Water Rewards — Information Rich Money
“Finance — the world’s more inefficient industry” outlines the cost reductions available by moving from low information money to high information money. Water Rewards is high information money.
Governments often fund large-scale water infrastructure development with long-term loans. Rather than using long-term loans water infrastructure could be financed with pre-payments of water where investors received a return on investment by being able to sell the pre-payments at full cost to water customers. This approach eliminates the cost of interest and so provide investors with a higher return than regular government loans.
ACT Water Rewards Co-op
The ACT Water Rewards Co-op is an example of how to implement this lower-cost approach to financing with information rich money.
Using the approach investors will get a 10% fixed return on the inflation adjusted initial capital. It is an attractive investment and is in limited supply. Customers receive free Rights to purchase Water Rewards. Customers who consume less water get more Rights to purchase Water Rewards. Those who conserve water get rewarded with more Rights hence the name Water Rewards.
In the ACT a Water Rewards Co-operative will administer the allocation of Rights and the purchase and use of Water Rewards. The Co-op decides the rules for the issuing of Rights. ICONWater is the name of the ACT Government Water Authority. Any customer of ICONWater can apply for membership of the Co-op. They receive a personal copy of the Water Rewards app containing the Co-op rules, the Water Rewards rules, and a history of their transactions. Click here to see a mockup of the application.
ICONWater can use the system to repay existing loans of $1.5 Billion dollars and remove 70Million in interest charges from ICONWater profit and loss meaning ICONWater short term profits increase. The price of water stays the same and the reduced income from the discount occurs when customers use Water Rewards. Because ICONWater can issue more Water Rewards to upgrade its infrastructure, there is no need to provide for depreciation, and this further increases ICONWater profits.
The ACT Government owns ICONWater. The Co-op pays for the infrastructure and operation of Water Rewards from a fee on money transfers.
The customers of ICONWater pay the same for water, but they receive Rights to buy Water Rewards. At present interest rates on long-term money, a discount rate of 10% makes the free Rights approximately the same value as the purchased Water Rewards.
Customers receive $1.5 Billion in Water Rights, and ICONWater increases its profits by 70 million each year. The ACT government debt has reduced by $1.5B. The infrastructure assets of ICONWater are greater than $1.5B, and so the ACT government can raise further funds via Water Rewards to spend on other investments such as hospitals, roads, renewable energy, or schools.
How Water Rewards increases the return on investment
Let us assume we have a loan of $100 and we pay interest on the loan of 5 per year and we repay the loan at the end of a year. To do this we have to sell $105 worth of goods. The buyer of goods receives $105 worth of goods. The supplier of the loan receives $105 in value. The supplier of the goods profit and loss has a $5 charge for interest.
With Rewards let us assume an investor purchased $100 of Rewards that gave them a discount of 5 percent at the end of the year. The investor receives $105 in value. The supplier of the goods profit does not have a $5 charge for interest. The supplier has an increase in profit of $5 while the investor gets $105 in value. With Water Rewards it is intended for the investor to get the $5 saved by increasing the 5% to 10% by adding the savings to the budgeted 5% return.