The following is a shortened version of what the Mayor handed out to the BRASS Meeting last Wednesday night.
WHAT IS THE SCALE OF THE INCREASE IN RATES & CHARGES
Braidwood residents have expressed considerable concern about the overall level of Palerang Council rates and charges, often called the "bottom right hand corner" referring to the total of a rates notice.
The following table provides an example of charges for a sample main-street business. It shows that the major cause of the increase from pre-amalgamation is the sewerage charge. The table shows that, even with valuation increases and Council's special variations to rates, the general rate has in fact fallen.
A similar scenario applies to residential properties although there is no sewerage usage charge for residential properties. On average general rates have increased in line with inflation.
INSERT FIGURE 1
Of course the actual rates and charges will vary accordingly for other businesses and residential properties.
WHAT STP WILL COUNCIL BUILD?
Council will build the most cost effective solution, to be determined by an open tender process.
Council has done its costing estimates based on a design similar to the Bungendore STP. Council has been advised that this is the most cost effective proven solution and is used by most country towns in NSW. Council will, in consultation with State Government experts who in the end will be the ones that have to approve the STP, consider all options that are tendered by private enterprise.
WHAT GOVERNMENT DEPARTMENTS ARE INVOLVED?
The Environment Protection Agency issues Council with a licence to discharge treated effluent. It is that licence that sets the standard for the water that is discharged from the STP.
The Department of Commerce, formerly Public Works, has been engaged by Council to undertake the review of the existing STP and provide the design for their recommended replacement.
The Department of Water and Energy will be responsible for approving the final design of the STP and will need to be satisfied that it will be able to meet the licence conditions under all operational conditions.
The Sydney Catchment Authority is not directly involved except as the most likely source of funding for the replacement plant.
WHAT WILL THE SEWERAGE WORKS COST?
The estimated costs can be summarised as:
* Pre-construction including design $410,000
* Sewerage Treatment Plant Construction $5,500,000
* Sewage pumping stations and rising mains $535,000
* Reticulation mains $400,000
* Total $6,845,000
HOW ARE THE SEWERAGE WORKS TO BE FUNDED?
The starting point is the $260,000 that was "in the bank" for the Tallaganda Shire at the time of amalgamation.
The remainder will be funded by 25-year loans. Approximately 60% of the loan's principle and interest will be funded through standard sewerage charges, the other 40% will be funded by charges against new developments, typically known as developer or S64 contributions.
HOW WERE THE SEWERAGE CHARGES CALCULATED?
Council engaged a specialist to prepare a 25-year costing estimate taking into account the loan repayments attributable to users plus the cost of operating, maintaining and administering the sewerage system. The goal was to ensure that there were no peaks in the charges at around the time of expected major maintenance.
WILL THE CHARGES RISE IN FUTURE YEARS?
Council expects that the charges will rise roughly in line with inflation.
The notable exception to this is the three year phase in of the charges for high non-residential water users.
WHY DOES BRAIDWOOD NEED A NEW SEWERAGE TREATMENT PLANT
Tallaganda Shire Council commissioned the Braidwood sewerage scheme in the early 1960s and has a nominal capacity of 2000 EP (equivalent population).
Palerang Council (then Eastern Capital City Regional Council) commissioned a status report on the Braidwood sewerage system in 2004. This status report showed that Council, and its predecessor, had been in breach of its EPA licence conditions since November 2003. Palerang sought and obtained an extension to December 2007 to permit the design and funding of a new sewerage treatment plant.
In summary this report showed that the STP was effectively beyond repair and Council took the decision to replace it with a new system.
Council has now had the design for the new plant completed and is ready to call tenders.
WHY IS THE STP DESIGNED FOR 2000 PEOPLE?
The STP is designed to cater for 2000EP (equivalent population). When calculating the EP, Council must take into account the sewerage needs of:
* The resident population (est. 1,100) and a reasonable projection for growth;
* Accommodation businesses that operate within the sewered area;
* The sewerage needs of business and industry, including the saleyards.
WHY DO NON-RESIDENTIAL CHARGES VARY ACCORDING TO WATER METER SIZE?
A substantial proportion of water supplied ends up going down the sewer - around 60% on average. The bigger the water meter the more that ends up in the sewer system and the whole system must be designed to cater for the Peak Instantaneous Demand (PID). This means that all the pipe work and the plant itself must be bigger to service the capacity of the large water users.
The pricing structure recognises that some businesses actually consume water with relatively little ending up in the sewer. This is recognised by a Sewerage Discharge Factor (SDF) for particular industry types. The SDF is larger for accommodation businesses but lesser for a concrete batching works. There is, however, a minimum charge that is equivalent to the residential charge.
IS THE PROPOSED SEWERAGE TREATMENT PLANT 'SPECIAL'?
One of the concerns expressed by the community is that the STP must meet special conditions as it discharges to the Shoalhaven River that provides part of the water supply for Sydney. The community suggests that the Sydney Catchment Authority should be required to contribute to the costs of meeting its required standards.
Council's EPA licence is similar to other licences, such as for the Bungendore and Captains Flat STPs that are not part of the Sydney catchment. The breaches that have occurred at Braidwood would have been breaches at Bungendore and Captains Flat.
Sydney Catchment Authority has made substantial contributions to Palerang over recent years to help address a number of water quality issues such a overflowing sewerage pumps and effluent containment at the Braidwood saleyards. They also make ex-gratia payments, in lieu of rates, of almost $100k per annum.
The proposed STP design is the standard NSW design that is used at Bungendore and Captains Flat as well as many other NSW towns and cities.
One possible reason the community thinks the proposed STP is special and hence costly is the use of the term 'best practice pricing" and extrapolating that to "best practice" STP and then equating best practice with most expensive. This is not the case.
THE BASIS OF THE "BEST PRACTICE PRICING"
The new water and sewerage pricing regime is based on the State Government's "Water Supply, Sewerage and Trade Waste Pricing Guidelines" published in 2004. These are commonly referred to as the "best practice" guidelines.
The forward of these guidelines pricing states:
"Best-practice pricing results in fair sharing of the cost of providing the services and complies with the Council of Australian Governments (COAG) Strategic Framework for Water Reform, National Competition Policy and the Independent Pricing and Regulatory Tribunal's (IPART) "Pricing Principles for Local Water Authorities".
The principle charge in the structure of the sewerage pricing is the split between residential and non-residential with the non-residential charge linked to the size of the water meter and water consumption. This recognises that non-residential users can place a greater load on the sewerage system and hence removes the subsidy of non-residential users by residential users inherent in the traditional single-charge pricing regimes. The non-residential pricing is also influenced by the Sewerage Discharge Factor (SDF) that allows for the difference in flows to the sewerage from different business types. For example an accommodation business will have greater flows to the sewerage system than a concrete batch plant.
Businesses that have a 20mm water meter and a very low SDF will not pay much more than a residential property.
The next issue is the total cost. The proposed sewerage treatment plant will be funded by loans. This is known as generational equity; the users of the system paying for the capital cost over time.
If Council is able to obtain a 50% subsidy for the construction of the new plant it would reduce the overall charge by about $180.
IS COUNCIL ELIGIBLE FOR STATE SUBSIDY?
The State Government provides funds to local water authorities through the Country Towns Water Supply and Sewerage Scheme program. Given that the original sewerage system was part funded by the State and that a major cause of the current situation is the age of the plant and the long term lack of maintenance, Palerang is having trouble convincing the relevant state government agencies that the works should be eligible for funding under CTWSSS program. The fact that this program is already fully committed does not help the cause of being added to the priority list for assistance.
The Sydney Catchment Authority has an Accelerated Sewerage Scheme grant program. To be eligible for this funding, you must be eligible for the CTWSSS program. The SCA has established this funding scheme to accelerate the introduction of adequate sewerage schemes across its area of responsibility. Council has approached the local member and the relevant Ministers to have the Braidwood scheme funded under this program even though it is not strictly eligible.
ARE THE HIGH COSTS A RESULT OF THE AMALGAMATION?
Council, and the State Government, acknowledge that Palerang has not been able to realise the savings anticipated prior to the amalgamation. The primary reasons for this are the large area, the small population base, the reduced revenue base and the employee protection requirements of the Local Government Act 1993. The latter costs include the overheads of maintaining two offices such as the need for a high speed communication link and the inefficiencies that arise from having small teams split across the offices.
These overhead costs are reflected in the "on-costs" added to the cost of staff and that are used to determine the true cost of Council projects and activities.
However, the design for the new STP was contracted out and tenders will be called for the construction of the STP. Consequently very little of these amalgamation caused inefficiencies are reflected in the total cost of the new STP.
They are however reflected in the operation, maintenance and administration (OMA) costs. With around 3-5% extra being added to on-costs these are not a major component of the total sewerage cost.
Basically the sewer charges have had to be increased significantly with the $6 million worth of loans for the new STP and 3 defective sewerage pumping stations being serviced by the relatively low number of assessments (620) that pay for this self funded scheme.
For the sewer pricing proposals to be sustainable over the 20 year financial planning period will require the assumed 1% pa in growth to occur. The high charges however do raise concerns, reinforced by the community at recent consultative meetings, whether any positive growth can be expected at all.
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