Central Hawke's Bay District Council says it will borrow $4million of the $5 million it has earmarked for a stake in the Ruataniwha dam.
The council yesterday voted to consult the public regarding plans to invest $5 million in the Ruataniwha water storage scheme after working through financial projections showing the investment would be worthwhile even if 80 per cent of the money was borrowed.
The other $1 million of the proposed investment would come from the council's reserves.
Central Hawke's Bay Mayor Peter Butler said earlier this week taking a stake in the dam was both a good investment and a show of support for the project. If the scheme goes ahead, it will provide irrigation for about 25,000 hectares of drought-prone land in the CHB district.
The council's investment in the dam would be made through the Tukituki Investments Limited Partnership, a structure set up by Hawke's Bay Regional Investment Company (HBRIC), which is working to secure funding for the $275 million project.
HBRIC is the regional council's investment arm. Regional councillors are to vote next month on whether to invest up to $80 million in the scheme.
CHB district councillors met in a closed-door workshop yesterday to work through details of the proposed investment, before voting unanimously to proceed with the consultation when they reassembled for a regular council meeting later in the day.
A worksheet prepared by council staff and circulated at the meeting said that although the investment would not generate any return for the first three years, it would return just under $3.5 million in interest by 2035 as well as a lump sum of $5.2 million in 2049.
The council would require additional rates funding to repay the $4 million loan from 2020 onwards but was confident it could manage the impact within the constraints of its 2012-22 long-term plan, the worksheet said.
The worksheet did not take into account expected growth in the value of the investment, it said.
Another benefit of the investment not factored into the calculations was the possibility that some of the district's smaller towns could be provided with "cheaper and cleaner water from the dam", the document said.
A financial assessment of that benefit had not been calculated "due to uncertainty in whether the water will reach these towns, and also the quality of the water once it gets there".
Consultation with Central Hawke's Bay ratepayers on the proposal will begin next week and run for a month.
The council will hold hearings on the proposal next month as part of a process which will run parallel to its annual plan consultation schedule.
As well as targeting qualified Hawke's Bay investors through the Tukituki Investments Limited Partnership, HBRIC is working to secure funding for the Ruataniwha project from corporates, the Government and banks.
HBRIC has said it needs to secure contracts with irrigators to sell 40 million cubic metres of water a year, about 40 per cent of capacity, for the project to go ahead.