Keywords: Environment & Resources; Maori;
My name is Brian Henry Easton. I am an independent scholar with particular expertise in economics, social statistics and public policy analysis. I hold a D.Sc, from the University of Canterbury and am an adjunct professor at the Institute of Public Policy at the Auckland University of Technology.
Over the last 40 odd years I have worked in a number of areas pertinent to this evidence, including project evaluation, regional planning, and resource economics and I have also provided evidence and advice in a number of Waitangi Tribunal and similar claims.
I agree to standards set down in the Environmental Court code of conduct for expert witnesses. I am also a Fellow of the Royal Statistical Society and a Member of the Royal Society of New Zealand, both of which have their own codes of conduct, consistent with the Court’s code, and to which I also abide.
I have been asked by Ngati Rangiwewehi to assist the Court by presenting evidence which will enable the better evaluation of the alternatives before it, in regard to the supply of water to the Rotorua area.
In order to do this, I have examined a number of other briefs of evidence put before the Court, and will source the ones I use, as I proceed.
My basic conclusion is that it is not in the interests of the citizens of Rotorua to draw water from Taniwha Springs. A better course would be to source the required water from bores. The critical reason for the conclusion is that the potential of Taniwha Springs for premium tourist purposes far exceeds the value of sourcing water from it.
The Issue Under Consideration
My understanding of the issue before the Court is, in brief, whether Rotorua District Council should have a consent to increase the draw-off of water from Taniwha Springs for distribution to the households and businesses of the western supply area Rotorua, or whether it should source all its water requirements from groundwater, that is from bores.
Grievance and Redress Issues
I observe that in the 1960s an acre which surrounds the springs were taken by the predecessor of the district council under the Public Works Act., and note that the Waitangi Tribunal concluded that some of the things which had happened in regard to the taking of Taniwha Springs were inconsistent with the principles of the Treaty of Waitangi, leading to serious prejudice to Ngati Rangiwewehi. (Central North island Waitangi Tribunal report, Volume III , p.506-507, 510) It is dealing here specifically with the Resource Management Act, but the clear implication of its discussion is that Ngati Rangiwewehi are deserving of some redress.
My analysis will not deal directly with the issue of such redress. But I will return to the issue at the end, and collude that the best economic advice also contributes to a redress path.
Siritual Value Issues
I am also aware of the extensive evidence of many members of Ngati Rangiwewehi which describes how the use of springs for domestic water reticulation led to a marked deterioration in the environmental quality of the area surrounding and including the springs and how it infringes spiritual values they whole dear. Again I will return to this issue after I conclude the economic analysis. .
The Economic Value of the Spring Water to the Citizens of Rotorua
The evidence of Mr Anthony Bryce, environmental engineer of the Tonkin and Taylor enables an economist to value the water from the springs in the following indirect manner.
In the following I have taken his assumption of a required flow is 6000m3/day. In which case the cost of the two bore solution (including bore investigation) is estimated to be $1,038.000. The cost of the same supply from Taniwha Springs $545,000. The difference is $493,000. (para 57)
(I note that Mr Bryce suggests that only one bore may be necessary, in which case the difference is $27,000. (para 57) Here, as throughout my evidence, I make the assumption least favourable to the ground water option, and so focus on the more expensive two bore solution. Like Mr Bryce I have also ignored the possibility that the existing pumps at Taniwha Springs may need to be replaced (para 54). )
The value to Rotorua of using the springs as a source for its water involves avoiding a capital outlay saving of $493,000 (in the two bore solution). Mr Bryce suggests that the operating costs for both options (springs or groundwater) would be ‘similar’. (para 58).
Mr Bryce calculates that the annual cost to the people of Rotorua would be $46,184 using a 8 percent p.a. discount rate, and depreciating over 25 years. (para 59) Perhaps I would use a slightly higher discount rate (10 percent p.a. is commonly used for economic evaluations) and a straight line amortisation for the depreciation costs. Caution too, would involve putting in a small margin for higher operating costs. That could give a cost as high as $70,000 a year – about $1.10 a resident, or less than a third of a cent a day.
My purpose here is not to criticise Mr Bryce’s figures, but to make the point that more conservative estimates than his best estimate still results in a very small saving from using spring water instead of the ground water. In the following I shall use Mr Bryce’s estimate of $46,184 p.a., in order to reduce confusion. However, a higher estimate gives a similar conclusion.
Mr Bryce’s $46,178 p.a. has the following meaning. It is the value to Rotorua of access to the spring water to draw off 6000m3/day, instead of obtaining the same water from bores.
This assumes that the Taniwha Springs are of no alterative use to Rotorua. However, in the longer run – once the environmental integrity of the springs are restored – they are a potential tourist attraction. What is the value to Rotorua of such an attraction?
The Economic Value of the Springs as a Premium Tourist Site to the Citizens of Rotorua
Valuing Taniwha Springs as a tourist attraction to Rotorua is not an easy. In the course of preparing this evidence I looked at the evidence of such experts as Dr Marian Mare and and Of Dr Mare, Tai Eru and Trevor Maxwell, at at various material published by the Ministry of Tourism on the prospects for cultural tourism and in the Rotorua District, and also at Destination Rotorua’s Ten Year Plan.
However the evidence which best captures the best use potential of the springs area, and hence its economic value, is that of Mr Wetini Mitai-Ngatai.
It relates how in 2005 Mr Wetini Mitai-Ngatai seized the opportunity to turn a run-down site known as Fairy Springs into a thriving business. His affidavit does not provide the complete story, but there is one salient figure which indicates the potential value of cold water springs of high environmental quality as a tourist attraction.
In the short period – lees than three years – of his stewardship, Mr Mitai-Ngatai has built his Mitai (previously Fairy) Springs business up to an annual turnover of $3,000,000. He says he expects to increase the turnover further, but I shall use this figure as a conservative estimate of the potential of Taniwha Springs.
This assessment need not assume that such a turnover is immediately realisable. Rather, at some stage in the future, Fairy Springs and other similar sites (including Rainbow Springs) will reach their full capacity.
The Ministry of Tourism’s projects that total visitor nights in Rotorua will increase from 3.43m in 2006 to 4.02m in 2013, an increase of 590,000 or 1600 tourists on an average night. (http://www.tourismresearch.govt.nz/RegionalData/North+Island/Rotorua+RTO/) In addition there will be day trippers.
That means the region has to create over the next seven years sufficient activities each day to keep an additional 1600 tourists and more interested entertained, above that which it currently provides (as well as provide their food and accommodation). If it fails to do this the official projections of tourist numbers will be too optimistic. If it does better, tourist numbers will grow faster.
Mitai Springs demonstrates that in due course Taniwha Springs has the potential to contribute to those additional events. Its possible $3m turnover would be small in contrast to the official estimates which suggest that total visitor expenditure in Rotorua will rise from $469.7m in 2006 to $698.4m in 2013 – an increase of 48.7% ($228.7m) or 5.8% per annum. A thriving Taniwha Springs would fill but 1.3 percent of the gap.
In an important way, the $3m potential annual turnover is an underestimate. Adding to the additional expenditure for accommodation, food and other incidentals might double the tourist turnover to the region to $6m a year that a site like a developed Taniwha Springs could generate.
The $6m annual boost to Rotorua tourism would generate further turnover from the regional ‘multiplier’ effects of the spending of those employed directly or servicing the tourist industry. A conservative multiplier would be 2, which would suggest that Taniwha Springs has the potential to generate an additional turnover of at least $12m a year in the Rotorua region if it can be developed as effectively as Fairy Springs.
However I shall not use the $12m figure, because I want to compare two businesses. In particular the options before the people of Rotorua, as being considered by the Court, is to use Taniwha Springs for a business to produce reticulated water for a cost saving of $46.000-70,000 a year and a premium tourist attraction which has the potential to generate a direct turnover of perhaps $6m in the region.
In the course of making these estimates, I have made various simplifications, in order avoid complicating the presentation. I also accept that the two numbers are not quite comparable. But I am confident that the economic benefit difference between the two propositions is so great, that any refinements would lead to estimates which would still strongly support the conclusion that the better economic use for a site such as Taniwha Springs is a premium tourist attraction in comparison to using it for reticulated water supply.
If this is not now intuitively obvious, consider the following. Suppose that the Rotorua District Council could reduce its energy costs by $70,000 a year, by closing down Whakarewarewa as it is today, and piping the hot water to other locations. Would anyone seriously support suggest a proposal?
The Rotorua District Council should take some comfort from this conclusion too. While sourcing the water from Taniwha Springs will save the Council around $46,000-70,000 a year, the development of Taniwha Springs, generating a business activities of an additional $6m a year plus the multiplier effects in additional regional activity, is likely to generate far more rates revenue than the cost savings from using the spring water.
The above estimates do not make any allowance for the spiritual values of Taniwha Springs to Ngati Rangiwewehi. It is a clear from the evidence that the use of the springs as a water source has severely damaged those spiritual values. Ceasing to draw water from the spring would contribute to their restoration. However, there is no direct way that economics can value these spiritual values. Suppose, however, that it was the equivalent of $X p.a. (if it is possible to establish a monetary equivalence of spiritual values). Then the value to Rotorua of using the ground water source in preference to the springs would be $(46,000-X) a year (using Mr Bryce’s estimate). Were $X to exceed $46,000, then it would be in the interests of Rotorua to use the ground water source, even if there were no tourist potential in the spring.
Redress of Grievances
Earlier it was noted that the Waitangi Tribunal had found that there had been serious prejudice to Ngati Rangiwewehi in regard to Taniwha Springs and that they are deserving of some redress. The ceasing of sourcing water from the springs and instead sourcing it from ground water, will simplify the terms of the redress, since it leaves open the possibility of returning the acre taken in the 1960s to Ngati Rangiwewehi. It is not my intention to argue that the return of the land should be a part of the redress (although it may make sense to reunite the land for tourist development purposes), but to point out that the groundwater sourcing is not only the better option in economic terms but it leaves the redress option open.
(In the above calculations I have not included as a cost the return of the land nor any necessary remediation. That is because such costs will have to be incurred as a part of the redress, irrespective of whether the urban water supply comes from the springs or the groundwater).
The purpose of my submission is to assist the Court by providing an economic evaluation of the broad options it faces.
What I have established that using the Taniwha Springs resource as a premium tourist attraction is much better economic use than using it as a source of water for urban reticulation. While the estimates of the value of each option are subject to a margin for error, the difference between them is such that I am confident of my conclusion.
Were I advising the Rotorua District Council and the people of Rotorua, I would unequivocally recommend that they phase out their use of Taniwha Springs as a source of reticulated water in favour of a ground water scheme, and that they take steps to make enable the springs and its surroundings to develop into the premier tourist attraction of which it is capable.
If this also contributes to settling the grievance of the Ngati Rangiwewehi in regard to their acknowledge grievance over Taniwha Springs, the people of Rotorua will be twice blessed.