I’m Running Scared

The Ruataniwha dam scheme is a brilliant idea. Whoever first started pushing it is a visionary of the highest order. The food industry in New Zealand has two major competitive advantages internationally – a mild climate and abundant water. Hawke’s Bay is seen as a dry spot here, but still our annual rainfall is greater than Paris, Beijing or San Francisco … even London.

Since we have high costs of land, labour and are a long way from our export markets, it’s important that we make the most of our climatic advantages. The key problem rural producers have with water is that it’s sometimes not where we want it, when we need it. For this reason, any talk of water storage immediately excites me. Where do I sign up?

However, just a handful of things worry me.

Scale

The Ruataniwha dam scheme is eye wateringly expensive. The HB Regional Council has an annual expenditure of a little more than $60 million, while the dam is set to cost some $600 million, all in. Big numbers get bandied about in the news all the time, such that we tend to gloss over them. $600 million is a lot of money for little old HB though. It’s the equivalent of central government spending $680,000,000,000 on behalf of the taxpayers.

If you’re going to take that sort of punt on behalf of ratepayers, you better do two things exceptionally well – get your numbers right and take the community with you.

Expert Opinions

Major resource consent applications are always accompanied by reports from experts. They assess economic impacts, environmental effects, impacts on transport and the like. My first experience in seeking professional advice of this nature was with a valuer. In order to secure a mortgage on an orchard, my bank required an independent property valuation.

The valuer was very thorough. I spent about 90 minutes with him looking at the well and fencing, the driveway, soil types, tree ages, varieties and every other attribute of the property. His approach was scalpel-like in its precision. At the end of the visit he leaned over to me and, in a hushed voice asked, “So, what sort of number are you looking for here?” Clearly I was paying the bill and he was keen to scratch my back.

Now I’m not suggesting these experts would compromise their professional integrity in order to satisfy their client – but anything just short of that they’re usually OK with. So it is with almost every resource consent I’ve ever seen. If an economist works for a resource consent applicant, their assessment will be sunny indeed. If they’re working for an objector, they’ll prophesize doom.

The economists are the worst at this and, invariably, completely wrong in their forecasts. In defence of the dismal science, an investment like the Ruataniwha dam is impossible to accurately assess. You’re trying to predict the actions of many people, over many years, selling goods at some mystical future price.

Normally an optimistic report on behalf of a council, trying to get things done, is no great crime. The HDC for instance, quite predictably, has fallen short on the Sports Park, Splash Planet and Opera House numbers. It’s usually only a $10 million or $20 million project and just another $50, added to your rates bill for the rest of your life, will cover any shortfall.

But when it’s $600 million, you’d want the experts to be incredibly even-handed. And then you’d want their reports peer reviewed by the smartest brains in the country right? They aren’t and they haven’t been. The assessment of the Ruataniwha dam scheme remains as casually optimistic as it is for every other resource consent. The pipfruit industry for instance, is forecast to grow significantly once the dam is built. This is hard to fathom, given the industry in CHB has floundered over the last 20 years. The three biggest reasons for this have been frost, hail and lack of labour – not water shortages.

Competence

With a project of this size you need to have complete confidence in the management – in this case the management of the HBRC and its investment company. You’d have to turn a blind eye to their new offices, which leak like a sieve. It’s hardly a compelling ‘dry run’ for prospective dam builders. You’d also have to believe that any adverse effects on the Tukituki River would be suitably managed. Their track record there continues to wallow in toxic sludge.

The HBRC’s most recent environmental coup d’état are the water bans. Imagine you’re a small peach grower in Twyford, on the exquisite light soils that abound there. You toil away pruning, fighting frosts and hand thinning your crop. A month from harvest everything looks perfect. That final month is a critical one though. The peaches go through the ‘final swell’ where they grow very quickly and absorb a lot of water…

Well, they would, if the HBRC hadn’t turned off the tap. The peaches are the reproductive embryos of the peach tree and the tree responds as do distressed mothers of all species. They think: “There is no choice but to sacrifice this year’s progeny, so that I may live and bear fruit for many years to come.” So the peaches do not grow; they shrivel and fall. If the drought continues for two more weeks, you can expect to lose a good deal of next year’s crop as well. Two more weeks and you may well lose your trees.

After many months of investment, most growers have a thumping overdraft. If the revenue fails to arrive, the banks are quite likely to force them to sell their land and their family home. Any new buyer of this land will have to factor in a likely loss of crops in the future, and so the land’s value is dramatically eroded. Future investment is also fatally undermined.

All this might be OK if there is a genuine crisis, but even the HBRC’s own reports do not seem to indicate this. Further the RMA, under which water rights are managed, talks about social and economic outcomes as much as it does environmental ones. A light switch mentality to water management smacks of an organisation that is terminally out of touch with the community it serves.

How else might a water problem have been handled? Perhaps earlier notice of an impending crisis; a staggered step down in water takes; a case-by-case evaluation of the impact on individual growers – there are many options for a regulator with a brain and a heart. Instead, growers must contend with ivory tower robots (in raincoats), who play God based on some computer model no one understands.

What did growers do in the face of brainless bureaucracy? What every right thinking individual would when faced with the prospect of losing their orchards, homes, and likely their marriages – they cheated! Many, at great expense, trucked in water from wells down the road. A few probably cooked the books on their water meter returns. They still experienced emotional trauma and financial loss… and they are furious.

Accountability

In the private sector, management is accountable, as Fonterra demonstrated recently. That dirty pipe ended at least one poor bugger’s corporate career. Managers of Pike River Coal are in the docks for that tragedy. And there are quite a few former directors of finance companies hanging out at home, adorned with ankle bracelets, or otherwise being detained at Her Majesty’s pleasure. Justice may not be comprehensive, but at least there is some.

Local government incompetence is not treated so harshly. The councillors of the Kaipara District, who ran up a $58 million debt on a sewerage treatment scheme, only seem to have resigned and slunk off into obscurity. CEOs and councillors have a habit of ‘resigning to seek new opportunities’ well before things go pear shaped. From a CEO’s perspective it’s a tested and proven strategy – be the visionary and shoot through to your next job before the numbers go up.

Choice

The HBRC currently has no intention of letting us vote directly on this $600 million project. It’s a startlingly arrogant position. The councillors are indicating they know best on this one. You’ll get to make a submission next year, but won’t get a vote.

If it were private sector investment you would get a vote of sorts. If say, Mighty River Power were building a dam, they’d likely have a ‘rights issue’ in order to raise more capital. Shareholders could take up their rights, buy more, or opt out, depending on their enthusiasm for the idea.

For the Ruataniwha dam scheme it looks like you’ll get no choice. The HBRC will make the investment on your behalf and as long as you own land in Hawke’s Bay, you’ll be a de facto shareholder carrying the can. Again for $10 million or $20 million I’d shrug my shoulders. But for $600 million? I’m running scared.

You do get one vote though – a vote for your regional councillors. If you do share my concerns then I’d suggest it’s time for a wholesale clean out of sitting councillors – and probably the CEO too. People get the democracy they deserve. Like many, I’m paying for my apathy. It’s time for change.