Auckland Council and the Council Controlled Organisations Debate - Logical Evolution or Misguided Devolution?

Much has been said about the proposed role of Council Controlled Organisations or 'CCO s' within the new Auckland Council structure. In this update, we look briefly at the history of the CCO , look at what is proposed under the new Auckland Council structure and conclude by considering the ways in which the new Auckland Council is likely to exercise control over its CCO s.

The CCO and its origins

In simple terms, a CCO is any company or entity in which one or more local authorities control 50% or more of the voting rights or the right to appoint 50% or more of the governing body of the company or entity. The term 'entity ' in the Local Government Act 2002 (LGA02) is given a very broad meaning and can include trusts, partnerships, joint ventures, unions of interest and a range of other similar arrangements. The LGA02 contains provisions, among other things, dealing with the establishment of CCOs, their governance and reporting requirements.

1989 marked the birth of the predecessor of the CCO, the local authority trading enterprise (LATE). Councils which operated trading undertakings were permitted to transfer those undertakings to local authority trading enterprises. Corporatisation and privatisation were the flavour of the times and the culture and regulation of LATEs reflected this. Every LATE was required to operate as a successful business. Placing LATEs on an equal footing with private sector players was viewed as critical with arm's length rules prohibiting a Council guaranteeing the obligations of a LATE or providing finance on favourable terms. Boards of LATEs embraced their independence, at times leading to tensions between the business objectives of the LATE and the social and political objectives of its owner, the local authority.

1999 saw a change of Government and a cultural shift away from the focus on the trading/business activities of local authorities. Councils were increasingly wishing to use entities which potentially came within the definition of a LATE to undertake non-commercial activities. For example, when the Auckland Territorial Authorities combined to develop Auckland's transport network, a company LATE, Auckland Regional Transport Network Limited was formed (ARTNL). This new generation of LATE was very different to its predecessors with adequate Council control being viewed as a must, rather than as something undesirable. In addition to the statutory safeguards, the constitution of ARTNL built in additional...

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