The Dunedin City Council is defending the fees it charges for water and waste services, in the wake of the closure of the Graeme Lowe Otago fellmongery in Green Island.
The plant shut suddenly in July, with the loss of 60 jobs, leaving the council's water and waste services business unit with a $703,606 hole in its forecast revenue for the 2009-10, and millions more in its 10-year plan.
The money was to be paid by the company for the use of the council's water and waste services, including wastewater treatment, trade waste charges and solid waste services.
The drop in revenue would be partially offset by $147,000 in savings from reduced operating costs across the three service areas, due to reduced use of the council's facilities with the plant's closure.
However, council water and waste services manager John Mackie yesterday said that did not mean the council was making a $556,000 profit on the charges it levied for the water and waste services it provided to large companies.
Asked about the figures by the Otago Daily Times, Mr Mackie said the the extra $556,000 went towards covering fixed costs associated with the department's operation.
While some operational costs reduced as usage did, fixed costs - such as interest or depreciation on loans associated with the millions spent upgrading water and wastewater infrastructure - did not, he said.
"A lot of fixed costs are interest and depreciation, which do not go away because Graeme Lowe has left," he said.
"It's not a $500,000 profit at all.
"These services are run to break even."
The council's charges were higher than those in some parts of New Zealand, due to the greater investment in infrastructure aimed at cleaning up discharges and other priorities, he said.
"That's come at a cost . . .
"That's what we are asking industry to pay a portion of."
However, a 2008 study by the New Zealand Water and Wastes Association found the council's charges to be "at about the median" when compared to other cities "in our peer group", Mr Mackie said.
Each city had its own charging method, but the report showed Dunedin's price for wastewater charges per rateable property ($308 a property) compared with charges as low as $83 a property in Hamilton and as high as $450 a property in Whangarei.
The figures were considered the best way of comparing charges across cities, he said.
This year's figures were not yet available.
Mr Mackie said the management of Graeme Lowe had not identified the council's charges as a reason for the closure of the company's Green Island plant.
Instead, they blamed the worldwide economic situation.
The council's charges were also reviewed annually and inflation-adjusted, and Mr Mackie believed the difference between the city's charges and lower-cost centres proving attractive to businesses were "not sustainable".
Eventually, those centres that did not meet Dunedin's standards - achieved through capital investment in infrastructure - would be forced to comply with the Resource Management Act, he said.
"That's the reality of the expectations of people in Dunedin.
"There's a cost that goes with that," he said.
