Ratepayers will not lose out on their investment in the North Otago Irrigation Company if the Waitaki District Council makes more money available and extends a loan.
Yesterday, the council unanimously agreed in principle to increase its investment in the scheme for the North Otago downlands and Waiareka and Kakanui Valleys from $12.5 million to $22 million and extend the loan term from 2016 to 2022.
However, a final decision will not be until September 24, after negotiations on the details of the loan agreement, including the interest rate.
That gives the public a chance to make their views known, but there is no formal consultation process.
Waitaki Deputy Mayor Hugh Perkins supported the loan but
insisted it should carry an interest rate that reflected the risk to the council of concentrating a large investment in one sector (farming), which limited its ability to support other sectors.
He successfully moved an amendment that the council negotiate an interest rate for the loan that reflected the risk and benefits of the investment.
The council first loaned the company $10 million, which has grown to $12.5 million with accrued interest, in 2004. It funded
infrastructure for a 10,000ha second-stage expansion. The first stage covered 10,000ha.
When asked by the Otago Daily Times about interest rates, chief financial officer Paul Hope said the existing loan was at the same interest rate the council would receive at the bank.
He envisaged a new interest rate would be between that and what the company would pay for a commercial bank loan.
Waitaki Mayor Gary Kircher said it was proper for further negotiations to occur and the interest rate would reflect the risk.
However, he would not want an interest rate that was cost prohibitive for farmers taking up water in the second stage.
''This is the most significant economic development decision this council will make,'' he said.
The council could put its money in a bank, which would decide where to invest it, and that would not bring rewards back to the North Otago community, he said.
Cr Peter Garvan said the company was asking for agreement in principle for the loan so it could take it to the next stage.
It was an opportunity to grow the wealth of the district for the next 100 years, he said.
The payback had been not just to farming but to the whole district. However, Cr June Slee was worried about the drop in dairy prices.
The trend was not good and could affect the take-up of water.
Cr Melanie Tavendale said the benefits from irrigation were hard to argue with and the second stage had to be affordable for farmers.
A social and economic benefit report found the first stage added $48 million to the district's gross domestic product and brought 274 new jobs, more families and a younger demographic to the survey area.
The decisions
-Extend loan six years to 2022.
-Increase loan by $9.5m to $22m.
-Change interest from compounding to quarterly payments.
-Remove link between company selling shares and loan repayment.
-Full amount repayable at end of term, subject to any extension request.
-Vary other terms, including council buying shares.
-Final council decision September 17.
-Public can comment before then.
