Money Loans are an expensive way to borrow money to build infrastructure to supply goods and service. It is cheaper to use loans where the community lends the money and are repaid with discounted goods, services or taxes.
ACT Water Rewards Co-op is an example. The Co-op will first replace existing loans that have already financed water infrastructure. ICONWater holds loans of $1.3Billion and pays interest of $70M annually. If ICONWater increased payments to about $100M, they would remove their debt within 20 years. ACT Water Rewards Co-op will replace money loans with loans from Co-op members within one year. The loans are called Water Rewards and are used to pay for water. The discounts provide a return on investment for the Water Rewards Loans.
The cost to ICONWater of Co-op loans is about 1/3 the cost of bank loans because ICONWater operating costs are about 1/3rd the price charged by ICONWater. The repayment and investor returns are lower cost to ICONWater, and so ICONWater gives investors higher returns than bank loans. Because Water Rewards are more valuable as an investment than Bank Loans the Right to purchase Water Rewards is valuable. The Co-op, after consulting the ACT government, can give different Rights to different members of the community to meet social objectives while leaving the price of water the same. For example, low per head consumers of water can receive more Rights to Rewards for conserving water.
If ICONWater uses this approach with a 10% yearly discount, it no longer needs to pay $100M each year for 20 years to remove its debt. Instead, Water Rewards holders could use 1/20th of their Rewards each year to pay for discounted water. Doing this will increase ICONWater profits by $35M each year and give the customers lower cost water of value of $65M each year. Over the 20 years, the infrastructure cost to the ACT Community reduces by about $2 Billion or $100M each year.
The cost of building and operating ACT Water Rewards Co-op is a water infrastructure cost. As it is part of the water infrastructure, the Co-op can issue Water Rewards to pay for it. The Co-op can recover the money by charging a fee in Water Rewards on all money transfers. It means the Co-op is self-funding.