One Tree Point –Ruakaka waste water treatment discussion paper

Undoubtedly one of the more significant decisions facing the new council is its level of financial commitment to infrastructure in the One Tree Point -Ruakaka area, and in particular waste water treatment.

Page 189 of the Long Term Council Community Plan 2006-2016 shows Council’s commitment to the One Tree Point -Ruakaka waste water treatment scheme to be $34.896m. The bulk of that commitment was originally timed for 2010 ($9.5m), 2011 ($12.2m) and 2012 ($12.7m) This represents approximately 80% of the total wastewater capital spending in those years and is a sizable contributor to Council’s debt position.

Since that expenditure was ratified in June of last year, there has been a dramatic reversal in the property market – something Council should not ignore.

Agents are reporting the number of property sales is down between 30% and 50% on 12 months ago, and the number of days to sell (a benchmark measure) has lengthened.

The media are now extensively reporting on the severity of the downturn. For example, the Sunday Star Times (November 4, 2007) reports the One Tree Point –Ruakaka area, “had 700 sections either recently developed or being developed in March [2007]. An additional 1600 sections are planned. [Rodney] Dickens [former ASB bank researcher and managing director of Strategic Rick Analysis] predicts the 700 sections alone should be enough to cater for a decade or more of demand from people wanting a long-term holiday home.”

Council’s own (revised) growth model is suggesting a massive over-supply of sections in the One Tree Point –Ruakaka area.  This is clearly illustrated in a chart accompanying the report (figure 1) which compares the model adopted by Council on 3 October 2007 against the revised projections. Assuming even the most optimistic population growth scenario the numbers that were expected to be achieved by 2016 will now not be achieved until 2029, and a more realistic scenario extends this beyond 2041. In other words, it is highly likely that the previous growth projections upon which the LTCCP capital spending was based, will be delayed by at least 25 years.

Page 86 of the Whangarei District Growth Model states,
“In assessing the Growth Model there does appear to be an anomaly in the data for the Marsden point – Ruakaka area. There is a significant spike between years 2001 and 2016… It is assumed that both the population and households will double in the 2001 – 2016 period. There is no evidence to support this rate of development. Forecasts of this nature will have the effect of artificially inflating the units of demand and lowering the level of development contributions levied. Then when the development does not proceed as anticipated there is significant under recovery in the development contributions levied. In addition, each development contribution paid will be significantly less than it should be.”

The report goes on to say the market is unlikely to absorb the level of development over a five year time frame. They base this on:

• The number of vacant lots that already exist now.
• The state of the coastal property market and the level of choice available.
• The unknown level of holiday homes that will be utilised as permanent residences as there owners retire.
• The unknown relationship between sub-division activity and the level of housing uptake, and
• How often sections are traded by land speculators before being built on. 

Given this new environment, it is therefore prudent for council to review its capital commitments to the One Tree Point -Ruakaka waste water project.

Impact upon infrastructure planning

This raises serious issues for the proposed One Tree Point –Ruakaka waste water treatment proposal. Should the project proceed to the proposed scale, it is highly likely that there will be significant over-capacity in the system that will last for decades, not years as was first assumed.

This poses a number of risks to council:
• The projected flow of revenue from Development Impact Fees is likely to be significantly less than projected.
• Council will in effect be financing (at its current borrowing rate of 7.5%) the surplus capacity. Assuming 50% utilisation, the interest burden on the excess capacity would be in the order of $1.3m a year.
• Council will be required to maintain the network and replace the infrastructure. This is significant. According to industry standards, the useful life of Pump Stations is 25 years, the reticulation network 50 to 80 years and treatment plants 5 to 50 years. It is therefore likely, given the new uptake forecasts, that depreciation costs will not be met by the users of the scheme.

Present capacity

The Marsden Point - Ruakaka Structure Plan adopted by Council in November 2000 summarised the existing capacity as follows,
“In Summary, sewerage disposal over the foreseeable future should not be a problem. However, it is important to undertake upgrading of the network, and treatment works, as and when required, and ensure that future residential, commercial, and industrial activity in the study area is connected to the public sewerage system…”

The report noted at that time the facility was processing 550 m3 (cubic metres) a day and could be upgraded to twice that volume “with ease”.

The NRC consent for the treatment site expired on 31 May 2005. The WDC applied for a replacement consent in 2004, but encountered difficulties.

Based on the number of subdivision consents in the process the expected demand is likely to be in the order of 2,500 m3 a day, assuming all of that capacity is built upon.  However, a more likely scenario based on the revised growth model is that actual demand will grow by about 70 m3 a year. In other words, adding a further 550 m3 of capacity to the existing plant would accommodate just under 8 years of expansion.

Issues for discussion

Clearly the revised growth model has highlighted a change to critical assumptions underlying council’s decision making on the One Tree Point –Ruakaka waste water project.

The key issue for discussion is whether the council should continue with a project on the scale originally proposed, or whether it should instead opt for a staged project to process waste as, and when, it is required.

It must be note that this paper has been compiled on publicly available information and will be updated when new information is released.