Tasman district ratepayers face potential liabilities of about $100 million for the Waimea dam project – on top of $29m in credit support already disclosed.
Information released under the Local Government Official Information and Meetings Act (LGOIMA) reveals a ratepayer contingent liability of up to $50m for “council compensation events” over the next 40 years. In addition, mayor Richard Kempthorne said if the plug was pulled on the $104.4m dam project, it could cost the council another $50m to break its contracts.
The $100m potential costs are over and above $29m to underwrite a loan for irrigators, which has already been disclosed. This $29m of credit support was outlined in the council’s proposed governance and funding arrangements for the dam project, which were put out for public consultation in October 2017.
However, the $50m for the council compensation events has not previously been disclosed by the council.
“[The council] has never publicly consulted or notified Tasman ratepayers of this liability,” said resident Kevin Walmsley, who lodged the LGOIMA request. “At $50m, the Council Compensation Events term is by far the largest liability for the dam, excluding overruns. Yet, the TDC only consulted on much lesser liabilities. Why hide it?”
Walmsley said he wondered if there were other “hidden liabilities” with the dam and other council projects.
Kempthorne said he could not remember what was talked about publicly. “I can’t remember what’s public or not.”
However, he was “comfortable” with the reason for the $50m compensation potential liability.
According to the information released, the council is liable to pay compensation to irrigators and other affiliated consent holders for losses if a “Council Compensation Event” occurs. A compensation event includes a change to council rules that could alter the rights of people to take and use water, which offers some protection to those who become shareholders in Waimea Irrigators Ltd and help pay for the dam.
Kempthorne said he believed the compensation clause could also be triggered if the council pulled the plug on the dam, which is now under construction in the Lee Valley.
“It would be very poor of the council to pull out of it [dam project] and leave those who have been putting in a lot of money stranded,” he said. “I can’t imagine that it would need to be called on. I can’t imagine the council would pull out.”
Council corporate services manager Mike Drummond said he did not know how much it would cost to break the contracts now in place for the construction of the dam but it would include covering all of the contractors’ costs and profit margins.
“I expect that wouldn’t be a small number,” Drummond said, adding that Kempthorne’s $50m estimate “might not be out of the ballpark”.
Drummond said the clause on council compensation events did not “exist in this form” when the proposed governance and funding arrangements for the dam went out for consultation.
However, it would be disclosed in the Annual Report, due out later this year, though “it might not have an amount next to it”.
“The chance of it being called on is very remote,” Drummond said.
Walmsley said he pursued details of the compensation contingent liability because he was worried about rising ratepayer costs.
“It’s like we’re a bottomless pit,” he said. “It just can’t continue.”
The $50m compensation clause should be removed. “This is about public money and the public has not been advised.”
Walmsley was also concerned some sections had been redacted from the term sheet that was released to him under LGOIMA. He had asked the Ombudsman to “have TDC release this information to me”.