Professor Brian Dollery has prepared an independent report in relation to the NSW Government Water Review. In summary the report finds: The USU Commissioned Report has established that any proposed 'regionalisation' of local water utilities in non-metropolitan NSW which removes local control, local ownership and local operation will inflict considerable damage on local councils and local communities with no economic gains.
USU Organiser Robert Potter with Professor Brian Dollery from the University of New England who prepared an independent report into the NSW Government Water Review.
The report suggests adopting a policy that water utilities should remain local, however scarce skilled labour shortages in managerial roles needs to be addressed. Thus, for instance, “two or more councils joining forces, and recruiting budgets in order to employ one skilled professional manager at an attractive salary to service the whole region. The provision of water/sewerage services could still be the responsibility of each council, and the attendant revenue streams could still accrue to each council, but in a time of national skills shortage, councils in regional and rural NSW would have a better chance of hiring skilled staff.”
Other highlights in the report include:
• A pioneering study examining 52 water utilities from regional NSW and Victoria. In a fortuitous turn of events, Australian water policy has witnessed a ’natural experiment’ over the past two decades that has allowed the authoritative comparison between a “Regionalised Water model” (Victoria went from 130 local government water utilities to just 18 urban water utilities owned now by the Victorian state government) with the NSW water and wastewater services that has had minimal consolidation to date. The result of this study concludes that no significant efficiencies are gained from regionalising. The report scratches the surface further and explains that “attracting water management expertise” provided the only efficiency gains between NSW and Victoria. This finding is also supported by the “Allan” Report.
• Water and Sewerage functions represent 23% ($742.1m) of councils operating revenue.
• Local councils have a total infrastructure renewal backlog expected to grow to almost $21 billion within 15 years.
• NSW water utilities managers often have an engineering background that may lead to “gold plate” infrastructure. More strategic decisions may be made by attracting professionals proficient in the environment and that offer higher skilled management expertise.
• Water restrictions on consumers reduce efficiency.
• Groundwater is a source of efficiency.
• A higher proportion of industrial consumers reduces efficiency.
• Water utilities of a sufficient size could be brought within the regulatory gamut of the IPART.
The Report contains seven main recommendations:
Recommendation 1 Key Performance Indicators as a measure of local council performance are fraught with difficulties. The selected Key Performance Indicators as marketed by the NSW Government are problematical, do not adequately assess local council performance and thus cannot be used as the basis for policy decisions (p. 29).
Recommendation 2 The Allan Report (2006) has demonstrated that financial distress in NSW local government is acute and it has given rise to the growth of an enormous backlog in local infrastructure provision. The magnitude of the problem is so large that it cannot be overcome by local government alone and thus requires greater financial intervention by higher tiers of government, including the NSW state government (p. 50).
Recommendation 3 Both the Allan Report (2006) and Byrnes, Dollery, Crase and Villano (2008a) have shown that no scale economies exist in water services. Bigger is thus not cheaper in water services. State government policy on water services should thus not be prefaced on the assumed existence of scale economies (p. 72).
Recommendation 4 Both the Allan Report (2006) and Byrnes, Dollery, Crase and Villano (2008b) have shown that no scale economies exist in wastewater services. Bigger is thus not cheaper in wastewater services. State government policy on wastewater services should thus not be based on the presumed existence of scale economies (p. 93).
Recommendation 5 Many local councils in non-metropolitan NSW are already struggling to maintain financial sustainability. The removal of water utilities will place an additional financial burden on these councils and severely inhibit their capacity to deliver an adequate range and quality of services. State government policymakers should thus not remove local water utilities from local control and ownership (p. 112).
Recommendation 6 The removal of water utilities from local council control and ownership will impose economic and social damage on small country communities through a loss in employment, local economic decline and the attrition of local services. Any policy aimed at the ‘regionalisation’ of water and wastewater services must thus bear this in mind and engage in widespread community consultation with affected local communities (p. 131).
Recommendation 7 The Allan Report (2006), Byrnes, Dollery, Crase and Villano (2008a) and Byrnes, Dollery, Crase and Villano (2008b) all identify a skills shortage, including managerial skills, in water and wastewater services. State government policy should thus seek ways of alleviating this problem to improve efficiency and reduce costs (p. 139).
