Central Otago Mayor Malcolm Macpherson and Alexandra businessman Russell Ibbotson yesterday accused the Department of Conservation (Doc) of extortion over a disputed $100,000 bill.
The Doc charge was to allow an easement for water underneath the Otago Central Rail Trail.
The 150mm water main services the Molyneux Estate subdivision, in Alexandra.
Doc says it has endeavoured to resolve the matter for two years but has been unsuccessful and has now instructed the Crown solicitor to take "appropriate legal action" to recover the debt.
Mr Ibbotson, an accountant and director of developer Molyneux Estate Ltd, told yesterday's Otago Conservation Board meeting in Alexandra that an independent fair market valuation by one of the South Island's most experienced valuers had assessed a market value fee for the easement of $5500.
He told the meeting the charge was exorbitant, morally and ethically unacceptable and showed gross unreasonableness.
"There is no justification for Doc to act in a manner contrary to other government departments, in using duress, exploitation and even extortion and blackmail to unfairly and unreasonably extract unjustifiably large amounts of money that does not reflect a fair market outcome," he said.
The new pipeline enabled the upgrade of infrastructure for services in Alexandra as well as completing a ring effect for enhancing water pressure and firefighting standards and allowed the council to create up to 700 sections for the town's development, Mr Ibbotson said.
Doc had failed to adhere to its standard operating procedures, which provided for a specific exemption and waiving of the fee where there was a combination of public good and public utilities involved, he said.
"Doc has seized the opportunity to exploit their position by demanding an exorbitant fee, regardless of the infrastructure upgrade and any independent valuation," he said.
Dr Macpherson later described the charge as "nothing short of extortion".
The council told Doc it would not pay the $100,000 because it was unreasonable and unjustified.
It would seek a fair and equitable charge.
"Doc said, `We've got a roomful of lawyers in Wellington - do your worst'," Dr Macpherson said in an interview.
The district plan includes a designation for a crossing of the rail trail.
The financial cost of the installation of the pipeline was met by the CODC and Molyneux Estate Ltd as part of standard developer levies.
In a statement to the meeting, Otago conservator Jeff Connell said Molyneux Estate applied for the easement in May 2004.
The easement was to site water pipes to service a 101-lot subdivision.
The developer made the application in the name of the CODC because the services would become the council's responsibility upon installation.
The Otago conservancy had issued 71 similar easements for commercial development during the past five years, Mr Connell told the meeting.
"The department is required by law to charge a market rate for such activity.
''How conservancies do this is a national, standard operating procedure."
A one-off fee per lot was charged, based on independent valuation advice from Quotable Value.
That fee was $1400 per lot for a 60-year easement.
"To date, every developer, except for Molyneux Estate, has accepted the fee without challenge," he said.
Because of the number of lots in the subdivision, Doc suggested Quotable Value determine if a discount was required.
"The developer agreed and Quotable Valuation provided a valuation that discounted the fee from $141,400 to $100,000."
The developer was unhappy with the discounted fee and, in May 2005, asked it be reconsidered under the review process in the Conservation Act.
At the same time, because the developer wanted to install the services, its solicitors issued an undertaking to hold the $100,000 fee on behalf of the developer, pending the result of the departmental process, the statement read.
In October 2005, the department issued the easement.
"This was signed in the name of the CODC by the mayor and witnessed by the chief executive.
''The easement specifically records the $100,000 easement fee," the statement read.
"The fee review was completed in March 2006 and the $100,000 fee confirmed.
''When notified of the decision, the developer declined to make the payment or honour the undertaking, even though the services had been installed.
''The CODC has also refused to pay the fee, even though, by signing the easement, it has contracted to do so."
Doc contacted the Otago Daily Times after the meeting to say the $100,000 would go back to the Otago Central Rail Trail.
That was strongly disputed by Mr Ibbotson after the meeting, who said Doc had maintained the money was going to a consolidated fund.
"That really is a rearguard action by Doc to try and sweeten the issue," he said in an interview.
Mr Ibbotson also said Molyneux Estate had no part of the May 2004 easement application.
