Options to fund River Scheme flood damage

Transcription

1 File Reference: Significance of Decision: Receives Only - No Decisions Report To: Operations, Monitoring and Regulation Committee Meeting Date: 3 May 2011 Report From: Ken Tarboton, Group Manager Environmental Hazards Options to fund River Scheme flood Executive Summary River schemes across the Bay of Plenty region sustained severe following severe storms in August 2010, and again in January A estimate of $10.5 million was reported to the 23 March 2011 Operations, Monitoring and Regulation Committee. Costs to repair this flood and ensure the future sustainability of the river schemes will affect Scheme Targeted s in 2011/ and in the Ten Year Plan. At the time the Bay of Plenty Regional Council s Draft Annual Plan 2011/ went to print, flood was still being assessed. Hence the Draft Annual Plan indicated that adjustments to the 2011/ budget would be made following discussion with scheme liaison groups and during the Annual Plan process. Information provided to and discussed with river scheme liaison groups is summarised in this report. A recommendation of the report on flood costs was that staff report to Council in more depth during the Annual Plan consultation process on funding options to carry out the remaining flood repair works programmed for 2011/. This report provides information on options to fund the river scheme flood with indicative increases for consideration by Council in deliberations on the draft Annual Plan. River scheme liaison groups have indicated that they will make a submission to the Draft Annual Plan based on the indicative s and options presented herein. 1 Recommendations That the Operations, Monitoring and Regulation Committee under its delegated authority: 1 Receives the report, Options to fund River Scheme flood. 2 Notes that indicative increases are significant and that options have been presented that could provide some relief to payers. 3 Notes that final scheme targeted s will be based on decisions made during the Annual Plan consultation process. 33

2 Options to fund River Scheme flood 2 from August 2010 and January 2011 floods River schemes across the Bay of Plenty region sustained severe following severe storms in August 2010, and again in January By the end of 2010 good progress had been made on flood repairs with $1.1 million spent on repairs exhausting flood reserves for most of the schemes. High flows in late December and floods in January, previously reported indicated that a further $9.4 million was required to repair all the remaining following the January 2011 floods, in addition to the $1.1million already spent, bringing the total flood since August 2010 to $10.5 Million. 3 Liaison group discussion Meetings were held with river scheme liaison groups in March and April to discuss the flood s. Schemes were presented with information showing indicative increases that would be incurred, A, if all flood repairs were loan funded (at 5% interest with repayment over 20 years) and B if the contribution to the annual and five year flood reserves were approximately doubled in addition to loan funding the flood repairs. Table 1 below summarises indicative increases under these scenarios. Table 1. Indicative increases if all flood s were loan funded (A) and with increased contribution to reserves (B) Scheme Debt as of 31 Dec 2010 Scheme annual opex Remaining flood after January 2011 % increase to opex scenario A % increase to opex scenario B Kaituna 1,464,874 1,505,000 2,326,000 15% 25% Rangitāiki-Tarawera 6,926,131 1,607,000 2,788,000 17% 26% Whakatāne-Waimana 4,692,765 1,387,000 2,386,000 15% 25% Waioeka-Otatra 1,557, ,000 1,366,000 22% 36% Rangitāiki Drainage 791, ,000 8% 11% Totals 14,641,455 9,366,000 Notes: Scenario A: All flood repairs loan funded over 20 years at 5% Scenario B: A plus contribution to flood reserves doubled Operating expenses are funded 80% from targeted s and 20% from general funds All schemes recognised the need to undertake the flood repair work however indicated that the indicative increases were untenable to the schemes and would not be affordable. While increased payments to reserves were desirable to make schemes more sustainable long term, the liaison groups indicated that increasing contributions to flood reserves would not be affordable while servicing new flood debt on top of existing scheme debt. The approximate doubling of the contribution to flood reserves increased s by approximately 10% for each scheme. Further analysis is required to determine the appropriate contribution to flood reserves in order for schemes to be sustainable long term. River scheme liaison groups discussed the options of prioritising flood repair works or not doing repairs in some areas such as the upper sections of rivers. It was recognised 34

3 Options to fund River Scheme flood that in the end the same work would need to be done. While work should be done in priority order all works should be done as soon as possible. The January 2011 floods following the August 2010 floods showed the detrimental effect of having not repaired from the August 2010 floods, which resulted in substantially greater from the January 2011 floods. Scheme liaison groups requested a joint meeting with representatives from each liaison group to discuss a making a joint submission on the draft Annual Plan. The joint liaison group representatives requested that the opex/capex split of the flood work be obtained and considered in indicative scheme costs. 4 repair assumptions and current policy Current policy is the where an existing asset has been d it is assumed that it would be replaced like with like and the expenditure is treated as opex. Where an existing asset requires replacement with a more robust asset, to prevent future, the betterment component is treated as capex and the like with like portion treated as opex. Where no asset exists and a new asset is required to be constructed then the expenditure is treated as capex. Based on this, the total estimated has been divided into opex and capex for each scheme in Table 2 below. Current policy is also that capital expenditure for schemes is raised as loans with the increased debt for the loans serviced as part of the operating expenditure. Given that the schemes already have considerable debt the additional loans will significantly increase the level of debt for each scheme. Table 2. Remaining flood after January 2011 sepad into operational expenditure and capital expenditure. Scheme Opex Capex Percent of opex Percent of capex Kaituna 2,326,000 72,446 2,253,554 3% 97% Rangataiki-Tarawera 2,788, ,258 1,997,742 28% 72% Whakatāne-Waimana 2,386, ,407 2,126,593 11% 89% Waioeka-Otara 1,366, , ,307 41% 59% Rangataiki Drainage 500, , ,000 25% 75% Totals 9,366,000 1,806,905 7,559,195 Based on the above assumptions flood s treated as opex will impact s in while loans raised to cover the capex works will be spread over the length of the loan starting in (assumed to be 20 years at 5% interest ). has the potential to significantly impact the targeted river scheme s as shown in Table 3 and Figure 1 below. The table shows the increase in operating expenses and subsequently targeted s for the 2011/ year of as much as 100% for the Waioeka-Otara Scheme where a large proportion (41%) of was to existing infrastructure while the increase for the Kaituna Scheme is significantly less at 13% where only (3%) was to existing infrastructure. Following the initial increase to opex costs in, the cost of servicing debt to pay for the capital expenditure continues for the length of the loan (20 years). Scheme cost increases in 2013 range from 12% to 50% above 2011 expenditure. Note that 35

4 Options to fund River Scheme flood increased contributions to flood reserves have not been included in either or 2013 costs. Table 3. Scheme operating expenditure indicating dollar and percentage increases to account for both opex repairs and increased debt servicing. Scheme 2011 Scheme opex Opex in draft Annual Plan Opex including flood % Above 2011 opex 2013 Opex including cost of flood debt % Above 2011 opex Kaituna 1,505,000 1,445,000 1,698,000 13% 1,739,000 16% Rangataiki-Tarawera 1,607,000 1,663,000 2,874,000 79% 2,403,000 50% Whakatāne- 1,387,000 1,414,000 1,951,000 41% 1,772,000 28% Waimana Waioeka-Otara 705, ,000 1,408, % 914,000 30% Rangataiki Drainage 791, , ,000 21% 884,000 12% Notes: Opex includes once-off opex cost plus cost to service debt on capex over 20 years at 5% 2013 Opex include cost to service debt on capex over 20 years at 5% plus other debt from planned capital works Figure 1. Impact of flood costs on projected river scheme operating expenditure for and 2013 repair cost impact on rivers scheme operating expenditure $3,000 $2,500 Thousands Cost of increased Opex Cost of Increased Debt Budgeted Expenditure $2,000 $1,500 $1,000 $500 $ Budget DAP TYP Budget DAP TYP Budget DAP TYP Budget DAP TYP Budget DAP TYP + Kaituna Rangitaiki-Tarawera Whakatane-Waimana Waioeka-Otara Rangitaiki Drainage Key: TYP = Ten Year Plan DAP = Draft Annual Plan Note: Cost estimates in the figure do not include any increased contribution to flood reserves 36

5 Options to fund River Scheme flood 5 Targeted s distribution and impacts The distribution of payers classes contributing to the targeted s per each scheme is shown in Appendix 1. The major contributions for each scheme are the protected urban areas and the protected floodplains (A class) reflecting the greatest beneficiaries from the schemes. The urban contribution from the Ōpōtiki urban area to the Waioeka-Otara Scheme is a particularly high contribution of 64% of the targeted. Targeted increases to fund flood will hence result in the greatest impact of the increased to targeted payers in the protected floodplains and urban areas. Impacts on Targeted Rural Rates, in dollar terms for a 135 ha property in the protected floodplains are shown for the 2011/ year in Table 4. Impacts on targeted urban roles for a 1000 square meter property in the protected urban areas are shown for the 2011/ year in Table 5. The flood results in significant dollar increases in s to both the rural and urban areas. Table 4 Impact of repair costs on typical rural s Impact on Targeted Rural Rates for Averge 135 ha 2010/11 Draft Annual Plan Draft Annual Plan + Dollar increase above 2010/2011 % increase above 2010/2011 Lower Kaituna (Class A1P) 19,710 18,876 22,704 2,994 15% Rangitaiki-Tarawera (Class A1) 20,215 21,419 27,155 6,940 34% Whakatane-Waimana (Class A1). 20,968 21,562 27,498 6,530 31% Waioeka-Otara (Class A1A) 21,380 23,001 42,046 20,666 97% Table 5: Impact repair costs on typical targeted urban s for 1000 square m property Urban River Scheme s per 1000 sm property Kaituna: Te Puke Urban (Class TP1) Kaituna: Rotorua Urban (Class R03) Rangitaiki-Tarawera: Edgecumbe Urban (Class U1) Whakatane-Waimana: Whakatane Urban (Class U1). Waioeka-Otara: Opotiki Urban (Class U1R) 2010/11 Budget Draft Annual Plan Draft Annual Plan + Dollar increase above 2010/2011 % increase above 2010/ % % % % % 37

6 Options to fund River Scheme flood 6 Analysis of options Six options to reduce the burden on the targeted payers are considered and discussed below. These include different options for undertaking the works to repair the flood and also different funding options. These are provided to Council for informational purposes for consideration in setting s during the Annual Plan process. Option 1. Prioritise and spread the work. In the end the same work will need to be done. Prioritisation could delay funding the works but puts the community at greater risk while repairs remain undone. The January 2011 floods showed the detrimental effect of having s that had not been repaired, resulting in substantially greater in the long run. All river scheme liaison groups recognised the need to undertake the repairs as soon as possible. Option 2. Reduce the level of service. Decisions could be made to reduce the level of service in some areas by not undertaking erosion repair works in these areas. Liaison group members opposed this. It would require a re rating of the scheme favouring some parts. Option 3. Change the rating contribution. Currently schemes are funded 80% from targeted s and 20% from general funds. This ratio could be reviewed along with consideration of other target distributions for the Ten Year Plan. This could address the heavy burden on some communities such as Opotiki and Edgecumbe, Option 4. Consider disaster relief grants. Disaster relief grants could be made based on the significant flood sustained throughout the region. Council could consider providing disaster relief on all or parts of the increased opex as a result of the flood or could consider funding all or parts of the flood capital expenditure. Option 5. Spread recovery of operational expenditure from flood. The recovery of the operational expenditure to fund flood repairs in could be spread over a 5 to 10 year period. This would reduce the significant s increase in. Option 6. Interest free loan for a period. Interest payments on the capex portion of loans raised to fund flood repairs could be withheld for a period of 5 to 10 years. This would result in real gains to the schemes with Council carrying the costs of interest on new flood related scheme debt. Financial modelling of the options 3, 5 and 6 would need to be undertaken to determine the impacts of these actions on targeted s. 38

7 $B OPRCRi versc heme $ Options to fund River Scheme flood 7 Financial Implications Current Budget Available funds in the current budget, including flood reserves and the annual flood repair budget have already been depleted in order undertake repairs following the August 2010 floods and repairs authorised to be undertaken up to 30 June 2011., Future Implications Future budget implications are significant. Without Council intervention to provide disaster relief or defer interest repayments, s will rise above the 2011 levels by between 13% and 100% for the schemes in. From 2013 for most schemes s are less than the but still significantly higher than in 2011.][- Ten Year / Annual Plan Implications Ten year Plan implications will depend on financial options selected in the Annual Plan process and possible consideration and adoption of other measures such as distribution adjustments prior to approval of the next Ten Year Plan. More realistic flood reserve contributions need to be determined and included in the Ten Year Plan. Bruce Crabbe Operations Manager - Rivers & Drainage for Group Manager Environmental Hazards 21 April

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9 Appendix

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11 Objective ID - A /04/2011 BOPRC River Schemes Targeted Rates Distribution Appendix 1 Whakatāne-Waimana Rivers Scheme Rangitāiki-Tarawera Rivers Scheme Waioeka-Otara Rivers Scheme Kaituna River Scheme Targeted Rates Percentage of Targeted Rate Targeted Rates Percentage of Targeted Rate Targeted Rates Percentage of Targeted Rate Targeted Rates Percentage of Targeted Rate A Class 37.5% A Class 47.6% A Class 28.2% A Class 41.5% B Class 12.0% B Class 16.8% B Class 1.0% B Class 4.7% C Class 8.1% C Class 15.8% C Class 6.8% C Class 13.9% Urban 42.4% Urban 19.8% Urban 64.0% R Class 35.4% Total Targeted Rates 100.0% Total Targeted Rates 100.0% Total Targeted Rates 100.0% TP Class 4.5% Total Targeted Rates 100.0% Notes: Notes: Notes: Notes: 1 - Urban - Whakatāne Urban area 1 - Urban Class includes Edgecumbe (10%), Te Teko (0.5%), 1 - Urban Class - Ōpōtiki Township 1 - R Class - Rotorua urban area 2 - A Class - Protected plains Matatā/Kawerau/Murapara (9%) and Okereka/Tarawera (0.8%) 2 - A Class - Protected Ōpōtiki Plains area 2 - TP Class - Te Puke urban area 3 - B Class - Valley floor areas upstream of stopbanking 2 - A Class comprises Rangitāiki Plains 3 - B Class - Unprotected areas alongside the river 3 - A Class - The Kaituna Basin 4 - C Class - Remaining hill catchments outside of classes A & B 3 - B Class comprises Galatea and Waiohau Plains 4 - C Class - Remaining undulating hill catchment 4 - B Class - Undulating land adjacent and south of the Kaituna Basin 4 - C Class comprises the wider hill catchments outside of classes A & B 5 - C Class - The wider hill catchments outside of groups A & B * Total funds available to the Scheme comprise the targeted plus 20% general fund contribution Whakatāne-Waimana River Scheme Targeted Rates Distribution Rangitāiki-Tarawera Rivers Scheme Targeted Rates Distribution Waioeka-Otara Rivers Scheme Targeted Rates Distribution Kaituna Rivers Scheme Targeted Rates Distribution TP Class 4.5% Urban 19.8% A Class 28.2% A Class 37.5% Urban 42.4% A Class 47.6% R Class 35.4% A Class 41.5% C Class 15.8% B Class 1.0% Urban 64.0% C Class 6.8% C Class 8.1% B Class 12.0% B Class 16.8% C Class 13.9% B Class 4.7% CopyofBOPRCRiverSche

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