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Casting vote used to keep dam project alive

June 15th, 2017
[by David Armstrong]

Tasman Mayor Richard Kempthorne used his casting vote to keep the Lee Valley Dam project alive, but the result will likely mean more costs to ratepayers.

A full count of Councillors, watched by a packed audience in the debating chamber, yesterday voted 7-7 on the request by CEO Lindsay McMenzie (pictured) to give a new mandate to Council staff to continue negotiations for the dam project.

But that new mandate will likely see Council contributing more to capital and operating costs, as well as underwriting the loan they are negotiating with Crown Irrigation Investments Limited (CIIL).

The softening of Council's negotiating stand in the face of a lack of movement by other partners - particularly the water users such as orchardists - caused half of the Councillors to say "no more", so the Mayor who had already voted "yes" used his casting vote to pass the resolution.

Motueka's three Ward Councillors, Peter Canton, Paul Hawkes and David Ogilvie, all voted against the resolution.

Following is a summary of the key factors involved in the request for Council to contribute more to the project.

Since community consultation in 2014 when Councillors were told that ratepayers would not fund the whole damn, TDC staff have been negotiating with Waimea Irrigators Limited (WIL, representing water users) and government agency CIIL in a joint venture to fund the project, which is officially called the Waimea Water Augmentation Project.

In his report to yesterday's meeting, the CEO reported that WIL "are at (or near) the limit of their ability to pay", and that "the project is in the balance unless the Council agrees to go back to the negotiating table with a view to meet the additional costs and providing the credit support being requested of it".

Additional costs include approximately $3 million in capital expenditure and about doubling the annual operating costs to around $1.3 million to $1.4 million.

This assumes that TDC meets Nelson City Council's dam capacity operating costs and that Nelson City Council makes a capital grant of $5 million.

For the past two years, the Joint Venture working party have worked on a "line in the sand", that ratepayers' contribution to the capital cost would be no more than $25 million. This now looks set to rise to as much as $28 million, depending on further negotiations.

The irrigator capital contribution is proposed at $40 million made up of $15 million cash raised and a loan from CIIL of $25 million. The original TDC position was that irrigators would underwrite that loan, but now they have declined to do so.

Lindsay said that "unless the Council steps up and carries more cost and provides strong credit support, the project is over". The term 'credit support' in fact means being responsible for paying back the loan at the end of its 15-year term or if anything goes wrong along the way.

For several of the counsellors who voted against the request for approval, this was considered too great a risk for ratepayers. Those voting for negotiations to continue on this basis said that the risks of insufficient water supply for future generations was far greater.

Lindsay said that with the proposed extra cost to ratepayers for the Council project, "keeping within the 3% (plus growth) annual limit on increases in rates income will be more challenging".

But he reported that the negotiators' feedback was that "unless the partners' negotiating positions shift, the Project will not proceed".

"On the other hand there are compelling reasons why the Project should proceed. The main reason why the Council should want the project to go ahead is because the alternatives to the Project will cost the domestic and business urban water consumers more.

"In addition, the alternatives don't deliver the same supply security and long term growth benefits that the project does nor the social, environmental, economic and cultural co-benefits. A no dam scenario is untenable."

But he also said that "Waimea Irrigators Limited and Crown Irrigation Investments Limited will also need to review their position if there is to be an agreement".

Before casting his vote on the proposal, Cr Paul Hawkes said he was torn between the need for water security and promises he made to those who voted him in.

"I said that $25 million maximum ratepayer contribution to the project was a line in the sand that I wouldn't step over, and I have to stick by that now that the goal posts have been moved," he said.

Cr Peter Canton brought up several points leading to his decision to oppose the motion.

Along with other councillors, he was very disappointed by the apparent lack of buy-in by most of the roughly 700 irrigators. Only a very small percentage of them have promised financial support, and they were mainly the larger players.

"If irrigators don't all support or believe in the plan, how can I go to my constituents and sell it to them?" he posed.

Several councillors, including Dana Wensley and Mark Greening, said Council offering to pay a greater share makes them look weak in negotiations and suggests that Council has "deep pockets".

Another point of dissatisfaction raised by those against the proposal was that no serious work appeared to have been done on a "Plan B". The only alternative solution that Council engineering staff had put up was not investigated thoroughly enough, they said, and other options, or a mix of options, had not been seriously considered.

Most also brought the issue back to ratepayers and their ability to cope with likely rate rises.

Those backing continued negotiations with new conditions and limits said the debate and political hurdles had been going on for too long (15 years), and to back out now would cause the region as a whole to suffer and be bad for future generations.

The mandate to continue negotiations with a new upper limit to ratepayer contributions and an agreement to underwrite the government loan still does not mean that the dam will be built.

Any agreement that the negotiators reach will need to be approved by the Council. Any such agreement will form the basis for a Statement of Proposal, which will then be put out for consultation to the community.

As the Mayor said, "This is not a final decision, but it will enable the process to continue in good-faith negotiations".

Public consultation on the entire proposal, including the funding split, the impact on rates and water charges, governance and commercial terms, will take place from November 2017.

A final decision whether to proceed with construction of the Waimea Community Dam is likely in early to mid-2018.

[See also the Nelson Mail article who also attended the meeting and took thorough notes.]

Comment by Eileen Prowse:
[Posted 16 June 2017]

Well Well Well no surprise there. It doesn't make any difference what people say, they will push this through even if 99% of people said NO. What is Murchison, Golden Bay and Motueka going to get from this! NOTHING. Our councillors from the 3 wards should rally ALL the ratepayers and suggest we hold back that portion of our rates and collectively put that money into something that will benefit each area.

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