Jane JonesRUAPEHU MOUNTAIN CLUBS ASSOCIATION (INC.)
Address: 6 Harvest Court,
PARAPARAUMU
Secretary Treasurer: John Rockell
Phone 04 902 4415
Fax 04 902 4413
E-mail: rockell@paradise.net.nz
12 April 2001
To Member Clubs Newsletter 22 Sewerage Scheme. Newsletter 21 reported how DoC and RMCA had begun to look at ways to finance the scheme and also reduce the overall cost after Ruapehu District Council had decided it could not afford to finance the scheme. The Project Management Group, and particularly RMCA, was also very unsatisfied with the estimated cost $5.3 million for constructing a sewerage scheme which included piping all effluent down to a treatment site beyond the Park boundaries. DoC reviewed its position and came up with a proposal to enlarge the Whakapapa Treatment Plant and discharge treated effluent near the Golf Course – with a substantial saving in costs. You will remember also that one of RMCA’s concerns had been the high engineering design and consultancy costs which over 7 years had amounted to $508,000 and which RDC had wanted to transfer to the scheme. RMCA was, and has remained, firmly of the view that until the matter is resolved satisfactorily DoC should not attempt to bill clubs and clubs should not make any such payments. By mid-September 2000 RDC and DoC staff had agreed on a plan to reduce the $508,000 costs still disputed. Both agreed that $377,000 could reasonably be allocated to the revised scheme. Of the remaining $131,000 RDC would accept responsibility for $55,000 leaving $76,000. DoC &RDC would each accept responsibility equally for this $76,000 i.e.$38,000 each. At this point the revised scheme was estimated to cost: Construction costs $3,227,895 Consultant and Engineering fees Accepted to August 2000 377,105 Fees from September 2000 Treatment Plant Design 60,000 Resource Consents 10,000 Contract Management 75,000 145,000 522,105Total Cost up to Commissioning $3,750,000 By the time of the RMCA AGM in October, DoC had decided it would guarantee the scheme finance and would accept treatment and dispersal within the park. By October the plan was that a Service Provider (SP) would be appointed to design, construct and operate the scheme. The SP could be RDC, a Whakapapa Utilities Co. or some other body or joint venture. RMCA Council had a preference for RDC to be the SP but would want to see some safeguards put in place to ensure the scheme would continue to operate to give the major benefit to scheme users. DoC would guarantee to buy the service developed by the SP and this would enable the SP to raise development capital. DoC would sell the service to users. At the RMCA AGM last October members were told the total cost of design and construction was currently estimated to be $3.75 million, equating to a lump sum of about $40,000 per club added to which there would be an annual operating cost of about $800 for each lodge (32+2 beds). An alternative would see annual charges for the life of the scheme, 30 + 30 years, of about $4,500 for each lodge. Construction was planned for the summer of 2002-2003 with the system becoming operational in September 2003 Discussion at the AGM, initially questioned whether the scheme should not be scrapped, or at least deferred. However, Members generally agreed that the existing arrangement of septic tanks, with disposal of effluent on the mountain, was unacceptable culturally and physically in this World Heritage park. Additionally, DoC requires a reticulated system with land based disposal. DoC licences all of the club hut sites and the licences require huts to be connected to a reticulated system when it is constructed. Delays since the scheme was first agreed upon have been largely unavoidable, but have been long and it is likely that the Regional Council will not brook further delay and will certainly battle any would-be non joiner which attempts to obtain a resource consent to discharge on the mountain slopes. Not discussed at the AGM was the RDC/DoC agreement on their absorption of $131,000 engineering design and consultancy costs. The intention to seek a Service Provider was only alluded to briefly. RMCA Council had hoped to be able to give rather more detail about these and other matters but were bound by confidentiality requirements of RDC. After our request and some delay, DoC has now produced a briefing paper. Some of the paper repeats information given above, but because it adds to our information and gives the DoC perspective I have included the full text of the briefing and the Critical Path diagram. Early next month a workshop is to be held and hopefully more information will then be made available for clubs. John Rockell Secretary Treasurer.
File : PLA 028 9/3/2001 Briefing For Public Use Whakapapa Iwikau Sewage Scheme 9 March Meeting Whakapapa Introduction Attached for your information is a revised timeline [not included – JDR] and critical path for the above project. This shows that the project has now formally come ‘out of abeyance’. The decision to do this was made by the Department in consultation Ruapehu District Council (RDC) and representatives of the contributors on the previous Project Management Group (PMG) in March of last year. The reasons for this decision were that the Department had been investigating a number of revised options for the scheme. The option that was under investigation was the upgrading of the existing Whakapapa Village treatment plant to handle the addition of Iwikau flows, then discharging of treated effluent to ground on the golf course by either deep bores or sub surface drains. The investigation showed that this was both viable and possible via way of shallow sub surface irrigation and that the best site for this is to the north between the golf course and the stream. This option reduces the all up capital cost of the project from and estimated $5.5 million to a revised estimate of $3.75 million. (a copy of the revised project report and costings is available [from DoC] on request). This revised project was put to the contributor representatives in March 00 and their support for the project to go forward was received. The Department has now formally decided that the proposed scheme will proceed and has mapped out the steps to take this forward to completion. Resolution of fees to date matter As you are aware there has been a matter of a significant sum of fees associated with the project to date (from 1995 to 1998). This sum was in the order of $508k. The sum was mainly engineering consultants and associated professional services costs for working on the scheme since 1995. This sum has been held by the RDC and was being debt funded by them. This sum has been in discussion between the parties RDC / DoC and the contributor group (PMG) for the past two years. There has been a number of concerns about this sum and the associated responsibility and liability for it. There has also been some concerns as to the value of the work done for this sum. During 00, DoC and RDC entered into a full review and analysis of this sum and the work done pre the agreement of the revised scheme to proceed. This review was to determine the value of the work done to date, what should and could be transferred to the new scheme (i.e. what components were associated with the above Whakapapa village and hence were relevant to the revised scheme) along with the intellectual property rights as to the work completed to date. There was also the need to look at what was not necessary and that needed to be written off. This review was very fruitful and it was determined that the majority of the work done to date had value to the revised scheme. The value of that aspect was set at $377k. The remaining $131k went into a more formal dispute procedure between DoC and RDC. A full and final settlement was reached between the parties in August of 00 and DoC agreed to pay RDC a sum of $37k. The remainder has been either absorbed by RDC and written off. This settlement now ends this component of the project and this allows the project and the parties to move forward. It is also worth noting that the sum of $377k being the value of work done that can be transferred to the revised scheme is built into the revised total cost estimate of the scheme @ $3.75 m. MOA DoC / RDC As part of the settlement of the fees to date matter the dept and RDC have entered into a MOA or Heads of Agreement to ensure that there were very clear lines of responsibility, liability and communication between the parties for the future of the project. This MOA has allowed the dept and RDC to agree on the holding of the $377 k until a service provider is appointed by the dept, but that service interest will accumulate on that sum from 1/9/00 until the point that it is transferred to the service provider. Within the MOA the dept has agreed to obtain all the necessary resource consents for the scheme and to complete all the necessary consultation with iwi and the community on the project. The MOA will terminate when a service provider is appointed and when the contract for service is in place. Proposed Service Provider The dept has been seeking a suitable service provider for the scheme. This body will take over the work completed to date and will then engage engineers to complete the design of the replacement treatment plant at Whakapapa, then build, own and operate the scheme. All of this will be done under a contract for service from the dept. The dept will remain in the role of being the principal and will then administer the scheme and cost apportionment both capital and operating via the community service cost centre and levies to all the contributors. The service provider will be required to have a project control group formed of contributor representatives who will be involved in the project management. (the request for service provision document is available for viewing on request). RDC and the contributor group, loosely known as Whakapapa Utilities (an informal arrangement between RMCA and RAL) were asked for submission proposals for service provision. After some internal discussion between RAL and RMCA it was decided that they did not want to submit a proposal. Both RAL and RMCA subsequently endorsed RDC as the preferred service provider. A draft proposal has been received from RDC. This is being finalised by RDC at the moment and it will be evaluated by the dept with the assistance of a consultant Ian Smith of Taupo and input from Brian Anderson and Alan Thompson. (refer timeline for proposed completion of this component of the project) Interim Interest Costs As noted, between the settlement of the fees to date matter in Aug 00 and the setting up of the service provider RDC are holding the sum of $377k and debt funding this until it can be transferred to the service provider. It has been agreed DoC/RDC, that a reasonable service interest cost is legitimately able to be charged by RDC from 1/9/00 to the point when the service provider is transferred this sum and when they will have the financial facilities in place to
accept that sum, including the instruments between it’s self and the department (the contract for service) to recover their costs on an annual basis. RDC have advised that the interest rate calculated be in the order of 8.2 % per annum. It is expected that interest costs in the order of $19k will arise between 1/9/00 and 30/6/01. A further $26k between 1/7/01 and 30/6/02. 2001 2002 BP Year Interest Costs As noted above approximately $45k interest costs (19+26) will come to charge over the next financial year for the 21 month period 1/9/00 to 30/6/2002. Resource Consents The department is now in the process of planning for and will make application for the necessary resource consents for this project. The costs of this being approximately $25k (application fees and hearing costs) will be required to be recovered during the coming financial year. The department is going to cover all staff time and legal costs out of it’s baseline funding (this is estimated at over $100k). It is also worth noting that all staff time to date for the project [has] not been nor is to be recovered. The department is absorbing these costs and contributing the[m] to the project. 2002 2003 BP Year As with 2001 2002 the only cost expected to come to charge is the interest costs on the $377k. By this time this sum will have been transferred to the service provider but it will still need to be serviced. The project is scheduled for completion in Sept 2003 and commissioned. At that point the capital and operational costs including debt-servicing mechanisms will be in place. Estimates of these annual costs and the apportionment’s will be given to all contributors through the 2001/2002-year. (preliminary costs apportionments are already available in the Becca Feb 2000 Revised Project Proposal Report) This will allow forward budgeting for all contributors. Mark Davies Ruapehu Area Manager and Project Manager Whakapapap Iwikau Sewage Project