Dear Editor, Re ‘Audit report reveals CIIC overspent budget by $2.7m, Cook Islands News, May 22’, the 2024/25 Budget Estimate has CIIC providing an additional $500,000 to the water authority. This top-up is earmarked for meter installation and user-pays.

On paper To Tatou Vai’s total operating budget is $3.5 million, including $2m to cover staff costs.

Despite the increase, it is unclear how TTV can afford to pay out $2.46m to a Depreciation Reserve Fund which is required by the Act.

The depreciation figure also requires scrutiny.

The effective use-life of infrastructure is 15 years. Te Mato Vai alone is an $102m asset. Accounting for the fleet of vehicles, sludge tankers, etc., the total asset pool is closer to $111m. This bumps up the annual depreciation fund obligation to $7.4m.

The fuzzy figure-work is unlikely to cause public concern while costs are being met through the tax take. However, the reality of user-pays means that customers will eventually be carrying this burden.

The current Budget has not made provision for the depreciation, leaving TTV in the embarrassing position of being in violation of its own Act.

Te Vai Ora Maori

Response:

Te Vai Ora Maori’s alleged facts are in material respects incorrect.

1.         The operating budget for 2024/25 is $3 million, not $3.5 million.

2.         There was no top-up of $500,000 from CIIC.

3.         The initial budget proposal from MFEM was $2.5 million operating and $1 million capital. This was insufficient, so TTV requested a reallocation, increasing operating to $3 million and reducing capital to $500,000.

4.         The principal infrastructure assets are not depreciated on the books of To Tatou Vai as those assets have not been handed over to TTV.  Consequently, for the present TTV is the manager rather than the owner of them. 

5.         Importantly, there is no requirement to pay $2.46 million to reserve fund as stated. Even if TTV has to add depreciation of the infrastructure to its books this is not a cost that may be passed on to consumers by way of tariff.

Section 26 of the To Tatou Vai Act 2021 provides the Authority must set charges with a view to allowing for depreciation of any inventory which is in the normal course depreciated to a nil value over a term five year or less. Consequently, depreciation of most of infrastructure cannot be a factor in determining the tariff. 

6.         The vast bulk of the assets have a ‘life’ of well over five years. Te Vai Ora understates the expected life of those assets as many are well over 15 years. 

Apii Timoti

Chief Executive Officer

To Tatou Vai