Developers of a Tarras irrigation project have got their loan guarantee from the Central Otago District Council, although not as much as they had hoped for and with a couple of conditions.
They had asked for an in-principle guarantee for a $26.7 million bank loan towards an irrigation scheme estimated to cost more than $37 million, which would supply water from the Clutha River to 6563ha of land and 40 families.
Councillors were wary of the risk of a call on the guarantee and took council chief executive Phil Melhopt's recommendation of guaranteeing only a percentage of the capital value of the project, but raised him from 15% to 20%, for a term of five years.
That equates to a figure just over $7 million, for which scheme beneficiaries will be liable through targeted rates if there was a call on the guarantee.
When approached by the Otago Daily Times yesterday, Tarras Water chairman Peter Jolly, who was not at the council meeting, said he did not want to comment until he had the facts.
The council guarantee was conditional on a 30% shareholding support from the Otago Regional Council as well as a successful prospectus and resolution of due diligence criteria.
Councillors reserved the right to appoint someone to the company's board as a director or observer, in conjunction with the regional council.
As well, they created a policy under which any further request for irrigation scheme support could be considered.
"We need to decide whether we get into this new game of supporting irrigation, because I see this as more about irrigation than just Tarras Water," Mayor Tony Lepper said.
Proponents of the Manuherikia irrigation scheme were expected to come to the council in 18 months' time, he said.
Under that policy, any council guarantee would be capped at 20% of the capital value of a scheme for a term of five years and any call on that guarantee would be recovered through targeted rates.
Council staff will now prepare a statement of proposal which is hoped to be adopted at a special meeting later this month and go out for public consultation in September.
Tarras Water developers hope to begin construction in October but still need to secure regional council support.
