The report, by council corporate services director Wayne Scott, recommends the council not invest in the scheme as the dry equity shareholder because of a ''significant financial risk'' and because it does not comply with the council's long term plan.
Tarras Water had asked the council to invest up to $3.35 million in the $36.5 million scheme, taking up 30% of the ''dry'' shares, covering properties whose owners
chose not to irrigate. In his report, Mr Scott said there was uncertainty around the council's ability to on-sell the shares not taken up by landholders.
Tarras Water had issued two prospectuses for the scheme. The first was withdrawn and replaced by a new prospectus, which will close on Friday, and reduced the ''wet'' share (landowners who take up the option to irrigate) take-up from 70% to 65%.
The second prospectus made ''fundamental changes'' without any contact with the regional council, Mr Scott said.
A statement from the irrigation company was circulated to regional councillors yesterday, aimed at correcting ''misinformation and wrong conclusions '' in Mr Scott's report, company secretary John Morrison said.
The regional council was aware that without the Tarras scheme, the implementation of a minimum flow on the Lindis River would severely restrict water supply and irrigation water and this would spark ''confrontation'' between the council and Tarras Water, the board statement said.
Tarras Water had met all the conditions required for the council to consider investment and met every timeline, it said.
Changes in the second prospectus allowed Tarras Water to provide an investment in redeemable preference shares to others, as the council had encouraged the company to seek an alternative dry shareholder.
This did not change the fundamental requirements of the council and the 70% threshold was always a ''pre-condition'' of investment in the scheme.
There was a contingency sum in the total capital costs and shareholders and bankers were aware Tarras Water would work to a cash break-even, which was normal for a co-operative company, the board said.
