Watercare chairwoman Margaret Devlin says the central interceptor will improve the environment.
Watercare chairwoman Margaret Devlin says the central interceptor will improve the environment.
Auckland's publicly-owned water company says a novel way to pay for a $1.2 billion sewer tunnel running deep below the city adds complexity and cost.
Politicians have called a new charge to pay for the project a "toilet tax" and now Watercare chairman Margaret Devlin has expressed concerns about the funding model.
For several years, Watercare has been planning to build the central interceptor, a 4.5m-diameter tunnel running from Western Springs to the Mangere wastewater treatment plant, funded through water bills.
With a $1.2 billion price tag, it's essential that we deliver the interceptor on time and within budget.
Now its masters at council are looking to move the cost of the project off its books by setting up a special purpose vehicle (SPV) owned by a Crown entity and paid for through a fixed charge on ratepayers collected over 25 to 40 years.
This would free up about $800 million for the cash-hungry council to spend on other projects without breaching its debt ceiling and triggering a credit rating downgrade.
Two months ago, National MP Judith Collins said the SPV model will be regarded by Aucklanders as Mayor Phil Goff and the Government inventing new ways to tax families to flush the toilet.
Collins and Manurewa-Papakura councillor Daniel Newman called the new charge a "toilet tax".
Devlin believes the SPV model "will introduce complexity and cost" to the central interceptor, according to documents released to the Herald under the Official Information Act.
A summary of concerns Devlin raised with Goff on the issue in April have been redacted in the papers.
Goff said the council had received advice that the model would not delay or add any cost to the project and any charges to pay for it would be different from a uniform annual general charge.
He said infrastructure investment by Watercare is creating pressure on council's debt-to-revenue ratio, saying council is determined to retain its strong credit rating. The prospect of transferring some of that debt to the new model "merits consideration", he said.
"Before any decision is made in this area, council is closely examining all implications of pursuing this option," Goff said.
Devlin told the Herald the central interceptor is Watercare's biggest project in a generation, promising to deliver a cleaner environment while also catering for growth.
It will significantly reduce sewage and stormwater overflows into the Waitemata and Manukau harbours and allow for future growth.
"With a $1.2 billion price tag, it's essential that we deliver the interceptor on time and within budget. My concern is that we need to fully understand the SPV funding model to ensure it doesn't introduce unnecessary complexity or cost to the project," she said.
Watercare is responsible for providing the city's water needs from sources like the Hunua Ranges.
She said Watercare's priority is to customers and meeting its obligations under the law to set a minimum price for water and maintain the long-term integrity of water assets.
Setting up an SPV would require a change to legislation that says Watercare must set a minimum price for water and is prohibited from paying dividends.
Devlin said Watercare is co-operating with Auckland Council to thoroughly investigate different funding mechanisms.
"It's about finding the right answer, rather than any answer, for this project," she said.
The papers also show that setting a uniform charge to pay for the central interceptor is likely to shift costs from business to residential customers and at odds with the current user-pays volumetric model to encourage water efficiency.
Four bids for the central interceptor closed on Friday. The successful contractor is likely to be announced in February. Construction will begin next year and is due to be completed in 2025.
