The dam decision on funding and governance options

Full council meeting

The decision on funding models and governance options was made at the full council meeting on Thursday, 11 December 2014. All councillors were in attendance.

The resolution in the agenda before council comprised nine points. These were:

That the Full Council:

1. receives the Proposed Waimea Community Dam – Funding and Governance Options report RCN14-12-01; and

2. 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

3. 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

4. notes that a commitment to funding a water augmentation scheme in the Long Term Plan 2015-2025 will be conditional on project scope and external funding being agreed; and

5. 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 affective local infrastructure.

6. notes that further consultation and engagement with the public on a water augmentation dam will be undertaken, including on a new proposal for the Long Term Plan 2015-2025 Consultation Document; and

7. notes that the decision to proceed or not proceed with the Waimea Community Dam cannot be made until further information is available; and

8. requests that staff report back on the work programme to implement these resolutions; and

9. 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.

The two main areas of concern for me were the inclusion of $25 million in the draft Long Term Plan (now draft Consultative Document) and the creation of a council controlled organisation (CCO). I will discuss these issues further below.

Procedural points

Before the meeting started, I reminded councillors that those with a conflict of interest should remove themselves from the council table to avoid any decisions council made being subsequently challenged. Cr King excused himself from the debate.

Given the importance of the issues and public interest I also asked that councillors votes be recorded for each of the nine items.

During the meeting I foreshadowed a number of amendments to the resolution. These included a replacement item 3 and item 5, and on behalf of Cr Bouillir, an amended item 4 and item 6 (amendments emphasised), as follows:

3. Requests staff report back to council on new or revised water augmentation schemes or solutions, including new funding options and methodologies for the councils’s share of those water augmentation schemes or solutions, that provide for current and future urban water needs, including consideration of different methodologies for funding environmental flows, so that an appropriate amount (if any) can be added to the Long Term Plan 2015-2025.

4. notes that a commitment to funding a water augmentation scheme in the Long Term Plan 2015-2025 will be conditional on ecologically sustainable water management practices, project scope (including an independent review of alternative options as agreed by council) and external funding being agreed; and

5. That the council approach the government to underwrite or fund in part or full, future and current urban water needs, including any environmental flows, and that staff advise members of WWAC, who represent the interests of irrigators, to form their own investment holding company in order to obtain external funding from the Crown Irrigation Investment fund for a water augmentation scheme or solution that funds the current and future irrigation needs of irrigators.

6. notes that further consultation and engagement with the public on a water augmentation scheme will be undertaken, including on a new proposal for the Long Term Plan 2015-2025 Consultation Document; and

The funding models

The rejection of either proposed funding models received unanimous support from council.

In my opinion, having heard all the submissions, the funding methodology of allocating cost on the basis of land area, rather than the amount of water consumed, was not equitable or fair, and did not incentivise water conservation. The models created winners and losers, potentially forced people off their land, and did not reflect how the land was used in terms of water useage. Other experienced orchardists wondered why they had to fund other businesses when they had not received similar assistance. A constant theme from submitters, was that a user pays or water consumer approach was preferred. I agree.

In my opinion, governance could not be determined without knowing who the funders were. Those that favoured a company governance mode also tended to favour a user pays approach, where the users were the funders. However, in my mind the governance options were premature considerations without knowing the sources of funding.

I do not want to comment to much on the merits (or not) of a dam, as that question was not before us. However, many submitters did express their thoughts on the merits of a dam, over other solutions. These observations do make me wonder if other alternatives to the proposed large scale dam augmentation concept (including a mix of demand and supply side initiatives, like, smaller multiple dams or weirs, purchasing back water rights, enabling temporary tradeable water rights during drought periods, stepped water pricing, and water harvesting) are potentially more cost effective and spread the risks more efficiently, given the constant change in technology, crops, and farming practices. I note that one very large business owner mentioned that he had shifted some of his orchard crops off the plains to another location in the region, “where the water was”. Perhaps unsustainable businesses need to reconsider whether the plains is the right location for their farming practices, while still remaining within the region.

The $25 million loan

I did not support a $25m loan figure going into the draft Consultative Document at this time. For me this was a question of process and timing. I acknowledged that a figure would be necessary for draft Consultative Document if we were to have an augmentation solution that needed council funding. But, how could we recommend a figure, when we had yet to discuss the merits or agree on the funding methodology that would support any figure going into the draft Consultative Document. Until we had that discussion, I could not support any figure being recommended. And I was surprised any councillor could support such a figure without such a discussion. Given we are still holding workshops on the draft Consultative Document, it seemed to me that we still had time to have a thorough discussion and agree on a figure before the draft Consultative Document was released to the public.

During the meeting, the council CEO advised councillors that the figure of $25 million comprised: $3 million for administrative purposes and $22 million for capital expenditure. The $22 million comprised urban water needs (involving future and current water needs) as well as maintaining environmental flows. I understand that the current urban water use was 6% of the total cost of the proposed dam, or 15% of current water consumption. This equates to about $4.5m. The CEO advised councillors that around $8-9 million was for current and future urban water needs and the remaining $14 million was for environmental flows and possibly funded as a public good interest by the wider community.

Whether the wider public should fund this amount either equally or on a cascading stepped approach, or whether the exacerbators (or water users) should fund this amount had not been determined. If the exacerbators were to fund this amount, then I did not understand why we were placing a figure of $25m in the draft Consultative Document as surely it would be a much smaller figure. In my mind, the allocation of water to private users has caused the environmental flow issues. I would add that without any allocation, the river flow would be fine. This confirms for me that there is not a substantial public good argument and that the exacerbator\polluter principle should apply to the allocation of costs towards an augmentation solution. Furthermore, as I understand it there is very little marginal improvement in the habitat for brown trout in lifting the water flows from 800 l\s to 1100 l\s.

With so many unknowns, and a lack of debate and agreement over the various issues, I could not support this figure.

Forming a CCO

I did not support a CCO being formed at this time. A CCO should only materialise if the council resolved to build a dam. To my knowledge, council had not resolved to build a dam.

The argument was made that we need a CCO to secure funding. While I support seeking external funding and acknowledge that many submitters supported a CCO model under a user pays approach to funding, I disagree that it is necessary at this time to form a CCO to obtain funding. We can keep our funding opportunities open without a CCO.

First, we do not know where we will get external funding from – it could be from private contributions, a government grant, the Crown Irrigation, or a mix of all three. A potential funder may well require a different ownership model (or company constitution changes) making the cost of setting up a CCO a waste of staff time and money.

Secondly, any external funding that might arise from negotiations with Crown Irrigation was for irrigators, not the general public. Irrigators should form their own investment holding company to hold whatever funds they secure. I was not aware of Crown Irrigation requiring a CCO as a condition of making funds available to irrigators. The council did not need to be involved in forming a company for irrigators.

The outcome

Council approved the $25 million loan figure going into the draft Consultative Document and the establishment of a CCO. While my resolutions were unsuccessful, a number of other resolutions that placed additional restrictions or conditions on the above items was approved. These can be viewed in the minutes of the Agenda.

On the upside there is still an opportunity for the public to provide feedback on the $25 million figure in the draft Consultation Document, when it goes out for public comment. It might be that the $25 million figure is further reduced at that time.

Agenda and minutes

The agenda (including staff reports) to be considered at the meeting are located at http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/full-council-meetings/?path=/EDMS/Public/Meetings/FullCouncil/2014/2014-12-11

Media statements 

http://www.tasman.govt.nz/council/media-centre/news/staff-report-provides-options-for-councillors-to-consider-on-dam-question/

http://www.stuff.co.nz/nelson-mail/news/64084737/Outcry-triggers-dam-rethink

http://www.stuff.co.nz/nelson-mail/opinion/64234792/Don-t-plaster-over-cracks-in-the-dam

http://www.stuff.co.nz/nelson-mail/opinion/64490233/Funding-woes-aside-the-Waimea-dam-must-be-built

http://www.stuff.co.nz/business/farming/65068043/ruataniwha-dam-questions-asked

Advertisements

One comment

  1. Philg

    Thanks Mark for your efforts and keep the council honest! I cannot believe how poorly council leadership has mishandled this issue, starting at the very top. It looks dodgy and undemocratic. It good to know that some representatives are holding the Executive to account. Best wishes Philip

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s