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Are Water and Sewer dividends creative accounting?

Eurobodalla Council, like all NSW council's are restricted in how much they can charge in their General Rates. This figure is based on a percentage of the Unimproved Land Value and is capped by the NSW Government. The money raised under the General rate is not enough to cover annual overheads so Council then seek additional State and Federal grants to make up the short fall. Meanwhile Council also charges a separate fee for water and sewer. Each year there is an opportunity to pay Water and/or Sewer dividends to the General Fund providing certain criteria are addressed. Payment of these dividends will assist Council to continue to meet its Fit for the Future ratios in accordance with Council’s adopted Fit for the Future Strategy. In June 2018 the fairly innocent matter of dividends from the Water and Sewer fund offered up a very interesting revelation. Finally the community managed to find a councillor with the gumption to ask the Elephant in the Room question. EVERY year the Water and Sewer funds pays the General Fund a dividend - but is there more to this than meets the eye ? Councillor McGinlay managed to have the Director of Finance admit that they budget for the "dividend" and that the "dividend" has been going on for a long time and that it is now factored into annual, four year and 10 year plans. The Director of Infrastructure joined in by supporting the process and saying that Eurobodalla pursues best practice pricing guidelines with the intent of making a small surplus every year. Note that the small surplus this year is $611,900 (Water) and $566,440 (Sewer) being transferred to the General Fund. This basically means that Council knowingly overcharge the community on Water and Sewer every year to get around the rate pegging that constrains the General Fund income. As Councillor McGinlay pressed on last June (2018) with his questions out came the smoke and mirrors with the Director of Infrastructure and Councillor Lindsay Brown deviating to talk about pricing structures saying how terrific the Council was with its initiatives to alter the billing model to best suit the 30% of homes in the shire that are usually vacant most of the year. The smoke and mirrors became double talk and it was soon apparent around the room that everyone was baffled enough to have forgotten that what Councillor McGinlay was actually asking was "Do we put up the water and sewer every year as a way of topping up the General Fund above the allowable 1.5% increase to cover the costs of the ever increasing overheads like wages and the ever mounting infrastructure maintenance and renewal shortfalls?" The short answer is YES. Will the Elephant in the Room make another appearance on Tuesday?


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