Council backs bid to cut bulk water prices
A bid to reduce the price of bulk water has been approved by the Auckland City Council.
The council is to guarantee Watercare’s debt, giving the company access to cheaper borrowing.
Councillor Doug Armstrong says it’s a “common sense” move.
“It’s absolutely worth doing and has negligible effect on the balance sheet of Auckland city,” Mr Armstrong says.
Leveraging the council’s AA+ credit rating means Watercare can borrow at a lower cost.
It also means the company doesn’t need to maintain surpluses in order to keep an A credit rating.
The guarantee may lower the council’s credit rating, adding to debt costs, but Watercare will pay a fee to cover it.
The council says the risk of Watercare defaulting on its debt is very low.
The bulk water price was forecast to increase by 30 percent next year.
The council says the guarantee will mean a 13 percent rise instead.
Mr Armstrong says the price hike results from tight controls on water prices in previous years.
“We’ve had the benefit of holding prices for the past four or five years at inflation less 3 percent, and frankly that was pretty tough on Watercare,” he says.
Infrastructure maintenance and upgrades, meeting new standards and the extra cost of treating Waikato River water have also driven up prices.
“As the city grows they need to use more Waikato water than Hunua or Waitakere, and that’s four to five times more expensive,” Mr Armstrong says.
The plan was approved at a full council meeting on Thursday last week.