Harvey Water has two cooperatives with almost the same membership but with different Directors. They are two separate companies and are run as such. The companies operate under the Cooperatives Act and have their own separate Articles of Association.
Membership is by way of shares. Each shareholder owns shares in each cooperative equal to the number of megalitres of water allocation that they owned at June 1996, before the privatisation. That is, if they had 100 megalitres of allocation before privatisation, they now own 100 shares in SWIAC and 100 shares in SWIMCO. These are their membership of the cooperatives and have a value of $1 each. This value does not change. In addition, under SWIMCO they hold a corresponding Certificate of Water Entitlement, which in the example above would be for 100 megalitres of Transferable Water Entitlement (TWE). Any property rights to water and any value attached to it, reside in this certificate. TWE may be transferred temporarily (within one season) or permanently according to some simple rules.
One cooperative is the South West Irrigation Asset Co-operative (SWIAC). This cooperative is not a trading entity in the normal sense and does not employ anyone except the Directors. Its function is to own the assets (worth around $70 million in replacement value ). It also manages the investment of the funds which accumulate from the Fixed Charges levied by this cooperative to pay for the future works required on the irrigation system.
This cooperative is a mutual with its origins in the Common Law. This means that all the funds it receives from its members as the Fixed Charges or Asset Levy, are non-taxable. However 95% or thereabouts of its income must come from its members for this to be allowed. This taxation provision has meant that SWIAC has been able to accumulate around $5m in 5 years from the asset levy as a sinking fund for future works. With tax, this would have been less than $3m. It is a considerable advantage and it allows the company to be independent of seeking funds from government for works.
The other benefit of this cooperative is that being completely separate from the management cooperative, in the event of the failure of that cooperative, the assets would not be subject to bankruptcy action. This was important for the government in the privatisation process which otherwise felt some unease that in handing over what were irrigation assets built with public funds to a private entity, there could be some considerable criticism if the assets became owned by a third or other party if the management cooperative failed.
The South West Irrigation Management Cooperative (SWIMCO) is the trading entity under the trading name of “Harvey Water”, it employs all the staff and manages the irrigation business. SWIMCO also carries out asset works and other management activities such as collection of asset levy funds for SWIAC by a formal contractual arrangement. That is, it always operates at arm’s length from SWIAC as SWIAC is just another private company.
In our cooperatives each member has an equal vote whether they hold 10 shares or 250 shares. A strength of our cooperatives is that it requires that you must be an active member. That is you may not cease being an irrigator but still continue to hold shares and voting rights. You must dispose of your shares to another member or in certain circumstances, to the cooperatives.
The Directors are all voted in by their fellow irrigators. They are all irrigators except for one external Director who has experience in finance. Directors have a 3 year term and face their shareholder electorate in rotation so that only one or two changeover at any time. There are no appointees, by government or otherwise.