Central Coast Council explores options for multi-billion dollar water and sewer business

Central Coast Council’s administrator Rik Hart has said there’s “no way in hell” the water authority would be sold as he floats a fourth option for the future of the $3.8b asset.

Options are on the table for the Central Coast’s water and sewer business, however Administrator Rik Hart says he’s not throwing away billions to sell it off.

The issue came before Tuesday’s council meeting where Mr Hart voted to look into options for the future of the business which is in the unique situation of falling under both the Water Management Act and Local Government Act which have “conflicting asset valuations”

He made it clear that selling the asset was not on the table.

“There’s no way I am going to sell the business,” Mr Hart told the Express.

Council’s Administrator Rik Hart ruled out the sale of council’s water and sewer business.

He said the Independent Pricing and Regulatory Tribunal (IPART)’s Regulated Asset Base (RAB), for water authorities such as Hunter Water and Sydney Water, values the Central Coast Water Management Authority at $1.4b while the Local Government Act values it at $3.8b.

“If we were to sell the asset, Hunter Water and Sydney Water are the only entities that could purchase it and they would not pay more than the RAB value,” he said.

“There’s no incentive for them to pay more than $1.4b. So Council would be throwing away $2.4b. It would be the biggest fire sale of all time giving away $2.4b of assets which the community has built up over the years.

“People in the community have been suggesting it be sold. It’s just ridiculous. There’s no way in hell that I am going to contemplate it.”

An independent report, tabled at the meeting, looked into three options for the water authority.

Council ordered the review in July 2021 to explore options to get more value and return on investment for the coast community.

Mangrove Creek Dam is the coast’s largest dam. Picture: Peter Clark

The independent report by Kellogg, Brown & Root (KBR) reviewed the operating model of the council’s water supply authority and found that being classed under the two Acts “severely restricts” the council which, under the Local Government Act, cannot transfer cash reserves from water and sewer to areas where it is most needed such as capital works.

They have put forward three options –

■ Remove the Central Coast Council’s water and sewer business from the Local Government Act – involves the establishment of a separate council-owned corporation.

This would remove LG Act restrictions and give the business the ability to pay dividends.

The KBR report says this is the only long term or permanent solution – “it is the most realistic option to remove the council from dual regulation. The large scale of the council’s water business makes it sufficiently like Hunter Water and Sydney Water for a consistent model to apply.

“Corporatisation will allow an efficient and innovative culture to develop, which is difficult to achieve as part of local government with its wide mandate,” the report states.

■ Amend the Local Government Act to remove the restrictions on funds raised from water and sewer

The Mardi to Warnervale Pipeline was completed in 2021.

The report says while this option would allow council to repay accumulated debt, it was not appropriate to adopt statewide.

■ Remove the Central Coast Council’s water and sewer business from the Water Management Act – this would remove the title of Water Supply Authority and certain economic regulations.

Mr Hart said it was unfair for the council-owned business to be compared with Hunter Water and Sydney Water and has suggested another option be explored which includes creating a regulated Central Coast water utility.

It involves having IPART create a Central Coast template to regulate water and sewer, similar to its recent review on domestic waste charges. He said it would be judged against the Local Government Act and would not be compared to state-owned enterprises.

“It’s important with the council’s past reputation that IPART keeps a close eye on our cost structures,” he said.

The KBR report stated that operating under both Acts was “creating a needlessly complex and restrictive regulatory environment”.

“Dual regulation also restricts the council in its endeavours to repay debt accrued in its restricted funds,” the report stated.

“The NSW Government should remove one of these regulatory burdens if it wishes the ratepayers of the Central Coast to benefit from an innovative, prudent and efficient water business”.

The report states that all options require State Government support.

Central Coast Council is currently seeking a 34 per cent increase in water, sewerage and drainage prices with the Independent Pricing and Regulatory Tribunal (IPART).

This follows IPART’s water pricing decision of 2019 which resulted in an annual loss of $39m to the council. This is highlighted as one of the contributing factors in the council’s financial crisis.