Tasman District Council

3 Waters Reform and More

04/10/2021

Water continues to cause concern around the region. I have had some 500 emails calling for our Council to reject the Government’s Three Waters reform package. Oddly, not a single email in support.

Incidentally, I use the term Three Waters rather than Three Water as someone pointed out would be more linguistically correct, because that is the term Government use. I am no linguist to debate the rights and wrongs of it.

Around the country we have had Councils vocalising concern over the honourable Mahuta’s reform. Hawkes Bay Mayor’s want to keep the reform in-house. Most of the South Island Mayors have been consistent with the view that it is not currently something that will work for them

In fact some Christchurch Councillors have called for the resignation of the honourable Mahuta

Unlike Nelson City Council, that had a Mayor and a CEO on the working party for the 3 Waters Reform, Tasman voted to send a message that we were unlikely to support the reform in its current form.

What is wrong with where Minister Mahuta is taking the reform?

Firstly, we have to ask if New Zealanders want gold plated 3 Waters systems. Or are we mostly happy with the provision of water that sometimes has a pipe burst, or very occasionally (like once in my lifetime) may put people’s health at risk. Yes, there are places that haven’t delivered as well as they could have, and we can all do better. But would you rather that or a gold plated solution that only the elite few can afford to drink from or flush away?

That is the first question that should have been consulted on. Because when we look at the satisfaction survey that Tasman polls the ratepayers with the overall satisfaction of our water supply service is 86% our Wastewater is at 98% and our Storm water is at 93% positive satisfaction levels.

The next issue with the 3 Water Reform is that it is delivering on the Government’s He Paupau agenda, which is something that was never campaigned on and certainly never consulted on. It will see the Maori interests gain a 50% and controlling share (as a 75% majority of stakeholders is required for a decision) of the Governance of all future 3 Water delivery.

Just like all New Zealanders, Maori have contributed to the establishment of the current Council controlled infrastructure. Just like all New Zealanders they have a say in who is elected to Council and like all New Zealanders can run for Council. In recent years they have had even more say as Council has to consult with Iwi (usually prior to the general ratepayer consultation) over any significant decision. But now, we are told that half the board members of the new entities controlling the 3 Waters will be Iwi appointed. Some have suggested that this is not democracy as their representation far out-ways their population.

Representation in the new entities is sparse enough for the general ratepayer without race based representation. It is likely that the three Council’s in the top of the South Island would have one appointed (non-elected) representative between them. Good luck getting a hold of them to pitch your case on a local issue, and then seeing how much voice they have at the next board meeting.

Centralisation will lead to a greater example of what we have now. With only so much budget, and so many staff hours, decisions will have to be made on how to best spend their money. Obviously, they will start with projects that deliver the most bang for buck – that is that which benefits the greatest number of people. In our case that would most likely be addressing the woeful Wellington water situation, just as Richmond currently gets projects brought forward with regular monotony because of the great gains we can make by combining projects or working with developers (sorry Tapawera, Murchsion, Ngatimoti, Collingwood).

Deliverability of the gold plated 3 Waters package is about as likely as Kiwi Build providing 10 000 new houses, or Auckland getting light rail or a harbour cycle bridge, or Ardern reducing child poverty (as something she did campaign on). There is physically not the availability of engineers or contractors in the Country to deliver the reform in any kind of timely manner.

And all of that would depend on someone funding the work. Some suggest that the new entities should be paying market rates for the infrastructure. I have news for you, they have no money, they just have an ability to borrow money – you the water user will be paying for the purchase and all the horrendous amounts of interest generated from the borrowing to pay you the ratepayer for the assets. On top of that the huge debt that will be racked up to upgrade the services to a gold plated standard.

Even more scary would be the thought that the Council whom have dug us into the best part of a $300 million hole would be given a large portion of the money back to lose it all over again! Meanwhile you are liable for both amounts.

Finally, let us also speak of the fact that NONE of the models we are basing the 3 Waters reform on have a 3 Water system. At best they have a 2 Water system that excludes Storm Water. The Storm Water component from the Government showed a complete lack of understanding of how it would work in the draft workings presented to Council to date. Many of our Storm Water infrastructures are currently managed in the Parks and Reserves space, others are connected to the roading network, and many flow paths are designations across private property.

There is nothing about another level of bureaucracy that screams efficiency and better levels of service or better delivery. As one of the emails submitted by a high ranking local fire officer suggests, when FENZ was created under the auspices of greater efficiency we have actually ended up with 50% cost increases and, at best, no improvement of service over the old rural and urban fire brigade system.

However, the 3 Waters Reform is just one of the many examples of your rights being diminished by this Government. The honourable Boyack took great pleasure in informing Councillors in attendance at a recent Resource Management Act reform workshop about how NIMBYs would no longer halt progress on the grounds of loss of “amenity” values. The new Act has no provision at all for amenity. Amenity being things that you value about where you live, like peace and quiet, nice views, village feel and the like.

Again, good luck getting local views represented by the new system of appointed commissioners hearing all plan changes and subdivision consents etc.

Many other rights are being stripped from you as you read this. Some under the banner of COVID response, others just because we can, most from agenda’s that were never campaigned on much less consulted on.

Tasman District Council is also definitely experiencing a lot of positive change this term. ███████ ██████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████

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When I questioned how we could fill a position without the budget to pay them (it was apparently in the LTP) which I pointed out had not been signed off, I was told if they had to they would accommodate it within the existing management budget. At the time, I questioned how the budget could have that much fat in it, but was assured it would be accommodated.

Fast forward a few months and we get a report stating that the “Corporate overhead activity had a deficit of $152, 000” which includes Coporate, Finance, Operational Governance, Property, Office Overheads, Human Resources, Project Management Office, and Executive.

So in the handful of months since signing off on the LTP our governance budget has gone from having enough money to fund a deputy CEO from existing budgets, to being $152, 000 over the new budget. Given that I am sure the deputy CEO is on a remuneration that is likely well North of $200, 000,especially if you also take into account the staff that are needed to assist the new position, then we have managed to “lose” more than $350 000 in a few months.

We are told that the Project Management is largely to blame for the deficit and that much of it will be recouped by the time the Government’s spending up on projects with unspent COVID funds from the first round is completed. What they aren’t telling us is how much unattributed money the dam is costing us. We consistently have numerous staff working on dam related matters that is billed as “overheads” and are not tagged as dam related. This will only dramatically increase if 3 Waters negotiations are required.

Do not forget that we also have a need to house our ever increasing staff numbers. Despite the CEO telling me that the move of a number of staff to the office above the mall was a temporary measure and they would shrink back to the Council building once renovations were carried out it was only a few months later that we were told we needed even more staff space. After I insisted that we have a proper review of the situation it was decided nothing short of a complete rebuild or new building would suffice.

Even knowing this they refused to allocate any budget in the LTP and the auditor turned a blind eye to the glaring deficit in funding required in the next ten years ( I pointed it out to him twice).

With Mike Scott, CEO of the dam company, further reminding us that they at the “upper limits” of the previous cost blow out contingencies on a dam far from complete the pressure on rates is going to be extremely uncomfortable for many. Some in Council are hanging their hat on the 3 water reforms by the Government going to be the golden ticket to solve all our money problems. I hear from members of the community that some Councillors and staff think it is as good as a done deal and they have already spent the Government’s windfall. The deputy Mayor thinks that debt won’t be a problem because of the 2% interest rates that are going to continue for the next ten years.

I pity all those loading themselves up with huge debt in the current housing market to get into their first home. Especially those in this region. A more-of-the-same Council has no intention of keeping your rates down.

The Long and Short of it

17/07/2021

Tasman District Council has locked in the new Long Term Plan (LTP) for the next ten years (reviewed in 3 years). It locks you in to more debt and more rate increases, which is interesting given that I ran against a deputy mayor with twenty years experience who publicly stated he believed he would keep us within the $200million debt cap and 3% rate increases. At the time, I said I didn’t see how we could given that the dam was still blowing out (as it still is) and the costs associated with pending Government reviews such as the three waters.

That is not the only time that I challenged fiscal wherewithal of our current leadership. I challenged the continued un-budgeted spending that this Council was approving early in the term when COVID was rearing its ugly head around the world. I was told by the Mayor that this council was “well informed of the likely impact of COVID.” Two weeks later the country was in level 4 lock down and a couple of weeks after that we were passing a zero percent rate increase for the year. If our leadership were so well informed, why were they still proposing and passing million dollar un-budgeted projects?

I railed against the constant haphazard proposals to accommodate the increasing staff numbers. For instance we hired a floor above the mall for staff. At the time staff were telling me that this was a temporary measure. I said that we would never shrink back, but the CEO assured me that we would once the rolling renovations were carried out in the TDC building.

The result of the accommodation review was that we need a completely new and updated building for staff. It was deemed to be an urgent requirement and we should get right on to it. So I tried to have funds allocated in the LTP that was just passed. Staff (and management) refused to allocate any funds in the consulted on LTP.

Why? Well because we did not have a quote.

Just like we don’t have a quote, or even a plan for the Million dollars of funding set aside for a regional boat launching facility.

Just like we don’t have a location or design for the Recreation Centre proposed for somewhere between Hope and Wakefield – but we do have funds allocated.

Just like a dam that we didn’t have a quote for but had (woefully inadequate) funds set aside in previous LTPs.

After we had consulted on the LTP and before we had even signed off on it, staff were back telling us about the urgency of the accommodation problem and how we need to start taking action because of “long lead times” and “Council reputation.” Even though the Government is about to remove much of Council’s responsibilities (and staff), and may even be about to amalgamate Councils with their big-is-better attitude.

One can only speculate that the real reason that we didn’t allocate funds for this imminently urgent project is that it would have pushed our LTP debt figure of the magic $300 million figure that is politically unpalatable (and might result in the appointment of a commissioner). Apparently, Mayor Kempthorne, had earlier proposed an LTP that reached similar heady spending heights, and was told it might be wiser to rein in spending. And a figure that starts to run into Government legislated debt cap ceiling issues.

Which draws me to the “Debt Cap” that we recently consulted on. Previously, we had a $200 million self
imposed debt cap. It was a figure well above the current debt levels of the day, and set to be a ceiling.
What we have now, is very different. Even though we use the same terminology of “debt cap.”

How is it different you might ask? Well, our current $280 million debt cap, knocked down to some $250 million by moving a bit of the debt into the Dam CCO (where we don’t have to include it in our figures), is not really a cap. Rather, it is a projected level of spend. Any future unbudgeted spend will automatically push this figure up. For example, unbudgeted spend like new staff accommodation.

A real debt cap, should not move because of the spending whims of a majority of councillors. Other unbudgeted spend that might occur – and has already occurred – is another Dam blow out. Already, we are up to the higher end of the most recent budget given by Waimea Water (the Dam company). The figures included in our consulted on LTP were at the middle to lower end of the forcasted budget. And let us not forget that we are only just over half way through the build, with COVID inflation likely to push up the cost of steel and imported materials – and without further “surprises” in the “bedrock”, that Mike Scott said was better than expected.

Speaking of inflation. Another example of how out-of-touch with global reality our management are: I tried to point out the cost to the ratepayers of the proposed level debt when interest rates go to 6% or 8 %. I was challenged by the deputy Mayor as to what they would be at 2% interest.

At $250 million (and doing some simple maths) its doesn’t take much of a shift in interest rates with such high debt, to affect rates. Amidst the round of chortling from the old-boy network for even thinking interest rates would go up, he retorted that he had information suggesting otherwise. I only hope its not the same advisor, who told him the Dam price was fixed?

In a world where global inflation is at levels not seen since the early 1980’s we apparently believe that interest rates will continue at 2% levels and not 1980’s levels. These are the same people “can’t be sure” that the dam will continue to overrun. Although, councilor Mailing would not take up my wager that the dam would not be built for the most recently forecast figure, which is surprising given how much higher that figure is than the $104 million that he publicly personally guaranteed he would ensure it would be built for (and on time) at the time of the last elections.

On the dam front: it is interesting to learn that the “shear zone” which is directly under the dam abutment is “not an earthquake faultline” according to Mr Kirby our head of engineering. I was asking Mike Scott if the shear zone is what a lay person might call an earthquake faultline. He said it was not, to which I suggested that begs the question of what the difference is. Mr Kirby gave a somewhat more detailed response defending the position that a shear zone is a small fracture caused by movement elsewhere (like one of the two faultlines either side of the dam). A shear zone is a small (in this case 5 meter wide by few hundred meters long) fracture, whereas a fault line stretches many miles.

Now whether we call it a fault line or not would appear to be semantics and headline damage control. What we have is a fracture caused by earth movement that sits right under the dam structure. If the ground moves again – along a fault line that is not this shear zone – what are the chances that this shear zone will respond by opening up more? Or perhaps there will be another shear zone near by that will open up – remember there is going to be an extraordinary amount of extra pressure here once the reservoir is filled. But of course I am no geologist. And maybe the concrete band aid we are applying will stop any future ground movement and the water will not flow out new cracks, nor will the dam crumble around a failing abutment during an earthquake.

I guess we should be reassured that the recently disgraced ex-MP Nick Smith cast his engineering trained eye over the site and said he could see no issues. He also guaranteed a bottle of win to those downstream of the dam in the event of a dam failure. Which I am sure is of great comfort to those down the valley.

It is also comforting to know that we are having an inquiry into the dam process that saw us go from a “P95” (95% certain to come in on or under budget) $75.9 million dam to a “good as fixed price” $104 million dam to a who-knows-where-we-will-end-up $million dam. As mentioned before, it already has gone up another $5 million (equating to $163 million) within a week of the LTP being signed off.

What is odd about the inquiry is that it only came about after much public noise. It was previously unsupported by council as a measure of good governance practice. How times can change. A few weeks can be a long time for some memories. █████████████████████████████████ █████████████████████████████████████████████████████████████████████████████████████████████

I voted against it. Which may seem to odd to those who heard me calling for it in the first place.

The scope of the inquiry is purely retrospective. There is no provision to investigate the current management and governance of the dam which is the only place that savings can potentially be found for the ratepayer. A retrospective inquiry can be held at any time, there is no urgency, and little to be gained on this project. Yes, it would be good to expose the decision making that got us in this position but what real-world governance would allow a project to overrun three times the P95 price only half way through the job without questioning the delivery?

Unfortunately, the Office of the Auditor General (OAG) was not interested in undertaking this inquiry either – according to staff advice on the day we voted. At least that is what we were told, until councillor Greening asked for confirmation of this position. Within a few days, staff were advising that the OAG might now be interested, and that staff would be seeking clarification. A few weeks later, and the OAG advised us that because council had undertaken their own review, an OAG review was not necessary. █████████████████████████████████████████████████████████████

On the bright side, John Palmer’s (ex-CEO of the bankrupted Solid Energy and man assuring us that the dam was going to be built to the P95) brother is involved in a review of Local Government. As quoted in a RNZ interview:

Review panel chair Jim Palmer said it was a once-in-a-lifetime chance to make a difference, but warned the decisions made were “not going to please everybody all of the time”.

We look forward to another 12 months of a more-of-the-same only more expensive Council.

More ████ More Debt

26/02/2021

You elected more of the same, and they delivered for you.

I ran for mayor against a deputy mayor with 20 years of experience that told the residents of Tasman that he believed he could keep within our debt cap and rates cap by making the hard decisions. At the time, I said I would like to think we could but I don’t see how it will be possible with a dam that is continuing to over-run and Government reform (such as the freshwater and three water reform) increasing our costs. Other elected members also claimed to want to stay within our fiscal caps.

The first 12 months of Council saw us spending millions of dollars of unbudgeted money, which alone sent us over our already maxed out debt cap of $200 million. Not a single debt control “hard decision” in sight.

Then along came the first of the dam overruns, taking our dam from ~~$75.9 Million~~ ~~$79 million~~ ~~$83 million~~ $104 million to $139 million.

How did we propose to keep all this under our debt cap?

Easy. We just inflation-adjusted out the debt cap and backdated the adjustment to the time of installation, and like magic, we were now under the debt cap again.

Awkwardly, the dam has overrun again just before we published our 10 year plan. Now we have to rewrite our 10 year plan to get it passed the auditors approval because the figures were horribly out-of-date.

What does our “debt cap” look like now?

First of all, let us stop using the lie that it is a debt cap. It is a projected level of debt figure. It is not a cap under the current Council. We will continue to adjust it upward to accommodate spending. There is absolutely no appetite around the table to cap spending at all.

Already, we are deliberately not including figures to house our rapidly increasing staff numbers (unless Government reform robs us of our duties and our staff – in which case they will have to be housed somewhere but it is not the Council’s problem?). We know that to solve the projected numbers of staff within the next 10 years we will have to spend a figure that will push us over $300 million in debt.

How do we intend to hide debt going forward?

I am pleased you asked.

We are concurrent with the Long Term Plan consulting on a proposal to create a holding company to amalgamate the Port and Airport under. Sounds pretty harmless?

The purpose of creating this new CCO is that we sell our shares in Port Nelson and the Nelson Airport to the bank. Much sneakier than the less politically palatable prospect of selling the shares directly. Once we have established the CCO we can move debt into the company and then for accounting purposes we don’t have to record it as debt on Council’s books.

Instantly, we can pay out special dividends to the Councils and load the new CCO with debt magically reducing our debt levels. I say magically because we haven’t reduced our debt, but we have reduced future dividends from the Port. Effectively, we have sold our shares to the bank.

I am sure the Council spin doctors will tell you a different story.

I tried to ask for some accountability within Council…

█████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████████ This is a technical statistical term that has requirements to meet before you can use it. I asked to see the workings that enabled Council to use the term. My request was denied.

I also asked for accountability around the statement made to Councillors on the day the dam was signed off, in response to a question that I asked of what assurance do we have the dam will be built for $104 million given that we had a “P95” at $76 million. We were told that we are even more sure, “it is almost a fixed price contract” now. There was only a tiny portion that wasn’t fixed price and we had the “equivalent of 30% contingency” on the small amount that wasn’t fixed price.

Obviously, this was a case of my word verses others word as to what was said and the mayor wasn’t prepared to debate that, so again, there will be no accountability for fabrications told. I previously asked Mike Scott for an estimate of how much of the contract was actually fixed price. I have not been provided with that information.

Have we seen the last of the dam over-runs?

Based on the previous performance of Waimea Water and the irrigator run predecessor to Waimea Water, it is highly unlikely that the dam will be delivered for $164 million.

Meanwhile, back in the Council Chambers:

In the recent Council meeting, the Deputy Mayor moved a motion to reverse the decision that I had previously managed to get passed where the irrigators would be target rated for “their share” of all future cost overruns. The proposal now being consulted on has the ratepayer picking up even more of the irrigator share of the dam. Surprising that the people of Murchison and Tapawera are so supportive of this approach. But then I guess I shouldn’t be surprised because this is apparently also the view of Golden Bay and the majority of Motueka, Richmond, and part of the Moutere.

To illustrate the gross subsidization of the handful of irrigators that the Waimea Irrigation Dam was built for, the proposal that I had moved for consultation would see the rates being paid by irrigators on the Waimea Plains are almost identical to the water users downstream of the Kainui Dam.

Let’s put that in perspective. The Kainui Dam built some 15 years ago at a final cost of around $3 million dollars is costing the water users a similar amount to the projected cost of the Waimea Irrigation Dam (at the $139 million figure) if we target rate the users for “their share” of the costs. So not only would the Waimea water users not been paying any more than the users of a $3 million project, they wouldn’t even be paying for 15 years worth of inflation.

Your duly elected members think it unfair that the Waimea irrigators should even be paying more than the Kainui Dam water users. Therefore, they have proposed that we consult on a financial model whereby general rate-payers pick up all the overrun costs (both the current estimated extra $30 million blow-out and any future blow-out). Once the precedent is locked in, it will be in perpetuity.

In addition, I am informed by members of the community that the running costs of the dam that were well below a million dollars when we had a P95 $76 million dollar dam, and are now predicted to be $3 million a year, will likely be double that again by the time the dam is commissioned.

This information is of course coming from the same “naysayers” and “fear mongers” that said the geology of the dam site would mean costs would be far in excess of the P95 price that Council was touting. And despite Mike Scott’s assurances that they were on bedrock and there was bedrock plainly visible up the valley, it turns out to be more of a “moonscape” and has caused the budget to blowout again. Who is more reliable?

To summarise: we are consulting on a debt cap, that is not a debt cap but a debt target, of $280 million. It is a fabrication that does not reflect costs that we already know will push it over $300 million. We plan to hide more of that debt by selling our shares in the Port and Airport to the bank under a proposed new company structure. General rate-payers should subsidize the Waimea irrigators further because they can’t afford their almost free water. You haven’t seen the last of cost increases for the Waimea Irrigation Dam.

This is the choice you endorsed at the polls, and they have delivered for you.

Spend Spend Spend

29/05/2020

The impact of the Government’s response to COVID-19 is beginning to be felt around the country with much more still to come as the wage subsidy is yet to run out and still no sign of a business as usual call from the Government.

In the current Long Term Plan pre-consultation Council survey 75% of respondents have said that they expected the Council to operate within the fiscal limits of debt cap and rate increases. We have a Mayor who campaigned that he believed he could keep us within these limits. Other Councillors also indicated that they would keep debt cap.

Decisions made by this Council consistently went the way of spending large amounts of unbudgeted money indicating that we had no intention of living within our means. Both staff and Councillors are now suggesting that we need to lift our debt cap.

In the CEO’s report for the 28/05/20 Council meeting she quotes New Zealand economist Shamubeel Eaqab who seem to be the hero of the current agenda by central Government and Local Government NZ.

“We need to ask how we can come out of this as strongly as possible. Be as bold and aggressive as possible because this is truly the greatest challenge that we faced since the great depression. Invest in the social and physical infrastructure of New Zealand. That will look after our children and grandchildren, that’s the opportunity we have now.”

Of course, the Government can print money do this. Our previous council way over committed itself and future councils for the next ten years (at least) to build the Kempthorne memorial of woe. We have no headroom to be saving the New Zealand economy.

Shamubeel is also the author of the metric as provided by the NRDA (Nelson Regional Development Agency) in a joint Council workshop lead by Mark Rawson.

Every $1million of rates relief provided supports approximately 8.5 jobs in the economy (i.e. the savings created 8.5 jobs through more productive investment of that $1 million)

However every $1million of interest payments for council investments in a capital works supports 155 jobs in the economy (approximately 18x multiplier).

If the idiocy of this comparison is not immediately obvious to you (like apparently those presenting it to us) then let’s compare apples with apples.

Every $1million of interest comes with $20 – $25 million debt which would typically be spread over 30 years worth of repayments. The total cost the $1 million interest payment and 155 jobs would be in the region of $50-$60 million if my math is correct. Even if my math is not correct, it is fairly obvious that if we comparing the total cost of the $1 million in interest with a comparable amount spent on rate rebates – I think the “18x multiplier” is a sorry joke. If we take the 8.5 jobs per million of rate rebate times $50 million of loan costs then we get 425 jobs created. Compare those apples!

However, we shouldn’t let facts get in the way of the current propaganda being foisted on the Councillors to encourage their already eager ambition to spend a fortune of ratepayers money on all the planet saving wet dreams that they can come up with. Meanwhile dam costs continue to spiral ever upward.

Another example of how your Council consults with you because your opinion counts is the issue of Chlorination of your drinking water supply (for those of you lucky enough to be on a supply without permanent Chlorination). We are, or are soon to be, asking if you would like your health “protected” through a permanently chlorinated water supply.

However, just in case you give the wrong answer, on the 21^st of May 2020 Council passed a Drinking Water Quality Management Policy. During the time of debate, I asked if by passing this Policy I was also passing compulsory Chlorination. There was some side-stepping of the issue in the staff response. So, I asked again if it was possible to meet these standards without permanent Chlorination. The response was that it maybe possible but that it would be extremely difficult and expensive.

The end result of passing that Policy is that any future consultation will be a moot point as we will consider public feedback along with staff reports and Government recommendations and come to the informed decision that we have no choice and will implement Chlorination whatever the majority result of the public consultation desires.

The fact that we have nullified public feedback before seeking it is one aspect of this process that annoys me. Another aspect is that the staff tell us that the Government is moving to require all public supplies are Chlorinated therefore, why are we wasting staff time and your money going through the motions of consultation etc by trying to pre-empt what is apparently soon to be legislated?

In conclusion, I will be very surprised if the projected debt during this round of the Long Term Plan (LTP) setting does not once again hit $300 million.

Last time there was a projected debt of $300 million the fine folk of Tasman reacted so passionately that the current debt cap of $200 million was self-imposed.

The difference between then and now is that they tell me they had no intention of spending $300 million last time but that the LTP was a wish list of all the projects that everyone thought might be nice to have and had not been refined down to actually achievable.

This time we will be spending all that money as we try and help the Government jump-start the economy, respond to the requirements of rapidly rushed through Government legislation, house the exploding staff numbers, upgrade everything else associated with more staff and rapidly advancing technological requirements, deliver on the save-the-world ideals of some Councillors, and of course continue to pick up all the liability for the runaway dam overruns.

P95 Probability or Implausibility

07/07/2018

For the past 18 months or so I have heard a lot about the P95.

What is a P95?
Good question!

Homer Simpson Doh — Waimea Community Dam quote = $120 million

I was told that it was a 95% likelihood that the Waimea dam would be built on or under budget.

Given the current state of press releases coming out of the Tasman Council, I thought it would be timely to delve a little deeper into this magical assurance while we await the next announcement. Incidentally, press releases are the only way anyone gets any information regarding the dam (not as big an exaggeration as you might imagine, councillors are just privileged to receive their copy 15 minutes ahead of the general ratepayer).

Back in January 2016, we read in the Nelson Mail the following:

The dam’s estimated cost rose to $83m last year after costs were revised by the council’s consulting engineers…

The council’s $83m figure is based on a risk factor which assumes there is a 95 per cent probability the dam can be built for that amount of money or less. It’s known as P95.

WCD project manager Nick Patterson said the dam can be built for $73m, including the $6.5m already spent. This was using a P50 risk factor that assumed the dam could be built for that amount of money or less.

There was a lot of confidence around what price the dam could be built for and the level of certainty once we added a few extra million and called it a P95. These confident assertions have continued right up until the press release on July 5 2018.

The Mayor was an early adopter of this confident boast as is recorded in articles such as this Stuff article on September 2017:

Richard Kempthorne said the dam costing was based on a “P95” confidence level, which meant the council could have 95 per cent confidence the dam would be constructed at or below the estimated cost.

“At or below the estimated cost” was the catchphrase that echoed the Council chambers every time anyone questioned the possibility of cost overruns. We have used a P95 to arrive at the budgeted figure.

On the 10th of August 2017 Natasha Berkett is quoted in the Farmers Weekly as saying:

However, there was also a $13 million contingency allowance in the $80m project for further increases.

“We are working to a P95 standard that is where we are 95% certain about the cost of the project.”

Waimea Irrigators Ltd advocates John Palmer and Murray King scoffed at any hint that there would be any budget blowout. The Waimea Water site boasts the following:

Are the cost estimates for the Dam accurate?

A great deal of work has gone into the current cost estimates for the dam construction and project leads are currently undertaking another robust analysis.

The base cost estimate for the Dam construction is $50m. On top of that there is $13.5m included in the project estimate for changes in scope and unexpected cost increases. This raises the level of confidence in the estimate to a very high level – there is only a 5% probability that the costs will exceed the $63.6m budgeted and a 95% probability the project will come in on or below budget. That level of confidence is far higher than the typical estimates you might see in other construction projects (emphasis added)

I hope you are feeling convinced in the level of confidence that we have that the dam will come in on or under budget. That is the completed dam, including construction cost blow-outs. We are 95% certain in our facts.

Just in case you still had a few doubts we put out a Dam Straight fact campaign at the ratepayer’s expense of almost fourteen and half thousand dollars (which I realise is chicken feed compared the ten million, in round figures, lost on the project to date).

To prevent large cost overruns, Council is doing all it can to keep risks to a minimum including:

using a p95 level for construction costs, meaning that there is a 95% probability that the project will come in at or under budget;

using modern engineering and risk management approaches and external professional advice; and

$13.5 million contingency for changes in scope and other unforeseen eventualities.

Can there be any doubt as to the robustness of the budget after we used a P95 level, modern engineering and risk management approaches, external professional advice, and even a whopping $13.5m contingency figure for good measure?

Well, some people thought so. One such person is Paul MacLennan who indicated:

TDC’s own recent admission they have never priced the civil cost of the 87 Hectare Reservoir and sealing of the lake bed to hold the 13.4 million cubic meters of water is appalling and makes the TDC claim $76.9 million at P95 a gross misrepresentation.(emphasis added)

A rather strong assertion. He claimed that “clearing 87 Hectares of steep, sloping, and fractured terrain will cost $30 million plus.” I tried to follow up on his concerns with staff only to receive repeated replies attesting to the robustness of our P95. A P95 that it seems, from reading between press release lines, was so grossly inadequate that it didn’t even cover the quote, never-mind the inevitable construction overruns.

In his submission, during the Waimea Dam consultation process, Dr. Roland Toder questioned the P95 claim.

A so-called ‘P95’, as mentioned by TDC is misleading. In project management, percentiles are expressed by P followed by the percentile. A P95 estimate of $82.5million means that the project has a 95% chance of being completed with this or less amount of money. Normally one uses data one has from similar activities (like executed several dams of similar size before). Ideally, if you have a number of similar activities (many dams of similar size) that would be best, because from this data, you need to find the mean (expected value) and the standard deviation (to determine the range of error) for each activity. THEN you can calculate cost and timing estimates for the entire project.(emphasis added)

People from the Water Information Network Inc also protested the validity of the P95 figure sold by WIL and Council staff.

Tasman District Council (TDC) admit they have never priced the clearing cost of the 87 hectare reservoir.

With steep, sloping and fractured terrain clearance of the area is likely to cost over $30 million.

Similarly, no costing has been made for the sealing of the lake bed to hold 13.4 million cubic metres of water.

Removed trees, bushes, shrubs, detritus, topsoil, and stumps will add up to a metre-high pile.

This will amount to around one million cubic metres to shift from the Dam’s footprint area to a stockpile area where run-off can be managed until final disposal.

Silting up risks and decommissioning costs have not been taken into account.

Suitability of rock fill ‘borrowed’ for the Dam wall has not been accurately assessed. So it may not be suitable.

All of this indicates that TDC’s claim of $76.9 million at p95 (95% ‘accurately’ costed) is a gross misrepresentation. (emphasis added)

I repeat that when I questioned the validity of these claims I was told that we had sufficiently budgeted all aspects of the dam, and early indications on pricing confirmed the validity of the budget.

When I questioned the age of the original estimate given that all our current contracts are experiencing a premium in a high demand marketplace I was again assured that the estimated budget for the Dam was adequate.

At the councillor 15-minute-advance-notice-of-the-press-release meeting, I asked TDC engineering department head Richard Kirby which aspects of the dam quote were currently running over budget he said he didn’t know. When asked what was the range of budget blowout on the figures that had come in to-date he responded that he didn’t know. When I questioned that they had called an extraordinary briefing and are about to send out a press release announcing that there are significant challenges with the contract price meeting budget and yet you are telling me that you have no idea what the overrun gap is? He confirmed that was correct.

The head of Engineering doesn’t know the figures.

The Mayor doesn’t want to know the figures.

I want to know whose head is going to roll for misleading the Council over the 95% certainty of the price for building the Waimea Community Dam. Information that resulted in the Council spending the best part of ten million dollars of ratepayer’s money progressing the project to this point. Whether deliberately misleading councillors or doing so through incompetence someone has to be held accountable.

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