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Tom Belford31 March 2016

Our councils are trying to get several big ticket spending projects over the finish line in the next two to three months – velodrome, Opera House strengthening, dam – plus a proposal before CHB ratepayers to spend $1.5 million per year on drinking water from the dam.

All in all, over $150 million in ratepayers dollars is at stake, and conceivably more if any of these projects – if commenced – incur cost overruns or shortfalls in operating revenue.
Here’s the state of play as we enter March.

Napier velodrome

Or is it the ‘Hawke’s Bay Multi-Sport Facility?’

In Velodrome … Spinning Wheels? (p38-45), Keith Newman does a fine job laying out the substantive arguments surrounding what is clearly a Napier City Council-driven initiative. I’ll leave that ground to him.

What I find curious is the political marketing of the proposal.

baybuzz_sack-race-web

NCC is making a determined effort to cast the project as a multi-sport indoor facility that, by the way, includes a cycling track. A facility that, if co-located next to Pettigrew-Green Arena, would provide sufficient combined indoor court space to accommodate more local demand in sports like basketball, volleyball, futsal and tennis, as well as national-level competitions.

$500,000 is earmarked to determine if that case holds merit – is the initial capital available to build the facility, and can revenue from usage and ongoing sponsorships be confidently expected to carry a reasonable percentage of its continuing operating expenses? So, the verdict is out for now, although earlier investigations have not been enthusiastic.

Meantime, NCC is pursuing the proposition with vigor, believing it has a mandate from its LTP consultations in 2015 to at least investigate the idea. That’s
fine, arguably, from the standpoint of Napier ratepayers.

However, a facility of this purpose and ambition is surely a regional proposition and – one would hope – a proposal that would enjoy support from throughout the region, including from the two councils – HBRC and HDC – with purses from which, possibly, to contribute.

The odds of that happening – certainly anytime soon – are slim. HDC is committed, firstly, to the ongoing viability of the Regional Sports Park, which has just announced a plan, supported by Sir Graeme Avery and EIT, to make that facility the hub of a regional high-performance sport system. It seems highly unlike that HDC will be looking to invest as well in a velodrome (by whatever name), to say nothing of its own Opera House/Civic Square needs. As Keith’s article reports: “Mayor Yule says Hastings … will support the velodrome philosophically if the business case is viable. ‘I don’t think councillors would be prepared to make a further (financial) commitment’.”

The NCC delegation has pitched the Regional Council for a $3 million investment in the project. My HBRC colleagues seem inclined to await the outcome of the NCC feasibility study and then, if that’s positive, decide whether to put the matter to public consultation during our budgeting process in 2017.

Any funding from HBRC would need to reflect some evidence that its region-wide constituency favoured this priority over many others – both sport and non-sport related. Moreover, a HBRC contribution would in effect represent a double-dip into the pocket of Napier ratepayers.

Which brings us to the issue of considering how regional infrastructure should be prioritized and funded. While the velodrome inquiry has been initiated because NCC has cash on hand and an avid cyclist in its CEO, Wayne Jack, this facility is not envisioned as a neighbourhood swimming pool or skate park – it’s presented and marketed as a regionally-significant sport infrastructure investment.

And most sport leaders in Hawke’s Bay, acting through the Hawke’s Bay Sports Council, thought they had carefully, in unison, only last year fashioned an agreed upon regional sport infrastructure plan – the Hawke’s Bay Regional Sports Facilities Plan. That plan, identifying other priorities, did not originally include a velodrome; it eventually gave nodding approval to NCC’s ‘feasibility’ study after NCC lobbying.

During the presentation to HBRC, when pressed on the nature of the further consultation planned for the velodrome (assuming the feasibility analysis was positive), NCC chief executive Wayne Jack described steps that would be taken vis-à-vis Napier residents and leaders of relevant sport codes; he had not anticipated that perhaps the matter needed to go before all ratepayers in the region whose pockets might be tapped. And I stress ratepayers, as one might expect sport leaders who might utilize a new facility, as opposed to pay for it, to be naturally enthusiastic.

It seems ‘regionalism’ has yet to take hold in Hawke’s Bay, even on matters like major costly infrastructure.

Strengthening Opera House comes first in HDC proposal

Strengthening Opera House comes first in HDC proposal

Opera House

Moving to Hastings, the HDC has its own infrastructure challenges to deal with – starting with earthquake strengthening the Opera House. HDC originally asked a working party to consider a bigger picture – dealing not just with the Opera House, but looking at potential broader redevelopment of the Municipal Building and Civic Square.

‘Too big a bite for now’ was the political verdict. BayBuzz reported on the bigger vision in our Jan/Feb edition, Square Heart Needs Arrow. And material from that
review can be found at: growingourculturalheart.co.nz

So now attention is focused on the Opera House, the Plaza, and the Municipal Building. HDC has floated these preferred options in its public consultation:

  • Strengthening the Opera House to a level of 70-75% of the National Building Standards;
  • Permanently covering the Plaza area;
  • Continuing work to find a better use for the Municipal Building, with options eventually taken to the public (including earthquake strengthening).

HDC is legally required to bring its public buildings to a minimum of 34% of the National Building Standards. The estimated cost of meeting that standard for the Opera House is about $7 million. Council has recommended meeting a higher standard – at an estimated cost of $11 million – to provide an increased level of safety and to future-proof against possibly higher building standards later.

The cost of earthquake strengthening the Municipal Building could be as high as $7.3 million (to highest standard). But appropriate uses – and resulting revenues – are not yet satisfactorily identified, and so HDC is recommending against undertaking that engineering work at this time. Further options are expected later in 2016.

The Plaza is regarded as a complementary investment to the Opera House, with immediate benefits if it is converted into an all-weather space, while preserving options that could support potential future uses of the Municipal Building. So the Council recommends spending about $2 million on that project.

In the event that earthquake strengthening was ultimately justified for the Municipal Building, HDC has set a cap of $20 million for work on the three projects. Since all of those funds have been budgeted already for city centre improvements, there would be no additional rates impact if, after the current public consultation, the projects were greenlighted.

Of course, Hastings ratepayers might prefer to simply demolish and clear the site at a cost of $600,000, with additional annual savings in the $1.4 million range if the venue were not replaced. Costs are sketchier as to demolishing and then building a new fit-for-purpose facility … but the Council suggests at least $20 million would be required.

I’m impressed with the HDC’s public outreach on the set of decisions to be made. Given the mailings, advertising, billboards and online promotion I’ve seen, it would be hard for any Hastings ratepayer to say they haven’t been given an informed opportunity to be heard. The consultation process began in mid-February and continues to March 21.

The Dam

If  HDC scores an ‘A’ for its consultation on the Opera House, and NCC an ‘Incomplete’ on the velodrome, the Regional Council deserves no more than an ‘F’ for its handling of key decisions on the proposed $600 million dam.

The pattern was set early on, with HBRC’s botching of consultation at the outset of the project – back in 2012-13 – leading to the local environmental community rejecting the process and its ultimate recommendations. This has led to legal challenges that continue to this writing.

And once the pattern is set, it’s hard to break.

Case in point … HBRC’s decision, once again by a 5-4 Council vote, to commit an additional approximately $43 million to the scheme, on top of its planned capital investment of $80 million, bringing the total ratepayer exposure (at least the more obvious part) to $123 million.

[Parenthetically, I note that the figure $35 million was used as literally a back-of-the-envelope calculation on the day of the vote, and was picked up by media, but the actual cost supplied by HBRIC is $43.1 million.]

In making the decision, Councillors Wilson, Scott, Dick, Pipe and Hewitt over-ruled the strenuous objection by Councillors Barker, Beaven, Graham and myself that no such financial commitment should be made without public consultation.

Councillor Barker asked in what other situation had HBRC ever committed to an activity with a $35 million price tag where it did not have to go to the community to explain its actions. The chief executive couldn’t think of any.

Various ‘witnesses to the crime’ have taken the matter to the Auditor General.

Some of the same councillors voting to proceed without consultation on what they thought to be a $35 million matter have led the charge demanding that full public consultation would be required on whether HBRC should invest $3 million in the velodrome, if that project gets off the launch pad; and similarly, that consultation would be required to spend up to $8 million drilling deep research bores into the Heretaunga aquifer, and conduct related science, to better understand its workings and capacity. Utter hypocrisy.

Given our Council’s disinterest in public consultation, Councillors Barker, Beaven, Graham and myself scheduled informal public forums in March in Hastings, Waipawa, Wairoa and Napier.

See above for details – some may still be yet to occur as you read this.

But this episode has worse implications than ‘merely’ spending $43 million without public input. Consider the rationale proposed by HBRIC for the increased spend.

It turns out that a ‘high-level initial assessment’ by HBRC staff has identified a number of possible uses of ‘surplus water’ from the dam scheme. These include uses like increased flushing flows (over those provided for in the dam consent conditions) and increased flows into Lake Hatuma outside Waipukurau.

These might well be entirely appropriate uses for water stored behind a dam ratepayers would already have paid $80 million for. And no doubt we could come up with even more uses for more water stored by a dam. That’s precisely why Councillors Barker, Beavan, Graham and myself proposed considering the feasibility of a smaller ‘augmentation dam’ back in early 2014 … an idea HBRC/HBRIC treated as ridiculous and refused to explore.

Oh yeah, the environment

The point is that a full array of environmental benefits achievable from water storage and increased water flows and diversions should have been identified and built into any water storage scheme contemplated by HBRC from the outset.

Those should have been handed to HBRIC as mandatories and given equal ranking to any stipulated rate of return on financial investment. If both conditions were attainable with a single dam on the Makaroro River, then we might have had a proposition worth pursuing.

Instead, as it stands in HBRIC’s original scheme, the Tukituki was allocated chump change – four 1 million m3 flushing flows per year … of unproven effectiveness. Whoopee.

So now, late in the game, struggling to sell the required threshold of water to actual farmers, HBRIC has come up with other gambits, like asking HBRC (you, the ratepayer) to buy 4 million cubic metres of water for 25 years … on the same ‘use it or lose it’ basis as the farmers.

And for that additional $43 million payment, which could make HBRC the biggest purchaser of water from the scheme, we would finally receive some water to use for environmental benefit from a dam ratepayers will have already contributed $80 million to.

Adrienne Pierce declares for mayor

Adrienne Pierce declares for mayor

HBRIC treats this as an environmental favour. Those of us opposing it see it as merely a back door financial payment – not an option, a ratepayer obligation – that helps HBRIC meet the revenue goals it needs to satisfy other potential investors in the scheme. As I termed it at the time, an HBRIC bid for financial security masquerading as an environmental proposition.

This episode aside, pursuit of the dam continues to cost about $250,000 per month, excluding HBRIC chief executive Andrew Newman’s salary. No water sales have been reported since December, although HBRIC says it’s working on other priorities and the contracting pace will quicken in March/April.

Among the other priorities has been finding an institutional investor, a process that should have been completed and announced by the time you read this. That should enable HBRIC to serve up a new business case for the dam, which must be reviewed for HBRC by Deloitte’s.

Which means attention must re-focus on selling the water user contracts required as a condition of start-up, and then assessing the future up-take scenarios that underpin all revenue forecasting for the scheme.

As for potential water buyers, first in line (after HBRC itself!) might be the CHB District Council, which has indicated it wishes to purchase 1.5 million liters per year for municipal water use, initially costing in the neighborhood of $350,000 (but indexed to rise with inflation).

I suspect that many CHB ratepayers might imagine better uses of that money – including not spending it at all – than paying for the drinking water they now get for free. How about paying for sewage treatment plants that work? The new scheme isn’t getting the job done, and CHBDC is violating quality standards, still polluting a river into which dam-induced farming intensification would add further nutrients.

In any event, much to Mayor Peter Butler’s dismay, CHBDC will need to consult with the public if it wishes to sign a 35-year water purchase deal.

So, all in, Hawke’s Bay ratepayers are facing possibly over $150 million in spending decisions – apart from the ‘normal’ council spends – over the next 3-4 months. It’s time to hang on to your wallets. It’s time to demand full financial transparency and genuine public engagement by our councils.

And it’s time to pay attention to the voting behavior of your councillors. It probably hasn’t escaped you that 2016 is a local body election year.

We were reminded of that by the early declaration by councillor Adrienne Pierce of her candidacy for mayor of Hastings. The decision most are awaiting is that of mayor Lawrence Yule, who has promised to announce his future political plans by April. Then the real fun will get underway.

Stay tuned!

Tom Belford31 March 2016

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