Minutes of Regional Council Meeting

1. Welcome/Prayer/Apologies/Notices

The Chairman welcomed everyone to the meeting and Councillor Pipe offered the prayer.

Resolution

RC19/14 That the apologies from Councillor Peter Beaven for absence be accepted.

Wilson/Pipe

CARRIED

2. Conflict of Interest Declarations

There were no conflict of interest declarations.

14.

Hawke's Bay Tourism Quarterly Report

Annie Dundas (General Manager, HBT) and George Hickton (Chairman, HBT) provided a presentation outlining the activities undertaken up to 31 March.

Councillor Dick arrived at 9.05am

The presentation covered visitor numbers and spend while in the region, advertising being used and its effectiveness by tracking number of views on the website, collaboration with the TLAs and trade shows as well as industry meetings and training opportunities. Future planning includes Cricket World Cup and All Blacks vs Argentina opportunities, and an overview of the HB Tourism Development Plan 2014-2017 was provided.

Discussions traversed partnerships within the Tourism industry, attendance levels at various events, and strategic planning for the organisation and industry.

RC20/14

Resolution

1. That Council receives the Hawke’s Bay Tourism Quarterly Update report for the period ending 31 March 2014.

Scott/Pipe

CARRIED

Napier Port Presentation

Mr Garth Cowie and Board Chairman Jim Scotland provided a presentation on the Port’s results for the 6 months ending 31 March 2014.

Some highlights include: containers up 16%, rolling 12 months up 8.1%, log trade grew 47% and total cargo volumes grew 11.4%, as well as net profit after tax increase of 51%.

In terms of operations, issues with space constraints caused congestion issues with truck turnarounds and efficiency issues resulting in additional costs. Port staff put in huge efforts to achieve outstanding results in difficult circumstances. Congestion issues caused by several factors including inability to control/manage uncoordinated truck arrivals, inability to free up space (51% more empty containers delivered and 400% increase in empty container storage days on Port in March), the Japanese government imposing an earlier delivery deadline at the Port for cargo shipped to Japan (effectively adding 3 days on-port container storage time) and an additional 2 new calls by Maersk Northern Star NZ1 and the KIX service as well as vessel sequencing due to congestion in other ports.

Predicting continuing pressure from container lines due to over supply and cascading effect of larger vessels in the NZ trade, international shipping lines to continue suffering and exerting pressure on current and future pricing and the Port will continue working aggressively to try and hold gains already made.

Cruise activity included 47 visits this last season, with a number of cancellations due to weather, 59 vessels are currently scheduled next year, and 39 are already booked for the 15-16 season. Influences on cruise activity include berth availability (1 large vessel uses 2 conventional berths), no offshore mooring option, cruise lines looking for new opportunities as well as Port pricing (not most expensive in NZ).

Dredging programme going well, development of Thames Street as empty container park is being progressed, Vehicle Booking System will likely be in place for next season to manage capacity/demand along with express lanes for electronically pre-advised containers, the new Port Central Building is on track for completion early 2015 and Log Yard hardstanding project is underway.

Growth initiatives often rely on: new regional development (i.e. apples, big players like Heinz Watties and Silver Fern Farms) and out of region opportunities. From Port perspective, Plan Change 6 without RWSS will have a significant negative impact on Port operations.

Long term strategic direction will focus on supply chains and their component parts (including transport, warehousing and Ports) that will compete against each other, requiring wider linkages across the NZ supply chain. With continued growth, Napier Port’s profile is changing to keep pace with larger vessels, larger customers and influences, increasing reliance on biosecurity protocols and investment and stranded assets.

Future infrastructure development in the 1-5 year plan includes dredging (commenced), extension of the Log Yard hardstanding and no.5 south wharf redevelopment; 5-10 years includes extension of the breakwater, northern and western reclamation and hardstanding the remainder of the Log Yard; 10-50 year development plan includes northern and eastern reclamation (total 16.5ha), breakwater extension, redevelopment of no.3 wharf and construction of a new (no.1C) 320m berth.

RC21/14

Resolution

1. That Council receives the Napier Port report.

Graham/Barker

CARRIED

The meeting adjourned at 10.35am and reconvened at 10.50am

Deloitte Peer Review of HBRIC Ltd RWSS Business Case

Mr Alan Dent and Mr David Morgan provided an overview of the Deloitte report’s findings to date, based on current information and the base case.

The peer review focused on assessment of the base case key assumptions in relation to capital cost and risk, from which Deloitte has concluded that:

· The draft construction contract limits HBRC’s exposure to the risk of capital cost overruns and performance issues (through the fixed time, fixed cost contract)

· At full uptake the project is financially viable without the need for subsidised (public) capital

· Subsidised (public) capital is required initially as full uptake is not expected at practical completion of the construction

· The structure of the proposed Crown Irrigation Investments (CIIL) capital is important in managing uptake risk

· The key project risk relates to uptake (timing).

Base case is unlikely to be the final investment case as there are a number of material matters yet to be finalised including:

· Construction contract

· Investors and investment terms

· Final Board of Inquiry decisions

· Implications for farmer uptake of extending financial close to 30 September.

Several slides covered sensitivity analysis and scenarios for investment returns, water uptake rates, cash flows, revenue and operating profit, and HBRIC distributions and returns. The ‘worst case’ scenario with water uptake never reaching beyond 75% of the water available resulted in a return, at the end of the first concession period, of 5.3%.

Andrew Newman and Graeme Hansen of HBRIC Ltd were invited to respond to a query relating to a rumoured $30M difference between the cost of the dam that the BoI sanctioned and a ‘different’ type of dam that is actually now proposed to be built. Firstly, Mr Newman stated, the competitive Design & Construct process undertaken for building the dam and distribution network included a significant amount of geotechnical and seismic investigation involving looking at the different materials and specific site requirements. The consent applications for the dam included well identified ‘flex conditions’ relating to design criteria that may change along the way.

Several dam types were investigated through the feasibility stage of the RWSS and that information informed the D&C tender process. Through the tender assessment phase, the two competitors requested further information to better understand the geotechnical and seismic conditions at the dam site, and so HBRIC Ltd invested in further work around foundation conditions and material types, running concurrently with the BoI process. Information that came to light about geotechnical and seismic issues, foundation materials and quantities, and fault features through the further investigations was shared with the BoI.

Armed with the additional information, the preferred D&C firm then carried out further material testing and sourced material onsite to enable delivery of a different type of dam, considered to be safer under the particular seismic conditions of that area. Any modifications to the dam design must either meet or exceed the dam safety specifications.

An additional Deloitte report offered to Council will be an ‘addendum’ containing assessments of any changes in investor terms, the final contracted capital construction cost, and any change to the demand curve resulting from the BoI final decision.

RC22/14

Resolution

That Council:

1. Agrees that the decisions to be made are not significant under the criteria contained in Council’s adopted policy on significance and that Council can exercise its discretion under Sections 79(1)(a) and 82(3) of the Local Government Act 2002 and make decisions on this issue without conferring directly with the community and persons likely to be affected by or to have an interest in the decision due to the nature and significance of the issue to be considered and decided.

2. Receives the report titled “Peer Review of the Ruataniwha Water Storage Scheme Business Case” prepared by Deloitte; and

3. Notes that a further report will be required from Deloitte when the final RWSS business case, including the capital structure, has been finalised by HBRIC Ltd.

Hewitt/Dick

CARRIED

The meeting adjourned at 12.35pm and reconvened at 1.10pm

HBRIC Ltd Discussion of Draft Plan Change 6 Decision

Dr Andy Pearce, HBRIC Ltd Board of Directors Chairman, provided the Board’s understanding and view of the implications of DIN limits set by the Environmental Protection Authority (EPA) Board of Inquiry draft decision for Plan Change 6.

It is the HBRIC Ltd Board’s view that if the 0.8 mg/l Dissolved Inorganic Nitrogen (DIN) limit remains unchanged in the final BoI decision, the RWSS can not proceed. Alternatively, if the LUC classification rates are used the Board’s view is that the RWSS project could work within those. The draft decision has set:

• Annual average DIN (nitrite + nitrate + ammonium) limit set at 0.8 mg/l - everywhere in catchment except in headwater zone

• Expressed as a limit (enforceable and has to be met now) – not as a target (to be met at defined date in future)

Dr Pearce explained that several monitoring sites in the Tukituki are currently above the 0.8 DIN limit, and that even if all properties in the catchment met the LUC nitrate leaching limits the 0.8 DIN limit would not be achieved as there is no link between the leaching rates and the 0.8 mg/l limit set. It appears that the BoI did not understand the consequences of applying the DIN limit as the draft decision includes statements expressing their belief that it allows ‘head room for growth’ and ‘provides a balance between protecting the environment and enabling further intensification (by good farmers) in the catchment’ when in reality current levels of activity are already in excess of limits and will have to be cut back.

Current DIN levels are:

• Tukituki at Red Bridge 0.751

• Tukituki at Shag Rock 1.036

• Tukituki at SH2 1.340

• Tukipo 1.238

• Maharakeke 1.739

• Kahahakuri 2.886

• Mangaonuku 1.976

• Waipawa at SH2 0.742

• At DIN of 0.8 mg/l, there is no “headroom” for N leaching from RWSS-intensified land use at any location upstream of Shag Rock.

Discussions traversed:

• Assuming all root-zone N losses arrive in-stream (worst case scenario), RWSS leaching of 625,000 kg N would increase DIN at Red Bridge by 0.46mg/l (10 x “headroom”), RWSS N leaching would increase DIN by 1.1 mg/l averaged over the combined annual runoff of Tukituki at Tapirau Rd & Waipawa at RDS. Result would likely be an increase of 1.1 mg/l to current DIN levels.

• The BoI decision does not permit grand-fathering or grand-parenting losses.

• Levels proposed by HBRC (based on toxicity to fish) as indicators provided either 90% or 95% protection against toxicity in line with the National objectives framework.

• RWSS conditions proposed by Council and accepted by the BoI require every farm to have a farm environment management plan prepared by someone authorised by Council - that uses current best practices and continues to improve on those; auditing of those farms every year for the first 3 years – if clean audits all 3 years then may be audited once every 3 years; 0 increase in phosphorous and requirement to use increasingly improved versions of Overseer or another Council approved modelling tool to model the losses; and if the combined losses from farms supplied by the RWSS in any sub-catchment get within 80% of the limit then all farms within that sub-catchment would be required to re-do their farm environment plans and improve their practices and be subject to audit until the modelling shows that they will be below 80% of the limit.

• HBRIC Ltd comments to the BoI on the draft decision have drawn attention to inconsistency between LUC leaching rates and meeting the DIN limit, and suggested alternative means of implementing the 0.8 DIN levels such as changing the ‘limit’ to a target to be achieved by a set date.

• Mrs Lambert clarified the status of the .44 mg/l DIN measure in Horizons One Plan as being a water quality ‘target’ and is not a limit. Limit is defined in the National Policy Statement for Freshwater Management as: maximum amount of resource use available, which allows a freshwater objective to be met, e.g. a water quality limit, and is enforceable. Definition of target is a limit which must be met at a defined time in the future.

• DIN maximum for drinking water standards is 11.2 mg/l (most NZ use working limit of 5.6 mg/l). Toxicity limit for fish proposed by Council for 95% protection is 2.4 mg/l. The 0.8 mg/l limit set by the BoI is 1/3 of the level proposed by HBRC.

• Once the final BoI decisions are issued, they are only appealable on points of law through the High Court.

• Council’s role once the final Plan Change 6 decisions have been released and the Plan Change is Operative, is to implement the rules, policies, objectives, etc.

• If Council officers believe a legal appeal or being party to another legal appeal may be warranted, a recommendation will be brought to Council for its decision on whether or not to proceed with whatever that action might be. Similarly – it is highly unlikely that HBRIC Ltd would commit to a legal (and costly) course of action without the support of its shareholder (Council).

RC23/14

Resolutions

That Council

1. Receives the HBRIC Ltd Discussion of Draft Plan Change 6 Decision report.

Councillor Belford moved an amendment, seconded by Councillor Barker, being:

2. Agrees to convene a one day public symposium to consider the implementation of Plan Change 6 as finally decided by the Board of Inquiry. The symposium would be balanced, with speakers from differing perspectives on the Plan Change including the agriculture/horticulture sector, the environmental community and local practitioners and experts on land use and farming practices in Hawke’s Bay. The forum would aim to foster a shared understanding of what Plan Change 6 requires and to identify approaches to best meet those requirements.

Belford/Barker

LOST

The amendment was LOST and therefore the substantive motion was put:

1. That Council receives the “HBRIC Ltd Discussion of Draft Plan Change 6 Decision” report.

Scott/Dick

CARRIED

3. Confirmation of the Minutes of the Regional Council Meeting Held on 30 April 2014

RC24/14

Resolution

Minutes of the Regional Council Meeting held on Wednesday, 30 April 2014, a copy having been circulated prior to the meeting, were taken as read and confirmed as a true and accurate record.

Scott/Barker

CARRIED

4. Matters Arising From Minutes of the Regional Council Meeting Held on 30 April 2014

In relation to Item 9 Recommendations from the Corporate and Strategic Committee on page 14, Mrs Lambert provided an explanation of the process undertaken by staff when applying for a Plan Change.

1. Staff are tasked with development of any Plan Change (PC) by Council, as per the Council approved ‘philosophy and direction’ for it.

2. Council ‘adopted’ PC is then publicly notified and open for submissions for a period of at least 20 working days.

2. Staff receive and summarise submissions and then notify those for further submissions.

3. Staff write an Officers Report and Recommendations on the submissions (and further submissions) received – in line with their understanding of the intent of the PC.

4. Submissions, further submissions and recommendations are then packaged up for the decision making body (Hearing Panel made up of Councillors / Council-appointed independent panel, Environment Court)

5. Staff are tasked with taking the PC through to the final decision, at which point any recommendations for further action (appeal, mediation) are brought back to Council for direction.

In the case of PC6, the ‘comments’ or submission to the BoI draft decision are accepted on technical and clarification matters only (within the approach endorsed by Council for the PC) and therefore not subject to Council ‘adoption’ or approval.

There were no further matters arising from the minutes.

Follow-ups From Previous Council Meetings

Mrs Lambert advised that both items have been addressed as per the paper.

RC25/14

Resolution

1. That Council receives the report “Follow-ups from Previous Council Meetings”.

Scott/Pipe

CARRIED

Call for Minor Items Not on the Agenda

Maori Committee meeting with Local Government Commission (Mohi)

He Toa Takitini treaty claim (Mohi)

Business HB (Barker)

Misinformation in media (Scott)

RC26/14

Resolution

1. That the minor items noted be discussed as Agenda item 17.

Wilson/Scott

CARRIED

Affixing of Common Seal

1. The Common Seal of the Council has been affixed to the following documents and signed by the Chairman or Deputy Chairman and Chief Executive or a Group Manager.

Seal No.

Date

1.1

Residential Leasehold Land Sales

1.1.1 Lot 2

DP 4488

CT 55/121