Cost of building dam soars by $87m

Proposed costs for building the Ruataniwha dam haven risen by a further $87 million.

Increased construction costs have pushed up the price of building the proposed Ruataniwha dam by $87 million.

It comes as farmers have been told they too will have to stump up more, with their capital investment costs jumping by $200 million.

Dam construction costs have increased putting the revised capital cost for the scheme at $333 million.

The regional council puts this down to several things, including the addition of another irrigation zone.

This increase would not affect the $80 million the regional council has set aside for the dam, with chairman Fenton Wilson saying the Hawke's Bay Regional Investment Company (HBRIC) would have to find any extra money it needed.

Author of the latest report, Geoff Butcher, said farmers would bear the brunt of this cost, with farm capital investment increasing to $556 million. This investment is not part of the scheme project cost. He said water charges paid by farmers and any subsequent profits they made after that had "increased enormously".

Mr Butcher said the economic impacts of the project had been mainly driven by the assumed increase in the long-term profitability of viticulture and orcharding in Central Hawke's Bay. HBRIC said that had driven up costs for farmers.

However, councillor Peter Beaven said the more pressing issue was the viability of such land use. Mr Beaven said frost was a risk to vines in Central Hawke's Bay.

"And while there continues to be a whole lot of land available here on the Heretaunga plains for these purposes, nobody is going to be planting down there."

Mr Beaven had asked around and did not know anyone planning on putting trees or grape vines there in the next 10 years.

HBRIC chief executive Andrew Newman said these on-farm development costs were an investment in the farming operation and would also inject funds back into the local community through increased spending by farmers.

Additional spending by farmers and other households as a direct result of the scheme was expected to boost regional GDP by $380 million a year.

The updated report suggests in the first three years, while the scheme is being built, 1400 jobs will be created, including 400 in the construction sector.

Long term, once farms reach full production, around 1300 farming jobs will be created, along with a further 2200 jobs in the processing sector and general off-farm employment.

Councillor Tom Belford questioned the increased cost of the project at yesterday's meeting of the regional council's corporate and strategic committee: "Are you saying that the all-in costs of this project are $333 million to build the dam and the pipes, $16 million of development costs, and $556 million of on-farm investment, which by my calculator adds up to $905 million - is that correct?"

Mr Butcher replied: "If I put the numbers on the table, yes, that is what I understand them to be."

Mr Wilson said the increase should be looked at as an investment, not a cost. "The values have changed - but everyone is talking about cost, but it is actually inward investment into our region, surely, because there is a return on it," he said.

Water users have until next Monday (April 18) to sign up to the scheme.