Infrastructure is a common good for the community who use the Infrastructure. To enhance cooperation in its use it is best if the community fund the infrastructure. In funding it the community will get a benefit (Reward) from the funding. Envesting with Water Rewards provides one way to do this.
During the most recent drought in Canberra we proposed a pilot scheme of Water Rewards. It was never implemented as the funds available for experiments were only available for rural water. The drought broke and other attempts to revive the idea were not successful. These attempts were rejected because interest rates on long term loans were low. It was said that “interest rates are low and we can get as much money as we need to build Water Assets”. However since those submissions Water Rewards has been extended so that there is no need for the community to pay any interest at all.
Interest is removed because there are no loans. Instead the Water Authority sells Water Rewards which are prepayments for Water. When the Water Rewards are used the buyer of Water gets a discount depending on the length of time they have held the Water Rewards. This turns Water Rewards into an investment where the return is known and fixed. It is suggested that a fixed discount of 10% per annum be used. It is recommended that the value of unused Water Rewards be adjusted for inflation.
Water Rewards are now an attractive long term investment for the Community. Because they are attractive they will be in high demand. The Water Authority can give the benefit to the whole community by issuing the right to buy Water Rewards to everyone in the Community. For simplicity let the same value be available to all who register. The rights to Water Rewards are transferrable and can be sold.
Extra rights can be issued to those whose consumption is below some per head amount. This is to Reward those who put less demand on the water supply.
The funds obtained from the sale of Water Rewards is low cost as it does not include interest. The savings to the community is the cost of interest on a loan of the same value for the time until the Assets need replacing. The whole Community gets the benefits of the Water Rewards investment. This is why a high rate of 10% discount is used.
Because the whole community has a financial stake in the Water Assets they will help look after them. They could also direct the money from their Rewards to a particular project. They could ask for infrastructure to support an urban farm. Or, they could ask for a local wetlands.
The amount of money needed for water infrastructure may be less than the cash flow available from the sale of Water. The community could issue more Water Rewards rights than needed. Initial holders of Rights could direct funds from the sale of their Rights to other community infrastructure.
Rights could get money to replace existing loans. This gives the Community an immediate saving of interest payments.
A further advantage is to help Price control authorities set prices. Communities typically have a Pricing Control Authority to oversee the pricing of monopoly services. Rewards gives the Community a voice in helping determine the price and the allocation of funds. The Community may even asks for a price increase as they can see how the Rewards are spent.
A Community can use the same idea for all its infrastructure. Examples are broadband services, renewable electricity supplies, public transport, hospitals, tax collection, law enforcement and schools. It will mean that a community can get twice as much infrastructure for the same amount of money than it does today. This happens because there is no long term debt with regular interest payments.