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Rate Increases Ahead

It never ceases to amaze me how fiscal responsibility is not one of the top considerations in Council decisions. We have a global crisis on our hands, with countries in lock-down, stock markets crashing, and businesses shedding staff. And yet it appears that our ratepayers still have unlimited funds to meet all the spending demands of the current Council.

Tasman Rate Increase Coming
Rates Increase

In the Regulatory Committee meeting this week we spent in excess of an estimated $150 000 for an early partial review of the dog bylaw. There was another considerable sum spent on the in-committee item. This was all unbudgeted expenditure.

Unfortunately, this is not the exception but has been the norm this year. Every meeting seems to consist of unbudgeted spending being allocated. In an ideal world, these “small” increases might be manageable, however, we are not living in an ideal world. We are living in times of extreme hardship ahead especially for many of our lower-income ratepayers. Those working will be facing reduced hours if not job losses. Retired people will likely have had many thousands wiped off their net worth in the Stock market over recent weeks, and those with money in the bank will be reduced to spending capital as interest rates head toward the negative.

As if this is not bad enough the rot of the Waimea Irrigation Dam is starting to fester out with another $25 million added to the initial $21 million overrun.

There are no signs of the overruns abating as they continue to dig into “the unknown.” Unknown that was pointed out at various stages during the investigation and consultation phases but apparently ignored by the various parties involved.

Extreme overrun risk certainly didn’t come through with the story that was being pitched by the likes of head of TDC engineer Richard Kirby (P95 it can’t go over budget), John Palmer who was in charge of getting the project over-the-line (some have questioned that he crossed the line), and later by the now CEO Mike (we’re on bedrock ) Scott. Nor was it mentioned as a concern by the TDC appointed directors who paid themselves $324 000 over and above their directorship fees to review and manage the early stages of the project. Especially when compared to the extreme risks we warned about in constructing riverside storage ponds.

The first hint that the various parties had been hiding the true risk of overruns was at the dam ground breaking ceremony where the comments were setting us up for the true cost of the dam yet to be revealed. Perhaps if the gruelling process of the 17-plus years of investigation had shone a light on the risks the former mayor might have found it easier to imagine a scenario where Council might have pulled out of the project.

Any reasonable person…

One thing is certain from this whole process – Tasman rates will not be dropping from the ranks of the most expensive district in New Zealand list any time soon. In fact, I think we will soon be a clear winner. A true legacy to Mayor Kempthorne and his band of faithful Councillors. Many of whom are keeping that legacy alive and thriving in the current Council.

Positive Change?

Council is starting to get it’s teeth into setting policy with a review of the Tasman Regional Management Plan (TRMP) and preparing to set the direction for spending in the next 10 year plan. I thought it would be a good time to update on how we are performing as a new Council under the direction of our new Mayor.

Tim King Positive Change

So far Positive Change (the banner that the Mayor campaigned under) looks a lot like more of the same, which I guess is not much of a surprise to many of us.

Yes, there have been some changes around how staff report to us by having the different departments report together around topics rather than individually reporting how their silo is operating. What does this look like in practice? We appear to have more highly paid staff sitting through all the meetings.

In terms of actual change within the direction of Council I am not seeing it.  This Council has been spending money like it is water in a post dam world. There appears to be no grasp of how dire the financial situation of this Council is – especially now the dam overruns are increasingly being revealed. Our 83 million dollar dam that was 95% certain to built for that or less has now blown out to $139m. With only half of the dig out done, and the majority of the dig out still to do on the problematic side, the likelihood that we have seen the last significant blowout is remote.

It is comforting to note that the tragedy duo of Smith and Jones are now asking the hard questions which is a far cry from the bullying and threats that Councillors experienced when questioning the information (or lack of) that was being presented pre dam signoff from the same pair.

It is also interesting to read Murray King say how irrigators are pushed to breaking point and already contributing “their share.” Quite apart from the nonsense of affordability that was highlighted when the shares bought up by a handful of irrigators are being resold at well above the price we were told would be unaffordable, there is also the comment about the “public good content” of the dam. Conveniently, he omits to point out that the irrigators are paying nothing for using the river as a conduit to run their water from their dam to their irrigation pumps.

However, that said, the issue is now the costs that the TDC ratepayer has been lumbered with. Any cost is a problem because the previous Council ran the debt right up to the $200m cap (and squirreled more debt away off the books).  A situation that is further exacerbated when you understand that the income from the Commercial arm of Council was supposed to be paying back the loan from Crown Irrigation from the first cost blowout. This money was supposed to be set aside to payback $5m sums in five yearly tranches.

The reality is that this money is being internally arbitraged. As explained, this means that instead of putting the money in a term deposit account where we receive next to no interest it makes sense to “loan” the money internally and reduce the amount we are paying in external interest. This would be a sensible action to take if we then effectively reduced our debt cap each year by the corresponding amount to allow for the debt head room to pay back the loan as payments fall due.

We are not making the reductions in total debt. So when Mr Drummond (Council Corporate Services Manager) was asked how we make the payment if we haven’t got the money set aside his response was that he would have come back to council to ask for more money. The net effect is that we have a $5m slush fund (to coin a term from another mayoral candidate) that pushes our debt cap out to $205m.  A small increase in the greater scheme of things given the dam blowouts etc, but a dishonest representation of what was consulted on all the same.

It is clear from the way Councillors are voting and from the early engagement document being sent out for the Long Term Plan that the majority of Councillors and staff feel that our debt and rates caps are hindering our grandiose visions and we have no intention of sticking to them going forward. If as a result of the LTP engagement process we decide that the debt cap needs lifting from $200m (a self-imposed cap) and we proceed to raise it to $300m (closer to the Government imposed cap) I can assure you that this Council will spend up to the new debt cap before it is done according to the trend already set.

There certainly has not been any sign of Council “making the tough decisions” that Mayor promised on his campaign trail when he affirmed that he believed the Council could operate within our fiscal caps. I said during my campaign that as much as I would like to see us doing so I could not see how it would be possible with impending dam blowouts etc, but obviously I didn’t have the 22 years experience of my opposition who believed it could be done.

If rate affordability is something that you have any concerns about then I would suggest that you will want to be very vocal during coming consultations and in communication with your elected representitives as double-digit rate increases and another $100m of debt are definitely not out of the realms of probability from the “positive change” that I have seen demonstrated to date (unfortunately, most of these decisions have been conducted in committee so far so I cannot detail them).

Scaremongering Mayor

After the announcement that the Waimea Community Dam has run millions, and millions, over budget before a digger has even put a bucket in the ground Tasman Mayor Richard Kempthorne has gone into over drive with the doom and gloom press releases.

As quoted by Cherie Sivignon in the Nelson Mail the Mayor says:

Water tankers may be needed on the streets of Brightwater during severe droughts if the Waimea dam project is shelved.scare tactics to sell waimea dam

“We’ll be slipping into Third World provisions [in a severe drought],” said Tasman district mayor Richard Kempthorne. “I think, the community doesn’t realise that’s what we have ahead of us without the dam.”

Kempthorne said he expected to be accused of scaremongering but the rules for tougher rationing in dry spells were in place under the no-dam provisions in the Tasman Resource Management Plan (TRMP). The rationing and related restrictions would affect rural and urban water users in the Richmond, Hope, Mapua, Brightwater and Redwood Valley areas including businesses and industry.

Of course, what he doesn’t mention is that if the dam project goes ahead as currently planned, there will likely be no inhabited streets of Brightwater. Already, they have proven that they have no idea what the cost of the dam would be, much less that they have any idea of the potential for overruns. Overruns that the ratepayers of this district are solely responsible for. There is every potential that the proposed $100 million-dollar dam could overrun by another $100 million like the Clyde dam. I suspect that by the time that the extra $30 million plus the potential extra $100 million is added to the rate bill of the residents of Tasman there will be a lot of cheap housing for sale as ratepayers file for bankruptcy.

It is rather ironic that when I argued that new residential builds should be required to put in water tanks like their rural neighbours it was argued that it would be too expensive. On the other hand, we can put up water rates by 1000% to pay for a dam and that is acceptable.

Staff have also been roped in to sell the dam at any expense.

“In the worst-case scenario, when there are cease-take directions, Tasman will face its own ‘Cape Town’ situation and people will collect water from tankers,” Bush-King said.

In the worst-case scenario with the dam going ahead we will face Cape Town like situations where a significant number of people will be living in cardboard boxes and shantytowns as they are forced off the land they currently own – if we are going to talk about “worst-case scenarios.”

Kempthorne agreed such a situation would not be palatable to ratepayers.

“That is why I have taken so seriously trying to bring in the Waimea Community Dam – because of the impacts without it.”

The council had a responsibility to provide a secure urban water supply and would have to look at other options if the dam did not proceed.

However, those other options were “considerably more expensive”, Kempthorne said.

I am pleased he explained why he has pushed this dam through with so many casting votes and spent so much money driving this project against the wishes of more than 80% of the consultation respondents because I had been wondering what his motives were.

However, he does again resort to gross exaggeration by stating that those other options were “considerably more expensive.”

Considerably more expensive than what? A $100 million-dollar dam plus full liability for all overruns? I don’t think so. He has conveniently forgotten to upgrade his figures unless Engineering manager Richard Kirby is going to revise the figures of the alternatives again to bring them back inline with the Mayor’s comments.

Last time Kirby revisited the “plan B” options they were found to be in need of some serious rescoping which increased their price by up to four times the previous budgets. When asked to apply the same scrutiny to the Waimea Community Dam he repeatedly came with the same lowball figures used to generate a P95 in 2015. It was a complete surprise when the quote missed the budget by almost $30 million dollars.

Even the recently inflated costs of a storage pond capable of supplying urban water needs for the immediate future is nowhere near the figures now being talked about for the Waimea Dam. While the initial potential plan B pond will not meet the 100-year projections, that they claimed to be able to meet with the dam, it will avert “Cape Town” like conditions in the near future.

Of course there are many options to avert urban residents begging on the streets for a cup of water including further reductions of the irrigation permits to bring allocation back inline with the new water availability requirements. Another might be to raise the price of water as restrictions are applied to ensure water is not wasted. Fixing leaks in the network is an option that many people are calling for, as are water tanks for urban users.

No solutions are going to be without cost, however, one thing is certain, the extra three million dollars that the Mayor used his casting vote to spend on the Waimea dam this term would have been better spent on a project that was affordable. Not to mention the thousands of dollars a day still being spent on the Waimea Community Dam project at the Mayor’s direction.

Grandstand Dam Long Term Plan

The 28th of June full Council meeting should have been about Council adopting the Long Term Plan. However, it was overshadowed by a couple of other agenda items. View the agenda here.

A surprising turn of events saw those on council who wanted to raze the Takaka grandstand to the ground do an about face. One wonders what persuaded the change of heart when a petition of over a thousand signatures, a demonstration outside council, a multitude speaking in the public forum, and numerous emails wasn’t enough last time we voted. Maybe the TV cameras filming people in chains was a little harder to ignore?

While the Grandstand execution order has been lifted there is a long way to go before the old lady of the Bay can rest in peace. There are a lot of issues to come out of the woodwork to satisfy the Council compliance team. The success of the in-situ restoration bid will largely depend on the ability of all the stakeholder groups to put the past and egos behind them and find enough common ground to work together for the good of the grandstand.

Other agenda items were no less surprising. Councillors were recommended by staff to sign a waiver of councillor privilege and take on personal liability if we wanted to view the Term Sheets in relation to the dam. They stopped short of insisting on a strip search but required that we book a time to view the documents. We would then be allowed access to them in a secure controlled room where we were not to take any copies, electronic or otherwise, of the individually identifiable documents. If our document was proven to be leaked then we would be personally liable for the breach.

dodgy salesman picture
Sign Here … trust me, its the best deal for us.

What staff didn’t explain was how our personally liable documents would be securely stored, who would have access to them, what supervision would be in place for anyone that had access to them. They also admitted that our staff that had access to the current documents did not have similar requirements, nor did the members of WIL that had access to the documents – even the Term Sheets between CIIL and TDC (rather bizarre I would have thought).

This overreaction in it self leaves one wondering what they are hiding. An earlier version of the Term Sheets was circulated with councillors without such extraordinary security precautions, so what has changed? According to the staff report councillors have “previously been made aware of the key conditions in the Term Sheets” so this is rather extreme to be protecting the non-key conditions surely?

Of course, there were those around the table that did not want to see the Term Sheets. Although, at least one of those councillors wanted “all the information” before making a decision on the Grandstand. A cynical person might say that this selective interest in getting all the information on topics seems to be related to the outcome desired by the individual councillors rather than a reasoned and fair-minded approach.

Another example of this would be a referendum on the Waimea Dam, twice denied by Mayoral casting vote. Yet on the topic of the Public Water Supply Bylaw Review the Mayor is recorded in the latest Engineering Committee minutes as saying “… that without the Waimea Dam there will be significant changes to the District’s water supply during dry summer months. He said that the proposed bylaw clarifies those changes and that it was important to consult with the community.”

It is very important that we have all the information, and the community have a voice, when it comes to water restrictions applying particularly in a no dam scenario. I can hear that cynical ratepayer making a snide comment about this being an attempt to scare them into paying for the dam. However, the current Tasman Resource Management Plan provisions in the event of a no dam scenario will require drastic water cuts should we face dry weather.

It is a pity the community doesn’t have a voice when it comes to expressing an opinion over water restrictions verses unaffordable rate increases when the dam runs over budget don’t you think? The Mayor doesn’t think so.

 

WIL Chairman Murray King Accuses TDC of High Appetite for Risk

Waimea Irrigators reveal some interesting information in their submissions to the Tasman District Council’s Long Term Plan. WIL chairman Murray King states that:

The allocation of cost Overruns beyond the first $3 million was reached between the parties on the basis of the following:

  • The Council’s higher appetite for risk than WIL’s around the construction contract – with WIL’s preference being a fixed price contract, whilst TDC’s preference was to proceed with an Early Contractor Involvement contract.
  • The inability of WIL’s shareholders to absorb higher water charges in the event project over-runs exceed $3m.
  • TDC receiving 100% of project under-runs between $3 and $6m – i.e. considerable ‘upside’ benefit to TDC in the event that the project comes in under budget.

Firstly, I would like to offer WIL an exchange of Council’s 100% of cost under-runs between $3 and $6m for WIL’s capped investment. I am sure the majority of ratepayers would be happy to switch out their “considerable upside benefit” on a project that is already running over budget on the work completed to-date for the risk of the highly-unlikely-event that the project will overrun more than $3 million.

Secondly, WIL Chairman Murray King has accused the Council of having a high appetite for risk which I find interesting given that our consultation document clearly states that our number one financial objective is to operate in a financially prudent manner. As Murray King was sitting beside Natasha Berkett during her WIL submission I thought I would ask him:Not a picture of Murray King WIL chairman

Does Murray King believe that council was being dishonest stating that their number one financial strategy is to act in a financially prudent manner?

He refused to respond.

WIL advocate John Palmer questioned the integrity of TDC. His submission states:

The suggestion that possible target rates can be used to negate the effects of legal agreements will cause any TDC counterparty to question whether it can have an agreement it can rely on. That [the ability to target rate irrigators in the event of dam over-spend] must be removed from the plan and the council thinking.

I find this a little ironic given that (according to staff) we had an understanding with WIL that all costs were going to be shared 50/50 and yet for the past 18 months council has been told we need to pick up more and more costs that WIL did not feel it should contribute towards.

I took the opportunity to ask John Palmer the same question that I asked of Murray King, did he feel that council was being dishonest stating that their number one financial strategy was to act in a financially prudent manner – given the WIL Chair’s accusation? Mr. Palmer responded by launching into a further tirade on Council’s dishonesty in trying to recoup costs beyond those stated in the TDC/WIL Terms Sheet without actually addressing the question put to him.

It is interesting to note that John Palmer is privy to more TDC information, and receiving information earlier, than are we as councillors. For me, this high-level access and influence that Mr. Palmer has begs the question of who is actually running council?

However, it would appear that Mr. Palmer is not happy with all Council decisions.

Bruno Simpson, another WIL advocate, was also unhappy with Council’s decision to rate irrigators in the event of a dam over-spend. His submission states:

It is our view that this is a breach of the agreement between Council and WIL in the term sheets between the parties, which were included (in summary) in the WIL PDS. Many individuals and organisations have supported the purchase of these shares, based on a reasonable limit to the exposure of cost overruns, and inclusion represents a material change in the risks associated. It contradicts the earlier consultation carried out by Council. Further, it suggests that all the benefits of completing the project fall to the irrigators rather than being shared by all water users, including urban and commercial, who benefit from the security of supply and increased capacity.

Ironically, Mr. Simpson is upset that this target rating system is unfair because it suggests that all the costs of dam over-runs will be unfairly attributed to irrigators rather than fairly shared around. Incidentally, it does not propose that all over-run expenses will be target-rated to irrigators. It does reserve the right to attribute some of the over-run expenses to irrigators which at the moment are unfairly being attributed to rate-payers only; a point that Mr. Simpson appears to have no problem within his world-view of what is fair.

Mr Simpson also makes mention that by including this provision in our LTP we are in contradiction with the WIL PDS. Given the amount of “errors” in the WIL PDS I think it laughable he should be accusing TDC of breaching the agreement between TDC and WIL. As councillors we tried to address the over-statements and out-right misinformation in the WIL PDS but we were told that it is a WIL document and that there was nothing that we could do.

The fact is that target rating always was, and remains, an option to recover costs. If WIL omitted to mention that to their potential share-holders it is hardly the fault of the Council. By including this information in the TDC LTP it is our way of addressing the omission of WIL to fully disclose the full position to their shareholders. I am not sure Council is the one that should be accused of dishonesty in this instance.

Speaking of WIL shareholders, John Palmer protested that WIL wasn’t just a few big shareholders, he stated that there were also many small shareholders who would find this target rating system unaffordable. Given that councillors have been asking for a breakdown of who exactly makes up WIL for the past 18 months, and been denied access every time, it will be interesting when the Companies Website is updated with a list of shareholders to see how accurate honest John’s statements are.

Bruno Simpson stated that if the change to the LTP in reference to the provision for targeted rating was not made “we believe there could be significant unintended consequences.”  When I questioned him as to the meaning of that statement he said it referred to the fact that some high capital value properties with low water subscription would be unfairly rated in this system. He advocated that any target rate should be tied to water subscription rather than capital value.

I believe that the point of capital value rating is that those who can afford to pay more are paying more. It is, however, a blunt instrument and like all generalizations not without exception. In terms of legality, we tax property not individuals, and I don’t believe we can target rate based on the volume of water consumption. We can charge for water use, but that is different to our ability to rate. I do stand to be corrected on that assumption though.

The fact that Waimea Irrigators are so concerned about this target rating of dam over-spend beyond the $3million over-spend that they are happy sharing is confusing. They, like council staff, have sat before us assuring us that this dam has been costed so well that we are almost 100% certain (95%) that this dam will come in on or under budget. Therefore, in their world there is almost no risk of this target rating ever being acted upon. Why so upset then?

I am left wondering about all this monkey business.

Perhaps Murray King is correct that the Council does have a high appetite for risk (that is not being disclosed) and, therefore, Council is lying that our number one financial strategy is to act in a financially prudent manner?

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