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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5 Comments

  1. It would be a surprise to me if The Hawkes Bay Regional Council or their Investment Company would pull their heads out of the sand and actually examined the financial data on the farmers viability status in relation to the Ruataniwha Dam Proposal.

    I would also be surprised if more than half the members of the Council and their Investment could understand what the farm financial data actually means.

    Just to clarify it for them; The Dam Proposal is an impossible financial flyer for the farmers.

    Also not mentioned to date (that I have observed) is that wind and other erosion in this area would lead to massive top -soil loss if increased arable use was made in the Ruataniwha Area.

  2. Tom, it is thanks to democratically minded people like you (and I include, inter alios, some elected regional councillors and members of Transparent Hawke’s Bay) that we, the public, get fully informed (as far as possible) of major issues such as the dam. I hope HB Today newspaper will publish a letter of mine which advises ratepayers to read the Ridler and Anderson report. I am indebted to BayBuzz, keep up the good work.

  3. Wow, the HBRIC report to be presented at Wednesday 29 October Council meeting gives some important clues to the future. “Financial Close” has moved out another 15 monthe to 30 June 2016 (I thought that the HBRC set the date at which they would not put any further ratepayer funds at risk??); the Napier Port may issue shares to entities other than the HBRC. What (overseas??) investment entities would be interested in a dam that is unlikely to show a reasonable return on the money invested and what additional incentive might they be offered? Hmmm.

  4. I didn´t pick up that financial close has been pushed out to June 2016. That is the date in the WUA, but it makes sense to leave some latitude there. Presumably they are still aiming for close in early 2015???

    The Port change is interesting, maybe laying the groundwork for some changes down the line? It´s consistent with the following para, from the draft HBRIC Strategic Plan, listed under Strategy Principles:

    “Reduce risk to Council of 100% ownership of significant assets by sharing investment risk with compatible long-term investors but retain controlling interest in key regional assets.”

    Interesting times, no?

  5. I went to the Regional Council meeting today to listen to the HBRIC report. Very educational, we heard about “randomality”, “conditionality”, “acceptance curves” and every question asking for ‘how many’ or ‘how much’ was answered with “a significant number”.

    I wonder if the GCSB and the SIS know that Hawkes Bay is running its very own secret society? I think I have become a convert to the need for amalgamation and a very hard-nosed Council that wont listen to crap.

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