The Otago Regional Council will tomorrow consider amending its treasury management policy to allow it to invest in irrigation projects and then look at a $3.4 million request from Tarras Water Ltd as well as a $2 million application to the council's new irrigation fund.
Tarras Water plans to build a $37.1 million irrigation scheme to supply water to about 40 families over 6536ha, with regional economic benefits estimated at $51.2 million and 257 jobs.
It plans to fund the project by raising $26 million from banks, $7.8 million from the farmers signed up to the scheme, and $3.3 million from the regional council as a "dry equity" partner standing in for 30% of the properties in the scheme which did not sign up for the initial construction phase.
It was expected when those properties joined the scheme, the council would sell the right to irrigate that land, probably in three to five years. The council would also be expected to pay fixed charges annually, estimated at $531,630.
The council had already contributed $190,000 to the project and chairman Stephen Woodhead described it in his chairman's report to the council as a unique opportunity.
"The benefit to the wider community that will arise from piecing together a sustainable minimum flow for the Lindis River with a new enhanced irrigation scheme means we should continue to support this initiative."
However, in a report to the council, corporate services director Wayne Scott said while the financial impacts on the council were difficult to judge, due to the uncertainty of information available, there would be an impact on general rates. This was because reserve funds would be used to fund the dry equity shares, which would reduce the interest available to reduce the general rate.
An estimate suggested a general rate increase could be as much as 4% in the second year of the project, with lesser increases over the other four years of the council's expected involvement.
Mr Scott noted the impact on rates could be "significantly ameliorated" if the company paid the council "interest" on its investment which would cover the loss of its interest.
The need for a constitution, water supply agreement and redeemed preference share documentation meant there could not be an informed assessment of the risk of the council's involvement.
Mr Scott suggested 11 caveats or conditions that should be applied to any decision to consider the funding, and said any council involvement would require an amendment to its long-term plan which would require public consultation.
