Redlands budget and the great big water tax

Redland City’s budget for next year will be discussed at a special Council meeting on 26 June. We have already been told by the Bayside Bulletin that the $317,000 surplus budgeted for the current year has turned into a disappointing deficit of about $2 million.
If Council had not wasted money on its flawed plans for over-development of Toondah Harbour, and other Mayoral propaganda activities, a surplus might have been achieved.
In her pre-election pitch, Redland City’s Mayor “pledged to control debt, abolish fees to dump rubbish at local tips, and make the council more transparent and accountable” according to an article in the Brisbane Times.
The dump fees have gone, but the other promises are looking rather hollow.
Redland City will overcharge for water and sewage by a total of $9.5 million in 2013/14 and a further $5.2 million next year according to a  Queensland Competition Authority (QCA) report .
The Council uses the term “revenue smoothing” to describe its policy of over-charging people now, on the pretext that this will be followed by smaller price rises many years from now. The impact of Council’s “revenue smoothing” can be clearly seen in this chart produced by the QCA.

The QCA makes this point in its report:

“The QCA notes over-recovery in any particular year is not necessarily problematic, where there are valid reasons for doing so and a robust proposal for returning over-recovery to customers over the remainder of the pricing period” (Page 61)

Is Council putting the “over-recovery” funds into a special reserve so that they will be available to keep water prices lower in later years? So far, Council appears to be funding other activities with the extra money it rakes in from over-charging water users. So Redland Water’s customers are effectively paying a “great big tax” to hide the true cost of Council’s general operations.
The QCA report expresses concern about Council’s plan for “negative retail-distribution prices” in the later years. The QCA says:

“Such prices will not reflect their underlying future costs and may result in excessive consumption.” (Page 65)

If Council spends all the money collected during the “over-charge” years i.e. up to June 2017 then how does it intend to subsidize the cost of providing water during the “under-charge” years shown in red on the chart?   Will this be done through increased general rates, another great big tax? Or perhaps a levy?
At the end of the ten year “revenue smoothing” period, when water prices are well below cost, how will Redland City  “adjust” water users to the higher price structure that will then be necessary?
If the cost of water, in the future, does not rise as forecast, will everyone be happy that they paid too much for water during the “over-charge” years? Don’t expect any rebate cheques to be issued by Council because it will have already spent the money.
When the Mayor finally unveils the City’s  2014/15 Budget we need to focus on the detailed numbers rather than any spin served up.
At its meeting on 26 June the Council should adopt a credible financial plan for the City which:

• Does not waste City funds on Mayoral promotion activities (photo opportunities)
• Accurately describes the true cost of providing the services required by residents and property owners
• Adequately provides for contingencies so that the budget can actually be achieved next year
• Charges fairly for services like water and waste management, and does not discount charges for major land developers
• Sets the general rates at what they need to be rather than disguising them to give the appearance of keeping election promises

For further information about the QCA’s investigation into Redland Water’s pricing go to:

• QCA Fact Sheet on Redland Water prices
• QCA Final Report on Redland Water, March 2014

For historical reference, here is a copy of the Redland City 2013/14 Budget and Operational Plan
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