27 November 2018

On Friday 30 November the Tasman District Council will make its final decision on whether to proceed with construction of the Waimea Community Dam.

Council staff have been working with the preferred dam contractor and the Council’s funding partners to continue refining the project cost estimates and funding options.

Taking account of community concerns about the potential for cost over-runs during the construction process, the Council has budgeted for additional project office resourcing and professional advice to further reduce the risk of over-runs. The cost of that advice and resourcing is the main contributor to an increase in the project price, which is now $105.8 million.

Of that, $66 million is a fixed price within the $75 million construction contract that holds no risk of the price increasing. (The physical dam works make up $66.3 million of the $75 million contract price.) The contractor will hold the risk of any escalation, such as inflation, material cost increases or fuel cost increases. There is also an $8.5 million contingency on the remaining $40 million of unfixed project price, or 21%.

The construction contract and pricing has been peer reviewed by dam safety experts DamWatch, and are robust.

Tasman District Council chief executive Janine Dowding said councillors would consider the updated price, along with the funding arrangements in place with the Council’s funding partners Waimea Irrigators Limited (WIL), Crown Irrigation Investments Limited (CIIL) and Nelson City Council, when it met to make the final decision on Friday.

“The increase on the $102m price that came out of the early contractor involvement process in August this year is largely an investment in reducing the risks of any cost over-runs during the construction process. It’s the cost of providing greater oversight through the project office, and of extra legal and financial advice to make sure we reduce or eliminate every element of project risk that we possibly can.”

Janine said WIL would meet half the extra project cost. CIIL, through WIL, would meet the debt servicing costs of the remaining half for the first 15 years of a 40-year loan term. How the remaining debt would be financed in 15 years would be a decision for the Council of the day, but one option would be to set aside the money needed over the next 15 years.

“That means ratepayers will not bear additional costs to those consulted on in the medium term,” Janine said. “The District-wide flat rate remains at $29, and the Zone of Benefit rate is also unchanged.”

“Staff are recommending the Council make a final decision to proceed because of the benefits the dam will bring to the region – the key ones being improved river health, a secure urban water supply for the long-term and ongoing regional economic prosperity. If we don’t build the dam, we will lose $64.2 million of external investment in our region’s environment, economy and urban water supply, as well as $18.7 million of concessionary loans.”

The agenda for Friday’s meeting, including the staff report, will be available on the Council’s website on Tuesday afternoon. Because of the likely high level of public interest, anyone wishing to speak in the public forum of the meeting is asked to register their intention to speak with the Council by 2pm on Thursday 29 November. There will be a set amount of time available for the public forum, which may require us to limit the number of speakers.

After the public forum, the meeting will enter a confidential session to go through legal documents and agreements required for the project to proceed. The final decision will be made in a public session afterwards.

Guidelines for speaking in the public forum are available on the Council’s website, www.tasman.govt.nz/link/public-notices.

Latest dam funding model – based on a conservative $105.9 million overall budget

Tasman District Council funding

$22.95 million (funded by rates, charges, commercial income, development contributions)

$10 million (20-year interest-free loan from CIIL)

$8.75 million (debt to be serviced by WIL for the first 15 years of a 40-year table loan)

Total: $41.7 million

Freshwater Improvement Fund grant

$7 million

Nelson City Council

$5 million

Waimea Irrigators Limited

Total: $52.2 million (share subscription, convertible notes and CIIL loans). (In addition, WIL will service $8.75 million of Tasman District Council borrowing for 15 years.)

Project Total: $105.9 million

ENDS

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