Local Government Finance Amendment Standard (No. 2) 1997 (Qld)

Queensland Subordinate Legislation 1997 No. 360 Local Government Act 1993 LOCAL GOVERNMENT FINANCE AMENDMENT STANDARD (No. 2) 1997 TABLE OF PROVISIONS Section Page 1 Short title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 2 Commencement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 3 Standard amended . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 Amendment of s 2 (Definitions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 5 Renumbering of pt 8 (Transitional) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 6 Renumbering of ss 62 and 65 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 7 Insertion of new pts 8 to 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 PART 8—FULL COST PRICING Division 1—Preliminary 57 Object of pt 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 58 Application of pt 8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Division 2—Full cost pricing Subdivision 1—Matters affecting full cost pricing 59 Matters affecting full cost pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Subdivision 2—Full cost pricing 60 Application of full cost pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 61 Different charges for commercial reasons . . . . . . . . . . . . . . . . . . . . . 7 62 Total costs of carrying on activity . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 63 Administrative and overhead costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 64 Cost of resources used in carrying on activity . . . . . . . . . . . . . . . . . . 8

2 Local Government Finance Amendment (No. 2) No. 360, 1997 65 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 66 Equivalents for taxes not otherwise liable to be paid . . . . . . . . . . . . 8 67 Return on capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Subdivision 3—Treatment of community service obligations 68 Extra cost for community service obligations to be treated as revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 PART 9—CODE OF COMPETITIVE CONDUCT Division 1—Preliminary 69 Object of pt 9 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 70 Application of code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Division 2—The code Subdivision 1—Elements of the code 71 Elements of the code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Subdivision 2—Full cost pricing 72 Application of full cost pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 73 Different charges for commercial reasons . . . . . . . . . . . . . . . . . . . . . 11 74 Total costs of carrying on activity . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 75 Administrative and overhead costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 76 Cost of resources used in carrying on activity . . . . . . . . . . . . . . . . . . 12 77 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 78 Equivalents for taxes not otherwise liable to be paid . . . . . . . . . . . . 13 79 Equivalents for State guarantees on borrowings . . . . . . . . . . . . . . . . 13 80 Return on capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Subdivision 3—Treatment of community service obligations 81 Extra cost for community service obligations to be treated as revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 82 Community service obligations not to be part of roads business activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Subdivision 4—Elimination of, or taking into account, advantages and disadvantages of public ownership 83 Effect of advantages or disadvantages of public ownership . . . . . . . 15 Subdivision 5—Financial reporting 84 Statement in budget . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 85 Omission of certain matters from statement in budget . . . . . . . . . . . 16

3 Local Government Finance Amendment (No. 2) No. 360, 1997 86 Statement in annual report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 87 Omission of certain matters from statement in annual report . . . . . 17 PART 10—REFORM OF CERTAIN WATER AND SEWERAGE SERVICES Division 1—Preliminary 88 Object of pt 10 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Division 2—Matters to be complied with Subdivision 1—Matters to be complied with for relevant business activities 89 Matters to be complied with for relevant business activities . . . . . . 18 Subdivision 2—Consumption as the basis for utility charges for water services 90 Application of sdiv 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 91 Consumption as the basis for utility charges . . . . . . . . . . . . . . . . . . . 19 92 When charges are based on quantity of water supplied . . . . . . . . . . 19 Subdivision 3—Full cost recovery 93 Application of sdiv 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 94 Application of full cost recovery . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 95 Total costs of carrying on relevant business activity . . . . . . . . . . . . 20 96 Administrative and overhead costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 97 Cost of resources used in carrying on relevant business activity . . . 21 98 Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 99 Return on capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Subdivision 4—Treatment of community service obligations 100 Extra cost for community service obligations to be treated as revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Subdivision 5—Identification and disclosure of cross-subsidies between classes of consumers 101 Disclosure of cross-subsidies in annual report . . . . . . . . . . . . . . . . . . 22 Subdivision 6—Disclosure of community service obligations 102 Disclosure of community service obligations . . . . . . . . . . . . . . . . . . 22 Division 3—Two-part tariffs 103 Utility charges if two-part tariffs applied . . . . . . . . . . . . . . . . . . . . . . 23

s1 4 s4 Local Government Finance Amendment (No. 2) No. 360, 1997 ˙ Short title 1. This standard may be cited as the Local Government Finance Amendment Standard (No. 2) 1997 . ˙ Commencement 2. This standard commences on the day chapters 7B and 7C of the Act commence. ˙ Standard amended 3. This standard amends the Local Government Finance Standard 1994 . ˙ Amendment of s 2 (Definitions) 4. Section 2— insert— ‘ “Commonwealth tax” means tax imposed under a Commonwealth Act. “community service obligations” means— (a) for an activity carried on by a corporatised corporation under chapter 7A, part 6 of the Act—see section 458I 1 of the Act; or (b) for an activity carried on by a commercial business unit of a local government—see section 458CJ 2 of the Act; or (c) for another activity carried on by a local government—the obligations to do anything the local government is satisfied— (i) if the activity were to be carried on by an entity with the primary object of making a profit—would not be in the entity’s commercial interests to perform; and (ii) arise because of a direction by the local government. 1 Section 458I (Meaning of “community service obligations”) 2 Section 458CJ (Definitions for pt 5)

s5 5 s7 Local Government Finance Amendment (No. 2) No. 360, 1997 “entity” , for part 10, see section 89. 3 “full cost pricing” , for part 8, see section 458CA 4 of the Act. “relevant business activity” , for part 10, see section 458NB 5 of the Act. “roads business activity” , for part 9, see section 458MC 6 of the Act. “State tax” means tax imposed under the Act, or another Act. “tax” includes a charge, duty, fee, levy or rate.’. ˙ Renumbering of pt 8 (Transitional) 5. Part 8— renumber as part 11. ˙ Renumbering of ss 62 and 65 6. Sections 62 and 65— renumber as sections 104 and 105. ˙ Insertion of new pts 8 to 10 7. After part 7— insert— 3 Section 89 (Matters to be complied with for relevant business activities) 4 Section 458CA (Meaning of “full cost pricing”) 5 Section 458NB (Meaning of relevant business activity) 6 Section 458MC (Definitions for ch 7B)

s7 6 s7 Local Government Finance Amendment (No. 2) No. 360, 1997 ‘ PART 8—FULL COST PRICING ‘ Division 1—Preliminary ˙ ‘ Object of pt 8 ‘ 57. The object of this part is to state requirements for full cost pricing for chapter 7A, part 4 of the Act. ˙ ‘ Application of pt 8 ‘ 58. Part 8 applies to a local government’s implementation of full cost pricing for its significant business activities under chapter 7A, part 4 of the Act. ‘ Division 2—Full cost pricing ‘ Subdivision 1—Matters affecting full cost pricing ˙ ‘ Matters affecting full cost pricing ‘ 59. The matters affecting full cost pricing are— (a) full cost pricing; and (b) treatment of community service obligations; and (c) elimination, or taking account, of advantages and disadvantages of public ownership; and (d) financial reporting. ‘ Subdivision 2—Full cost pricing ˙ ‘ Application of full cost pricing ‘ 60. In deciding charges to clients for goods and services provided in carrying on an activity, a local government must ensure the projected total

s7 7 s7 Local Government Finance Amendment (No. 2) No. 360, 1997 revenue from carrying on the activity is enough to cover the projected total costs of carrying on the activity for the local government’s financial year. ˙ ‘ Different charges for commercial reasons ‘ 61.(1) A charge may be decided for the provision of specific goods or services in carrying on an activity that is, for commercial reasons, an appropriate charge for the goods or services provided. ‘ (2) For subsection (1), a charge is, for commercial reasons, an appropriate charge if it is a charge that could reasonably be charged if the goods or services had been provided by an entity carrying on the activity with the primary object of making a profit from carrying on the activity. ˙ ‘ Total costs of carrying on activity ‘ 62.(1) For this subdivision, the total costs of carrying on an activity include the following— (a) operational costs incurred in carrying on the activity; (b) administrative and overhead costs; (c) cost of resources used in carrying on the activity; (d) depreciation; (e) equivalents for Commonwealth or State taxes the local government is not liable to pay because it is a local government; (f) equivalents for the cost of funds advantage the local government obtains over commercial rates of interest because of State guarantees on borrowings; 7 (g) return on capital. ‘ (2) The total costs must be adjusted for other advantages and disadvantages of public ownership that are not eliminated. 8 7 See section 458CB of the Act (Guarantees by State) 8 See section 458CA(2) of the Act (Meaning of “full cost pricing”)

s7 8 s7 Local Government Finance Amendment (No. 2) No. 360, 1997 ˙ ‘ Administrative and overhead costs ‘ 63. The local government must make a reasonable allocation of its administrative and overhead costs to each activity to which full cost pricing is applied. ˙ ‘ Cost of resources used in carrying on activity ‘ 64.(1) If resources are provided by or to a local government for carrying on an activity, the cost of resources used in carrying on the activity includes an equivalent cost. ‘ (2) If the resources have an identifiable cost, the cost of the resources may be taken to be the equivalent cost. ‘ (3) If subsection (2) does not apply and the resources are readily available on the open market, the price at which they can be obtained in the market may be taken to be the equivalent cost. ‘ (4) If subsection (3) is applied, the local government must ensure the terms on which the cost is based are similar to the terms on which they are made available in carrying on the activity. ˙ ‘ Depreciation ‘ 65. Depreciation of each asset used in carrying on an activity must be based on the deprival value of the asset allocated over its useful life. ˙ ‘ Equivalents for taxes not otherwise liable to be paid ‘ 66.(1) If, for an activity, the local government would be liable for a Commonwealth or State tax if it were not carried on by a local government, the amount equivalent to the tax must be included in the total costs of the activity. ‘ (2) In working out the equivalent amounts, the local government must, if appropriate, apply the general principles of the tax equivalents manual issued under section 458CO 9 of the Act that apply to activities carried on by commercial business units. 9 Section 458CO (Commonwealth and State tax equivalents)

s7 9 s7 Local Government Finance Amendment (No. 2) No. 360, 1997 ‘ (3) Subsection (2) does not, of itself, require compliance with any processes or other requirements under the manual but the local government must keep details of calculations done in working out the equivalent amounts for 7 years. ‘ (4) For a tax not dealt with in the manual, estimates of amounts that a private sector entity carrying on the business would calculate to be its liability to the tax must be included. ˙ ‘ Return on capital ‘ 67.(1) The amount for the return on the capital used in carrying on an activity must be decided using the rate at which, in the opinion of the local government, a comparable private sector entity carrying on the activity would be able to obtain the capital in the market, having regard to the split the local government considers appropriate, for the type of business, between equity and loan capital and the return appropriate to each. ‘ (2) Despite subsection (1), the amount for the return on the capital used in carrying on an activity for the first year in which full cost pricing applies to the activity may be the amount the local government decides. ‘ (3) In this section— “capital used in carrying on an activity” means the total value (using an accepted accountancy method) of the assets used for the activity less the liabilities attributable to the activity. ‘ Subdivision 3—Treatment of community service obligations ˙ ‘ Extra cost for community service obligations to be treated as revenue ‘ 68. If community service obligations are carried out as part of an activity, for deciding charges for goods and services provided through the activity, there must be treated as revenue for the activity an amount equivalent to— (a) the cost of carrying out the obligations; less (b) any revenue arising from carrying out the obligations.

s 7 10 s 7 Local Government Finance Amendment (No. 2) No. 360, 1997 ‘ PART 9—CODE OF COMPETITIVE CONDUCT ‘ Division 1—Preliminary ˙ ‘ Object of pt 9 ‘ 69. The object of this part is to prescribe the code of competitive conduct for chapter 7B of the Act. ˙ ‘ Application of code ‘ 70. This code applies to an activity of a local government— (a) if it is a roads business activity—from when it is to apply under section 458ME 10 of the Act; or (b) if it is a business activity to which the local government has resolved to apply the code—while the resolution is effective under section 458MH 11 of the Act; or (c) if it is another activity to which the local government applies the code 12 —in accordance with the local government’s decision to apply the code. 10 Section 458ME (Code must be applied to roads business activities) 11 Section 458MH (Local government to resolve whether to apply code of competitive conduct to business activities) 12 Under section 458MI of the Act, a local government is not prevented from applying the code to other activities.

s 7 11 s 7 Local Government Finance Amendment (No. 2) No. 360, 1997 ‘ Division 2—The code ‘ Subdivision 1—Elements of the code ˙ ‘ Elements of the code ‘ 71. The elements of the code are— (a) full cost pricing; and (b) treatment of community service obligations; and (c) elimination, or taking account, of advantages and disadvantages of public ownership; and (d) financial reporting. ‘ Subdivision 2—Full cost pricing ˙ ‘ Application of full cost pricing ‘ 72. In deciding charges to clients for goods and services provided in carrying on an activity, a local government must ensure the projected total revenue from carrying on the activity is enough to cover the projected total costs of carrying on the activity for the local government’s financial year or a longer period (not more than 5 years) decided by the local government. ˙ ‘ Different charges for commercial reasons ‘ 73.(1) A charge may be decided for the provision of specific goods or services in carrying on an activity that is, for commercial reasons, an appropriate charge for the goods or services provided. ‘ (2) For subsection (1), a charge is, for commercial reasons, an appropriate charge if it is a charge that could reasonably be charged if the goods or services had been provided by an entity carrying on the activity with the primary object of making a profit from carrying on the activity.

s 7 12 s 7 Local Government Finance Amendment (No. 2) No. 360, 1997 ˙ ‘ Total costs of carrying on activity ‘ 74.(1) For this subdivision, the total costs of carrying on an activity include the following— (a) operational costs incurred in carrying on the activity; (b) administrative and overhead costs; (c) cost of resources used in carrying on the activity; (d) depreciation; (e) equivalents for Commonwealth or State taxes the local government is not liable to pay because it is a local government; (f) equivalents for the cost of funds advantage the local government obtains over commercial rates of interest because of State guarantees on borrowings; (g) return on capital. ‘ (2) The total costs must be adjusted for other advantages and disadvantages of public ownership that are not eliminated. ˙ ‘ Administrative and overhead costs ‘ 75. The local government must make a reasonable allocation of its administrative and overhead costs to each activity to which the code applies. ˙ ‘ Cost of resources used in carrying on activity ‘ 76.(1) If resources are provided by or to a local government for carrying on an activity, the cost of resources used in carrying on the activity includes an equivalent cost. ‘ (2) If the resources have an identifiable cost, the cost of the resources may be taken to be the equivalent cost. ‘ (3) If subsection (2) does not apply and the resources are readily available on the open market, the price at which they can be obtained in the market may be taken to be the equivalent cost. ‘ (4) If subsection (3) is applied, the local government must ensure the terms on which the cost is based are similar to the terms on which they are made available in carrying on the activity.

s 7 13 s 7 Local Government Finance Amendment (No. 2) No. 360, 1997 ˙ ‘ Depreciation ‘ 77. Depreciation of each asset used in carrying on an activity must be based on the deprival value of the asset allocated over its useful life. ˙ ‘ Equivalents for taxes not otherwise liable to be paid ‘ 78.(1) If, for an activity, the local government would be liable for a Commonwealth or State tax if it were not carried on by a local government, the amount equivalent to the tax must be included in the total costs of the activity. ‘ (2) In working out the equivalent amounts, the local government must, if appropriate, apply the general principles of the tax equivalents manual issued under section 458CO 13 of the Act that apply to activities carried on by commercial business units. ‘ (3) Subsection (2) does not, of itself, require compliance with any processes or other requirements under the manual but the local government must keep details of calculations done in working out the equivalent amounts for 7 years. ‘ (4) For a tax not dealt with in the manual, estimates of amounts that a private sector entity carrying on the business would calculate to be its liability to the tax must be included. ˙ ‘ Equivalents for State guarantees on borrowings ‘ 79. If the State guarantees repayment of a debt of a local government attributed to an activity, the local government must in carrying on the activity take account of amounts equivalent to the cost of funds advantage the local government obtains over commercial rates of interest because of the guarantee. ˙ ‘ Return on capital ‘ 80.(1) The amount for the return on the capital used in carrying on an activity must be decided using the rate at which, in the opinion of the local 13 Section 458CO (Commonwealth and State tax equivalents)

s 7 14 s 7 Local Government Finance Amendment (No. 2) No. 360, 1997 government, a comparable private sector entity carrying on the activity would be able to obtain the capital in the market, having regard to the split the local government considers appropriate for the type of business between equity and loan capital and the return appropriate to each. ‘ (2) Despite subsection (1), the amount for the return on the capital used in carrying on an activity for the first year in which the code applies to the activity may be the amount the local government decides. ‘ (3) In this section— “capital used in carrying on an activity” means the total value (using an accepted accounting method) of the assets used for the activity less the liabilities attributable to the activity. ‘ Subdivision 3—Treatment of community service obligations ˙ ‘ Extra cost for community service obligations to be treated as revenue ‘ 81. If community service obligations are carried out as part of an activity, for deciding charges for goods and services provided through the activity, there must be treated as revenue for the activity an amount equivalent to— (a) the cost of carrying out the obligations; less (b) any revenue arising from carrying out the obligations. ˙ ‘ Community service obligations not to be part of roads business activities ‘ 82. Community service obligations must not be included in offers or competitive tenders submitted for roads business activities carrying out work on State-controlled roads.

s 7 15 s 7 Local Government Finance Amendment (No. 2) No. 360, 1997 ‘ Subdivision 4—Elimination of, or taking into account, advantages and disadvantages of public ownership ˙ ‘ Effect of advantages or disadvantages of public ownership ‘ 83. The local government must ensure— (a) if possible and appropriate, any advantages or disadvantages arising because an activity is publicly owned are eliminated; and (b) if the advantages or disadvantages are not eliminated—they are taken into account in deciding full cost pricing for the activity. ‘ Subdivision 5—Financial reporting ˙ ‘ Statement in budget ‘ 84.(1) Each budget of a local government must include a statement about its activities to which the code applies. ‘ (2) The statement must— (a) show the estimated revenues for each activity; and (b) show the estimated expenses for each activity including any items required to be taken into account for full cost pricing other than return on capital; and (c) include the estimated surplus or deficit for the period; and (d) include a description of the nature of community service obligations to be provided under the activity. ‘ (3) The statement must disclose, as estimated revenues, the following items separately— (a) estimated revenue for services to be provided by the activity to clients other than the local government; (b) estimated revenue for services to be provided by the activity to the local government; (c) the estimated cost of, less any estimated revenue arising from, carrying out community service obligations provided under the

s 7 16 s 7 Local Government Finance Amendment (No. 2) No. 360, 1997 activity. ‘ (4) A separate statement under this section is not required if— (a) the activity, or the total for all activities, is a significant activity for accounting purposes; and (b) all the required information is shown in the budget. ˙ ‘ Omission of certain matters from statement in budget ‘ 85. A statement in a budget of a local government under section 84 may include a summary of a matter required to be included in the budget, rather than a full statement of the matter, if— (a) the summary indicates— (i) it is a summary only; and (ii) a full statement of the matter is open to inspection; and (b) a full statement of the matter is open to inspection. ˙ ‘ Statement in annual report ‘ 86.(1) A local government must include in the financial statements in its annual report a statement about its activities to which the code applies. ‘ (2) The statement must— (a) show the revenues for each activity; and (b) show the expenses for each activity including any items required to be taken into account for full cost pricing other than return on capital; and (c) include the surplus or deficit for the period; and (d) include a description of the nature of community service obligations provided under the activity. ‘ (3) The statement must disclose, as revenues, the following items separately— (a) revenue for goods and services provided to clients other than the local government in carrying on the activity;

s 7 17 s 7 Local Government Finance Amendment (No. 2) No. 360, 1997 (b) revenue for goods and services provided to the local government in carrying on the activity; (c) the cost of, less any revenue arising from, carrying out community service obligations provided under the activity. ‘ (4) A separate statement under this section is not required if— (a) the activity, or the total for all activities, is a significant activity for accounting purposes; and (b) all the required information is shown on the statement to be included under section 52 14 in the financial statements. ˙ ‘ Omission of certain matters from statement in annual report ‘ 87. A statement in an annual report of a local government under section 86 may include a summary of a matter required to be included in the annual report, rather than a full statement of the matter, if— (a) the summary indicates— (i) it is a summary only; and (ii) a full statement of the matter is open to inspection; and (b) a full statement of the matter is open to inspection. ‘ PART 10—REFORM OF CERTAIN WATER AND SEWERAGE SERVICES ‘ Division 1—Preliminary ˙ ‘ Object of pt 10 ‘ 88. The object of this part is to state the requirements for the reform of 14 Section 52 (Statement of original budget compared with actual results)

s 7 18 s 7 Local Government Finance Amendment (No. 2) No. 360, 1997 certain water and sewerage services under chapter 7C of the Act for relevant business activities of local governments and their corporatised corporations. ‘ Division 2—Matters to be complied with ‘ Subdivision 1—Matters to be complied with for relevant business activities ˙ ‘ Matters to be complied with for relevant business activities ‘ 89. In complying with section 458NN 15 of the Act in relation to its relevant business activities, a local government or corporatised corporation (the “entity” ) must comply with the following matters in this division— (a) if the local government has resolved that a two-part tariff is to be applied for an activity—a two-part tariff; (b) consumption as the basis for utility charges for water services; (c) full cost recovery for water and sewerage services; (d) identification and disclosure of cross-subsidies between classes of consumers; (e) identification and disclosure of community service obligations; (f) disclosure of the classes of consumers provided with water and sewerage services at an amount below full cost and the amount. ‘ Subdivision 2—Consumption as the basis for utility charges for water services ˙ ‘ Application of sdiv 2 ‘ 90. This subdivision applies to the extent that an entity’s relevant business activity provides water services. 15 Section 458NN (Local governments to implement charging and operational arrangements for relevant business activities)

s 7 19 s 7 Local Government Finance Amendment (No. 2) No. 360, 1997 ˙ ‘ Consumption as the basis for utility charges ‘ 91. In deciding the utility charges to be made for the supply of water services provided by a relevant business activity, an entity must ensure the charges are based on the quantity of water supplied. ˙ ‘ When charges are based on quantity of water supplied ‘ 92.(1) A utility charge for water services is based on the quantity of water supplied by the entity if it is worked out on a basis stated in subsection (2), (3) or (4). ‘ (2) If utility charges are worked out based on meter readings of water consumed, the utility charges for consumers or groups of consumers must be based on either— (a) a fixed amount and a further amount or further amounts for each unit or part of a unit of the quantity of water supplied greater than a stated unit or units; or (b) an amount or amounts for units or part of a unit of the quantity of water supplied. ‘ (3) The utility charge for consumers in a group must be based on the estimated average consumption by all consumers in the group if— (a) utility charges are not based on a meter reading of water consumed; and (b) the consumers are divided by the entity into groups based on the estimated average quantity of water expected to be supplied to customers in each group. Example for subsection (3)— A local government could, by sampling or other ways, work out the average usage of domestic consumers was 300 kl per year and the average of commercial consumers was 2 000 kl per year. The utility charge could then be based on a notional access charge of say, for domestic consumers—$100 and, for commercial consumers—$600 and a notional usage charge of $1.00 a kl. The charges would be $400 for domestic consumers and $2 600 for commercial consumers. Given the considerable variability of consumption across commercial consumers, it would be preferable to further divide them by type and carry out separate assessments for each. Some of the commercial users may be metered and charged on the basis of actual consumption in which case subsection (3) would not apply to them.

s 7 20 s 7 Local Government Finance Amendment (No. 2) No. 360, 1997 ‘ (4) If a utility charge for water services is not made under subsection (2) or (3), the charge must be worked out on a basis the entity considers appropriate to determine the reasonably likely consumption by the consumer. ‘ (5) Subsections (2) to (4) do not prevent a utility charge for supply of water services including an access amount. ‘ Subdivision 3—Full cost recovery ˙ ‘ Application of sdiv 3 ‘ 93. This subdivision does not apply to an entity deciding the charges for water and sewerage services provided to clients in carrying on a relevant business activity if the entity applies full cost pricing under part 8 in deciding the charges. ˙ ‘ Application of full cost recovery ‘ 94. In deciding the charges for water and sewerage services provided to clients in carrying on a relevant business activity, an entity must ensure the projected total revenue from carrying on the activity is enough to cover the projected total costs of carrying on the activity for a financial year. ˙ ‘ Total costs of carrying on relevant business activity ‘ 95. For this subdivision, the total costs of carrying on a relevant business activity include the following— (a) operational costs incurred in carrying on the activity; (b) administrative and overhead costs; (c) cost of resources used in carrying on the activity; (d) depreciation; (e) return on capital employed.

s 7 21 s 7 Local Government Finance Amendment (No. 2) No. 360, 1997 ˙ ‘ Administrative and overhead costs ‘ 96. The entity must make a reasonable allocation of its administrative and overhead costs to each relevant business activity to which full cost recovery is applied. ˙ ‘ Cost of resources used in carrying on relevant business activity ‘ 97.(1) If resources are provided by or to an entity for carrying on a relevant business activity, the cost of resources used in carrying on the activity includes an equivalent cost. ‘ (2) If the resources have an identifiable cost, the cost of the resources may be taken to be the equivalent cost. ‘ (3) If subsection (2) does not apply and the resources are readily available on the open market, the price at which they can be obtained in the market may be taken to be the equivalent cost. ‘ (4) If subsection (3) is applied, the entity must ensure the terms on which the cost is based are similar to the terms on which they are made available in carrying on the activity. ˙ ‘ Depreciation ‘ 98. Depreciation of each asset used in carrying on an activity must be based on the deprival value of the asset allocated over its useful life. ˙ ‘ Return on capital ‘ 99.(1) The amount for the return on the capital used in carrying on a relevant business activity must be a positive real rate decided by the entity. ‘ (2) In this section— “capital used in carrying on a relevant business activity” means the total value (using an accepted accounting method) of the assets used for the activity less the liabilities attributable to the activity.

s 7 22 s 7 Local Government Finance Amendment (No. 2) No. 360, 1997 ‘ Subdivision 4—Treatment of community service obligations ˙ ‘ Extra cost for community service obligations to be treated as revenue ‘ 100. If community service obligations are carried out as part of a relevant business activity, for deciding charges for goods and services provided through the activity, there must be treated as revenue for the activity an amount equivalent to— (a) the cost of carrying out the obligations; less (b) any revenue arising from carrying out the obligations. ‘ Subdivision 5—Identification and disclosure of cross-subsidies between classes of consumers ˙ ‘ Disclosure of cross-subsidies in annual report ‘ 101. In its annual report, an entity must state the amount of cross- subsidies between the following classes of consumers, for water or sewerage services provided for the financial year— (a) domestic consumers; (b) commercial consumers; (c) industrial consumers; (d) another class decided by the entity; (e) other consumers. ‘ Subdivision 6—Disclosure of community service obligations ˙ ‘ Disclosure of community service obligations ‘ 102. An entity must state in its annual report— (a) community service obligations carried out during the financial year as part of a relevant business activity; and

s 7 23 s 7 Local Government Finance Amendment (No. 2) No. 360, 1997 (b) the cost of, less any revenue arising from, carrying out the obligations. ‘ Division 3—Two-part tariffs ˙ ‘ Utility charges if two-part tariffs applied ‘ 103. If a local government decides under chapter 7C, part 4 of the Act to apply a two-part tariff for a relevant business activity that provides water services, the utility charges for water services must be worked out under section 92(2)(b) and (5). 16 ’. ENDNOTES 1. Made by the Minister on 22 October 1997. 2. Notified in the gazette on 24 October 1997. 3. Laid before the Legislative Assembly on . . . 4. The administering agency is the Department of Local Government and Planning. © State of Queensland 1997 16 Section 92 (When charges are based on quantity of water supplied)