If I told you I could save the ratepayers of Christchurch 200 hundred million dollars for no cost and no impact on 80% of residents, and only a fairly minor impact on the other 20%, what would you say? Too good to be true? Well that’s what’s been quietly happening in Christchurch over the last couple of years. I was amazed when I heard about it so thought I’d share it.
It’s to do with the way we charge for the use of infrastructure. It concerns water infrastructure, but I think there is a lesson to be learned for other infrastructure too, including the transport sector.
Christchurch is blessed with massive underground aquifers filled with pristine water, so our water infrastructure needs are less than most councils. Yet despite that there is still a fair bit of kit. The Christchurch City Council owns and operates 6 water treatment plants (all on Banks peninsula), 170 wells, 689 pump sets, 154 buildings/kiosks, 4,000km of pipes, 15,000 fire hydrants, and 155 reservoirs/tanks (from page 6 of the activity plan and page 45 of the annual reporting).
Like many other councils around New Zealand, the residents used to pay for this infrastructure solely through their general rates. Each household would pay their annual amount and then they could use as much water as they wanted. There were no ramifications for excessive use, and so no real incentive for people to limit their water use, other than their own conscience. As a result, through the 2010s and early 2020s peak water usage in the city was high and growing.
The issue came to a head in 2022 when council realised expensive infrastructure upgrades were going to be needed to accommodate this increasing water usage. And to pay for this, they would of course need to increase everyone’s rates. But rather than do that, council decided they would try something different. The idea of an “excess water charge” had been floated about 30 years earlier and been on and off the table ever since, but no one had the political gumption to see it through. This time they did, and so it was introduced. The way it worked is that every household could use up to 700 litres per day for free. At that time the median household in Christchurch used about 450L, with 80% of households using less than the 700L threshold.
If anyone wanted to use more than that then they could, but they had to pay a fee for the extra load they were placing on the infrastructure, set at $1.35 for an extra 1,000 Litres. To me this seems comically cheap, when you compare it to, say, bottled water at the shop, but that’s what it was set at anyway.
I won’t get into the long history leading up to this decision but it is quite interesting and well-documented in this paper by Michele McDonald here.
After the excess water charge was introduced, it was observed that water usage throughout most the year didn’t really change, but the big spike that’s normally seen in the heat of summer didn’t happen, or at least happened to a much lesser extent.
For some of the biggest users in the city it just turned out that they had a leaky pipe: these tended to get fixed very quickly once a charge was brought in. The other common cause was people with large, water-hungry gardens: these people had to make a tough decision whether they continue watering them and stomach the extra fee, or swap out some of the plants in their garden to species better suited to our dry climate. Anecdotally there was a mixture of both that happened.
A graph below from Michele McDonald’s paper shows the number of households by usage before the excess charges came in in grey, and after the charges came in in blue. you can see that lots of households dropped out of the really high usage categories and appeared instead in the more normal usage amounts.
In council’s annual report, they say that the result of this reduction in peak water usage was “savings of $150-200 million over the next 50 to 100 years because of reduced need to expand water infrastructure. With less pressure on supply, pump station maintenance work can continue over summer months and there’s plenty of water in reserve for firefighting.”
In addition to these longer term benefits, Michele McDonald’s report said there were also immediate benefits:
So Council achieved some pretty big cost savings, but what did it cost residents?
The total amount of money collected through excess water charges in 2023 was $4.4 million. In the same year Council collected a total of $637 million.
So the excess water charges are less than 1% of Council revenue. This is virtually negligible in the grand scheme of things.
So the charge results in relatively little revenue being collected and has zero impact on 80% of residents in Christchurch. But because it has been enough to nudge the most excessive 20% of users to reduce their consumption a little, it has reduced the need for huge infrastucture upgrades and ended up saving the city hundreds of millions of dollars.
Sounds like a pretty good deal right? But what’s it got to do with transport?
Well for roads, the equivalent of peak water usage is peak vehicle usage. Most of our roads are empty most of the time, but they have short sharp peaks in traffic which inevitably leads to calls for road widening. But road widening costs a lot of money, far more than pipe widening. The current government are planning on pouring $40 billion dollars into just 15 of these road widening projects – that’s several orders of magnitude higher than the water infrastructure upgrades that were on the cards for Christchurch. If we just charged a small fee for driving at peak times, then there’s a good chance we wouldn’t need any of these road widening projects and could save ourselves untold billions.
If this government is serious about saving taxpayers money, then they should forget about banning foreign-sounding foods – that’s chump change – and get amongst some congestion charging instead.
TALKING TRANSPORT 