Dublin City Council will be left with hundreds of millions in liabilities and will lose some €2 billion in assets following the transfer of its services to Irish Water next month, city manager Owen Keegan has told councillors.
In what has been his stronger statement since becoming city manager earlier this year, Mr Keegan said the transition was set to result in higher charges for businesses, could damage the council’s ability to respond to severe weather events, and was likely to cause “very significant financial and operational risks to the city council” .
The council was facing pension liabilities for water services staff of €330 million without the assets to fund them and this was the “ single most significant area of concern”, Mr Keegan said. “In the normal course of events one would expect that when a function transfers from one public service agency to another, public service agency responsibility for legacy pensions associated with the function would also transfer.”
'Major liability'
Assets of approximately €2 billion were transferring to Irish Water "without any compensation" to the council. These assets had been built not only on funding from the government but from the commercial rates paid by the business people of the the city.
“It seems unreasonable that a major liability relating to these assets will remain with the council notwithstanding the fact that the assets have transferred to Irish Water. The pension liability is directly related to the underlying water assets and was incurred in developing and maintaining those assets.”
The council was obliged to sign agreements to provide water services as agents of Irish Water for the next 12 years, but although the transfer was due to take place on January 1st next, the council had yet to be given a final draft of the Service Level Agreement. However Mr Keegan said he had already been made aware the council was to be left €1.7 million short of what was needed to run water services in 2014.
'Violation' of principle
This represented "a violation" of the principle that the council should be recouped in full for the costs it incurs under the agreement, he said. "Local authorities should not be in a position where they are providing services on behalf of Irish Water for which they will not be fully reimbursed."
If this budget deficit continued in future years, the council would lack the capacity to react to unforeseen weather such as floods or freezes.
“In previous years when there was severe weather we had no option but to respond, but if we are not going to recouped for it, that will put us in a very difficult situation.”
A uniform national charge was due to be set for businesses, which was likely to be higher than the current rate charged in the city. The council would be unable to compensate business for any increase.
“It seems likely that water charges will have to be increased, we won’t be able to compensate businesses for any increase. I personally think that is a major loss.”
Mr Keegan also presented a report from the council’s law department that pointed out that the published Bill does not prohibit the sale of Irish Water or its assets.
He told councillors his predecessor as manager, Irish Water managing director John Tierney, and Minister for the Environment Phil Hogan were requested to attend or send representatives to last night's meeting but declined.
