The Beagle Editor, COUNCIL: LEGITIMACY OF OVERCHARGING TO DERIVE DIVIDEND
Can ESC legitimately overcharge ratepayers for water and sewerage services in order to derive a dividend payment, thereby supplementing their income above the RATE PEG set by the state government?
Short answer: Yes they can!
BUT, in order to do so, there are MANDATORY CONDITIONS which must be met.
The ‘Best Practice Management of Water Supply and Sewerage Guidelines’ set out these mandatory conditions.
Council must comply with the 6 Best Practice Criteria and demonstrate that it has achieved the outcomes for each of the following:
1. Strategic Business Planning
3. Water Conservation
4. Drought Management
5. Performance Reporting
6. Integrated Water Cycle Management(IWCM)
To demonstrate compliance with these conditions council must obtain an independent Compliance Audit Report and an independent Financial Audit Report.
These 2 independent Reports must be provided to Councillors so that they can, “resolve, in a council meeting open to the public, that it has complied with the Best Practice Guidelines” for its Water Supply and Sewerage businesses. (p 34 Guidelines)
It is also up to councillors to resolve whether a dividend is to be paid or not (p 34) as stated by Mr Sharpe and the GM at the council meeting 7 April.
BUT IS COUNCIL COMPLYING WITH THESE MANDATORY REQUIREMENTS?
* Does council have a current (updated last 3 years) Strategic Business Plan or Financial Plan for at least the next 20 years (p22 Guidelines)? - as I cannot find one on Council’s website.
* Does council have a current Drought Management Plan(DMP) yet? I contacted council about this Plan 6th September last year, as it was not publicly available. It was forwarded to me upon request but was dated 2011 – this Plan is supposed to be updated at least every 5 years.
Mr Sharpe assured me (email 13 Sept), “given the current dry period, we have commenced a full update of the DMP leading into summer to ensure it reflects the current context.” “Once the update is complete, we will make the revised DMP available on our website.”
It’s been 8 months and still no DMP on council’s website.
* The IWCM Plan has not been updated with 2016 census data or recent weather data. This will impact predictions and long term management, planning and service provision. Outcomes are not being met.
So, how has council been demonstrating its compliance with the 6 criteria and achievement of the associated outcomes without current updated Plans?
Have the independent Audits been done? Who does them?
Have councillors been provided with these Audit Reports?
Have councillors been resolving compliance with the Guidelines as required? If so, at which meeting/s?
* In a recent response from General Manager re the legitimacy of dividend payments, I was provided with a resolution passed by councillors (excluding McGinlay and Mayne) Sept 24 2019:
“THAT Council resolve to transfer dividends from the Water and Sewer Funds of $611,900 and $566,440 respectively based upon 2017-18 audited results in the Water and Sewer Funds, and subject to achievement of substantial compliance with Best Practice Guidelines and approval from the Department of Primary Industries, Water.”
This resolution approves the ‘transfer’ of dividends (although it doesn’t state ‘where to’).
However, it does not resolve that council, “has complied with the Best Practice Guidelines” as required by the Guidelines for council to derive a dividend. (p 34)
I have requested a link/s to the Council Meeting/s where councillors have, ‘resolved that the Best Practice Guidelines have been complied with.
I have also requested a copy of the last independent Compliance Audit Report.
* The Guidelines also state that it is up to councillors to decide whether to pay a dividend from the surplus (p 34).
I think it appropriate that councillors consider: is it an acceptable and ethical practice to:
- deliberately plan for a significant surplus($3,859,660) in its Water/Sewer Fund, which is essentially ‘overcharging’ and not ‘user pays’
- direct half of the surplus from Water/Sewer Fund as a dividend into the General Fund, thereby supplementing its revenue above the rate peg.
* Council’s Pricing Methodology (p88 DPOP) espouses:
* “fair imposition and user pays”
* “ensure value for money”
* “develop transparent pricing structures that can be ............ understood by the public”
* “it recognises people’s ability to pay”
These principles are not reflected by deliberately overcharging and budgeting for Water/Sewer surpluses/dividends. Nor do they reflect the financial stress currently experienced by many ratepayers due to bushfires and COVID.
IN A NUTSHELL
The practice of deliberately ‘overcharging’ for water and sewerage services in order to extract a substantial dividend, is a decision made by councillors.
Councillors MUST resolve:
1. That a dividend is to be made/paid, AND
2. That council has complied with the 6 best practice criteria and achieved the outcomes for each.
Will councillors endorse this practice, of ripping off ratepayers, when the the Delivery Program and Operational Plan come up for adoption at next Tuesday’s council meeting, 23rd June?
Deua River Valley
Are councillors simply token rubber stamps and little more than acquiescent toadys to staff whims?