13 Reasons Why-The Waimea Dam

15/10/2018

Waimea Irrigators Ltd (WIL) have announced a new funding model for their share of the dam. The institutional investor that rode in on a white horse the day after the Council voted the Waimea Dam funding and governance model down has been side-lined.

The story as relayed by John Palmer, chief negotiator for WIL, is that the institutional investor, whom we know not the identity of, wanted to de-risk his investment by shifting the risk of his shares onto the irrigators. The same irrigators who have shifted large portions of their risk onto the general rate-payer and urban water user. When the irrigators saw that risk was being shifted to them in similar fashion they started to squeal like a stuck pig and said it wasn’t fair.

Instead of this unfair arrangement they said they would like to fund the extra shares themselves, so John Palmer passed the hat around, and within a few days they had come up with an extra $11 million dollars from 13 irrigators (and possibly one non-irrigating shareholder).

These are the same irrigators, who when we were talking about an $83 million-dollar dam said they were “at their limit” of payment and wanted Council (the urban water ratepayer) to buy more shares then the amount of shares we already had signed up for to more than satisfy our 100-year demand.

These are the same irrigators who were “at their limit” on the $83 million-dollar dam and could not possibly be tied to any dam overrun expenses, thus shifting 100% of dam overrun risk on to the general ratepayer and urban water user.

These are the same irrigators who were “at their limit” when the environmental flow components of the dam were being divvied out [these figures are a fabrication designed to shift cost from irrigators that should fall on the users for using the river as a conduit to run their water from the dam to their pumps like with all the plan B options]. The end result being that the general rate-payer had to pick up these costs (now a total of 52% of running costs) because “we all have to get there together or we don’t get there at all.”

These are the same irrigators who were “at their limit” on an $83 million-dollar project who managed to find “their share” of the increase in the dam budget when the project became a $102 million-dollar project – within a matter of days.

And now we see that within a matter of days 13 irrigators (plus possibly one other) are able to put their hand in their pocket to find another $11 million dollars. This would be in line with the comments by WIL chairman Murray King who said if the dam doesn’t go ahead they would spend more than four times their dam contribution to put in their own water supplies.

The 13 reasons why this dam is being built have been revealed, and they will, once the dam is built, control the water on the Waimea Plains as they have a monopoly on water right allocations. They will set the price of any water shares sold and they will determine if the applicant is a worthy recipient of said shares.

In order to protect their investment, WIL have written into Terms Sheet with Council that if a future Council for any reasons decides that the allocation between dam affiliated water user and non-dam affiliated water user is unreasonable, that a minimum $50 million-dollar payment will be made by the rate-payer to WIL as compensation. John Palmer was pushing that this $50 million-dollar be an uncapped compensation amount, and open for negotiation at a later date. This despite the fact that the general rate-payer and urban water user will be subsidising irrigators on the Waimea Plains for at least the next 100 years anyway.

On top of that we have still ended up with a scenario where the Council does not have a buffer zone between when irrigators are required to experience water restrictions and when the Council reticulation is required to experience water restrictions. I have heard all the explanations from staff how with the dam this won’t be an issue for 100 years. I have also heard how the Government could change what we currently consider to be an acceptable minimum flow in the river at the drop of a hat. I am also waiting to see that the dam works as described as we head into changing climate conditions. If we decide it isn’t working as described it will be a $50 million-dollar ticket to change the rules once the proposed Term Sheets are agreed to (not a bad return given that WIL are contributing $15 million plus $11 million by a WIL investment company).

Dam Decisions

08/09/2018

Congratulations to the Waimea Irrigators who have secured a subsidized water supply for the next 100 years (assuming the dam can be built, functions as intended, and lasts for 100 years). I hope the smaller shareholders in WIL are informed as to what risks they carry. Given that 2000 shares have been sold to investors only 3000 shares are target rateable in the event council comes knocking for a share of any overruns. I suspect that some of the 3000 shares are held by people with an exit strategy also, although councillors have no idea who the shareholders (or the investors) are.

Businesses on the reticulated supply will also be celebrating. However, I hope they read the fine print of this dam that they wanted so badly. I also thought a dam was a good solution, but not THIS dam. If the costs start to overrun then water on the reticulated supply is going to be eye wateringly expensive given that we are starting from a position of the most expensive urban supply in the country. One can imagine in this scenario that Nelson residents being supplied from Tasman will insist that Nelson City Council supplies them water, and in that scenario, there will be another million dollars a year (current prices) that will fall back on Tasman residents and businesses.

Looking ahead (given that I have been accused of near sightedness among other things) we are destined for a similar problem that exists with the current over-allocation model. Urban supply should always have been protected as allocations were made on the plains. This did not happen and the council has repeated exactly the same mistake with the new dam supply model.

Given that the urban water user and businesses are paying for gold-plated shares in the dam (because it is not an irrigator subsidy) we should have a gold-plated supply guarantee. This would look something like a protected portion of the reservoir that can only be released to cover the urban supply. The deal that we have got is a deal where everyone is on the same restrictions.

During the summer the irrigators will be pumping full allocations and the tap on the dam will be opened to meet the demand. When the dam gets down to 20% capacity water restrictions will kick in across the board (irrigators, urban, and commercial). Everyone will end up on cease take at the same time just as occurs now. This will not affect the bulk of irrigators as they need the supply early in the summer before their fruit and crops are harvested. The most likely irrigators to be affected by late summer restrictions are market gardeners and dairy farmers extending their season.

However, the industrial users such as fruit processors, and the meat works will be hitting peak season as restrictions apply. Other industries also spoke about how they cannot afford any restrictions, such as the glue plant, cool stores, and the mall etc. Given the exceedingly high price our industries are paying for their “water security” I hope they are happy with the deal this dam offers for the next 100 years.

Since I am so nearsighted, my objection that there is no mention in the Terms Sheets of who pays for the decommissioning of the dam is obviously redundant also. But what do we care, we won’t be around in 100 years, right? Let’s hope this dam doesn’t need decommissioning before then.

In the short term I only have to worry about the degraded state of the river, a responsibility in our consents and under The National Policy Statement For Fresh Water (that doesn’t state we have to build dams contrary to what dam supporters keep telling me). The corners being cut in dam construction by flooding a huge quantity of mulched wood and stumps left in situ will be challenging to mitigate the effects of. It is highly likely that the running costs will blow out accordingly as we try and mitigate these effects – further adding to the burden on water users.

Of course, my concerns are only based on a few vocal nay-sayers and I should only be taking the advice of staff and their experts.

No doubt time will tell who are the heroes and who was the voice of reason. Whether dam advocates will be labelled as saviours of the district or whether the nay-sayers will be able to say “I told you so.” But one thing is for sure, if this dam doesn’t deliver as promised, it won’t be the wealthy that will be left homeless.

Tasman District Council Remains Economical – With The Truth

28/08/2018

This Council is always looking for ways to save. We have found that we can stockpile the truth by only using it sparingly.

For instance, in the agenda for Tuesday 28^th August 2018 the council staff inform me:

Funding and Finance – Waimea Community Dam
The Nature of Public Investments

18.10 Concerns have been raised in the past about the Council’s investment in the proposed Waimea Dam being a subsidy to irrigators. What is proposed is not that but is an increased Council contribution to get a project over the line. The Council should be motivated to do that (within limits) because the do nothing and alternative augmentation options cost the community more and/or deliver less value.

18.11 Public capital investment in government-owned assets creates the opportunity for private investment and productivity – that is why councils and central governments do it. The effect of public capital investment on economic growth is hotly debated. While analysts debate the magnitude, the evidence is that there is a statistically significant positive relationship between infrastructure investment and economic performance.

18.12 In the case of this project the investment opportunities are for the irrigators and others to take. Some may argue that there is an element of exclusivity here in that ‘affiliation’ and a water supply agreement is required to gain access to the benefits. In other words, access is available for a fee.

18.13 Other public investments in assets such as roads, airports, ports, transit systems, and even community facilities create investment opportunities for and ‘subsidise’ someone. Our consenting and regulatory work enables developers and others to profit also. While some may be genuine public good and access is ‘free’ there are many other examples where a fee is needed to particulate.

It is such a relief to know that this dam funding model is not a subsidy to irrigators – I was obviously mistaken when I highlighted the ways that this project has gone from an extractor/user pays model to a huge subsidy of irrigators.

It turns out that the urban water user and general ratepayer (staff use the term “Council”) is making an increased contribution to get the project over the line. This increased contribution reduces the amount that the irrigators are paying for their shares, and increases the cost of our shares as the percentage of water allocation remains the same. Which is obviously a different model to the irrigators getting a subsidy.

Here was I thinking that a subsidy is not a matter of opinion, it is a matter of simple maths. Either you are paying the same rate as everyone else for your shares, or you are getting discounted shares at someone else’s expense (a subsidy by any other name).

It is interesting to note also that other public investments in assets “subsidise” someone. It appears if you use “air quotes” when talking about something, like a subsidy for instance, it is somehow not an actual subsidy but instead it is a “subsidy.” This clarification is important because once upon a time I would have said staff are lying but now I understand that they are just “lying” (which is not telling real lies, just the other kind of lies).

“Lying” appears to be a common trait amongst those ardent supporters of the dam. We have seen that irrigators are often found to be “lying,” such as Juliane Raine who also claimed there was not a subsidy of irrigators, and Murray King was picked up by Newsroom reporters as using truth in an economical fashion

King bristles at suggestions the extra irrigation might pollute the very waterways it’s trying to save. “This area is already heavily irrigated. And when people say that it’s going to lead to more nitrates and things it’s just not true.” (However, he adds the disingenuous line that “farmers are not in the business of wasting resources”, which, if true, would mean councils wouldn’t have to impose rules to fence off waterways or limit farm runoff.)

And again:

Another points-scoring argument comes from Waimea Irrigators’ King: “The more you delay the project, the more it costs.” But then he adds that delaying have often been “instigated by the naysayers”, when it appears the project’s biggest hurdle has been funding.

However, it is not just irrigators that stoop to using “lies” to get their point across with more conviction. Independent CWS Advisory Group (who are independently ardent advocates of the dam) representative Morgan Williams has offered to sell his reputation down the toilet for free (likely a candidate for a Tui advert I suspect). I am sure most Tasman residents heard the radio adverts and received a glossy flier in their letterbox paid for by …. (good point, who is funding Mr independent Williams and friends?).

He claims that without a dam there will be serious water cuts, and the Waimea River will get sicker. Well, which is it Morgan? Is the river going to dry up or are we going to have water cuts?

The dam is the only option, using natural gravel “pipes” to feed the land and fill our urban water supply. Note the use of air quotes around “pipes” because they are not real pipes – in fact they are not pipes at all. The truth is that we are using the river, and urban water user and general ratepayer is “subsidising” (staff tell me it is not real) the irrigators use of the river “pipes” under some fictitious concept called environmental flow costs.

The “Who Pays? Donut chart would have you believe that the ratepayer is picking up hardly any of the bill. In running costs alone you are paying 51% (which is conservatively around $81,100,000, over 100 years) never mind actual contributions, and underwrites of irrigator loans etc.

There are many more economies of truth in the flier such as alternatives that won’t work, the dam is the most affordable option, the project has region wide benefit, etc etc. But I will highlight just one more.

Morgan Williams, ardent supporter of all things truthful would have us believe that the Waimea Community Dam has had 18 years of YES votes at “every stage” of the Community Dam. Very conveniently, he entirely overlooks the 11^th December 2014 vote that was a NOT YES, back when the Council consulted on a Council owned and funded dam.

Tasman District Council Minutes of Full Council – 11 December 2014 Minutes

That the Full Council

receives the Proposed Waimea Community Dam – Funding and Governance Options report RCN14-12-01; and
agrees not to include either option 1 or option 2 of the funding proposals from the Funding and Governance Statement of Proposal consulted on in October/November 2014 in the Long Term Plan 2015-2025; and
Funding and Governance Statement of Proposal consulted on in October/November 2014 in the Long Term Plan 2015-2025; and
requests that staff include $25 million in the Long Term Plan 2015-2025 Consultation Document for a water augmentation scheme being Council’s share of the environmental flows and provision for the current and future urban water needs for the Waimea basin; and
notes that a commitment to funding a water augmentation scheme in the Long Term Plan 2015-2025 will be conditional on project scope (including an independent review of alternative options for urban supply encompassing ecologically sustainable water management practices, as agreed by Council) and external funding being agreed; and
establishes a Council Controlled Organisation for the objectives set out in s59 of the Local Government Act 2002 and for the purpose of enabling external funding to be obtained, enabling the statutory purposes exercisable on behalf of the Council to be accessed, and delivering cost effective local infrastructure; and
notes that further consultation and engagement with the public on a water augmentation scheme will be undertaken, including on a new proposal in the Long Term Plan 2015-2025 Consultation Document; and
notes that the decision to proceed or not proceed with the Waimea Community Dam cannot be made until further information is available; and requests that staff report back on the work programme to implement these resolutions; and
instructs staff to write back to all submitters with information on the Council’s decisions contained within this report and informing them on the next consultation steps; and
requests that staff report back to Council on the proposed constitution and board make up of the Council Controlled Organisation; and
requests that staff report back to Council on the opportunities available for the promotion of water conservation; and
promotion of water conservation; and requests that staff report back to Council on options to attribute the $25M funding for urban water needs and environmental flows and to model these funding options on a number of sample properties; and
advocates, in seeking any external funding for direct beneficiaries, a proportional user-pays model whereby contributions are relative to consumption or future consumption; and
ensures that the Long Term Plan 2015-2025 Consultation Document contains information on alternative options to the proposed Waimea Community Dam.

Note that at this juncture we were to advocate a proportional user-pays model. Which is more or less what was presented to me when I was first asked to vote on proceeding with the dam. Then we had to NOT “subsidise” the irrigators into the current funding model to get the version we have now. A model that some describe as a wealth transfer of significant magnitude.

The TDC staff pie chart is slightly more reflective of the current funding model, although, it also neglects to shade the $35million ratepayer underwrite of the CIIL loan in at the very least a hatched colour.

Let us return for a moment to the “lies” told by dam advocates such as Mayor Kempthorne and senior council staff. This old, often repeated, chestnut is one of my favourite:

Environment and planning manager Dennis Bush-King said “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.“

Surely this is a fact? Well, it is certainly a possible outcome … if the Council elects NOT to build the dam … AND there is a serious drought … Ohh and a change of council policy (something they neglect to mention – economical with the truth). The current agenda mentions on at least two occasions that council policy is:

4.16 For many years, Council has accepted that ‘doing nothing’ is not an option when it comes to addressing the water allocation and water quality issues in the Waimea River catchment.

4.35 As noted above, “doing nothing” is not an option when it comes to addressing water allocation and water quality issues in the Waimea River catchment or for securing the urban water supply against droughts and demands from growth.

And yet we proceed to make media statements that the worst-case scenario if the dam doesn’t go ahead is a do nothing option.

There are many other economical uses of the truth in the agenda, however, it is late and tomorrow will likely be a big day as we vote on the dam. As we are told that a $26 million change in the dam funding model is not worth consulting the ratepayers on (even if it means pushing out $20m worth of budgeted projects) I will just leave you with the question I have asked before:

If this dam is so good why are we constantly “lying” to sell it?

Mistaken By Any Other Name

17/08/2018

While researching dams and risk contingency I came across an article in the Journal of the American Planning Association (vol. 68, no. 3, Summer 2002, pp. 279-295) called “Underestimating Costs in Public Works Projects: Error or Lie?” It details the results of a study looking at 258 transport projects across 20 nations and 5 continents suggesting that cost underestimation appears to be a global phenomenon. The study reveals that;

Four kinds of explanation of cost underestimation are examined: technical, economic, psychological, and political. Underestimation cannot be explained by error and is best explained by strategic misrepresentation, i.e., lying. The policy implications are clear: In debates and decision making on whether important transportation infrastructure should be built, those legislators, administrators, investors, media representatives, and members of the public who value honest numbers should not trust the cost estimates and cost-benefit analyses produced by project promoters and their analysts

Strategic misrepresentation is not only a transport related phenomenon and the authors also reference The Economist (“Under water, over budget,” 1989);

Of course the numbers add up

…anyone persuaded in this way to buy shares in Eurotunnel in the belief that the cost estimate was the mean of possible outcomes was, in effect, deceived. The cost estimate of the prospectus was a best possible outcome, and the deception consisted in making investors believe in the highly unlikely assumption–disproved in one major construction project after another–that everything would go according to plan, with no delays; no changes in safety and environmental performance specifications; no management problems; no problems with contractual arrangements, new technologies, or geology; no major conflicts; no political promises not kept; etc. The assumptions were, in other words, those of an ideal world.

We have already seen the Waimea Community Dam project budget blowout from $79-$82 million to in excess of $100 million. It would appear that a $26 million blowout before the project even starts, despite being told “we are 95% certain it will come in on or under budget,” would definitely be a contender for a case of strategic misrepresentation.

The case is all the stronger when considering that a number of questions had been asked about the robustness of the budget given the current contractor environment and escalating costs and also the extremely underwhelming figure given to clear and prepare the reservoir. To put the figures in context $1.2 Million was allocated to cover the costs of clearing and stabilising the 70-hectare lake reservoir in challenging terrain compared to (for example) $3 million to widen Bateup road, or almost $5.5 Million to upgrade Borck Creek (different in scope but also significantly different in scale).

The case for continued strategic misrepresentation is no less moving forward given the extreme pressure to reduce the budget to an “affordable” amount as the Council elects whether or not to embark on the Waimea Dam journey. A cynic might also reiterate that a lower quote price works in favour of those partners who’s spend is capped once a price is agreed upon and construction blowouts fall on other parties.

Local chartered accountant Ian MacLennan isn’t convinced that the true costs of the Waimea Dam have been revealed. His own research indicates that the true cost of the dam could be as high as $400 million by the time it is paid off.

It was “alarming to me that at no stage has there been open and honest financial modelling of either project risk or interest rate risk to underpin the discussions, decisions and commercial arrangements”.

In the absence of such a financial model from the council “I have prepared one as I was interested to properly understand … the true commitment TDC was making for ratepayers”.

MacLennan said he had taken publicly available information from the WIL disclosures for its capital raising and disclosures in the council’s Long Term Plan 2018-28 consultation documents, and calculated the GST-inclusive cash commitment required “as most of us ratepayers cannot get that back”.

Three build and operating cost scenarios, three interest rate scenarios and three loan-term scenarios of 25, 30 and 40 years, were run.

MacLennan made that 19-page financial model available to the council.

He said in light of a recent revelation of a $26m budget blowout, the minimum initial dam project cost would be at least $114m but could go “well beyond” $131m in his upper net project cost scenario.

MacLennan is also a believer that irrigators are receiving a subsidy by the urban water user and general ratepayer. “He estimated irrigators would gain at least 80 per cent of the benefit from the proposed dam, earmarked for the Lee Valley, but would pay $136m of the $300m-$400m project life-cycle costs.”

If the dam continues to be built under the current financial model McLennan believes there will be a significant transfer of wealth on the Waimea plans – perhaps of the magnitude not seen since the Maori first signed a deal with the early settlers.

A further explanation of MacLennan’s model can be downloaded here along with the figures that he produced downloadable here.

Council staff are having the figures independently reviewed for comment at the council meeting on the 28th of August.

An MPI study revealed a different story to that which the Mayor and staff endorse:

The Waimea Plains is one of New Zealand’s major horticulture areas and is highly reliant on irrigation. Irrigators draw water from a complex integrated surface water and groundwater systems. Freshwater resources in the Plains area are over-allocated in terms of quantity, 64% above the allocation limit. Water users face significant seasonal restrictions due to natural fluctuations in river flow and low groundwater storage, that is, water in the Plains is unreliable.

The proposed Waimea Community Dam (the dam) would address over-allocation and unreliability and would allow expansion of current irrigated areas. However, if the dam does not proceed, the Tasman District Council would have to phase out over-allocation by cutting back on water permits or making other changes to the management regime.

Strategic misrepresentation appears to be a significant concern across the boundary in Nelson City as well with projects going well over budget and work not being completed, meanwhile, governance is kept in the dark.

Nelson City councillor Matt Lawrey had the following comment to make on the Waimea Dam “My message to members of the Tasman District Council is that it isn’t just their hairstyles that have changed since the ’70s; lots of things have changed including the concept that you can save a river by damming it, the idea that it’s acceptable to socialise costs and privatise profits, and the notion that growth is justifiable at any cost.”

Lawrey’s not the only Nelson City Councillor who is not convinced about the Waimea Community Dam process, his colleague Paul Matheson said the process was “one of the most appallingly managed projects [he had] ever experienced”. “The water has become so muddied that it’s like a porridge that’s been sitting out for a while.”

Have we been sold a line of strategic misrepresentation?

I suppose I will have to visit the local barber to get the low down.

Photo Credit BRADEN FASTIER/STUFF

Shane Jones Challenge To Waimea Irrigators

16/08/2018

If a person or persons were receiving a helping hand (like a subsidy) you would think they would respond with gratitude. Not so with the members of WIL. They have two responses, one is denial, and the other is to attack anyone that suggests they are receiving a subsidy.

Why do people dare to suggest that WIL are being subsidised in relation to the share of the Waimea dam? It is not just me making this outrageous claim Forest and Bird chief executive Kevin Hague questioned why 16 per cent of the fund’s latest grants – making the project the single largest awarded so far – had gone to what he argued was a taxpayer-funded subsidy for irrigation.

If we go back to the beginning (or at least to the beginning of this term of Council) we are presented with a Waimea Community Dam funding policy that was extractive users (irrigators and Tasman District Council/Nelson City Council community water supplies) would contribute one-third of the capital costs of the environmental flows/public good, 30% of the project costs, i.e. 10% of the project costs. All operating costs were to be met by extractive users. That meant that the Council would not contribute operating costs relating to the environmental flow capacity.

Then on the 14^th of June 2017 Council was presented with a new funding model because “Waimea Irrigators Limited are at (or near) the limit of their ability to pay.”

“That approach to cost allocation on extractive use has been deemed unaffordable to irrigators especially in light of the increase in estimated operating costs.”

“The JV Working Group is developing an alternative for consideration by all parties that involves the Council covering the full costs of the environmental flows. The Council is also being asked to meet the operating costs on the environmental capacity.”

“The revised allocation of operating costs would see the Council contribute 52% of operating costs and irrigators 48%. This approach would see the Council’s operating cost contribution increase by an estimated $460,000 per annum to $675,000 per annum based on current LTP and dam operating cost estimates.”

Not finished there WIL also required an underwrite of their $25 million CIIL loan so they could get a reduction in interest rates. “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.”

“The Council’s current strong financial position, in particular it’s lower than budgeted debt level puts it in a position where it can accept the irrigator funding debt being held within the Joint Venture. Debt in the JV or in WIL will be treated as Council debt by credit rating agencies.”

By 19 October 2017 the full extent of the subsidy had become apparent for “the Waimea Community Dam (Dam) project to proceed it is likely that Council would need to agree to the overall funding package and Council’s contribution of $26.8m. WIL have made it clear through the funding negotiations that they are at their potential shareholder affordability limit with this funding model.”

The total estimated cost of the Dam project (excluding incurred project costs) is $75.9 million (m). Under the Dam funding proposal this would be funded on the following basis:

$50.22m by extractive users, where a secure water supply is guaranteed.

– Irrigators through (WIL) $37.12m

– Nelson City Council’s (NCC) $3.52m

– Council $9.58m

$22.77m by Council for the benefits that would accrue to the environment and community generally. This would be funded through:

– $7m grant from the Government’s Freshwater Improvement Fund (FIF Grant)

– $10m interest free loan from Crown Irrigation Investments Limited (CIIL) (that Council would need to repay),

– $1.48m from Nelson City Council

– $4.29m by Council

$2.91m by Council for its share of the additional Dam capacity for future use

“Council would provide credit support of up to $29m for the CIIL $25m loan to the dam company for WIL. The reason for the difference is that from day one, once the loan costs and interest are capitalised, the actual potential maximum liability of the loan would be $29m.”

The “future use” component is the difference between the dam capacity of 7765 hae and the portion that irrigators decided would actually be uneconomic for them service, a total of 850 hae. “Additional capacity in the Dam would be shared on a 50/50 basis between WIL and Council. This results in each partner contributing $2.91m. WIL’s contribution is included as part of their $37.12m contribution as in paragraph 5.1.1 above. Because the use of our additional water capacity has not yet been determined, Council is treating this cost as part of the benefits that relate to the environment and community generally.” It will be serviced from surpluses in Council’s Commercial account.

Not yet finished with the subsidies, there was also the small matter of cost overruns.

There is a $13m contingency allowance for the budgeted dam construction cost of $50m. This provides a high level of confidence (95%) that the dam will be constructed within budget. In relation to project cost overruns, amounts between 0 – $3m would be shared on a 50/50 cost share basis between Council with irrigators, while debt above $3m would fall to Council to fund.

There were also those sneaky costs not shared in the project costs that council would raise a further $2m to $2.7m through a Table loan over 30 years to cover additional project costs to financial close.

How far we have strayed from a water extractor or beneficiary pays model.

Where the principle of user pays and/or direct beneficiaries pay is applied to the Dam project, then the allocation of capital cost relative to the levels of current and future extraction is:

$37.13m for irrigators (WIL) – 69.9% of $53.13m capital costs allocated to extractive use
$12.5m for Council – 23.5% of $53.13m

If the $22.77m capital cost allocation apportioned to environmental/community benefits was fully funded by the exacerbators/users at the same percentage of their extractive use, then Council’s share would be $5.35m and WIL’s $15.92m.

“The total cost if transferred to landowners/irrigators would make it unaffordable for them. It represents a 43% increase in the proposed capital investment and the associated costs.”

To Recap

The urban water user/ratepayer bought more shares (or hectare equivalents) than we will need in 100 years growth.
The urban water user/ratepayer underwrites the WIL loan from CIIL so they get a cheaper interest rate.
The urban water user/ratepayer picks up significantly more running costs than their share of the allocation because it is too expensive for irrigators.
The urban water user/ratepayer picks up all the cost overrun liability (that won’t happen – yeah, right!) because the irrigators are at their limit.

And this is what the irrigators have to say about their subsidy:

On the Waimea Water Facebook page Horticulture NZ Chair and WIL shareholder Julian Raine “there is no subsidization by ratepayers. Irrigators are paying their fair share. This is a myth naysayers have made up. If irrigators do their own augmentation then the rest of the community will pay double the current cost. It’s not rocket science but clearly lost on some. The Dam is a win win solution”

WIL chairman Murray King on Radio Live speaking about the recent protest outside of council “ Probably half the people there were probably in support of the dam.” If 30 supporters are about the same as 300 demonstrators then yes that is the same math that could be used to say the irrigators are paying their fair share.

After being told for the past two years that WIL were at their limit, any more would be unaffordable for irrigators, two weeks after the announcement of a $26 million budget blowout the mayor announced that the irrigators would meet their share. How do they suddenly now find the capacity to meet supposedly an extra $13 million?

Possibly because an MPI case study reveals that:

The dam would also provide close to full water supply reliability for existing irrigators, representing a $2.9 million (or 20%) increase in average annual earnings.

The extra money that the irrigators could contribute is confirmed by Murray King who said:

without a dam, larger irrigators would look to put in their own storage ponds, “which will mean instead of having a community solution, irrigators and the council will end up competing with one another for water”.

“The cost to irrigators to construct on-farm storage will be more than four times what they are currently contributing to the dam,” he said. “If you add the consenting costs and the opportunity cost of the loss of productive land then the figures are even worse.”

Image credit – BENN BATHGATE/STUFF

Perhaps this is why Shane Jones challenged the region’s civic and economic leaders to do the “vast majority of the heavy lifting” to cover the funding shortfall before they could expect “expeditious treatment” of the growth fund application.

He would not be specific about how much extra funding needed to come from both groups, but thought the economic stakeholders were “capable of picking up quite a bit of that (deficit)”

It sounds like from a Government perspective that if the irrigators are not prepared to “step up to the plate” then the Waimea Dam project is dead in the water.

If the dam fails to get across the line the MPI study reveals that the 64% overallocation would best be solved by:

Clawback based on irrigation needs would result in lower costs than flat-rate cuts (an 8.5% drop in average catchment profit compared with a 10.4% drop) and a slightly more even distribution of those costs. This is a logical conclusion, consistent with the approach already adopted by many regional councils.

DEAN MCNAMARA – YOUR VOICE IN COUNCIL

13 Reasons Why-The Waimea Dam

Dam Decisions

Tasman District Council Remains Economical – With The Truth

Mistaken By Any Other Name

Have we been sold a line of strategic misrepresentation?

Shane Jones Challenge To Waimea Irrigators

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Have we been sold a line of strategic misrepresentation?

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Councillor McNamara: As Reported In The News

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