Is sewerage for SMBI a pipe dream?

CAUTION: THESE COSTS ARE ESTIMATES AND ARE PROVIDED TO INDICATE THE SCALE OF COST TO SEWER SMBI AND THE COST IMPACT ON RATEPAYERS. The cost of undertaking a comprehensive cost and business case is estimated at approximately $6m[1]. Clearly the level of unfunded analysis I am able to undertake will not be as detailed or accurate.

1 Executive summary

Based on an estimated base cost of $66,000 per lot for sewerage on the mainland, the indicative cost of sewering Southern Moreton Bay Islands (SMBI) is calculated at approaching $1billion. This may be a conservative estimate and costs will vary whether all islands are sewered, only Russell and Macleay are sewered, only the commercial areas of Russell and Macleay are sewered and the type of system selected.

Firstly, building a bridge to transfer wastewater to the mainland will only add more costs as mainland wastewater treatment plants are running at capacity. The wastewater still needs to be treated somewhere, and this somewhere will require a new and expensive wastewater treatment facility.

Funding for a SMBI wastewater system can be through connection fees, borrowing, and/or state or federal funds. There is also the depreciation and ongoing maintenance and operational costs to be considered.

The key drivers of cost to ratepayers will be:

The overall area to be sewered – all islands, some islands, part of islands
Design and construction costs
Depreciation costs
Interest and loan repayments if funded through borrowings

The key revenue opportunities to pay for sewerage infrastructure come from:

The regulated connection fee (currently $5,501 per lot) and would only be charged to new connections
Grant funding, in which case an annual allocation for depreciation must still come from ratepayers
A levy on SMBI ratepayers
A levy on all Redland ratepayers.

There will also be annual operating and maintenance costs of the wastewater treatment facilities, currently at $915 and charged only to properties that are sewered. This charge will increase as new treatment plants have to operate to higher environmental standards, increasing operating costs.

Table 1 below, provides an indicative annual cost of sewering SMBI under four scenarios:

Loan funded infrastructure, in which the funds are borrowed by council
Grant funded infrastructure, full cost funded by state/federal government
Costs allocated across all of Redlands
Costs allocated across only SMBI

These costs are only indicative. The purpose is to highlight the scale of costs and also provide the basis for consultation with the local community as to community appetite for sewering SMBI and priority areas for sewerage, given the cost to residents.

It may be useful to ask yourself, would these costs be affordable and acceptable, even if they were half that estimated below? Also, the costs would be reduced if only parts of SMBI were to be sewered.

Table 1: Indicative summary of additional costs to residents

	City wide distribution of costs		All costs to SMBI
Loan funded infrastructure	Mainland impact	SMBI Impact	All costs to SMBI
Loan repayments	$1,025	$1,025	$6,282
Depreciation	$302	$302	$1,848
Operating and maintenance costs		$915	$915
Additional annual costs	$1,327	$2,242	$9,045
Plus, one-off connection fee		$5,501	$5,501
Grant funded infrastructure
Loan repayments
Depreciation	$302	$302	$1,848
Operating and maintenance costs	Already paid	$915	$915
Additional annual costs	$302	$1,217	$2,763
Connection fee		$5,501	$5,501

Clearly, the cost of sewering SMBI without grant funding is unaffordable, even if the cost is distributed across all Redlands ratepayers. Redland ratepayers on the mainland would not accept a $1300+ increase in their rates to pay for sewerage on SMBI. SMBI residents would not be able to do it alone at an annual cost of $9,000+ and a one-off connection fee of $5,501.

While full grant funding would meet construction costs, there would still be an annual depreciation cost of $302 if levied across all of Redlands, or $1,848 if only levied on SMBI. SMBI residents accessing sewer would also have to pay an annual wastewater treatment levy to cover operating and maintenance costs, this is not currently charged to SMBI ratepayers.

The additional annual cost to SMBI residents under a grant funding model, with depreciation allocated across all of the city, would be $1,217 ($302 depreciation + $915 operating and maintenance costs). Plus, the connection cost of $5,501. The grant funding model, with depreciation allocated across all properties would be the most affordable and equitable model, reflecting how the depreciation costs of major assets are currently distributed across the city.

The cost of depreciation is unavoidable. It is a legislative requirement that all councils in Queensland make cash allocations for the depreciation of their capital assets. This is a major and increasing cost to Council and is the subject of ongoing negotiations between councils and the state government.

If SMBI residents are strongly opposed to the cost it is unlikely there would be the political will of local, state or federal government to fund such a project.

An alternative option would be to work with the state government to allow place-based resident and business groups to design, construct and operate private wastewater treatment plants. Other jurisdictions have this in place.

2 Caveat and citation

This analysis has been undertaken by me on the information readily available to me; it is solely the result of my work. It has not been approved or endorsed by Redland City Council, nor submitted to independent peer review.

In releasing this report, I provide no indication or assurance as to cost estimates or that this project will be taken up or actioned by Redland City Council, state or federal government. It is the commencement of a journey.

If referring to this report, the following citation should be used. Rendalls S: Is sewerage for SMBI a pipe dream. 2026. https://shanerendalls.au/is-sewerage-for-smbi-a-pipe-dream

3 Introduction

Cost is a major impediment to constructing a wastewater system (sewerage) for SMBI. The objective of this paper is to provide some indicative cost estimate to gauge SMBI resident support for sewering the islands given the likely financial costs to residents.

The cost to residents will comprise:

Wastewater connection fee. This is regulated by the state government and is currently capped at $5,501 per approved residential connection. This will only be payable by residents connecting to the wastewater system, where a system is available.
A wastewater management fee to cover the maintenance and operating costs and sewerage availability whether residents choose to connect or not – as per fixed water fees and charged to residents where a connection is available.
Increased rates for residents to cover the capital costs of design, construction and depreciation.
Whether external federal and/or state funding is available for design and construction. This will affect the calculation of repayments on borrowings to construct, or whether only depreciation costs are incurred by residents.

It is important to note that these costs are only estimates and are designed to inform discussion with residents about:

Resident support for sewering the islands, noting that there will be an associated general rate increase to cover construction and depreciation, a wastewater connection fee and ongoing wastewater management fees in their rates notices.
Should we only sewer some islands, or on the larger islands, only the commercial areas to reduce overall cost.
If there is a price point at which sewering the islands is not supported by island residents.

4 Objective of the report

The objective of the report and subsequent discussions with the community is to inform whether I should argue in council for, and advocate externally for funding for council to undertake or commission a detailed cost and feasibility study on wastewater management systems for SMBI. Put simply, if there is strong local opposition to funding a wastewater system for SMBI from local residents, why take the issue any further to where agreement for funding from mainland residents will be harder to achieve.

This paper does not explore the environmental risk of the current onsite wastewater management systems, impact on lot use or comparison with the installation and operation costs of existing onsite wastewater systems available to SMBI residents. I have written to DETSI requesting advice on what water quality monitoring systems are in place in the peripheral waters to SMBI, what is the outcome of this monitoring and if there are any plans to increase the level of monitoring.

Nor does this analysis examine alternative onsite wastewater systems. These are subjects for separate analysis. I will be consulting with external experts on these options.

While there has been discussion of collecting and pumping wastewater off islands for treatment, this would not obviate the need to construct new treatment plant capacity. All treatment plants in Redlands are approaching capacity and are unable to cater for the current and increased population growth forecast for SMBI, Shoreline and Southern Thornlands PDA. Options to pump wastewater to Shoreline and/or Coochiemudlo for connection to mainland systems are not possible under current environmental regulations. The Coochiemudlo model of undersea pipes to connect with the mainland wastewater treatment system would not be approved today.

5 Background and assumptions

At the last federal election, the Hon Henry Pike MP committed $15m for a feasibility, planning and cost study for a SMBI wastewater solution. Importantly, this would have also been a precursor for submissions to the federal government for funding. Unfortunately, this was not a matched funding commitment, and no funding has been promised or offered by the current federal government. Access to funds are further constrained by the removal of SMBI regional status by the current federal government.

Rather than await funding for a feasibility and costing study, I have undertaken an indicative and high-level costing; several days work drawing on my professional background, not a multi-million dollar independent expert study. The cost is based on:

Best estimate of average per lot costs of new sewerage treatment plants on the mainland.
An estimated cost weighting of 40% for SMBI reflects spread of properties across islands, challenges of installing infrastructure where other infrastructure (roads, footpaths, water mains, etc.) is already in place, greater pump distances and pipe networks, current environmental barriers to cross island wastewater flow, transport and logistic costs, etc. While this weighting is arbitrary, I expect it is conservative, producing a low total cost estimate.
Informed guestimate of Queensland Treasury Corporation (QTC) intergovernmental interest rates for major capital projects. These rates are set by QTC on a project basis and subject to detailed project feasibility study as per the Queensland Gateway Review Process.[2] This paper precedes even the commencement of Gate 0: Strategic Assessment in the Gateway Review process.
The loan repayment is calculated using the PMT function in Excel. This calculates the annual loan repayment based on constant payments and a constant interest rate. This is calculated as PMT (rate, nper, pv, [fv], [type]) where:
Rate The interest rate for the loan = 3.5%
Nper The total number of payments for the loan = 20 (years)
Pv The present value, or the total amount that a series of future payments is worth now; also known as the principal = $1,063,246,800
Fv The future value, or a cash balance after the last payment is made = 0
Type Payments are to be made at commencement of each year to reduce interest, value = 1
A loan repayment period of 20 years, reflective of current borrowing guidelines. Clearly, variation in term of the loan and/or interest rate will affect annualised repayments.
Straight-line depreciation over 50 years. By law, Council is required to make an allowance for the depreciation of capital assets. A straight-line depreciation model where the initial capital costs are depreciated by the depreciation period, for example $1,000 over ten years equals $100 depreciation per year. Asset value and depreciation schedule are reviewed and adjusted periodically to ensure that at the end of the asset’s life, cash reserves are available for asset replacement.
The cost of depreciation is equally applied to the total project value whether the project is funded from cash reserves, capital borrowings or external private (e.g. donations of parks, etc.) or federal or state funding.
The overall cost of construction is derived, less the government regulated connection fee of $5,501 per residential lot in Redlands. Adjustments have not been made for commercial and industrial land or lots amalgamated for rating purposes. This detail is outside the scope and information available for this review. While having a material impact on final costing, it does not impede an indicative cost for gauging community appetite for a SMBI wastewater management system given cost to residents.
Under a city-wide cost model, the cost of borrowing (if required) and depreciation (net of connection fee) is allocated to the 70,500 residential lots in Redlands. This shares the capital costs across all rated properties. Note, adjustments have not been made for differential commercial and residential rating, the exclusion of lots not able to access sewerage, and lots amalgamated for rating purposes.
Under a SMBI only cost model, the cost of borrowing (if required) and depreciation (net of connection fee) is allocated to the 11,507 approved residential lots on SMBI. Note, adjustments have not been made for differential commercial and residential rating, the exclusion of lots not able to access sewerage, and lots amalgamated for rating purposes.
An average annual cost to SMBI residents is then calculated by the addition of the existing wastewater fee paid by properties with access to sewer. This is not currently paid by SMBI residents and is currently $915 per annum. Note, technology and environmental compliance requirements of new systems (including Shoreline) is likely to increase the wastewater fee charged across all city properties with access to sewerage. This approach is a fair and equitable way of levelling operational and maintenance costs of different wastewater treatment plants across all ratepayers having access to the wastewater management system. You do not pay more if the plant serving your community is more expensive to operate.
The current ‘one off’ connection fee is applicable only to new connections to the sewer and will include all SMBI residents, where the sewer is available. The model assumes all approved residential lots connect to the sewer. Variation will affect level of borrowings and impact other cost components. This level of detail would be considered if the project progresses to more detailed feasibility assessment and costing.

6 Summary of costs

6.1 Capital cost SMBI wastewater treatment

The total estimated capital costs of a wastewater system for SMBI is approximately $1billion, this equates to approximately $92,400 per lot. Note – this is an indicative estimate only.

Table 2: Summary of cost calculations

Capital cost estimate	Per lot	Lots	Total
Mainland cost estimate
Estimated cost	$60,499
Regulated connection fees	$5,501
*Est cost per connection*	*$66,000*
SMBI costing
SMBI cost weighting	1.4	40% more for SMBI
*SMBI Total Cost*	*$92,401*	*11,507*	*$1,063,253,244*
Regulated connection fees	$5,501	11,507	$63,295,404
Unfunded, no developer	$86,900	11,507	$999,957,840

6.2 Borrowing and depreciation

The cost of borrowing funding comprises the loan repayments for the component of construction not covered by the connection fee. If external funding is obtained, residents will not have to pay capital loan repayments; depreciation payments will still be required. Table 3 provides a summary of the costs of capital.

Whether the repayments on money borrowed to construct sewerage infrastructure is distributed across all ratepayers, or only SMBI ratepayers; loan repayments of $72m+ to sewer SMBI would be a very high cost to the city and is unlikely to be supported by the majority of ratepayers and councillors.

Table 3: Cost of capital

Cost of borrowing	Per lot	Lots	Total
Estimated total project cost			-$1,063,246,800
Regulated connection fees -funded			$63,295,404
Borrowing – unfunded			-$999,957,840
*PMT – all city residential lots*	-$1,025	70,500	-$72,281,343
*PMT – only SMBI lots*	-$6,282	11,507
Depreciation
Annual straight-line depreciation all city	-$302	70,500	-$21,265,065
Annual straight-line depreciation only SMBI	-$1,848	11,507
Annual loan repayments and depreciation
All city lots	-$1,327	$70,500	-$93,546,408
Only SMBI	-$8,130	$11,507

There is a strong argument that the depreciation costs should be distributed across all of the city, to reflect current depreciation allocations.

While an additional $300+ per ratepayer to meet the depreciation of new wastewater treatment plants if costs were allocated across the city is both equitable and more affordable; it will remain a challenge to secure councillor support as it is likely most mainland residents would object to such an increase.

While we note that new estates such as Shoreline and the to be developed Southern Thornlands have sewer, most of this cost is met by the developer and passed to the resident in the purchase price of the property. SMBI properties were subdivided and sold in 1971/72 (before transfer of SMBI to council) and there we no infrastructure provided by the develop or infrastructure payments made.[i]

A further key difference with SMBI housing growth and mainland new estate development, is that there is no increase in the number of rateable properties on SMBI as new houses are built, and the rateable value of owner occupied properties is less than vacant residential properties. In summary, SMBI is getting increased population growth and demand on services with a reduction in the average rates paid.

6.3 Other costs

The whole of city cost model means that SMBI properties will incur the same costs as mainland properties with access to sewer. This includes:

$5,501 connection fee, where sewer is available
$915 wastewater management charge for maintenance and operation costs of wastewater treatment

Note, the wastewater management charge is likely to increase due to the higher operational costs of new treatment plants in order to meet current environmental standards.

6.4 Cost summary

The additional annual cost estimates are provided in Table 1 above and repeated in Table 4 below. The higher cost for SMBI under the city wide distribution of cost model is due to the inclusion of the annual wastewater charge, this is already paid for by mainland residents with access to the sewer. As such, it is not reported as an additional cost for them.

SMBI residents will also be charged a ‘one off’ regulated wastewater connection fee, this is paid by all residents connecting to the wastewater treatment system. The fee is currently capped at $5,501.

While depreciation and cost of borrowings is not identified as a separate charge in the rates notice, it is captured in the summary below to provide an indication of cost.

Table 4: Additional annual cost summary

	City wide distribution of costs		All costs to SMBI
Loan funded infrastructure	Mainland impact	SMBI Impact	All costs to SMBI
Loan repayments	$1,025	$1,025	$6,282
Depreciation	$302	$302	$1,848
Operating and maintenance costs		$915	$915
Additional annual costs	$1,327	$2,242	$9,045
Plus, one-off connection fee		$5,501	$5,501
Grant funded infrastructure
Loan repayments
Depreciation	$302	$302	$1,848
Operating and maintenance costs	Already paid	$915	$915
Additional annual costs	$302	$1,217	$2,763
Connection fee		$5,501	$5,501

7 Wastewater treatment alternatives

Council funded alternatives to a SMBI wide sewer network could include only sewering parts of SMBI and/or buybacks and amalgamations of properties to reduce the number of residential lots. This would deliver clear savings if smaller islands were not sewered, as the capital costs of an on-island wastewater treatment plant on the unsealed islands would not be incurred. While undersea wastewater pipes is not possible under current environmental regulations, it may be possible to transfer wastewater from Lamb to Macleay via overwater pipes. It should also be noted, that given the capital infrastructure costs for each treatment plant will be larger than the network cost to connect each island residence, a reduction in the number of properties sewered on an island will not directly correlate with the reduction in costs.

An investment decision to sewer the islands should also include an assessment of the technological capacity to mitigate the risk of leakage in underseas pipes transferring wastewater to the mainland for treatment. This may enable a successful campaign to review current environmental regulations to reflect the improved technology.

An alternative, in place in other jurisdictions, is to engage with the state government to change regulations covering the privately funded and managed transfer of wastewater across property boundaries using systems of covenants and easements. This approach would allow local place based resident groups and businesses to design, construct and operate private wastewater treatment plants. Jurisdictions with this in place have assessment, testing and monitoring processes to ensure achievement of environmental standards. It can also provide a potential revenue stream to council for the licensing of council lands for the regulated dispersal of wastewater.

There is also the option of pressurised pump systems (PPS) retrofitted to existing septic systems. PPS can reduce installation costs to residents with septic systems and reduce infrastructure costs through easier laying of pipe. These systems use a macerator to process wastewater and it is then pumped under pressure for processing. New wastewater treatment facilities are still required to process the raw sewerage.

Another option is to leave existing systems for solid waste (sludge) and capture and treat only the wastewater after aerobic and anaerobic treatment is completed on site. Residual sludge is pumped out and removed.

There is also the option of composting toilets. While reducing wastewater demand it will not obviate the need for onsite wastewater treatment of the majority of properties choosing not to connect to a sewerage system if available on SMBI.

As is apparent, there are a range of sewerage management and treatment options, and they will all influence the level of cost. But as said in the beginning, even if we were able to reduce the cost of treatment by half, would residents want to pay?

8 Next steps

A recommended process of moving forward:

Preliminary consultation with SMBI residents to seek feedback on appetite to sewer the islands and options in respect to all or some parts of SMBI. This will be through meetings on each island.
Structured survey and consultation with SMBI residents to assess the appetite for sewering the islands, which islands and which parts of islands within a range of cost scenarios
Based on the assessed resident support for sewerage, Council would advocate to state and federal government for funding a strategic assessment of the need for and options to sewer SMBI. This would include current and forecast demand, environmental and economic risks of not sewering the islands, environmental and economic benefits of sewering the islands, shortlist of preferred options and indicative cost and funding models. This would be the commencement point of the Queensland Government Gateway Review for this project.

[1] The cost of the Tamworth Advanced Water Treatment Plan Detailed Business Case, jointly funded by the Federal and NSW Government is $6m, see Tamworth Advanced Water Treatment Plant detailed business case | National Water Grid Authority.

[2] , see Gateway reviews (assurance) – QLD Treasury.

[i] The lack of infrastructure is reported in minutes of a Cabinet Meeting 9 January 1973 in discussions on takeover of control of SMBI by Redlands Shire and what financial assistance the state government would provide to council. (page 3.(4)) “…the merit or need for the government or the council now to carry out the development work that should have been done by the subdividers is very questionable….in these circumstances it would appear that no such major commitments would be accepted over and above such rate revenue as may become from the islands themselves. Page 5(iii) goes onto state…. As the islands will automatically bear a share of the Shire’s loans and liability, some loans should be raised for works on the islands, with such loans being repaid from the whole shire. Page 3, section (4) of the Cabinet Minutes.

. Is sewerage for SMBI a Pipe Dream