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:
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?