The NSW Government's Country Towns Water Supply and Sewerage Program is managed by the NSW Office of Water. The goal of the program is to provide appropriate, affordable, cost effective and well managed water supply and sewerage services in urban areas of country NSW. To be eligible for financial assistance, local water utilities must comply with the NSW Best-Practice Management of Water Supply and Sewerage Framework (PDF 136 KB).
Financial assistance is available to local water utilities towards the capital cost of the backlog component of approved water supply and sewerage infrastructure.
Financial assistance is only available to those utilities that obtain stage 3 Ministerial approval, as described below, before committing to tenders. Funding is only available subject to NSW Government budgetary constraints.
Local water utilities will commission and fund all necessary scoping activities in order to identify a preferred option. The NSW Government will not provide financial assistance for costs incurred by a local water utility before the utility adopts a preferred option. These ineligible costs include investigations, strategy studies, community consultation, preliminary environmental investigations and options studies necessary for the utility to decide on a preferred option.
After the preferred option and project have been approved by the Minister for Natural Resources, Lands and Water, financial assistance will be available, subject to availability of funds, for preconstruction and construction costs. This includes concept design, survey, project management, design, community consultation, environmental assessments, preparation of tender documents, construction management, risk management and land acquisition.
Government funding cannot be used for the reworking of preconstruction or construction activities as a result of a deficient scoping study, or a decision by a utility to adopt a different option without technical reason to do so.
Works eligible for financial assistance would normally form part of an overall capital works program which would be set out in a local water utility's strategic business plan. Financial assistance will be determined for each scheme component on the basis of the proportion of capacity required to address the backlog.
Backlog works are those required to meet demands and/or prevailing standards as at 1996. They include provision of services to towns that had no water supply or sewerage service in 1996. They also include situations where in 1996 the existing water supply or sewerage system had deficiencies in drinking water quality, capacity to meet reasonable 1996 water demands, water licence environmental flow requirements, adequate drought security, dam safety requirements, effluent quality or capacity to treat reasonable 1996 sewage loads.
Financial assistance is provided towards the backlog component of the capital cost of the option that provides the best value for money on a triple bottom line basis involving social, environmental and economic considerations. Funding is not provided for works to cater for growth, works to meet increased standards beyond those applicable at 1996, and asset renewal or replacement works. Financial assistance is not provided for operation, maintenance or administration costs.
For unserviced towns backlog works are defined as:
- the provision of basic water supply and/or sewerage systems for existing premises at January 1996 within defined town boundaries.
For serviced towns backlog works are defined as works necessary:
- for those services to satisfactorily meet relevant requirements of regulatory authorities at January 1996
- to address agreed reasonable operational levels of service at January 1996
- to extend supply and provide reasonable operational levels of service to unserviced premises at January 1996 within existing serviced areas.
Levels of assistance
A means test has been introduced to distribute the available funds equitably and to reflect the ability of utilities to contribute to the cost of their project. Accordingly, financial assistance will be limited to:
- 50 per cent of the backlog cost for utilities with annual revenue of less than $10 million, for water and sewer combined, or $5 million, for water only or sewer only
- 20 per cent of the backlog cost for utilities with annual revenue greater than $10 million, for water and sewer combined, or $5 million, for water only or sewer only
- maximum capital cost eligible for financial assistance for provision of a sewerage service to an unsewered town will be capped at $30,000 per equivalent tenement
- 50 per cent of the backlog cost of the project irrespective of the annual revenue of the utility if an unsewered town is listed in the small town sewerage program
- capital cost of the project less any external grants obtained by the utility for the project
- not more than that necessary to reduce the typical residential bill to the qualifying charge determined from time to time – currently $350 per property. This figure may be adjusted in the future.
In exceptional circumstances, the Minister may approve funding to address cases of significant and extreme hardship outside the control of a local water utility or the community. These will be dealt with on a case by case basis.
Amalgamations of local water utilities
Local water utilities that increase their annual revenue to exceed $10 million as a result of amalgamation will not be disadvantaged with respect to their eligibility for financial assistance. The relevant annual revenue for such utilities will be deemed to remain the same as that which would have applied prior to the amalgamation. This concession will apply for three years from the date of amalgamation.
Financial assistance depends on:
- substantial compliance by the utility with the 19 requirements of the Best-Practice Management of Water Supply and Sewerage Guidelines (PDF 1.7 MB)
- the assessed typical residential bill per property for the service, in the years immediately after construction of the works, exceeding a qualifying charge. The assessed typical residential bill per property for each service will be determined by the NSW Office of Water from projection of the utility's expenses and revenues, assets and liabilities and cash flows
- the works being part of a comprehensive capital works program which includes a significant backlog component
- the utility's program of works making adequate and sensible provision for reasonable growth and meeting increases in regulatory standards beyond 1996. Subsidy will not generally be made available for isolated and relatively minor backlog problems
- the utility substantially owning the works at project completion.
The Minister for Natural Resources, Lands and Water will determine the amount of financial assistance to address the backlog component of any individual country town water supply and sewerage project. The provision of financial assistance will take into account the following factors:
- degree of deficiency of the water supply or sewerage service with regard to security of supply, public health and environmental impacts
- level of community acceptance
- regional/state significance.
An Interagency Prioritisation Committee was established in 2004 to review the priority of all remaining projects at that time. The committee comprised the NSW Office of Water, NSW Health, Department of Environment and Conservation, Department of Local Government, the Local Government and Shires Associations, and the NSW Local Government Water Directorate (or their predecessor organisations).
A priority ranking was assigned to each project on the basis of security of supply, public health and environmental impacts.
Local water utilities were advised of the draft priority ranking assigned to their proposed projects and given the opportunity to object to the draft ranking. The committee considered submissions and adjusted rankings where appropriate. Local water utilities were advised of the final ranking to allow them to plan for future works. Available funding will be provided to the highest priority projects.
Roles and responsibilities
Roles and responsibilities have been established so that those best placed to manage risks are accountable for the outcomes.
Local water utilities are responsible for project investigation, risk management, project management, contract management and contract payments. Utilities will be the Principal in contracts for procuring capital works.
Local water utilities that consider they do not have the skills, staff and processes to undertake these activities will be required to demonstrate this to the Minister. Alternative arrangements will be approved by the Minister only in exceptional circumstances.
Three stage financial assistance process
- Approval for a project must be obtained from the Minister before commencing any preconstruction activities. This approval is sought after the local water utility has considered an options report and adopted a preferred option. The NSW Office of Water will determine whether the utility is eligible for financial assistance, whether the project is suitable, and whether the project scope is soundly based. This is referred to as stage 1 approval.
- After obtaining the necessary statutory approvals, the Minister's approval must be obtained before calling tenders for construction to ensure that the developed project remains soundly based and funds are available. At this stage the Minister will provide a commitment to financial assistance for a nominated percentage of the estimated capital cost. This is referred to as stage 2 approval.
- Immediately after receiving the Minister's stage 2 approval, the utility must proceed to calling and reviewing tenders, at the end of which the Minister must be notified. The Minister will then approve a fixed dollars grant for the contract on the basis of the percentage assistance detailed at stage 2 multiplied by the eligible component of the contract. This is referred to as stage 3 approval.
Financial assistance for stages 1 and 2 will be paid on award of the first construction contract. Assistance for stage 3 will be made available at approved project milestones.
Financial assistance will be provided only towards tendered contract prices for the approved project. Variations or amendments to a project after award of contract will not receive financial assistance. Utilities are encouraged to arrange tenders concurrently. Where this is not practical the utility will need to seek separate stage 3 approvals for later contracts.
Timely completion of works
Financial assistance is contingent on completion of approved projects within an approved period. Project delays within the control of the utility may result in financial assistance being reduced or withdrawn.
In any event, utilities will be required to complete the works within three years of receiving the stage 3 offer unless the Minister determines otherwise. All land matters must be completed within one year of completing the last contract. Land matters not completed within that period will be paid for on the basis of the assessed cost provided by the Valuer General, after which the project will be immediately finalised and closed.
Integrated Water Cycle Management is an important initiative to identify water management problems. It determines appropriate management responses to mitigate the impacts of these problems so that social, environmental and economic objectives can be met at least cost. Financial assistance will be made available towards the cost of a local water utility's first integrated water cycle management strategy. The subsidy level available will be as for other projects funded by the program. For more information go to Integrated Water Cycle Management.
For more information, or to discuss any aspect of financial assistance, contact your nearest regional urban water officer.