Our water assets

### ODT Online Sat, 22 Jan 2011
Public to have say about future of city’s water
By Stu Oldham
A binding public referendum has been proposed as a safety mechanism to allay public concerns over feared privatisation of Dunedin’s water. The suggestion came during the Dunedin City Council’s 2011-12 pre-draft annual plan deliberations yesterday, as councillors debated a proposed council-controlled organisation (CCO) to manage the city’s $1.6 billion in water assets.

Some councillors remained opposed, with a block of four – Crs Fliss Butcher, Jinty MacTavish, Teresa Stevenson and Kate Wilson – trying unsuccessfully to block the CCO proposal from proceeding.

Read more

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Related Posts:
19.1.11 Dunedin: your water
15.1.11 Just when DCC thought no-one was watching
26.12.10 DCC – will there be a “corporate grab” of water infrastructure!?

Posted by Elizabeth Kerr

11 Comments

Filed under Economics, Geography, People, Politics, Project management

11 responses to “Our water assets

  1. peter

    The strongest measure to avoid water privatisation is to keep the management of water inhouse. CCO’s and water meters are a step toward privatisation. It makes it much easier. There is no such thing as written in ‘cast iron guarantees’. They can be written out again. The four women councillors could see this. Good on them. We have seen all the reassurances given before with the stadium and all the solemn promises to proceed with caution. Why on earth do they need to ‘consult’ on whether we have a CCO or not? Ratepayers would be just as happy if things stayed as they are and any ‘efficiencies’ were carried out under the present structure?
    We can well be suspicious of this move.

  2. Russell Garbutt

    It comes down to trust. History tells us that we cannot trust politicians particularly well – we only need look to see how they rate as a whole on the past surveys and they rate below car sales people. On a local level, we have ample proof they cannot be trusted – “a line in the sand” – so why should we trust them on this?

    There is no need to put water supply into a separate company or entity at all as the first thing that will happen is a loss of transparency. As an example of this, I suggest look at the history of trying to get information on how much ratepayer money has been poured into professional rugby by Delta. Every dollar Delta makes should be coming back one way or another into Dunedin ratepayers, but apparently no-one including those Councillors who have responsibility in this area either know or can find out.

    Lack of transparency normally means that there is something to hide, or there is a desire to be able to hide something and we ratepayers have had a long experience of such opaque entities – CST for a starter. No, I don’t trust the DCC yet because I haven’t yet seen a willingness to be open and transparent and so any move to potentially hide anything must be resisted.

  3. peter

    Yes, Russell, what was that about ‘transparency’ which we heard so much about during the recent election campaign?
    I see your reference to surveys as to whom we trust most – and least. See today’s ‘Sunday Star Times’, page 5. Why do elected people often lose their way so easily? Is it from being overwhelmed by all that is expected from them and/or information overload where they can’t see the wood from the trees when making decisions? Is it because not enough good people are attracted to local body politics? (I can see why) I’d like to think that most serve with good intentions and are not totally venal and cynical – even before they are elected. Part of the problem, I think, is that too many people are gullible and weak in the face of the manipulations of others who are venal and greedy. Flattery and power are pretty seductive forces that can change people who would normally be quite honourable.

  4. Robert Hamlin

    Water, as a basic necessity, and an unbreakable natural monopoly, has always attracted the attention of those who may be interested in taking advantage of the wider community. Most jurisdictions recognise this potential threat. However, I am not surprised, given the recent historical weakness of the DCC’s commitment to the welfare of its citizens, that we are now witnessing the first gambit of the privatisation game.

    There are three routes to the privatisation of the Dunedin water supply. Each starts by separating the process of supplying water from Council business. Exactly how this is done, or what initials are used to describe the new and separate entity does not really matter. As has been noted on this and the ODT website, ‘policy’ and legislation, at either the local or national level, can literally be changed ovenight – once these assets that they protect have been suitably ‘gift wrapped’.

    Let’s just look at these three routes:

    1) Mortgaging against cash flow

    This one does not actually involve selling the water supply, and therefore represents the most attractive (and dangerous) option that we face. Here are the moves:

    1) Separate the water supply.
    2) Reorganise as a trading company.
    3) Install water meters, cut maintenance and capacity.
    4) Cut rates intiallly (politically handy) and then charge the ratepayers directly like a wounded rhino for the water.
    5) Make a whopping profit eg $30 million per annum (How inconvenient for tax purposes).
    6) If not already done so – roll company into DCHL.
    7) Now borrow money via DCHL against this guaranteed cash flow (& it is guaranteed – Are you going to refuse to pay up, and end up thirsty and smelly?). This should be good for an extra $300 million of debt onto DCHL. The money could be sourced from habitual investors – bless them.
    8) Spend the $300 million on such necessities as stadium management consultants and 50 metre round marble plunge baths full of asses milk for ‘elite’ athletes.
    9) Announce with pride that the tax bill, and the profit, have disappeared.
    10) Some time later, increase the rates to pay for ‘essential upgrades’ to the water supply. This can be done because the wreckage still ‘officially’ belongs to us – A bit like a bloke who ‘owns’ a house on which he has a 100% mortgage.
    11) Contiuue to charge the citizens of this town like a wounded rhino and revolve the debt ad infinitum.

    Route 2: ‘Allow Mom & Pop to invest. This one has worked before on several occasions. The hypothetical moves are laid out below:

    1) Separate the water supply.
    2) Reorganise as a trading company.
    3) Install water meters (at ratepayers’ expense).
    4) Announce that massive investment is required, and that the answer is that ‘Mom & Pop’ can now invest in Dunedin’s watery future at an advantageous price.
    5) Announce that each ratepayer can buy a parcel of shares in the Water Company at, say, $300, when the Company is valued at $450 on the open market on the basis of the cash flows generated by current charges. ‘Wow, How fantastically generous – Thanks DCC!!’
    6) The majority of Dunedin ratepayers understandably take up this offer – The shares are issued on Monday morning.
    7) On Tuesday morning, a letter from Mssrs Wright, Pratt & PI Locke of Auckland (lawyers) lands on every recipient’s mat in Dunedin offering them $450 for any parcel of Dunedin Water Company shares that they might have recently recieved. Just exactly how Wright, Pratt & PI Locke got hold of the mailing list is unknown.
    8) A sizeable minority of DCC residents promptly sells, giving the lawyers’ clients effective control of the company due to the highly fragmented nature of the remaining shareholdings.
    9) Maintenance effectively ceases and prices start to rise. A parcel of shares is now worth $600, and there are plenty of large investors willing to buy at this price. Individual ratepayers continue to ‘cash out’ at a steady rate.
    10) As a result of several major ‘big-biz’ deals, a single investor’s stake goes above 90%, the remaining shares are then compulsoraly acquired at the current market price of $800. The Company is then delisted.
    11) After some considerable time, and an even more considerable profit, the DCC, and possibly Central Government, are forced to buy back the wreck(s) of the Water Company(s) for an effective price of $1,000 a share.

    Route 3 – ‘TINA Also known as ‘there is no alternative’. The least likely route, but still a possibility, given the trends. Here are the steps:

    1) Separate the water supply.
    2) Reorganise as a trading company.
    3) Install water meters (at ratepayers’ expense).
    4) Let the DCC’s finances go to hell in a handbasket.
    5) Announce this fact.
    6) Note that the Water Company is the only thing that is not hocked to the hilt that is actually worth something.
    7) Suggest selling the Botanic Gardens as an alternative – In fact, even better, have a democratic and binding referendum on which to sell.
    8) Get the nod for a public listing of the Water Company.
    9) Proceed approximately as for steps eight onwards above.

    Take your pick – There may well be other even cleverer routes – After all, there’s a lot of money at stake.

  5. Phil

    I’m a bit nervous about the comparisons with “successful” private water comapnies in England, made by the people driving the review. It’s another “selected highlights” reporting. These companies have made a lot of money, no doubt about that. But it has meant the death of many smaller communities who no longer have the guarantee of supply they once had. Sounds like an urban legend, but I have friends experiencing just such conditions in the very regions our proposed model is based on. They live in a small village which faces regular water restrictions. Not because of a lack of supply in the region, but because their water allocation gets raided to shore up a lucrative deal selling to wealthier communities outside of the catchment region. A number of small villages within the Anglia catchment have been abandoned in recent years specifically due to an unsufficient continuous water supply. Not saying that this will happen here, but it’s a major reason why the control of the water supply should remain 100% in the hands of the community. To ensure sufficient supply to all.

    On the positive side, I’m fully in favour of water metering. Providing the unit rate price remains the same. The price of water doesn’t change (excluding upgrade costs), so there is no reason for that rate to change. If people can see that they had the opportunity to save money for themselves through a more efficient use of water then that benefits them, the resource, and the community. If people are using water wisely, then they should see no difference. If they are currently being irresponsible with the water resource then they get punished for it. Seems fair to me.

  6. Calvin Oaten

    Rob Hamlin’s detailed synopsis of just how our water infrastructure/supply could be winkled out of our control makes a worrisome tale. The three methods of doing this are all equally relevant, subject only to the needs of the time when the city’s debt forces our city fathers to tell us that the time has come for all good men/women to rally to the cause. That cause is: we must reduce our debt.
    Route 2: This already has a recent example. Contact Energy. This was floated to the public [via] offered parcels of shares (I forget the number) at a cost of $850. These shares rose in value and dividends were paid. All seemed lovely until the share value slowly sunk and most people did what was expected, they sold. Result, the corporate moguls took control and it has been all downhill for the ‘lumpen citizens’ ever since.
    Route1: Just as devious, but I do like the idea of bathing in asses’ milk.
    Route3: “TINA” The most likely, as it appeals more to the emotions. The people will be sold it in such a way that they will see it as their bounden duty to save the city. A bit like the Kennedyesque “ask not what the city can do for you, but rather what you can do for the city.”
    What Rob omitted to mention is the fact that once the ability to assess individual house water consumption (with meters) it would be a simple matter to arrive at an arbitrary figure to waste. Bingo! They then have the option to corporatise or sell off the waste disposal side of the equation. It would only require another “TINA” scenario and job done. We should all be afraid, as there is sufficient examples around the planet of this happening.

  7. Elizabeth

    Woops, an apologist for selling OUR WATER crept out of the woodwork at ODT Online.

    OUR WATER IS NOT FOR SALE TO A DCC CCO.
    Remember, the godforsaken DCC DEBT MAKING MACHINE has sick connection to local fatboy cronies on the take.

    The Link

    {Elizabeth, you shouldn’t speak ill of the venerable gentlemen. -Eds}

  8. Russell Garbutt

    Rob Hamlin’s scenarios listed above makes chilling reading and it is even more appropriate that it be carefully read now that the unwanted Councillor has re-appeared with his scrambled thoughts.

    It is abundantly clear that the City, either directly, or indirectly, is in a parlous state with debt levels and it is entirely due to the dangerous mix of incompetence and worse of the last Council in particular that put us in this position.

    Selling our water to ourselves is right up there with building a rugby stadium that is unnecessary, unwanted and unjustified.

  9. Robert Hamlin

    I have addressed this issue in some detail in my submission to the DCC, most notably, I have addressed the venemous clauses carefully inserted behind the 35-year lease ‘lightning rod’ that helpfully gathered all the publicity and comment unto itself – An excerpt is below, read on…

    “As the City Administration desperately looks for a way out, the only asset that this City has that is not hocked to the hilt and that can generate large amounts of cash (and therefore has substantial capital value) is its water and sewage supplies.

    Water and sewage are natural monopolies that have attracted the attention of the well heeled neo-liberal community since the days of Roger Douglas and Margaret Thatcher. If they are transferred to private ownership, they allow the systematic long term financial rape of the community concerned. In almost every case where it has occurred, the consequences of water privatisation to a community, especially for its most vulnerable sections, have been absolutely miserable.

    Recently an Act was passed (Local Government Act 2002 Amendment Bill 142-2 (2010), that allowed the privatisation of water supplies in this country. Attention focused on Section 136 (below), that suggested long term leases could be entered into:

    Section 136

    “A local government organisation may enter into contracts for any aspect of the operation of all or part of a water service for a term not longer than 35 years.”

    The undesirability of such leases has been well discussed in the media, but less attention has been paid to two later sections that quietly permit the effective total privatisation of the water supply.

    Section 137.2

    A joint arrangement for a term not longer than 35 years (except a concession or other franchise agreement relating to the provision of water services or any other aspect of the water services.

    Section 137.2 allows the lease sunset clause to be circumvented by describing it as a concession or franchise. A contract lawyer of even average ability should be able to achieve this with ease. If this occurs, the estrangement of control of the asset can be made permanent. The ‘any other aspect’ clause allows sewage to be dealt with similarly.

    Section 137.4

    If a local government organisation enters into a joint arrangement under subsection (2)(a), it must not sell or transfer ownership of any existing infrastructure associated with the water service, unless the local government organisation reasonably believes that the sale is …desirable for the success of the joint arrangement.

    Section 137.4 is rather more straightforward. The water/sewage infrastructure can be sold outright in the interests of the ‘arrangement’. Note that it is the ‘arrangement’s’ interests’ that are specified, not those of the community. Note that ‘Success’ is also very carefully not defined. Therefore success could easily be defined as a very large profit for the new (private) owners of the assets!!

    As the administration of the DCC now appear to be in the habit of presenting Council with proposals to sell community assets at zero notice, requiring complete secrecy and forbidding Councillors to obtain information and opinion from third parties outside the source of these proposals, and to consult with the wider community, Councillors should take the possibility that the Water Supply could suddenly appear on the table in such circumstances sooner rather than later seriously. They should therefore equip themselves with the necessary information and knowledge (especially the opinion of the public that they supposedly represent) to reliably assess such a proposal before their capacity to do so is (unexpectedly) removed from them.

    The habit of holding such unlawful Council meetings does have the possibly desirable side effect that disastrous commercial arrangements as an outcome of such meetings, can be challenged as unlawful at some later date. While the Mayor states that he has obtained a legal opinion that such goings on are OK, it remains just that – an opinion – that can be tested later in court.

  10. Russell Garbutt

    Remember that this is all happening because of the orchestrated plundering of the city’s assets – all in the name of this stadium.

    What really intrigues me in all of this is how much is being driven from outside the Councils? And who outside the Councils?

    Just who is in the position of profiting substantially from the various deals that have been done? The habitual investors? The “just a piss in the bucket” opportunists? The faceless members of the OB network sitting comfortably in their hillside or hinterland homes?

    It is clear that for the most part the big picture drivers are way cleverer than most of the “governance” people on the Councils – many of whom readily admit to not knowing what is going on. Easiest by far to just listen to someone important and vote along with what you are told – so much harder to actually read a submission from someone other than the profiteers and try and understand.

    I was told from the horse’s mouth a short time ago that many Councillors would be lucky to read 10% of the received submissions and if they don’t like, or have been told to not like, a particular submitter then that submission goes unread.

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