STATEMENT OF PROPOSAL JOINT ARRANGEMENT FOR LONGBURN SEWERAGE CONNECTION

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1 STATEMENT OF PROPOSAL JOINT ARRANGEMENT FOR LONGBURN SEWERAGE CONNECTION Introduction The Palmerston North City Council (Council) has entered into an agreement with Water Enviro Services Limited and its associated companies (WESL) for the connection of a 300 millimetre diameter sewerage pipeline from Longburn, outside the Palmerston North district, to the Totara Road Wastewater Treatment Plant (Treatment Plant). This agreement is conditional upon consultation. The purpose of this statement of proposal is to undertake that consultation. The decision that is to be made by the Council is whether or not to confirm the agreement. Reasons for this statement of proposal WESL has applied to connect a sewerage pipeline, and convey wastewater from that pipeline, to the Council's Treatment Plant and the Council is responding to that application. Under section 137(3) of the Local Government Act 2002 (LGA) before the Council enters into a joint arrangement for the purpose of providing water services or any aspect of a water service, the Council must have undertaken consultation in accordance with the procedures of Part 6 of the LGA. In accordance with this requirement and the Council's assessment that the significance and the subject matter of the proposal warrants formally obtaining the views and preferences of the Palmerston North community, the Council has decided to consult by way of the special consultative procedure. Section 83 and 87 of the LGA require the Council to prepare a detailed statement of proposal that includes a statement of the reasons for the proposal, an analysis of the reasonably practicable options and any other information that the Council identifies as relevant. Background WESL carries out commercial activities at the former Longburn Freezing Works site in Manawatu District to the south of Palmerston North City. The consent held by WESL from Horizons Regional Council to discharge wastewater to the Manawatu River has expired WESL approached the Council in 2001 to obtain the Council's consent to convey wastewater from Longburn by pipeline to the Treatment plant. The Council and WESL have been negotiating since 2002 over the construction and connection of a pipeline. Between late 2007 and early 2008 the pipeline was constructed by WESL.

2 On 22 April 2008 WESL and the Council entered into an agreement for the connection of the pipeline and the provision of wastewater from the pipeline to the Treatment Plant. This agreement is conditional on, amongst other things, the completion of consultation under the LGA and the Council passing a resolution to declare the agreement unconditional. Key terms of the agreement The agreement is intended to take effect from the date it becomes unconditional and will continue for five years. WESL will have two rights of renewal, each for a period of five years. WESL is to bear the costs of constructing the pipeline. Ownership of the pipeline and all infrastructure associated with the pipeline is to vest in the Council in accordance with section 137(4)(b) of the LGA. The maximum volume wastewater discharge is 700m³ in any 24 hour period. The Council has determined this volume of discharge to be within the present and future available capacity of the Treatment Plant Under the agreement this rate of discharge must not be exceeded without the written approval of the Council. The Council's resource consents allow it to accept and treat this waste. The Treatment Plant has consented spare capacity estimated at 17,000 cubic metres per day. The existing consents expire on 16 May 2028 by which time it is anticipated most of this capacity will be utilised. The characteristics of any wastewater discharged into the Treatment Plant must at all times comply with the acceptable discharge characteristics set out in Schedule 1A of the Palmerston North Trade Wastes Bylaw 1997 or the more stringent requirements of any bylaw made in substitution of the Palmerston North Trade Wastes Bylaw The discharge will be monitored by the Council and WESL will bear the costs of this monitoring. A commercial connection fee of $115,500 must be paid by WESL before the Council receives any wastewater from the pipeline. WESL will also pay the Council an annual treatment charge on an ongoing basis. The annual treatment charge will be the sum of the biochemical oxygen demand treatment charge, the suspended solids treatment charge and the volume reception charge. The amount of each type of these charges will depend on the quantity and type of waste discharged. These charges will be set by the Council in each financial year under the terms of the Palmerston North Trade Wastes Bylaw. WESL is entitled to receive the benefit of any spare capacity. WESL must apply to the Council if it wishes to allow any party other than a registered proprietor of any part of the Longburn premises to discharge wastewater into the pipeline. The Council has total discretion as to whether consent will be granted. Any fee paid by

3 other users will be paid to WESL but the Council must first approve the fee at its discretion. During the term of the agreement, the Council may purchase any spare capacity of the pipeline. The purchase price is set at $165 plus GST for the right to discharge 1m³ of wastewater per 24 hour period for the balance of the term plus any renewal period. WESL has agreed to indemnify the Council against losses or damages that may arise out of: The construction, operation or maintenance of the pipeline or any infrastructure retained by WESL. WESL or any other party utilising the pipeline or retained infrastructure. Damage to the pipeline or retained infrastructure. The pipeline needing to be closed for any reason. Ownership by the Council of the pipeline. Transit New Zealand making any claim against the Council in relation to the agreement between Aotearoa Coolstores Ltd and Transit relating to the laying of the pipeline along State Highway 56. The Council entering into the agreement. This indemnity does not extend to circumstances in which the agreement places a direct responsibility on the Council to meet costs in relation to a specified matter. Palmerston North City Council may terminate the agreement if: any sum payable by WESL to the Council is more than 60 days late; the agreement has been breached and not remedied within seven working days after notice of the breach has been given by the Council to WESL; WESL is in breach of the same provision in the agreement on more than three occasions during any five year period of the agreement; WESL goes into liquidation (other than with the Council's permission), is removed from the New Zealand Companies Register or a statutory manager is appointed; or WESL makes an assignment to its creditors. The Council's liability for any breach of the agreement will not exceed $5000. Costs and benefits to the Palmerston North community If the connection proceeds, capacity within the Treatment Plant will be used to the benefit of properties located outside of the district. This will limit the amount of capacity available in the Treatment Plant for growth within the Palmerston North district over the next fifteen years by a small amount. The flow expected to be received as a result of any arrangement is not expected to impact upon the spare capacity of the Plant or the growth requirements for the plant as anticipated in the consented discharge volumes. Palmerston North is the closest urban centre to Longburn and will therefore receive most of the economic benefits of a revitalised Longburn site. The site at Longburn has been in disuse since the closure of the Longburn Freezing Works in It is expected that the proposed sewerage connection will facilitate the redevelopment of the site. The site has an industrial zoning and is likely to be developed for industry. Any workforce required by industry at the site will be predominantly sourced from

4 Palmerston North. Employment opportunities will increase the social and economic wellbeing of the Palmerston North community. There will be a financial costs involved in the connection of the pipeline and the Treatment Plant's receipt of waste. However, the Council is confident that these costs will be recovered through the agreement. The agreement has the following mechanisms to allow the Council to recover costs: A commercial connection fee. Treatment charges. A one off charge to recover the Council's costs in developing the agreement. The commercial connection fee is the purchase price for the spare capacity that exists at the Treatment Plant. The fee is to ensure that the capital impact of the wastewater discharge made to the Treatment Plant is recovered by the Council. The commercial connection fee is $115,500 plus GST and must be paid before the Treatment Plant receives any wastewater from the pipeline. This amount is the same amount that would be required as a development contribution under the Council's development contributions policy for the use of that part of the Treatment Plant's capacity. WESL must also pay the Council an annual treatment charge on an ongoing basis. These treatment charges will generate an annual income of $16,790 on the basis of the initial minimum discharge of 100m³ per day, increasing to $117,530 at current rates if the 700m³ per day limit is reached. It is considered that the effect of the discharges will not be able to be detected at the Treatment Plant unless a particularly strong trade waste is produced on the site. Under the agreement the Council will also recover its legal costs for the development of the agreement. Because ownership of the pipeline and its associated assets vests in the Council, the Council will incur a cost through operational maintenance and depreciation. These costs have been assessed as approximately $12,000 per year. The Council considers that all costs involved would be recovered through the agreement, with a substantial proportion of these costs recovered upfront through the commercial connection fee. The Council does not consider that Palmerston North ratepayers would bear any cost for the proposal. It is unlikely that the cost of treating the wastewater will have a noticeable impact on the operating costs of the Treatment Plant as the proposal has been developed on a cost recovery basis. Reasonably practicable options The only other reasonably practicable option available to the Council would be not to enter into an agreement with WESL for the connection of the sewerage pipeline to the Treatment Plant. If the Longburn site is unable to discharge its wastewater elsewhere, then development of the site would likely be suspended. The consequences of this for the Council would be that the city would not receive the benefit of a revitalised Longburn site or its associated employment opportunities.

5 The Treatment Plant would have unused spare capacity and the Council may not receive the benefit of utilising that spare capacity. Making a submission Submissions on the proposal are invited and must be received by the Council during the submission period which opens on Wednesday 2 July and closes at 5.00 pm on Monday 4 August Submissions must be in writing and may be delivered, posted, ed or faxed to: The Governance and Civic Team Leader City Corporate Unit, Private Bag Palmerston North City Council Palmerston North 4442 Facsimile submission@pncc.govt.nz All submissions received will be considered. Submissions should include the name and address of the person making the submission, including a daytime telephone contact number, and should state whether the submitter wishes to speak to their submission at a Council hearing. P Clifford CHIEF EXECUTIVE