Martin Williams
There seems to be general even widespread support for the Hawkes Bay Regional Council's focus on the environment under its proposed new 10-year plan "Facing our Future".
More controversial is that this would come at the price of a significant increase in rates, and a cut in funding support to the tourism sector.
$71 million of borrowing is proposed, with about half of that for environmental projects. The basic idea being advanced by the council under its new 10-year plan is that we need to make choices. Is it the environment, or is it the economy? On this view, we cannot both invest in the economy and protect the environment.
Illustrating that debate, in last Saturday's Hawke's Bay Today, councillor Tom Belford (in the 'left' column) expressly rejected the "both and" argument being advanced by the tourism sector (as put forward by Mike Wilding, chief executive for Craggy Range, in the 'right' column).
That argument runs that we can both invest in the environment, and continue to support tourism.
One need not come at the expense of the other. This is an important conversation for the region, and lies at the heart of not only the council's 10-year plan proposals, but the recently released Capital Structure Review report.
This report recommends that the council diversify its investment asset base which is currently dominated by ownership of the port (some $235m of the council's $300 million of total commercial assets).
This is said to present a highly concentrated geographic and commercial risk. Put simply, an "eggs in one basket" scenario.
The Capital Structure Review report proposes a "rebalanced risk profile" with at least 33 per cent of the port holdings released and reinvested into new investments targeting an average 5 per cent return. To fund the large-scale infrastructure developments required at the port (some $250m), several options are canvassed including a minority share sale, listing on the stock exchange, and a long-term lease. Within the mix, the $50m reallocated from the "now shelved" Ruataniwha Water Storage Scheme would be reinvested at a higher than bank rate return.
There can be no doubt that the 10-year plan signals a fundamental shift in direction and policy approach.
A "step change" as chief executive James Palmer put it when introducing the new plan to councillors. Back in 2009, the council introduced an active investment strategy targeting greater returns with a focus on projects that have both an environmental and economic benefit.
As well as increased resilience, the goal was to reduce reliance on ratepayer resources.
The model was very much in the "both and" category. Rather than just "leveraging" off the balance sheet to fund environmental projects through borrowing, the balance sheet itself would grow and diversify.
Ultimately, the lead project advanced through the council's investment vehicle (HBRIC Ltd) under that model was rejected, not least out of concern that it could lead to significant borrowing and potentially put the port at risk of a forced sale to pay off that debt.
The irony now of course is that, with the more singular focus on investment in the environment, we seem to be facing exactly that, more debt and port divestment, but without the future prospect of a significant addition to the council balance sheet (for example, with the dam asset being returned to the council at the end of a 70-year concession period).
The reality is that we do have to make choices. Personally, I applaud the environmental focus and strong leadership being shown by the council.
But I respectfully suggest that if we are going to successfully confront the many challenges ahead, not just in the forthcoming 10-year cycle, but over generations, we are going to need every tool in the box. We cannot choose between economy and environment. We need to invest in both.
That is, we will need the proposed "cloak of trees" on the targeted 100,000ha of highly erodible land, to protect waterways and Hawke Bay from sedimentation, particularly as we face the imminent prospect of more frequent and severe rain events.
We will need to invest in the response to coastal erosion and inundation threats recommended in the recently completed coastal hazards strategy.
We will need to sustain our primary sector and tourism industries to enable ratepayers, both residential and commercial, to meet the burdens of these investments, and actually repay the debt now being proposed.
We will need to set and maintain minimum flows in our rivers to sustain aquatic habitats.
We will need to invest in water storage and augmentation infrastructure to achieve that, and now (it seems) without central government support.
We will need to financially support predator and pest control on private land to protect our struggling biodiversity. We will need to raise capital to fund essential investment in developments at the port, currently the council's largest asset.
Rather than just borrowing to protect the environment however, I suggest we need to explore opportunities to invest in social and physical infrastructure that sustains the economy and generates a return that can be directed to environmental projects.
This is after all, the primary purpose of local government under the Local Government Act 2002 - provision of good quality local infrastructure.
There is no "intergenerational" investment without that, just borrowing off our grandchildren to fix the mistakes of our forebears.
That is the choice in front of us. I do hope this council considers it carefully, in facing our future.
* Martin Williams is a barrister specialising in local government and resource management law, based in Napier.