Council and irrigators seek dam debt bailout

Saturday, 26 July 2025

A briefing to government ministers has revealed the extent that debt from the blow out in costs of the Waimea Dam is financially straining both Tasman ratepayers and irrigators.

Central Government has been asked by both shareholders - the Tasman District Council and Waimea Irrigators - to consider paying off either $95.8 million or $53m of debt from the $211m project.

The briefing by the Nelson Regional Development Agency, obtained by the Nelson Mail through a Local Government Official Information Act request, reported there was a “real risk” that servicing the dam’s debt would make the cost of water financially untenable for businesses - including the types of high productivity land uses the region was looking to enable.

Councillor Mark Greening, an outspoken critic of the project, said he understood the water from the dam was already amongst the most expensive in the country, and the project had been like a “slow train wreck”.

“This is all coming home to roost. We were told ‘it's all affordable’, and now you're starting to see that here, the undercurrent story, which is it's not affordable for irrigators and it never was.

“As far as I am concerned, this dam is a millstone around this council’s neck, as this report is starting to show.”

Written with the input from both the council and irrigators, the report also said servicing the dam’s debt was now “restricting the ability of the council to borrow, in particular its ability to borrow to respond to natural disasters”, and for Local Water Done Well Initiatives.

According to the briefing, $167m, or 80% of the project costs were loan funded through council or provided through council credit support - borrowings through Crown Irrigation Investments Limited (CIIL) and the Local Government Funding Agency.

Water charges per share, estimated at $650 in 2018, now cost $1081, while modelling showed that these charges were predicted to reach $1500 by the 2028 financial year.

“There is a scenario in which, in ten years’ time, irrigator uptake reduces in size … because of water affordability issues. This will significantly constrain the delivery of economic benefits on which the dam’s business case was modelled,” the report said.

It also noted there were “serious rates affordability concerns” across the district.

Under the terms of the CIIL loan agreement, Waimea Irrigators have to sell 80 water shares annually.

But the irrigators are seeking to renegotiate this, because of difficulties in selling these shares. That’s cited as being due to the delays and uncertainty over the dam’s costs, the severity of the cost increases, and the increased water charges per share.

Also, the land area that might use that water has been subject to “substantial erosion”, as large areas of horticultural land were consented for housing, such as more than 1000 new homes in Richmond West.

The dam currently services around 3000ha, and while the dam’s design incorporated “overbuild” for future capacity of up to 5425ha, to do so would need “new and expensive” irrigation schemes to service those areas.

Aside from two bailout options, other possibilities in the report included a renegotiation of the dam’s finances.

The dam, which came with an original price tag of $75.9m in February 2018, ended up costing nearly three times that with a final bill of $211m.

Waimea Irrigators chair Murray King said the report highlighted the challenges irrigators had with some of the conditions around repayment and share sales.

At this stage, there had been no issues with default by irrigators, he said.

Asked why the dam was “overbuilt” when there was shrinking horticultural land, King said it was built for future capacity, but at the time, the future was unseen and unknown.

Asked whether shareholders could afford to pay $1500 in annual water charges per share, King said that would be difficult.

He said he would be “disappointed” if anyone took the view that the investment in agribusinesses came at a cost to the community, and argued that the community would be in a “bad situation” without it, as these irrigated properties generated rates and revenue.

Tasman mayor Tim King said the council’s debt limit was self-imposed, and there was still headroom in banking covenants and Local Government Funding Agency covenants.

The council’s preference was that the dam was utilised to deliver the economic benefits that it was intended to, he said, alongside other benefits.

“At the moment, that’s proving challenging,” King acknowledged, adding that some of of the obligations that sat with irrigators over refinancing and selling shares could be modified to “take the pressure off”.

Irrigators were still obligated to pay back their 49% share, he said.

Asked if the dam risked becoming a white elephant if it was not used for what it was intended for, King said it was there for 100 years, and he was still “entirely confident” that the provision of water was as essential as it was when the decision was made to build the dam.

The intention of the briefing was to engage with ministers about the options put forward as soon as the next period of bad weather had passed, he said.

Brian Halstead, a consultant to the Waimea Irrigators and Water Users Society, a group that was against the dam since its conception, said he couldn’t see how irrigators would afford the debt with the damage they had sustained in the floods.

Several hop gardeners and market gardeners were “really struggling”.

Lifestyle block owners also had a heavy share presence, he said, and the debt had the capacity to “doom” the real estate market.

“Properties will become unsaleable simply because of the debt and the charges that are going to be attached to them,” Halstead said.

“I can see it really hurting people … it’s just a bomb waiting to happen.”

Halstead also questioned whether the irrigators would go into administration if there were no refinancing or bailout.

Waimea Water Ltd general manager Kelly Norris said the dam had performed well since it started operating last year, ensuring the Lee and Waimea river levels were above minimum flow requirements, and stopping possible water restrictions when the region faced serious drought in the first summer and autumn of operations.

During the 2024 drought, water restrictions were lifted after water was released from the dam, but mechanisms for restricting non-shareholders were not in place.

“Next time around, there may be a stark difference between those who subscribe to the scheme and those that don't,” he said.