Council water charges found to be unlawful

The Supreme Court has held that water service charges issued by Mount Isa Council are unlawful due to non-compliance with the Local Government Act 2009. This decision has important implications for Local Government and land owners in relation to the methodology and calculation of utility charges.

Implications  

• A utility charge is a type of rate and charge and may be for any type of utility such as waste management, gas, sewerage or water.
• Local governments may levy utility charges broadly having regard to matters such as the rateable value of the land, the use of the land and any other circumstance that is peculiar to the land.
• Utility charges for water services may be charged wholly according to the water used or partly according to the water used, using a 2 part charge which is made up of the following:
  • • a fixed charge for using the infrastructure that supplies water to a person who is liable to pay the charge;
    • a variable charge for using the water, based on the amount of water that is actually used by a consumer.
• Where water is measured using a meter, the local government must work out the charge on the basis of either:
  • • an amount for each unit, or part of a unit of water that is used; or
    • a fixed amount plus an amount for each unit, or part of a unit, of water that is used over a stated quantity.
• The methodology and calculation of utility charges must be undertaken having regard to the context of the objects and purpose of the Local Government Act 2009.
• Local government must be transparent in expressing in its budget documents the methodology and basis for calculating utility charges.

Decision

The Council’s utility charges were calculated in accordance with the Council’s revenue statement which relevantly provided that:

• the basis of charges shall be on a unit basis;
• one unit shall entitle a ratepayer to 112.5 kL of water;
• commercial shall be at a rate of $2.60 kL or part thereof for water consumed in excess of the allocated entitlement;
• utility charges were calculated on the basis of full cost pricing and the units applied to different types of properties;
• service charges were apportioned on the basis of units for water and per service or connection rendered to each ratepayer.

The Council gave the applicant two rate notices over two properties which were in the amount of $49,187 (based on $101 per unit charge for a period of 6 months) for the period of 1 July 2016 to 31 December 2016.

It was an agreed fact by the parties that the Council’s method of levying charges did not constitute a 2-part charge.

The applicant contended that as the Council did not charge using the 2-part charge method:

• the Council was only able to charge for a water service wholly according to the water used and therefore the charge could not be worked out using a fixed amount plus an amount for each unit, or a part of a unit, of water that is used for a stated quantity;
• the Council also failed to exercise its general power to levy rates in accordance with the local government principles as the methodology and charge was not determined in a way that was consistent with the transparent and effective processes, and decision-making in the public interest.

The Council contended that:

• its method for levying utility charges was lawful as:
  • •  local government utility charges may be calculated by either of the following options:
      • • an amount for each unit, or part of a unit, of water that is used; or
        • a fixed amount plus an amount for each unit, or part of a unit, of water that is used over a stated quality;
    • the Council’s utility charges for water were structured on the following basis:
      • • a fixed amount calculated in accordance with the number of units calculated in accordance with the use or uses to which a particular parcel of land is being used;
        • an amount for each unit of water used over a quantity calculated by reference to the applicable number of units;
• even if the charges were invalid, there was an intention on the legislator’s behalf that the charges for water service would remain valid and recoverable as a debt.

The Court determined that the methodology and charge was:

• flawed as a charge wholly according to the water used could not be determined by way of a fixed charge;
• unlawful as it was not in accordance with the context of the objects and purpose of the Local Government Act 2009, as the Council’s revenue statement was inadequate in properly explaining why the Council chose to adopt a method for determining the utility charges for water in particular in circumstances where a water mater existed.

Authored by:
Stafford Hopewell, Partner, Brisbane
Elton Morais, Senior Associate, Brisbane