Concern about $1.2b ‘toilet tax’

Worry model to pay for sewer tunnel may add complexity, cost

ASuper City uckland’s publicly owned water company says a novel way to pay for a $1.2 billion sewer tunnel running deep below the city adds complexity and cost.

Politicians have called a new charge to pay for the project a “toilet tax” and now Watercare chairman Margaret Devlin has voiced concerns about the funding model.

For some years, Watercare has been planning the central interceptor, a 4.5m-diameter tunnel running from Western Springs to the Mangere wastewater treatment plant, funded through water bills.

Now its masters at council are looking to move the project’s cost off its books by setting up a special purpose vehicle (SPV) owned by a Crown entity and paid for through a fixed charge on ratepayers collected over 25-40 years.

This would free up about $800 million for the council to spend on other projects without breaching its debt ceiling and triggering a credit-rating downgrade.

Two months ago, National MP Judith Collins said the SPV model would be regarded by Aucklanders as Mayor Phil Goff and the Government inventing new ways to tax families to flush the toilet. Collins and Manurewa-Papakura councillor Daniel Newman called it a “toilet tax”.

Devlin believes the SPV ● Runs from Western Springs to the Mangere wastewater treatment plant.

● Could be paid for with fixed charge on ratepayers over 25 to 40 years.

● Four bids for the central interceptor closed on Friday.

● Construction to begin next year and due to be completed in 2025.

model “will introduce complexity and cost” to the central interceptor, according to documents released to the Herald under the Official Information Act. A summary of concerns Devlin raised with Goff on the issue in April have been redacted in the papers.

Goff said the council had received advice that the model would not delay or add any cost to the project and any charges to pay for it would be different from a uniform annual general charge.

He said infrastructure investment by Watercare was creating pressure on council’s debt-to-revenue ratio, saying council was determined to retain its strong credit rating. The prospect of transferring some of that debt to the new model “merits consideration”, he said.

“Before any decision is made in this area, council is closely examining all implications of pursuing this option.”

Devlin told the Herald the central interceptor was Watercare’s biggest project in a generation, promising to deliver a cleaner environment while catering for growth. It would reduce sewage and stormwater overflows into the Waitemata and Manukau harbours.

“With a $1.2b price tag, it’s essential that we deliver the interceptor on time and within budget. My concern is that we need to fully understand the SPV funding model to ensure it doesn’t introduce unnecessary complexity or cost to the project,” she said.

She said Watercare’s priority was to customers and meeting its obligations under the law to set a minimum price for water and maintain the longterm integrity of water assets.

Setting up an SPV will require a change to legislation that says Watercare must set a minimum price for water and is prohibited from paying dividends.

Devlin said Watercare was co-operating with Auckland Council to thoroughly investigate different funding mechanisms: “Should we be considering it [an SPV]? Absolutely. It’s about finding the right answer, rather than any answer, for this project.”

The papers also show that setting a uniform charge to pay for the central interceptor is likely to shift costs from business to residential customers and at odds with the current user-pays volumetric model to encourage water efficiency.

Four bids for the central interceptor closed on Friday. The successful contractor is likely to be announced in February. Construction will begin next year and is due to be completed in 2025.

$1.2b sewer tunnel