Ratepayers getting fleeced under Waimea dam funding model, says economist
Tasman district ratepayers will be left "holding the baby" for the proposed Waimea dam, says economist Peter Fraser.
Fraser, a former Treasury economist, on Tuesday stood by his earlier claims that the price of water from the proposed dam in the Lee Valley would be between 50c and 60c a cubic metre – more than three times the 14c per cubic metre average cost of water supplied in 2016 by irrigation schemes across the country, according to Irrigation New Zealand figures.
"It's a really, really expensive dam for really, really expensive water," Fraser said on Tuesday. "Irrigators can't afford it. I think, they're [ratepayers] going to be left holding the baby the whole way through."
His comments come after Tasman District Council released a new funding and governance proposal under which the council will pump $26.8 million into the Waimea dam project, underwrite a further $29m and face the cost alone of any overruns above $3m. The overall project cost is estimated at $82.5m with a build price of $50m tipped, including $13.5m for changes in scope and unexpected costs.
"These schemes: Try to find anything that comes in on cost," Fraser said. "It seems ratepayers are on the hook alone for anything above $3m if there's a blowout of the build cost."
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However, mayor 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.
Fraser said the proposed dam was too big for the area to be irrigated and the water would be too expensive for irrigators.
"What I object to is ratepayers and taxpayers paying for it," he said.
The new model incorporates a $7m grant, announced in August, from the Government's Freshwater Improvement Fund and an interest-free $10m loan from Crown Irrigation Investments Ltd (CIIL) that was announced last week.
Kempthorne said he was fully supportive of the use of the Freshwater Improvement Fund and CIIL loan because it was a "huge challenge" to get a funding model across the line for large infrastructure projects.
Under an earlier funding model, the council was to pay two-thirds of an environmental flow component of the dam with its likely joint-venture partner, Waimea Irrigators Ltd (WIL), due to pick up the other third. It's a scenario Fraser described as the "Meat Loaf solution – Two Out Of Three Ain't Bad".
However, under the new model, the environmental component of $22.7m is to be funded by the $7m Government grant, the $10m CIIL loan – that the council will pay back – and ratepayers directly.
"Ratepayers are getting fleeced," Fraser said.
Waimea Irrigators and Water Users Society consultant Brian Halstead described the new dam funding proposal as a "massive subsidy" to affiliated irrigators at ratepayers' expense.
However, Kempthorne said irrigators were coming to the party, signing up for $40m – $15m in shareholder funds and responsibility for the repayment of a loan of up to $25m from CIIL.
"This is a big challenge for irrigators," the mayor said.
Halstead said the proposal carried "high risks", pointing to the $29m underwriting provision to cover the proposed loan from CIIL for the benefit of WIL.
"In guaranteeing the CIIL loan, the council is leaving itself wide open," he said. "In agreeing to fund the majority of the cost overrun ... the council is giving the dam builders an open cheque book not to keep tender prices down."
Kempthorne said he "completely disagreed". The tender process to be utilised would ensure the "best price possible" for the dam build, he said.
The mayor added that he found it helpful to have people challenging the dam project.
"This has got to be really compelling for our community," Kempthorne said. "The reality is: without a dam, we are in serious trouble with water."
Halstead called on the council to further investigate other options for water augmentation.