Flora Fox

Regional News Kingborough | Hobart | Tasmania

Water & Sewer governance, Tasmania

Water Corporation Governance

Submission to Select Committee

 

 

The Government has taken water supply assets from the direct control of Tasmanian Councils. Subsequently there is vociferous public debate on the actions of the newly formed water supply companies.

 

The Water Corporation’s Directors should be accountable to the water users, either by the political process, like Councillors, or by shareholder vote, proportional to capital contribution holding, as in public companies.

 Some water users fear the consequences of monopoly suppliers. The proponents claim a state wide water authority will provide better service. So far there has been no evidence of this. Those users who paid a year in advance and then received overdue notices have justifiable concern.

 Why is the issue so hotly debated? Kingborough Councillor Flora Fox evaluates the politics of the debate and why people are so frustrated by the issues. Twenty three years of experience as an elected Councillor on Tasmania’s fastest growing Council gives Flora an overview of the issues. Kingborough had paid off its water and sewerage assets and owned them debt free before the new Water Corporation, at formation, compulsorily acquired everything, without paying.

 

The current debate about water supply focuses on water meters.

“Do we want them” and “Yes we must have them”. The new water and sewerage corporations state that users will get water meters and Hobart City Council advertises their position against them. The debate concentrates on the methods for charging residential properties for water. Commercial and Industrial properties have had many water meters for many years, but this has been obscured in the current debate.

 

Although water meters provide the topic for debate, the real issue is who has control of community assets.

 

Historically in Tasmania local Councils have provided water and sewerage. Councils in the south achieved economies of scale by jointly forming, owning and controlling a joint company. This now historic company sold bulk water to Councils who retailed it to their customers and ratepayers. If water users didn’t like the taste of their water or the pressure, then they phoned their local elected Councillor who had a direct chain of responsibility for water supply. Most councils decided to meter commercial and industrial users, but that it was not economic to meter residential users.

 

Councils integrated planning, roads, stormwater, water, sewerage and rate collection with significant economies of scale and commonality.

 

The Water and Sewerage Corporations Act of 2008 changed all that.

 

Councils have a long history of responding to demands to optimise the allocation of local community resources for overall benefit.

Politics is the art of allocating these community resources.

Councils and elected Councillors devote all of their time to optimising this allocation of resources. If they get it wrong, hundreds of aggrieved ratepayers will phone them to let them know.

 

The community resources in the current debate include the water, the geographic location of the water, the pipe to transport it and the treatment plants (both water and sewerage).

 

The geographical availability of water is a key point. There is an excess availability of water in Queensland and none in the Gibson Desert. If water and sewerage are not available the land values are low. If water and sewerage services a property, the property has a higher value. The location of land adjacent to water and sewerage supply is a significant community resource. In a democratic society citizens expect to influence the allocation of these resources.

 

Councils have historically allocated local resources among the residents under the supervision of the state government. Occasionally uneven representation or “Gerrymanders” skew the process. Decades ago Kingorough suffered under a skewed electoral system where the Councillors from the low population, North and South Wards could outvote the highly populated Central Ward of Kingston and Blackmans Bay. The Central Ward paid the rates but did not get the services. The Water and Sewerage Act of 2008 creates a new “Gerrymander” or “Watermander.” (The original Gerrymander was an electorate shaped like a salamander to collect all the votes for “Gerry” the politician.) The process of resource allocation for water and sewerage assets is skewed. The bulk of the water assets have come from the large councils but they do not have majority control of the water corporations.

 

We now have the situation where the directors of the new water corporations are not appointed under majority control of the providers of the bulk of the capital assets and revenue streams. The people who pay do not have control. A small debt laden Council has as much control as Kingborough and Hobart, that contributed hundreds of millions of dollars worth of assets to the new water corporation.

 

Conflict over resource allocation frequently occurs when both parties feel as though they have no control. In this case the small remote Councils feel aggrieved that they cannot afford water services because they do not have land located close to good quality water supplies. Their consequent low economic activity and low population place then in an actual minority situation. The Water and Sewerage Act of 2008 places the larger Councils and their larger populations in a minority. Control of the new water corporations rests with the more numerous small Councils. This “double minority” will not be resolved by debating about water meters. Skewed corporate governance and lack of accountability of the directors lies at the heart of the debate.

 

Even the newly appointed directors of the water corporations may not be aware of the real reason for the current rash of hot opinions. However, unlike the elected Councillors who preceded them, dissatisfied water users cannot vote them out. Consequently all we hear is gnashing of teeth by enraged residents who get over-due notices for bills they have already paid.

 

Compared with the historic situation, Council’s have no control over the water and sewerage supply. What residual control the Council’s do have is skewed by the “Watermander”. The 2008 Act specifies that in the case of the Southern Regional Water Corporation, the 12 southern Councils appoint a three person Owners Representative Committee. This Committee in turn appoints a Committee to select Directors of the Southern Water Corporation. So the extent of Local Government control is both diluted and skewed.

 

The Act also specifies that the Southern Council’s provide a “Letter of Expectation” to the Corporation. However this is not legally binding on the Directors of Southern Water (similar to the other two regional water corporations.)

 

Councils and water users have no control over the policies and actions of the water companies. The Directors have no obligations to take any notice of either. So we have a situation set up by the State Government which gives absolute power without representation. This is a recipe for frustration and annoyance, as demonstrated by the misplaced vehemence of the water meter debate. Residents are not focusing on the core issue of the exercise of arbitrary administrative power by the water corporations. The situation is effectively taxation without representation.

 

The strategic consequences of a gerrymander include provision of “lollies” to the smaller constituencies to obtain agreement to extract resources from the larger constituencies. The extent to which this can occur is obviously diluted by the lack of direct control of operations by the constituent councils. Of more significance is the fact that there is no integrated strategic plan released by the Water Corporations, allowing Council’s to integrate land use planning with associated infrastructure. 

 

The State Government’s economic regulator has power over pricing. So ultimately the State Water Corporations are a state-controlled tax like land tax.

 

The behaviour of monopolies is well known. They have no obligation to consider the customer’s needs and can charge what they like. The evidence so far would suggest that the Water Corporations behaviour is not likely to be any different.

 

From the advertisements in the Mercury by the Corporation, “you will get a water meter and pay, and pay and pay…..”

 

The Water Corporation’s Directors should be accountable to the water users, either by the political process, like Councillors, or by shareholder vote, proportional to capital contribution holding, as in public companies.

 

Kingborough Councillor Flora Fox

6767 2571