The merger of five Hawke's Bay councils would save $10 million a year but incur a set-up cost of $18.4 million, which would take two years to pay off.
The major cost to transition to one council would come from establishing a business system, picked from present councils, and adapted for a single authority. The largest ongoing expense for the new council would be managing its regional road network.
Local government specialist Peter Winder presented his report on the potential costs and savings of local government reform in Hawke's Bay, to the Hawke's Bay Regional Council yesterday. It was based on the Auckland super city model and three scenarios, including the one by A Better Hawke's Bay, which supported a merger of Wairoa, Napier, CHB, Hawke's Bay regional and Hastings councils.
Mr Winder's earlier report suggested a merger would save up to $25 million but that figure had been revised down to $10 million. He estimated it would cost between $13.6 million-$18.4 million to set up a new, single authority.
The regional road network represented the biggest expense, 23.8 per cent of overall costs. But it was also the area where the biggest savings could be made, if it was run under a single contract.
"New Zealand Transport Agency has done a lot of work around savings through clusters of councils maintaining their road services together. My gut feeling is that through injecting a higher level of professional services and well qualified engineers, there is potential savings to come directly as a result of those changes."
Mr Winder's report said there would be minimal benefit to ratepayers in terms of savings as a result of a merger. Setting new rate increases across the region would be difficult. The Auckland model showed there had been "winners and losers".
"It would be easy for any savings to get lost in rate increases."
Mr Winder was asked whether shared services among the councils could generate the same level of savings as amalgamation.
"You would struggle to get the same level but shared services is the single biggest option for savings, short of amalgamation."
He had met the chief executives or chief financial officers of the Wairoa, Napier, Hastings, CHB and regional council as part of his study but found it difficult to gain a consensus on some issues.
"It was a challenging workshop because there were different perspectives in the room, relating to potential savings and how it could be achieved.
"There were a large number of areas where we got a common view but on others it was difficult."
A Better Hawke's Bay chairwoman Rebecca Turner said the report confirmed the annual savings of $10 million and the costs would be recovered inside the first two years of a new council operating.
"The ongoing compound benefit of $10 million annually will be immense for our region."