Number crunching for city over Three Waters
Hamilton is doing some hard number crunching as financial currents continue to swirl around the implications of the Government’s Three Waters reforms for the city, with many millions of dollars at stake.
Against a backdrop of fierce local and national controversy, today marks the end of public consultation aimed at helping finalise the city council’s submission to the Government on Three Waters legislation.
Councillors are due to sign off on that submission by July 20, in time for the Government’s public consultation period ending two days later.
While it believes the city will be better off financially after the reform, the council is formally opposed to being part of the Government’s four new water services entity plan, preferring to be in a smaller Waikato and Bay of Plenty entity.Last week, councillors grappled with one aspect of reform – whether to sign up by September to the $14.6 million first tranche of a potential $58 million Better Off Funding sweetener from the Government.
That would involve the council having to work collaboratively with the Government on the reforms, although it wouldn’t be constrained from criticising them.
But there are much bigger dollar numbers to consider as well, reflecting the importance and complexity of the reforms for the city and other Waikato councils.
Hamilton’s assets for water supply, sewage and stormwater are worth some $1.6 billion. These are mostly due to be transferred to the new water entity Hamilton would be part of.
Council Three Waters debt is currently around $370 million – it’s not certain how much of this would get transferred.
However, overall, the council has told ratepayers it expects the city to be financially better off once Three Waters is implemented.
The council would be a smaller operation and wouldn’t need to charge so much in rates. The Government estimates Hamilton’s household water services costs (some $1070 on average last year) would climb to $2740 by 2051 with no reform but rise more modestly to $1220 with reform in today’s dollars.
Some $256 million worth of extra borrowing capacity would be created.
But there’s particular concern around what’s known as ‘‘stranded costs’’ – expenses, such as corporate overheads, the council would be left with regardless.
They’re forecast to be $20 million in the first year, decreasing over time.
The council lobbied for a $29 million payment to compensate for stranded costs but had only been offered $8 million, leaving it $21 million short of what it wants.
It’s also been noted that, in the current long term plan, there are some $400 million worth of unfunded new costs related to Hamilton’s Three Water services, no doubt providing a challenge for the new entity that takes over.
The range of issues and unanswered questions could mean finalising a submission to Government may prove tricky.
Aside from the Better Off Funding deal and stranded costs, these include understanding all costs to Hamilton and when benefits of reform will actually be delivered.
The swirling currents of reform clearly won’t hit calmer waters in Hamilton for some time yet.