The former head of Auckland’s water services says taxpayers face increases in charges that are incorrect and unnecessary.
Water rates are forecast to double over the next decade, starting with a 7 percent increase this year.
“It’s absolutely unnecessary,” said Raveen Jaduram, who was the CEO of Watercare for six years.
He resigned a year ago during the city’s worst drought in decades that led to more than $ 200 million in infrastructure improvements, and amid suggestions that he was overpaid a salary of more than $ 700,000.
Jaduram said he was speaking because this was not being discussed and the people of Aucklanders should know about it.
“The key question is why should Auckland residents pay more for their water rates simply because Auckland City Council has a debt problem?
“Surely, if Auckland residents can get their water services at a lower price if Watercare is not owned by the council, that is a good result.”
Watercare has $ 11 billion in assets and just $ 2 billion in debt – a solid balance sheet to borrow to fund upgrades, but cannot because of its link to the council, which has reached borrowing capacity.
Jaduram believes that the council’s protection of the turf is a factor.
“I, for one, could never sit down as a civic leader and knowingly ask the people of Auckland to pay more for their water and sewage rates than they should. Personally, I think that’s ethically wrong.”
Auckland Mayor Phil Goff said he was protecting Auckland’s opinion of his assets.
“Watercare definitely needs the ability to borrow more to invest in infrastructure, despite the $ 10 billion the council has invested this year in its 10-year budget,” Goff said.
“Yes, if you separate the books you can do that, but I think there are other ways to separate the Watercare books from the council than to give up democratic control.
“We have seen what happens when you do that to the power supply authorities.”
A better way to do this would be for the government to offer a guarantee that Watercare could borrow more, Goff said.
He compared this to Three Waters’ reforms to create four great water organizations – reforms that Goff and some other mayors oppose, but which the government says will safeguard local ownership of assets.
Jaduram, in an online post, wrote: “We cannot accept Phil Goff’s mediocre reasons why Watercare should remain the property of the council. We need to challenge our councilors: do you know what is happening and why?”
In January, the Watercare board Announced Covid-19’s “severe impact” on the Auckland Council group’s revenue was forcing it to cut back on its upgrade plans to try to curb charge increases.
It had a much stronger balance sheet than most utilities, he said, and “if we were free from our current financial constraints, we could comfortably fund our preferred asset management plan without higher-than-normal price increases.”
Jaduram points to a Watercare review last year by Scotland’s successful Water Industry Commission, as part of Three Waters, which said large upgrades should be possible without massive charge increases.
He said: “Comparisons with the UK suggest that if Watercare could borrow based on its financial performance, its clients could benefit from an additional investment … and could be delivered at lower annual price increases than previously planned, with a limit of approximately 2.5% for 10 years. “
The commission advocated for more indebtedness by Watercare and more spending, to save in the future because the infrastructure would be better.
In practice, he said, Watercare should be able to borrow against assets it owns directly, but cannot because its balance sheet is consolidated with that of the board.
“This effectively restricts Watercare’s investment activity, which, in turn, affects Watercare’s performance and makes its responsibility less clear,” he said.
At the end of the council, “unfortunately, debt limits have hampered the ability of some high-growth councils to invest in infrastructure.”
Jaduram told RNZ that some councilors don’t know, or understand, that Watercare could work better on its own or under Three Waters.
“Watercare … should be removed from council, arm outstretched.
“If Watercare wasn’t owned by the Auckland Council, and it was borrowing on its own and providing its services and making the investment that it needs to make, it wouldn’t have to increase the … fees that much.”
He estimates that cargo increases of 3.5 percent a year would be sufficient.
Watercare declined to comment.