A CCO’s main purpose is to help achieve the council’s objectives. When a council decides to deliver public services through a CCO, it effectively transfers responsibility to a board of directors or trustees. This is common practice internationally and is often referred to as delivering services at arm’s-length.
Auckland Council reviewed its substantive CCOs in 2015 and developed criteria for deciding whether or not to deliver public services through this mechanism. These include:
• Commercial focus – arm’s-length entities have the ability to act commercially and, in certain circumstances, can be more effective at growing external revenue streams, leveraging private investment or driving lower operating costs.
• Efficiency – arm’s-length delivery can be more efficient where there are benefits from grouping related activities. Operational efficiencies may also be achieved by enabling a CCO to focus on delivering a discrete service (e.g. water).
• Flexibility - arm’s-length delivery can be helpful for services that benefit from the ability to respond quickly. CCOs operate outside council processes and can make rapid decisions when needed.
• Specialist skills - oversight by a board of directors with specialist skills and knowledge is an advantage for some services.
• Accountability for ratepayer funding - when CCOs deliver services that require high levels of ratepayer funding, particularly where this is the primary source of funding, the relationship with the council is more complex, due to the council’s accountability to the public for rating revenue. Retaining transparency and accountability of CCOs has transaction costs (e.g. performance monitoring).
• Stakeholder, iwi and political interest in decision-making - CCO boards are accountable to the governing body rather than directly to the public or other stakeholders. Services where the majority of decisions require a high level of engagement with the public, iwi, local boards and/or the IMSB can be more difficult to deliver through CCOs as it can be difficult for the council to monitor the effectiveness of engagement before decisions are made.
• Integration - services that are highly connected to other council activities or contribute to multiple strategic outcomes can be less suited to delivery through a CCO because of difficulties in achieving effective integration.