Icon Water in Canberra is 100% owned by the ACT government, yet it operates as though it were a public company. The movement of government-run services to become a Quango (Quasi Autonomous Non-Government Organisation) has accelerated over the years to the detriment of many services. The idea is a good one of making the organisations independent of the government of the day, but the implementation has not matched the hope and it has created serious governance and economic issues.
The government of the day controls the board appointments, and the organisations act as though their primary function is to "make a profit" rather than serve the people. Government Treasury treats the organisations as an alternative source of taxation, and some governments treat the organisations as a stepping stone to full privatisation giving windfall capital gains for short-term political advantage.
The interests of political parties to stay in power often deviate from the wishes of the general population. The general population wants to see action on climate change, reduced inequality, and affordable services. Political parties want the same things but also wish to minimise taxation and be seen as able to manage the economy.
Fortunately, there is a solution that reduces taxation while showing that the political parties can manage the economy. The same solution will address existential crises while providing affordable services.
A Circular Economy with Community Capital
Businesses are on a path to failure when they change their focus from providing goods and services to delivering profits for shareholders. When investor shareholders control the board and hence the company's investment decisions, profits and shareholder wealth take precedence over long-term sustainability. Shareholders and management work to extract as much money as possible from company assets. Money and value are seen as synonymous.
It applies to quangos just as much as private companies. However, the shareholders in quangos should include the citizens they serve and the workers who make it possible, as well as government bureaucracies and political parties.
A solution is to give the buyers and receivers of goods and services, and the workers who produce them, a say in the governance of the businesses, no matter the form of the business. To have a say in governance, buyers and workers need a share of the business and a voice on the governing board.
Community Capital provides a way to give buyers investments with the bonus of increasing the efficiency of Capital distribution. In the case of Icon Water, it will recycle $3.8 billion of Capital for Community investment.
Icon Water Capital
The 2022 Balance Sheet for Icon Water shows $1,800 million in loans with a yearly interest of $82 million. Inviting the lenders to change to Community Capital or raising the $1,800 million from buyers will, each year, make $82 million available for ACT Community investment. Icon Water also makes a profit of $106 million each year on $1,800 of Equity. It becomes incrementally available for Community investment without borrowing or selling off the assets to external organisations.
The rate it becomes available is determined by Icon Water in discussions with the ACT, Federal Government, and the Reserve Bank.
These funds become available because the investors in Community Capital get their return on investment in the form of more Capital they can sell to other investors or Icon Water. They must sell some each year to buyers who purchase it each time they pay for services produced by the assets.
The effect of Icon Water changing its Capital Structure would be immediate and beneficial to the ACT. The budget bottom line would improve, and investment in water infrastructure would work to reduce consumption and reuse water. The price of water would stabilise and commence to drop, and Canberrans would have an excellent local investment for their superannuation and other savings.
The gains come because the community no longer rents money to distribute Capital, and Capital does not sit in water and sewerage infrastructure but moves out with each payment. The asset value becomes available for investment in the community.
The approach can work for all community assets, including land, roads, energy, health, and education. It maximises financial resources and changes any government's emphasis from finance issues to the well-being of the planet and people.
Summary
The financial system aims to maximise profits. A Circular Economy driven by Circular Community Capital aims to maximise well-being by distributing profits for near zero cost. The approach works for all businesses and should be mandatory for government quangos.
