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It’s all about growth! (2 comments)

November 21, 2014

There is only one issue, after all!

Enjoy!

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What?! Research slanted? No way! (no comments yet)

November 5, 2014

The National Business Review (NBR) just posted a remarkable survey, following up its story of last month, Guns For Hire.

Here is the question it posed to its readers … who hardly represent the radical vanguard of New Zealand:

Are you confident about the validity of reports commissioned from NZ’s economic research institutes?

The response:

Yes, they maintain a rigorous independence from their funders — 17% agree

No, they’re influenced by the outcome desired by their commissioning clients — 83% agree

NBR reported the comments of Dr Eric Crampton, director of research for the New Zealand Initiative, a think tank representing several dozen of  NZ’s major corporates. He said:

“The commissioning agency in some cases might not want to know the real number.” … “They might just want to have a number that can show up on the headlines for a few days and put it into the public debate around the time some policy is being decided upon.”

Golly, consultants dancing to the piper’s tune?!

The fact is, in tiny New Zealand, there are very few paying customers for ‘independent analyses’ and, my favourite, ‘peer reviews’.

Councils are one of the most significant and reliable sources of $$ for consultants’ studies. But how much repeat work do you suppose a consultant or consulting firm (or university researcher) gets if they report back to a council … “Your proposition sucks and would be an insulting waste of ratepayer dollars!”

Does that happen in Hawke’s Bay — ie, consultants rubber stamping council wishes? You can bet $250 an hour or more on it!

Tom Belford

 

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Councillors offer alternative dam proposal (4 comments)

November 2, 2014

On Friday, Councillors Barker, Beaven, Graham and myself offered an alternative dam proposal that we believe is superior to the $300 million scheme (plus another $300 million in on-farm costs) advocated by HBRIC and five of our HBRC colleagues.

As argued in the proposal, we believe our approach reduces key risks inherent in current HBRIC scheme, while still accomplishing the key goals intended for water storage at roughly half the cost, and therefore deserves public consideration.

In my view, our more affordable proposal poses less risk to the environment, because both the effectiveness of the new water quality safeguards and the actual reliability of dam water supply would be established in practise before unconstrained farming intensification was encouraged.

As Councillor Beaven said in releasing the proposal: “Water storage is critical to the Bay’s future. This alternative option reduces risk to ratepayers and gives us a lower cost opportunity to grow the region’s economy.”

Our proposal is pasted in below and attached here as PDF.

As you will see, we are asking HBRIC’s assistance in fully vetting our alternative. Our Council has spent nearly $20 million attempting to make a case for the silver bullet some believe will transform Central Hawke’s Bay into a Garden of Eden. Surely ratepayers deserve a careful look at a reasonable alternative.

We will seek Council support for vetting our proposal at upcoming Council meetings this month. So far, HBRC Chairman Fenton Wilson has not yet made a public comment. However, HBRC/HBRIC did manage to make same-day delivery of our proposal to Irrigation NZ chief executive Andrew Curtis, who immediately dismissed it as “naive”, even though it is built upon core aspects of the HBRIC scheme.

As Councillor Barker describes: “This proposal is an affordable two-stage option. The first, for this generation to build the dam that will protect the Tukituki, while providing significant increases in irrigation capacity for economic growth. And the second, leaving a platform for a future generation, should they chose, to make a similar-sized, second-stage investment in the more efficient but costly piping system.”

Councillor Graham sums up our goal: “We need to find a commercial solution that allows our farmers to successfully manage their business’s in harmony with the environment.”

Stay tuned.

Tom Belford

The right dam

A proposal from Councillors Barker, Beaven, Belford and Graham

We have consistently endorsed water storage as a prudent strategy for enabling Hawke’s Bay to better manage its water to meet the equally important challenges of mitigating impacts of climate change, improving farming productivity, and protecting the environmental integrity of our rivers and aquifers.

We do not believe the dam scheme presently proposed by HBRIC is a defensible response to that challenge, for reasons we have consistently raised, including its pricing of water at 26 cents per cubic metre.

Therefore, today we offer an alternative water storage proposal for the Tukituki catchment.

Our proposal, still in development based upon expert advice as to detail, has these main features.

1. Initiating a programme to actively support, including financially, farmers in the Tukituki catchment who wish to improve their own on-farm water storage capacity and water use efficiency. This would include support for on-farm dams, improved irrigation technology and use, and improved soil management approaches.

2. Building a dam on the Makaroro, much as presently proposed, utilising the engineering work completed to date as the basis of planning. This would include the electricity-generating capacity now contemplated, and potentially enhanced.

3. Using the stem of the river as the irrigation channel instead of building the extensive and costly distribution infrastructure currently proposed by HBRIC. Farmers more distant from the river on the Ruataniwha Plains could still draw water from the aquifer. Whether from the aquifer or from surface water, such extractions would be compensated by dam water released back into the river. This approach could serve the bottom part of the Tukituki as well as the Ruatanwha plains area. In contrast, the distribution infrastructure HBRIC proposes effectively doubles the cost of the project but provides no extra water.

4. Farmers using irrigation water would pay for that water, but at a far reduced rate – we anticipate half the rate or less – from that projected by HBRIC’s current proposal.

The advantages of our alternative proposal are:

  1. Costs are reduced by approximately half. The dam alone is estimated by HBRIC to cost $140 million (distribution infrastructure is estimated at about an extra $135 million – this amount would be saved).
  2. Reduced maintenance and operating costs, because no distribution pipework involved.
  3. No outside investment with high commercial returns required – project could be funded by HBRC and the Crown. Better cash-flow for HBRC – no costly returns for commercial investors.
  4. Cheaper water – less than  half the current proposed HBRIC price. At full uptake of 93 million cubic metres water at $0.10 per cube would generate $9.3 million. Sufficient to generate a return on Council’s investment of $80 million plus repay the Crown, when added to electricity revenue, next point.
  5. Greater power generation because no water diverted into a distribution system or used to pressurise the water. Revenue from power generation is estimated at $3 million.
  6. Greater environmental benefits from significantly increased water flow in the Tukituki. HBRIC in fact has indicated that a smaller dam holding 10 million cubic metres of water and costing $30 million would be sufficient to ensure environmentally needed minimum flows and offset the economic constraints of Plan Change 6. We propose building storage capacity up to the amount originally proposed.
  7. Better opportunity for farmers and growers in the lower Tukituki catchment. Our scheme would result in more water being available throughtout the catchment, including downstream.

This approach is prudently future-proofed in three critical respects:

  • First, operating in this fashion would allow time for Plan Change 6 to gain traction and, importantly, to indicate whether the environmental requirements of that Plan were: a) being met; and b) sufficient to protect the Tukituki ecosystem, before potentially unconstrained intensification of farming in the catchment was encouraged to proceed.
  • Second, similarly, operating in this fashion would allow verification of the actual water collection and storage capacity of the dam over time. Dispute exists over the actual quantity and reliability of water flows in the Makaroro and whether these are adequate to deliver the volume of water HBRIC current projects selling. Our alternative allows the system and its recharge capacity to be tested. If it proves lower than HBRIC estimates, it would still generate a fair return on investment for HBRC.
  • Third, assuming these two conditions were met and the scheme is successful in getting sufficient farmer support to commence, a distribution system could be considered as a future additional investment.  If sufficient demonstrated farmer demand for irrigation water developed and could be managed, at a future point the building of distribution infrastructure could be re-assessed, on the basis of water-user (not ratepayer) willingness to invest and own.

We are requesting staff and consultants support to flesh out the feasibility details of this alternative proposal, including re-pricing of water and alternative financing options.

At issue is a $600 million public/private investment that is projected to have a 100 year life benefitting Hawke’s Bay. Given the magnitude of this investment and its huge environmental and economic stakes and risks, we think it only prudent that Council consider a no frills alternative that provides water at a more viable rate. We do not need to hurry this decision, nor make it in a vacuum with the only one option presented so far.

 

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Dam critics speak out (5 comments)

October 24, 2014

In case you missed them, two excellent Talking Points have been published recently in HB Today regarding the proposed dam. And three highly experienced farm economists trash the dam in a recent academic paper.

First up was Pauline Elliott, chairman of Transparent Hawke’s Bay, writing on 13 October. In ‘Public does not know RWSS uptake’, Pauline wrote: “The stakes are high, the costs to date are great, the lack of transparency is astonishing. A wholly owned council investment company is pushing farmers to increase debt while all advice from farm advisers is to manage current debt carefully and nor increase.”

Pauline’s Talking Point can be downloaded here.

Backing up Pauline’s point about farmer debt, here’s some data on just how well CHB farmers are doing from Crowe Horwath business advisers and accountants, as published in the 13 May CHB Mail. Crowe Horwath looked at returns of 125 CHB farmers and found:

  • Overall return on assets dropped from 4.3% in 2012 to 1.1% in 2013.
  • Average gross income per hectare of $813 in 2013 was down 23% from 2012′s $1,055.
  • The ‘Economic Farm Surplus’ per hectare — excluding debt servicing and rent — decreased from $335 in 2012 to $69 in 2013.
  • Debt servicing as a percentage of gross farm  income “blew out” to 17% in 2013 from 11% in 2012.

Yep, CHB farmers, let’s borrow some more to pay each year for dam water you might use one in ten or twelve years … if it’s available when you need it! The only guaranteed winners in this proposition … bank lenders.

Then, on 20 October, Trevor Le-Lievre, who lives in Waipukurau and has followed closely the dam proposition and the CHB Council’s attempts to promote it, wrote his Talking Point.

In ‘Pull the plug on the dam’, Trevor particularly critiques the latest CHB Council proposal to buy drinking water from the dam scheme. He concludes his analysis: “Advancement of the Ruataniwha dam is now being driven by political and not any rational economic imperative. There are reputations at stake and awkward questions to be avoided, namely, which dark hole have Regional Council ratepayers just poured an estimated $15 million into?”

Trevor’s Talking Point can be downloaded here.

If you really want to dive into the dam’s economics in detail, read the paper recently published by Peter Fraser, a former head of dairy policy for MAF, and two other deeply experienced farm economists/advisers, Barrie Ridler and W.A. Anderson. After 13 pages of detailed analysis, their paper — The Economics of the Ruataniwha Dam – Is it the son of Clyde? — concludes:

“The conclusion this paper reaches is simple and clear: there is no economic or commercial rationale to proceed with the RWSS – indeed, HBRIC’s own analysis confirms the former and the withdrawal of two major private sector investors (including one with significant hydro experience), the apparent difficultly in securing alternative investors, and the tardy response from farmers to sign up for water contracts provide a telling commentary regarding the latter.

In addition to being wary of the sort of local (and potentially national) boosterism associated with large scale regional development initiatives, this paper also finds claims that failing to progress the RWSS will doom Hawke’s Bay to third world status are overblown and unconvincing.  The example of lucerne use in Marlborough shows that there are viable development alternatives in the agricultural space – and not all of them happen to go ‘moo’.”

The study was reported in some detail in NZ Farmers Weekly on 13 October and appears to be causing severe heartburn for dam advocates within and outside Hawke’s Bay.

You can download the full paper here.

Tom Belford

P.S. Meantime, Regional Councillors will receive a public update on the dam scheme from HBRIC at the Wednesday, 29 October meeting of the Council. It’s an open meeting folks.

 

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Mystery dam investor identified (one comment so far)

October 11, 2014

While the rest of the world puzzles over the whereabouts of North Korea dictator Kim Jong Un, BayBuzz has snapped these exclusive photos of Kim’s recent surprise trip to Hawke’s Bay, where his eminence toured the site of the Ruataniwha Dam and announced his decision to invest.

In our first photo, Kim arrives at Hawke’s Bay Airport, greeted by the Republic of Napier Colour Guard.

Keeping to the water theme of his visit, Kim’s first stop was the National Aquarium.

Getting down to business, he was then briefed on intricacies of the RMA by regional councillor Christine Scott.

Then off to a rally in Waipukurau sponsored by Federated Farmers, who entertained Kim with synchronized sheep whistling.

Kim then inspected the dam site, from a safe distance (given his phobia about earthquakes). Project leader Graeme Hansen was suitably garbed to host the site visit.

HBRC chairman Fenton Wilson, pulling out all the stops, impressed his money-bearing guest with a look-alike doo.

Later, Kim inspected a water slide that will become part of the recreational offering at Lake Newman.

Furious at a breach of security, Kim fired several rounds at intrepid BayBuzz photographer Tim Whittaker, who suffered a minor graze wound.

And finally, Kim signed his investment certificate and Water User Agreement. Kim has agreed to purchase the Ruataniwha dam and its entire water supply outright, with plans to market bottled water under the ‘Korean Klear’ label. In a humane gesture, Kim announced he would donate several cases of Korean Klear to meet CHB’s drinking water needs.

HBRIC chief executive Andrew Newman praised the deal, saying: “I’d rather sell the water to North Korea than to any friend of CHB mayor Peter Butler.”

After the agreement signing ceremony, Kim took a private call from Napier mayor Bill Dalton, who sought advice on Napier’s proposed de-militarized zone.

Commented a bellicose Dalton afterwards: “With the Berlin Wall down, there’s no better model to follow than a de-militarized zone to protect Napier from our southern aggressors.” Kim was heard to remark to an aide: “Now that’s one crazy dude!”

BayBuzz understands the visit ended on a sour note when Kim was informed his promised tour on the famed Art Deco buses would not occur. Efforts to placate Kim with a boat ride around the harbour were unsuccessful.

HBRIC chairman Andy Pearce equivocated on whether the dam investment would stand, but noted: “Kim Jong Un is not the only despot on the planet with deep pockets.”

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Show us your agreements (2 comments)

October 3, 2014

This past week, nine farmers from Central Hawke’s Bay ran a large advert — Open Letter from the Farmer Reference Group — in the CHB Mail.

These farmers — Eliot Cooper, Graham Anderson, Hugh Ritchie, Jeromy Greer, Phil King, Richard Dakins, Will Foley, Campbell Chard and Bob Cottrell — implored CHB farmers to sign water user agreements (WUAs) that would commit such farmers to purchasing irrigation scheme water for 35 years. The agreements would require farmers to pay for their stipulated water each year, whether or not the water was actually needed or used.

The advert asserted the benefits of the dam scheme and touted the discount being offered to early signers of WUAs, noting “the time to do it is now”. It made no mention of the substantial on-farm costs farmers would need to bear — estimated at up to $300 million over and above the cost of the proposed dam and its distribution network to farm gates — if they indeed signed on to the scheme.

The advert closed with this offer from the Farmer Reference Group: “We are happy to discuss this opportunity with you and discuss the potential of irrigation in your farming  operation.”

What is amazingly missing from this advert is the strongest possible persuasion point these nine farmers could possibly have made — “We’ve already signed up.”

Their statement might have read something like this:

“We nine fellow CHB farmers have already put ourselves on the line, each of us having signed water user agreements committing us, collectively, to purchasing [insert big number] cubic metres of water from the scheme each year for the next 35 years.”

Surely that would be impressive! HB Today would give it 3-inch headlines. The CHB Mail would run photos of each signer.

Why is there no such statement in the advert?

Three possible reasons I can think of:

  1. Some or all have not yet signed WUAs.
  2. One or another might not farm in the projected scheme’s footprint.
  3. Or maybe they’ve all signed WUAs and they’re all just too bashful to talk about it.

So here’s a simple suggestion for the Ruataniwha Farmer Reference Group. Why don’t you lay your signed purchase agreements on the table, in full public view? The HBRIC Board conducts its annual shareholder public meeting on Monday afternoon. That might offer a decent opportunity.

I have no doubt that demonstrating your confirmed ‘skin in the scheme’ would do far more than your advert to impress the other farmers you are urging to tie their fortunes to the proposed scheme.

It would certainly impress me as a Regional Councillor, because I’ve yet to be shown any evidence by HBRIC — publicly or privately — that Water User Agreements are actually being signed.

Tom Belford

 

 

 

 

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The Big Six Issues (no comments yet)

September 23, 2014

The Regional Council is now conducting informal consultation around six key issues that could be addressed in next year’s re–write of its Long Term Plan (LTP).

The ‘Big Six’ issues are:

1. Our Energy Future — what path should we be on … oil & gas, solar, electric cars, converting waste to energy, energy conservation?

2. Relationship With Maori — with numerous treaty settlements coming to closure, including commitments councils must meet, as well as creating new governance arrangements and economic potential, plus a resurgence of marae-based leadership, we need to revamp our formal and informal consultation and decision-making practices.

3. Climate Change — it’s real, it’s happening, it will have major impacts on Haawke’s Bay. How must we mitigate and adapt?

4. Connecting Our Region — roads, railroads, buses, i-Ways and fibre lines, port and airport, how do we best connect ourselves in the region … and our region to the outside world?

5. Regional Economic Development — ‘one for all and all for one’ … or ‘let a thousand flowers bloom’ … how do we get off the bottom rungs of NZ’s socio-economic ladder?

6. Wise Land Use — our land and soil is essentially irreplaceable … what should we be doing to protect, restore and enhance our most precious regional asset?

These issues are briefly teased out in this highly readable 16-page booklet, The BIG SIX. I urge you to take a look, have a think, and get your views to the Regional Council.

As I said above, this is an informal consultation (more information on the process here). It will help inform the Council discussions through the balance of the year that will shape what initiatives and funding priorities are set forth in the next draft LTP, which will appear next March/April.

It would be most helpful if you can get your thoughts in by October 15th, as HBRC will be deep into planning in November and December. Two opportunities to meet with all Councillors are scheduled for 24 September, 3:30-4:30 and 8 October, 3:30-4:30 (both sessions at HBRC Council Chamber in Napier).

However, I and other Councillors will welcome your views at any point. And presentations can be made to inquiring organisations — contact helen@hbrc.govt.nz

And of course the formal consultation process will still occur when the draft LTP is issued next year.

Look forward to hearing from you.

Tom Belford

P.S. The Big Six exercise is an effort to raise issues over and above the work that HBRC must do ‘routinely’ given its statutory responsibilities in areas like water quality, biosecurity, flood control and civil defence planning. So don’t be alarmed that such issues are not highlighted in The Big Six document.

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