Readers following the ongoing drama of the Ruataniwha dam project should be grateful to Sophie Price for continuing to probe beneath the bland press releases of the regional council's wholly owned subsidiary, HBRIC.

The table of projected RWSS (Ruataniwha Water Storage Scheme) cash-flow figures recently published in HB Today (May 17) is a good example. Faced by the refusal of HBRIC and HBRC to supply relevant modelling on grounds of "commercial confidentiality of financiers" (and why are they so much more important than ratepayers?) HB Today published results from its own model, clearly showing HBRIC's claim that the RWSS will be cash positive, at current levels of pledged water uptake, is a nonsense.

Anyone who has closely followed the dam financing issue would surely agree. But to understand how all this arose, one needs to go back more than a decade to when Alan Dick was chairman of HBRC and Christine Scott was chairwoman of the council's regulatory committee.

The HBRC mantra at that time was council-led economic development, a proposition that, in my opinion as a former MP and regional councillor, was always ludicrous.

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Councils spend money, they don't create it, as history has proven time after time.

Consistent with HBRC's development mantra, the regulatory committee, in my opinion, grossly over-allocated water from the Tukituki catchment for irrigated farming and orcharding operations, discounting the evidence on long-term unsustainability.

The consequences are with us today in our polluted rivers and streams, already exceeding the new nitrogen limits set by the board of inquiry, despite the dam not yet being built.

In my opinion, there are reasons to believe the dam's proponents have been fully aware of this historical over-allocation, and have promoted the dam, in part, as their only hope for remedying it without requiring reductions in the existing water takes.

Now let's look at the financial consequences of the dam project for ratepayers. For starters, the recent increase in general rates, announced with so little fanfare, would, in my opinion, never have been required under more prudent HBRC management.

I said in my previous Talking Point on the dam (April 21, 2014) that the only guaranteed economic outcome would be higher rates, but I hadn't expected to be proven correct so quickly.

Secondly, the 6 per cent return on dam investment "required" by the regional council. This figure is a mirage, because HBRC, as 100 per cent owner of HBRIC, cannot "require" HBRIC to deliver profits the dam cannot in fact generate. All HBRIC can do is move profits and losses around within its investment portfolio.

Now that our gold-plated, long-term investment in leasehold land has been hocked off at a massive discount to its true value, HBRIC's only large investment is the Port of Napier.

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While the facts have been carefully hidden under the cloak of "commercial confidentiality", I believe HBRIC is relying heavily on tax savings from off-setting large impending losses by the dam company against profits from the port. The risks created by this approach are financial as well as political, because these trade-offs can only be used once. They cannot be used a second time to off-set profits the dam may eventually make. But by then the current key players will have moved on.

Thirdly, the dam's negative financial consequences for ratepayers will continue for many years after the dam is built, because of the "cash waterfall" model incorporated in HBRIC's commercial contracts with water users and financiers.

This near-secret device, never mentioned in press releases, requires all the initial cash flow from the dam to be paid to other investors before HBRIC or ratepayers receive a single dollar. The cash will go initially into the generous subsidies paid for five years to users who sign up early for water, then to repay the banks lending money to the dam company, then to repay the government agency lending money, then to pay the private-sector financiers a guaranteed 10 per cent rate of return, and only then to HBRIC and through it the council and ratepayers.

It is these last three groups who will bear most of the risk.

So where are we now? Even if the current 5-4 HBRC majority for the dam is overturned in this year's election, which is by no means guaranteed, so many commercial contracts have been signed behind the cloak of secrecy I have no confidence that the dam project can realistically be stopped.

- Bill Sutton is secretary/treasurer of the Hawke's Bay Live Poets' Society. He was Labour MP for the former Hawke's Bay electorate and later served as a Hawke's Bay Regional councillor.

- Views expressed here are the writer's opinion and not the newspaper's. Email: editor@hbtoday.co.nz