Letter to the Treasurer of the ACT Government

Dear Minister,

Although initial decisions regarding funding of the Cotter Dam may have already been made, I would like to request that you still give some consideration to the following alternative funding method.  The reason I am pursuing this discussion is that I believe the approach outlined below is superior to your intended government loan for a number of reasons.  The most notable of these are that it:

  • will reduce average water consumption
  • requires no total increase in water charges
  • removes water restrictions as the water demand control mechanism and replace it with a price penalty.
  • will give the ACT community funds to implement other water augmentation methods such as local pondages and recycling.
  • is socially equitable.
  • is non inflationary
  • incurs no cost to the ACT government
  • reduces inflation

The proposal will be electorally popular and provides a model for future sustainable government initiatives.

The money to build the dam will come from a zero interest loan issued by a commercial bank to the ACT government. The government in turn will distribute the loan equally between every registered ACT citizen. The money to repay the loan will come from the earnings (extra water sold) that can be attributed to the new Dam.  The bank will make a profit on the loan from transaction fees and because the loan is secured by the government there is no risk of the loan failing hence there is no reason to charge interest on the loan.

Water restrictions will be replaced by charging more to households with a high per head level of water consumption. This extra money will be distributed as Rewards to the low per head consumers of water. Rewards must be spent on ways to save water or to augment the water supply.

When the dam generates income – which occurs when the capacity of the existing system is exceeded – this income will be distributed to pay off the loan automatically and the remainder of the money will be distributed in inverse proportion to the average amount of water consumed by each registered individual since the dam was built. These Rewards must be invested in extra infrastructure to increase the supply of water or to save water. With the approval of the Reserve Bank loan repayments may be distributed as Rewards.

The construction of the information system to implement this proposal will be funded by a zero interest loan.

The ACT community will save $536M in interest charges assuming a loan of $365M repaid over 50 years with an interest charge of 6%. The amount of money earned will depend on the number of times the new dam capacity is used but assuming a figure of 10%, this will generate one billion dollars of income that will be invested in further water infrastructure. One billion dollars of investment in water infrastructure can augment the water supply by 100 gigalitres per year and, with the increase in capacity from Rewards, will be enough to sustain the likely population growth over the next 50 years.

The cost of excess water will be set at a figure that removes the need for water restrictions. If it increases expenditure on water infrastructure by $10M each year then over ten years this will be the equivalent of an extra inflow of 45 gigalitres.

The system can be constructed to apply to both businesses and households.

The reason the proposal is less inflationary than the proposed method of funding is that there is no need to increase the supply of money to pay the interest charges.

From the point of view of the end consumer the system will be simple to understand and it is suggested it will be controlled by a board elected by adults who have zero interest loans. The reason the system does not affect the ACT budget or cost the government anything is that the loan and the Rewards money will be separate from Actew and from government budgeting.

Kevin Cox

22 Yirawala St
Ngunnawal ACT 2913