Compensation clause ‘sensible’

A compensation clause in the Waimea dam project deed is a sensible protection, says Tasman district mayor Richard Kempthorne.

‘‘For council, it limits the grounds, cost and time period for that compensation,’’ he said of the clause that could cost ratepayers up to $50 million if triggered.

Kempthorne’s comments came at a press conference on Wednesday called by Tasman District Council to ‘‘provide some clarification and context’’ around a Nelson Mail story about information released under the Local Government Official Information and Meetings Act, revealing a potential ratepayer liability of up to $50m for ‘‘council compensation events’’ over the next 40 years.

‘‘The $50m outlined in the clause is not a liability to council – it’s a fallback provision in case council acts to undermine the partnership and remove the benefits to shareholders of Waimea Irrigation Ltd, benefits they are paying for,’’ Kempthorne said.

‘‘The clause deters council from using its regulatory powers to backtrack on its agreements under the understanding. This is completely in the control of council.

‘‘Any reasonable person would say that there should be consequences to breaking an agreement where significant investment has been made in the belief that all parties would act in good faith.’’

Such a clause was not unusual in public-private partnerships, Kempthorne said.

‘‘The clause is a sensible protection for both parties. I’m confident that provided the council behaves in good faith in relation to its dealings with the dam, the compensation clause should not be a concern to ratepayers.’’

Council corporate services manager Mike Drummond said he would not treat it or describe it as a liability.

‘‘It’s a provision within the project deed, or within the contracts regarding the dam. If at a future date, council took a course of action that triggered that provision, then you would need to consider whether or not you had a contingent liability at that time.’’

Kempthorne said a summary of the project deed, similar to a document released under the information request, was put up on the council’s website on Wednesday. Asked if the council would release an unredacted copy of the deed, the answer was no.

‘‘It’s covered by significant confidentiality agreements with other parties and we would breach those agreements if we were to release an unredacted version of the contract,’’ Drummond said.

Those other parties were Crown Irrigation Investments Ltd, Waimea Irrigators Ltd and Waimea Water Ltd, which is responsible for managing the construction, operation and maintenance of the dam.

Drummond said the compensation provision was still under negotiation in October 2017 when the proposed governance and funding arrangements for the dam project went out for public consultation.

‘‘The negotiation occurred between 2016 and the finalisation of the documents in November 2018,’’ he said.

When asked if ratepayers should have been told about the compensation clause before the project was signed off, Kempthorne said no.

‘‘This is about working in good faith with irrigators. They are funding a lot of money, and so this is protecting their investment as much as anything.’’