Transport Minister Gerry Brownlee has poured cold water on a Hawke's Bay Regional Council-backed initiative to restore the Napier-Gisborne railway.

However, backers of the plan say the minister's rejection of it is based on a "significant misunderstanding" of their proposal and they will continue lobbying Central Government for assistance to re-open the line.

The council has floated the idea of investing just under $5.5 million of ratepayers' money over five years to re-establish a rail service on the mothballed line but its proposal depends on the Government also spending several million dollars repairing the damaged track and other infrastructure.

The plan is outlined in the council's 2014-15 draft annual plan, which will be voted on at a meeting today before being released for public consultation.


The proposal to lease the line from KiwiRail and run a rail freight service comes from the Napier Gisborne Rail Establishment Group (NGR), which estimates $10.7 million will be needed to finance capital and operating budgets, including $5.3 million to buy rolling stock, $2.4 million for working capital and a $3 million disaster contingency reserve.

A 51 per cent shareholding from the regional council is proposed, with a contribution of about $5.46 million through to the 2018-2019 year, with investors from Hawke's Bay and the Gisborne region holding the remaining 49 per cent interest in a holding company, which would be formed especially for the purpose.

But any investment by the council would require the Government and/or KiwiRail to fully fund the restoration of the railway line, satisfactory leases on the line and locomotives, and agreements on freighting of logs and fruit and vegetable produce beyond 2020, to ensure the long-term viability of the service.

A spokesman for Mr Brownlee said yesterday the Minister wrote to NGR after meeting with them in December and the letter made it clear the government would not support the initiative.

NGR is chaired by former Napier mayor and current regional councillor Alan Dick who said at the weekend that negotiations with the government were at "a sensitive stage".

Mr Dick said last night the group was contesting the Minister's response which he said "contained significant misunderstandings of our proposal".

"We may not have communicated as well as we should have," he said.

"As far as I'm concerned the matter is not determined at all. The [Minister's] misinterpretation is fundamental in terms of our proposition to the government and the safeguards and risk minimisation that's in it for them."


NGR had responded to the minister's letter.

A spokesman for Mr Brownlee confirmed the Minister had received a reply to his letter.

"We are going to be responding to [NGR] again but I don't think it will be changing anything."

Mr Dick said under NGR's proposal the Government was being asked to spend $3-5 million "to repair their own rail line".

That figure was based on an earlier KiwiRail estimate that the work would cost $3.3-$4.4 million, and allowing for additional work that may now be required. He said regardless of the Minister's's stance he wanted the regional council to pursue the proposal.

"I would still be pressing the council to keep it in the annual plan and let the public of Hawke's Bay express their opinions because a lot of things can happen in a few years in politics and it's election year."

Submissions on the plan close on May 12.