026

Is the model recommending a preferred option?

No. The model compares options using a common set of assumptions. It does not recommend a preferred governance structure.

Does the model show what rates will be?

No. The model is not a rates forecast. It shows indicative cost and savings impacts under different assumptions. Future rates would depend on future council decisions.

Why are savings relatively modest?

The model assumes councils are already delivering their services efficiently. It also assumes that most services still need to be delivered under any structure. Savings are therefore mainly expected where similar corporate or support functions can be consolidated.

Why are transition costs included?

Any significant organisational change involves cost. These costs may include systems integration,

legal establishment, organisational design, workforce change and implementation support.

Excluding these costs would overstate the near-term financial benefit of reform.

Why do regional functions matter so much?

Regional functions often operate across boundaries and at catchment or regional scale. If those services are divided between organisations or require additional coordination, costs may increase. If they are delivered once across the region, those additional costs may be avoided.

Why use Auckland as a benchmark?

Auckland is one of the few recent New Zealand examples of large-scale local government reorganisation with publicly available financial information. It provides a useful reference point, but it is not directly comparable to Southland and is not used as a prediction

Does the model include service reductions?

No. The model assumes broadly current levels of service continue. It does not rely on reducing services to generate savings.

Does the model include water services reform?

Water-related costs are treated separately where relevant.