Transcript Document

The Cost of Water –
A Local Government Perspective
Alec Fleming,
County Manager,
Clare County Council
Reality Check
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We are not meeting quality standards.
Insufficient capacity for business requirements.
Legacy of old plant past its “sell by date”.
Totally unacceptable level of “unaccounted for
water”.
All local authorities faced with affordability issues
relating to both capital and current expenditure.
Water Pricing Policy
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Another name for “Polluter Pays Principle”.
Non-domestic sector must pay full
economic cost of water supply.
Sanitary authorities receive no capital
contribution for non-domestic, houses
built post 2002 and future housing.
Operational cost of water to be
determined using new costing model.
Split between domestic and non-domestic
to be determined using Matt Shortt Model.
What’s the Problem?
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Legacy issues.
Revenue from domestic sector.
Failure to fund depreciation of assets.
Increased standards.
Timely improvement of infrastructure.
Affordability - Capital/Revenue.
Prioritisation of Water Services Investment
Programme.
Capacity for future demand.
Compliance
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As a food, water must be produced to the
highest standard.
Consumer must have utmost confidence.
Failure to meet standards can have very
serious consequences.
Compliance (contd.)
The Current Situation
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Ireland is facing a number of unfavourable ECJ Judgements
with possible significant fines.
Recent EPA report on drinking water quality – unfavourable
in its view of LAs.
EPA reports & water framework results indicate significant
problems regarding quality of water resources.
LAs have received improvement notices from EPA re: Water
Services Infrastructure.
HSA has also issued Improvement Notices.
Considerable backlog of under-investment.
Public confidence at an all-time low.
Fisheries have taken legal action against LAs.
Compliance (contd.)
EPA Drinking Water Quality
Report focuses on:
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Risk Minimisation
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Source Protection
It puts security of supply firmly on the Agenda
Compliance (contd.)
Implications for Local Authorities
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Standards Determined.
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Non-Compliance is a serious felony.
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Corporate and Personal Liability.
Compliance (contd.)
Population Increase directly impacts on
water services
Category
2002
2006
% Inc
Water Connections
937,765
1,092,998
+ 17%
Sewerage Connections
937,765
956,000
+ 2%
Compliance (contd.)
Recent Cases where Water Quality
became an issue
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Recent example and lessons for wider system.
Crisis caused by inadequate and out-dated treatment
facilities, fast-growing population.
Contributory factors may have been:
 Agricultural practices and municipal discharges.
 Delays in putting necessary infrastructure in place.
 Funding difficulties.
 Staff resources a problem.
 Processes for risk assessment and prioritisation
nationally may be an issue.
Compliance (contd.)
Fall-out
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Health implications for members of public.
Lack of confidence.
Impact on business.
Political implications.
Inevitable financial implications.
EU focus on water quality.
Compliance (contd.)
Challenge is…
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To learn from this experience.
Affords us opportunity to ensure that
action is taken to deliver high quality
water.
Compliance (contd.)
Resources
To move towards the achievement of a standards
required, requires:
 Certainty in relation to long-term funding both in
terms of amount and sources;
 Dependence on development contributions poses
level of risks for local authorities;
 Resources need to be targeted in strategic way at
national level;
 Radical approach on all sides will be needed to
reach challenging targets – i.e. identifying actions
required to deliver a programme.
Capacity
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Water Services Infrastructure is critical to
economic development similar to roads and
telecommunications.
There must be sufficient capacity to provide
for both the needs of industry and housing.
Affordability
> 1/3 of Costs to be
Funded by Levies
Approved Core of Settlement
(Limits number of domestic units)
Affordability (contd.)
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DoEH&LG previously provided 100% funding for domestic
infrastructure.
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Only existing domestic funded, leading to:
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Under-Design of Schemes.
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Schemes not feasible where capped unit cost if exceeded.
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Heavy bias against undeveloped rural settlements.
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Average cost to be met by local authority of 1/3 of capital cost.
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Rural counties with large programme cannot make up deficit.
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No account taken of economies of scale and realistic future
demand.
Affordability (contd.)
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In theory, “future domestic” funded via dev levies and water
charges;
In practice, these are being part-funded through borrowing;
In order to fully recover monies, charges would need to rise
substantially for many local authorities;
Depending on the stream of income “expected from development
levies”, may not be a sustainable financial stream for the future;
It may be the case that depreciation is not provided for in current
model – could lead to ‘running down’ of expensive asset base over
time.
No certainty that level of income in individual cases derived from
development contributions will provide sufficient funding for capital
investment needed.
Storm Water: Govt funding needed in addition to this – particularly
given impact of climate change on flooding.
Social/Affordable Housing: non-funding by DoEHLG of necessary
additional infrastructure is an issue.
Affordability (contd.)
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According to DoEHLG paper, non-domestic infrastructure are fully
funded by LA via consolidated water charges or specific capital
contributions from significant users.
But consolidated water charges in many cases do not reflect full cost
recovery.
This is due to political, local and national competitiveness pressures.
Implication 1 – local governmentt sector funding dependent on future
buoyancy of property market and commercial development,
Implication 2 - in order to meet water quality standards,
infrastructure needs, and progress regional development, LAs will
need to borrow to invest – without certainty of future income,
Implication 3 – increased pressure on borrowing likely in less
developed areas,
Implication 4 - Unit cost of water charges will never be uniform implications for regional development and regional competitiveness,
Affordability(contd.)
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No certainty that ‘Ireland Inc’ can reach EU
requirements by proceeding with this policy.
Assumption that level of need, level of
development or level of income derived from
development is uniform across the country.
Appears to be expectation / belief that, once
water pricing is fully applied, that water charges
will be uniform across the country – this is
unrealistic.
Affordability (contd.)
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Rural authorities unable to fund local
contribution – as interpreted currently under
the WPP.
Huge gap in resources (human & finance)
currently available relative to what is
required to achieve EPA standards.
Affordability (contd.)
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Depreciation (Cost of Capital).
Domestic element (identify and fund separately).
Cost of maintaining new assets.
Treat DBO and direct provision equally.
Risk minimisation to be funded.
Higher standards to be funded.
Cost of monitoring private supplies to be funded.
Finally: Essential to Accept
The critical impact of provision of sanitary services
to:
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Support development generally.
Meet the economic & social objectives in the
National Spatial Strategy, Regional Planning
Guidelines & Local Plans.
Implement Government policy on regional
development, e.g. Rural Planning Guidelines.