By the numbers: Comparing Councils’ restructure options

Environment Southland has worked with the other Southland councils to further refine our financial model that compares the costs and savings of local government restructure options for the region.

Chair Jeremy McPhail said the aim of the model is to help inform Southlanders about the financial implications of different reform options.; It is not designed to advocate for, nor predict, a preferred governance model.

“It’s really good to have the numbers to inform the financial side of the conversation about restructuring local government in Southland.

“We’ve been both transparent and conservative in our approach and have worked with the other councils to refine the outcome. I’m confident our model is solid because of the work we’ve done to get to this point.”

The model is designed as a decision-support tool for comparing the relative financial implications of different options under a consistent set of assumptions. The Council recognises that other considerations, like representation, are also critically important to the reform conversation.

The assumptions and data inputs have been tested and refined with senior financial staff from all four Southland councils. While the assumptions have been refined, the broad conclusions remain consistent:

• 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.

Regional council functions such as flood resilience, catchment management, biosecurity and regional planning operate across district boundaries. The model considers how the functions may be delivered under each structural option, recognising that the assumptions around these arrangements have a material impact on financial outcomes.

The financial model was built from the published long-term plans, funding impact statements and water service delivery plans of the four Southland councils and has been further refined.

Chair Jeremy McPhail said the financial model’s underlying assumptions draw on the available evidence, including the Auckland Council experience, and expert knowledge from local council staff while recognising that there are few directly comparable recent examples of large-scale local government reform in New Zealand.

The primary assumptions are:

• 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 model tests four restructure options:

• One Unitary (single unitary authority – Environment Southland, Gore District Council, Invercargill City Council, Southland District Council combined).
  Under the assumptions used in the model, this option produces the greatest operating savings because all existing councils are merged into one organisation, allowing the greatest opportunity to consolidate corporate overheads and reduce duplication.
• 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).
  Under the assumptions used in the model, this option produces the lowest savings because there would still be two councils and some duplication of regional council functions.
• Two Councils + Regional Business Unit (urban (Invercargill City Council), and rural (Southland District Council & Gore District Council)), + business entity delivering regional functions (Environment Southland e.g. flood resilience, catchment management and biosecurity).
  Under the assumptions used in the model, this option has more modest savings (see no.2), also reflecting the complexity of the business unit operating with more than one owner, plus the establishment and system costs associated with creating it.
• 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).

Under the assumptions used in the model, this option has potential savings (see no.1 above), but carries additional establishment and system costs associated with creating and servicing the business unit.

The numbers are in the table below.