Neil Abel: Metrowater merry-go-round

The Auckland City Council intends to use a significant component of people's water bills for non-water related expenditure. It will force increases in water and wastewater charges instead of increasing the level of general rates.

The tactic is smoke and mirrors and amounts to a hidden rate rise. It is dishonest, unfair and needs to be stopped now.

Water is a necessity of life - and water charges should not be used as a means of piling up revenue for other non-essential activities.

Metrowater will effectively be used as a cash cow to fund other projects in the city, through the council drawing charitable payments or dividends from its profits. These dividends will be used for stormwater upgrading and maintenance, and the stormwater content embedded in the general rate will be passed back into the consolidated fund to be used on whatever expenditure the council chooses.

But our water charges should be for water and wastewater services only - and they should certainly not be used as a covert way of raising funds for things like fixing the Aotea carpark.

The solution? Bring Metrowater back under full council control as a stand-alone business unit. This would also address another problem on the horizon - that Metrowater will need to pay to central Government income tax of 33 per cent on its profits.

The council has demanded of Metrowater a return on investment by way of dividends of $280 million over the next 10 years. This carries an expectation that Metrowater will be making a gross profit of $420 million, with a $140 million tax liability being incurred in that period.

Siphoning that amount of money from Auckland residents back to Wellington in tax is a reckless use of public funds, and avoidable.

The council is demanding an increased dividend from Metrowater as a way of avoiding the politically unpopular prospect of a general rates rise. But the only way Metrowater can meet that demand is by increasing the water and wastewater tariffs.

The council wants $280 million from Metrowater over the next 10 years, but the company's gross profit for the year ended June 30 is predicted to be just $11 million.

Part of the council's deception is to use water and wastewater charges to pay for stormwater infrastructure. But the stormwater infrastructure bears no relation to the water we consume or use for sewage disposal.

Rain falls from the sky and runs off rooftops, carparks, roads and impermeable surfaces. Stormwater has no link to how much water you or I may use in our home. Therefore stormwater costs should be charged as part of the general rate, and not tacked on to ratepayers' residential water bills.

There is an issue of social fairness and equity involved here, too. Forcing people to pay more for water than the actual cost of that water (and of wastewater services) is scandalous. It is a regressive tax.

There is no question that those on lower incomes are now paying a greater percentage of their incomes on water than in the days when the cost of water services was met progressively, through rates based on property values.

To boil it all down: the overall cost of rates and water services to business has decreased in recent years, whereas the overall cost to residents has increased.

The council is now redistributing the rate take through our water bills - which is a rort.

I stood for council because I strongly believe that people should have access to good quality water and wastewater disposal services at a fair price.

The use of our water charges as a way to increase the local tax take is immoral.

The council has devised a payment structure for water, wastewater and stormwater services that is not only socially regressive - in that it is based less now on the general rating linked to property values - but which leaves those revenues vulnerable to being diverted.

* Neil Abel is an Auckland City councillor and chairman of the council's works and services committee.