The Waitaki District Council agreed in principle yesterday to support the roll-out of stage two of the North Otago Irrigation Company’s infrastructure.
The company recently gave notice to the council that it wanted to extend the term and amount of its existing loan, and also vary certain loan conditions.
According to NOIC, the council’s decision to agree to the request in principle gives the company certainty regarding potential funding. It also impacts on the terms offered to farmers in the stage two share prospectus, particularly the proposed funding mix and the share price.
The prospectus is due to be released in November.
The key features of NOIC’s request include extending its loan from $12.5m to $22m and extending the repayment date from January 2016 to June 2022.
A final decision from the council will follow a period of negotiation with the company and public consultation.
Discussion centred around whether the council would seek a market interest rate on the loan and if it did, whether this would be perceived as giving a commercial advantage to one group of ratepayers.
Cr Hugh Perkins said while he supported the scheme and it had “performed well”, yesterday’s recommendation had shortcomings.
“I can see there are wider benefits but we shouldn’t lock ourselves into a situation where general ratepayers are giving an advantage to one group of people in the district,” he said.
He proposed adding a clause, which was carried as part of the final recommendation, suggesting that council negotiate an interest rate for the loan which reflected the risks and benefits of the investment.
“I don’t think we can base our decision on the frothy excitement of the benefits,” he said.
“Banks have a margin on their lending for good reason.”
Other councillors reminded those present of the social and economic benefits that stage one of the scheme had brought to the district and wanted to assist NOIC in getting a quick uptake of farmers signed up to stage two.
“The fundamental issue today is whether we can assist,” Cr Peter Garvan said.
“For every dollar spent, there is considerable payback to the community.
“I reject the fact that only the rural community benefits – everyone benefits.”
Mayor Gary Kircher had the final word, saying that the interest rate needed to reflect the real risk but he didn’t want the margin to be prohibitive.
“This will be the most significant economic decision that this council will make,” he said