Together with three other provincial lines, Napier/Gisborne will be reviewed by KiwiRail in consultation with communities and customers. Its so-called “rail turn-around plan” flags that unless new anchor customers emerge, such lines will be closed or mothballed by 2012. The consequence would be almost total reliance on road transport for freight between Napier and Gisborne on State Highway 2 (SH2), which as we all know, is a secondary road at the very best. The third transport mode of coastal shipping is not viable for other than a very few types of bulk product.

Measured at Tangoio north of Napier, SH2 carries an average of 2,075 vehicles per day, significantly less than say Hastings to Waipukurau at 7,000 per day. But of the Wairoa traffic, over 17 per cent is heavy traffic, double the percentage south of Hastings. This is on a twisty, hilly route with few passing opportunities.

The immediate effect of two train movements per week being transferred to road would be an additional 30-50 truck movements per week.  Maybe not that significant in total vehicle movements, but materially adding to the heavy traffic concentration.

The future though, is of real concern. Freight movements in general are predicted to rise significantly and, in particular, the timber harvest from the Gisborne region is about to grow massively. Unless unprocessed logs are exported from the Port of Gisborne (which would be a lost opportunity in itself), containerised processed product destined for the Port of Napier will rely upon land transport and in the absence of rail, overwhelm the road system.

A specific example is Hikurangi Forest Farms, which is building a major wood processing plant in Gisborne. Its anticipated output on 200 container loads of processed timber per week can be shipped either from Tauranga, but preferably and most probably, from Napier, as long as rail transport is available. This is a great economic development opportunity for Gisborne and Hawke’s Bay and perhaps in itself the salvation of the rail line.

But we and KiwiRail cannot just rely upon one opportunity. In the two-year period of grace available, more freight business must be secured over and above the two present train movements each week (mainly Ravensdown fertiliser to Gisborne).

Formerly, there was a daily service carrying general freight, sawn timber, bulk wine, fresh produce and meat from the Wairoa AFFCO works.

What happened to that trade? Unfortunately there has been a contraction in production and processing of food products in the Gisborne region. Another reason is perhaps more insidious. It appears that under previous ownership, prior to the Crown re-purchase, Toll Holdings Limited promoted the use of their trucking division to secure business at all costs – including the cost of loss of rail traffic.  KiwiRail does not have this conflict as it is now solely a rail operator.

To its credit KiwiRail is not accepting defeat. I am advised that they are seriously investigating lowering the one tunnel on the line which prevents them from carrying hi-cube 40 foot containers. They can already carry 20 foot containers on their low loader wagons but the market is moving to the big hi-cubes. It is worth noting that the significant new Fonterra business (ex-Taranaki) gained by the Port of Napier was only made possible by the recent lowering or, alternatively, “day lighting” of tunnels in the Manawatu gorge area to carry the big containers.

I understand this single tunnel upgrade will cost less than $200,000 and the rest of the rail infrastructure is in pretty good condition. The line is one of the youngest in the country, being finally completed as late as 1936.

Little known also is that monthly passenger excursion train services have been running this year, capitalising on the scenery which is as good as, if not better, than the South Island tourist train services.

To conclude:

• We must maintain choice in land transport modes;
• We need rail to keep competitive pricing pressure on road operators and vice versa;
• Economic development opportunities will be compromised without rail;
• Safety on the Napier/Gisborne road will be more and more compromised with more and more trucks.

It was a year of challenges, role definition and several momentous decisions that will impact the region for years to come.

The challenges included survival. As 2009 began, with the new National-led Government keen to effect change, the prospect was that a Wellington-based Environmental Protection Agency would take over our resource management functions; catchment-based Water Boards would assume water allocation and monitoring; and up to seven River Boards modelled on the Waikato Tainui settlement, resulting from Treaty Settlements in our region, would fragment rivers management and marginalise or replace our democratically elected Council.

Over and above that, Regional Councils generally were copping severe criticism (sometimes justified) over seeming inability to protect our environment, particularly water quality.

I thought, unless we substantially upped our game and effectively refuted our critics, we’d face about a 50% chance of being around as an institution within three years (with or without amalgamation).

I now revise that to a 90% chance of survival as the realities of the relevance of Regional Councils and the cost, disruption and loss of democratic accountability (inherent in radical reform proposals) sinks in with a Government now much more experienced and pragmatic than a year ago.

Challenges to survival focus the mind! And so this Council has thought hard about its responsibility and potential to influence our region’s environmental and economic development in a unique way. We are determined to combine our science and engineering knowledge and expertise, our investment portfolio wealth, and our power to set rules and regulate, as powerful complementary levers to effect significant outcomes.

For example, the water storage project in Central Hawke’s Bay could result in hundreds of millions of dollars of new wealth generation for this region. Expertise in water science and storage will influence the shape of the project. Our ability to fund (together with partners) the feasibility studies will insulate eventual investors from the initial high risk phase of the project. Our investment portfolio can help fund cornerstone investment in the infrastructure itself. And our ability to regulate through resource management plans will ensure sustainable use and protection of the enhanced water resource.

No other organisation has the capacity to launch a project of such potential and hopefully bring it to fruition well within the next decade. The fact that we are a public body, there to serve and democratically accountable to electors and ratepayers also helps provide the trust and confidence vital to ensuring public and stakeholder support for the scheme.

Last year saw the confirmation of a huge change in the Council’s strategy for use of the investment portfolio. The priority now is that yes, we want a reasonable rate of return to offset rates, but that investments should work for and in Hawke’s Bay to maximise economic and environmental benefits for the region.

Our partnering with the Wairoa and Central Hawke’s Bay Councils in land disposal of sewage effluent to plantation forests, is an example of the positive use of the Council’s financial wealth. Effluent removed from Tukituki for environmental gain, economic benefits for Wairoa and Central Hawke’s Bay ratepayers in project cost savings and a reasonable return on investment for regional ratepayers through the forestry ventures.

Other significant decisions included the purchase of degraded pastoral land in Tutira for a model forestry conversion including carbon trading; becoming the 100% owner of the Port; allocating six million dollars to assist the major community facility projects such as the HB Museum redevelopment, Hastings Velodrome and the Central Hawke’s Bay Town Hall project; putting together a package to help households insulate and replace inefficient burners to clear up our winter air pollution problem; and implementing an Ombudsman’s requirement to publicly identify suspected or actual contaminated sites.

Another landmark decision was to take action on pollution of the Mohaka River arising from farming intensification in the Tahaurua catchment. Whilst collaborative arrangements with landowners, including assistance from our land management team, ranks high in mitigation measures, this Council for the first time has decided to regulate nutrient inputs and outputs if necessary to fix the problem. An important precedent.

Moving to 2010 – I see it largely as a period of consolidation and implementation of the major decisions made last year to start producing the desired outcomes. For example, the CHB sewage scheme will take time to move through consenting, construction and forestry planting before the environmental benefits for the Tukituki are seen. Similarly, containment of nutrient flows into the Tahaurua/Mohaka involve completion of scientific studies, plan change processes to effect nutrient controls, and land management adaptation … all take time and effort.

Focus on implementation will be a priority for the Council’s strategy for improve its management of the water resource in the Heretaunga and Ruataniwha aquifers and the $2 million feasibility study for the water storage project will swing into high gear.

A crucial decision will result from Central Government decisions on the method of co-governance of natural resources, inherent in the settlement of Treaty of Waitangi claims of 6-7 claimant groups across Hawke’s Bay over the next few years. The forerunner of these will be the Crown’s settlement of the Ngati Pahauwera claim in the Mohaka region which is imminent. Change and power sharing is inevitable and should be embraced in good faith, but we must avoid the Waikato Tainui precedent, with Rivers Boards being multiplied across this region.

Resource management plan policy reviews should be under development this year for stormwater and waste water quality standards, and recommendations adopted from the Heretaunga Plains Urban Development Study will be proposed to be integrated into the Council’s Regional Policy Statement.

Perhaps not so many dramatic decisions and issues this year, but instead the hard graft of making things happen to get things done.

I agree with Lawrence’s timing proposals. There is so much at stake that there needs to be time for real community debate and thorough consideration of costs, benefits and even different reorganisation options.

Take for example the prospect for cost savings.  With a single region wide unitary council we will create an organisation more than three times the size of Hastings District Council.  Sure there will be only one (more highly paid) CEO but Wairoa and Central Hawke’s Bay will still need District Managers and as is universal with bigger organisations, another layer of senior support staff is likely to be laid in.  As well, major changes like this will disrupt in the first instance and take probably 2-3 years to fully bed in.  I am not saying that there won’t be cost savings or that costs will necessarily increase, but there must be very thorough and cautious investigations before we jump in the deep end.

Given that unlike Auckland, there is nothing seriously broken that must be fixed in Hawke’s Bay, we have to again be very careful that change is not at the cost of effective representative democracy and we must preserve the right of our four separate and distinctive communities to maintain essential self determination.  That requires an effective second tier of local councils with appropriate delegations and some real powers to make a difference for their own communities.  The present proposal protects that to a reasonable extent.

It is also important to be aware that the Regional Unitary Hawke’s Bay Council, is not the only reform option.  It is possible for one, two, three or four of the present territorial councils to merge with the Regional Council to form a new Unitary Council.  If one or two present councils wanted to retain the status quo then the Unitary Council would provide Regional Council services to them.

All of these options and the opportunities and threats, inherent in such major change, mean that we need to take our time to get it right.  Accordingly, I agree with Mayor Yule’s proposal that the matter should be considered, consulted upon and deliberated upon by referendum over 2011/12.

In the meantime, it is also essential that we don’t get distracted from our important governance tasks.  The Regional Council has vital work to do on its water strategy including its water storage scheme and water quality issues.  All Councils could and should be doing work on service and planning harmonisation and we have to make sure that the Government does not make serious mistakes in its reviews of Local Government generally and Resource Management Act in particular.

I agree with my Mayoral colleagues that any change should be the wish of electors and not be imposed from outside.

The Council’s Embracing Futures Thinking document reflected this analysis, with draft strategic goals and objectives under headings such as Sustainability, Water Management, Optimal Land Use, Coping with Climate Change, Renewable Energy, Future Regional Infrastructure, Economic Development, Investment Strategy and Partnerships with Maori.

The thinking in this document (available on request) has been further developed in the long-term plan into key policy change proposals and programme activities which, if adopted, will in my opinion be transformational for the Council and have a huge positive influence on the region’s economic development and environmental protection. Whilst the plan is for a ten-year period, the first three years should be a fairly accurate prediction, but further out is indicative only.

There are two key and critical strategies, affecting water management and Council’s economic investments.

Water strategy

Firstly, regarding water – our most precious and finite resource – under demand pressure from industry and irrigators, and likely to be under supply constraint, as with climate change Hawke’s Bay becomes an increasingly drier place.

Over and above the Council’s presently substantial investment in science, monitoring and consent compliance, the Council proposes to invest $2.6 million in scientific investigation and policy development over the next three years. The science objective is to fill knowledge gaps about the scale of the Heretaunga and Ruataniwha plains aquifers and sustainable takes. The policy objective is to better manage the resource to sustainably maximise water utilisation, while avoiding environmental degradation.

But we won’t sit on our hands in the meantime, or be paralysed by analysis. Two projects are being planned for right now. The first will provide real time data from water takes through metering and telemetry for highly responsive management of water demand, to enable better utilisation and maintenance of critical water flows in our rivers.

The second project is a pre-feasibility study into the potential for water harvesting, particularly in the Ruataniwha plains and upper Ngaruroro River catchments.  Storage reservoirs can capture winter peak flows and enable irrigation and supplementation of ecological surface flows in the dry summer months. There is the potential for a further 41,000 hectares to be irrigated in these areas, with an irrigated farm earning 2.4 times the revenue of a dryland farm.  As well as the obvious economic benefit, careful design and management can enhance environmental and ecological values, so we will work with Iwi and organisations like Fish and Game for the best possible outcome.

Investment strategy

The second key strategy is review of the Council’s Investment Strategy.

We are fortunate that the Regional Council is a relatively wealthy organisation, but to date it has had a very lazy balance sheet (with $30 million sitting in bank accounts).  Our intention is to have those funds working, and also to be able to leverage off the balance of the portfolio, including the Napier residential leasehold lands and ownership of the Port of Napier.

The objective is new investments in Hawke’s Bay that have a triple benefit.  Firstly, economic development; secondly, environmental protection or enhancement; and last, but not least, maintaining a reasonable financial return to minimise costs to ratepayers.

Expect active investment in ventures such as water use monitoring, wastewater treatment, conservation forestry, carbon farming and, subject to feasibility, water harvesting.

The Port of Napier will continue its status as a vital strategic asset. Despite media assertions that the Council is intending to sell its shares, at the moment we are buying, not selling, with the Horizons Regional Council shares under purchase negotiation right now.  However, the Investment Policy needs to ensure more flexibility in future ownership arrangements, and a future sale of a minority percentage of shares could be an option if a compelling case can earn public support through a special consultation process.

Other significant proposals in the Plan include improved public transport services, our “healthy homes” response to Government’s air quality regulations (insulation plus clean heat for the 60% of substandard housing in Napier and Hastings), a $3.7 million contestable fund to assist significant community infrastructure projects, and ongoing resourcing to assist a stronger partnership with Maori.  The latter is increasingly relevant as Treaty settlements may result in new partnerships around the management of natural resources.

And whilst this is by no means a “Business as Usual” plan, there will be business as usual in the Council’s vital functions of drainage and river control, land management, biosecurity, civil defence, resource management, transport planning, and economic development through Hawke’s Bay Incorporated.