State councils have warned they might have to readjust their rates policies if payment of dividends to them by TasWater is drastically altered in the future.
The Local Government Association of Tasmania in a submission to the Legislative Council inquiry on the operation of the water body said councils relied on dividends each year for their budgets and non-payment affect short term and long term financial plans.
It said this year marked the second time councils had to go without receiving full dividends.
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Councils agreed to accept a significant reduction in dividends in 2016 in order to sufficiently fund TasWater's 10-year capital works program.
This reduction was collectively worth $10 million.
LGAT said councils were concerned the impacts of the coronavirus pandemic on TasWater's earnings would prevent payment of annual dividends to them into the future.
"Ultimately if there are to be no TasWater dividends for councils there needs to be a broad understanding that there will need to be reconsideration of current rates policies," the submission read.
"The TasWater dividend can represent between 3.5 per cent and 8 per cent of rates income, dependent on the council.
"Most councils have not received the level of dividends agreed as part of the initial reform agenda or when they complied with National Competition Policy as asset owners."
Additionally, LGAT said one of the drivers around the lack of guarantees around the dividend revenue stream was from the politicisation around water pricing and headworks charges.
LGAT chief executive Katrena Stephenson said councils recognised that the coronavirus pandemic had placed extraordinary pressure on TasWater.
"When adopting TasWater's Corporate Plan 2021-25 in Launceston last week, councils noted that against comparable water and sewerage businesses nationally, TasWater's debt profile appeared to be quite reasonable," she said.
"Under these circumstances, councils believe it is in all Tasmanians interests that TasWater return to being a sustainable and profitable company which can pay the agreed dividends as soon as possible."
Council representatives were told earlier this month TasWater would record an underlying net loss of about $15 million for 2019-20.
It recorded an operating profit of $41.3 million in 2018-19.
The water utility has also moved to bump up its debt to $735 million to continue to progress its ambitious capital works program.
The state government owns a 10-per-cent share of TasWater.
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