The council will consider potential involvement in Tarras Water Ltd's scheme today - about a week after a $3.3 million short-term investment was requested from the Otago Regional Council. The ORC asked the company for more information.
District council chief executive Phil Melhopt suggested the council create policy to consider such requests, citing an expected request from an irrigation project covering the Manuherikia catchment as an example.
Mr Melhopt told the council that, in providing a guarantee, it should consider the risk of a call on that guarantee no matter how small the risk. He also said the council's cash position and balance sheet were strong.
Last week, the company also asked the regional council for a $2 million grant from the irrigation fund for a scoping study.
At that meeting some regional councillors were uneasy about investing $5.3 million in a commercial venture, a sentiment that was also evident in recent submissions to the district council's long-term plan.
Central Otago residents were asked whether they supported the development of irrigation infrastructure.
The district council received 26 submissions on the proposed $27.4 million loan guarantee.
Only seven supported it and three of them would be direct beneficiaries of the scheme.
Most opposing submissions expressed concerns about the council supporting private enterprise with public money.
The development, which would provide water via a pressurised pipe system from the Clutha River to about 40 Tarras families over 6563ha of land, is estimated to cost more than $37 million but provide regional economic benefits of $51.2 million and create 257 jobs.
Of the estimated price tag, $7.8 million has been raised from the farmers ("wet shareholders") who will benefit from the scheme.
The $3.3 million asked of the regional council as a "dry equity" investor is expected to be repaid as more farmers pick up those shares as the project progresses.
In a report to the district council, Mr Melhopt suggested a guarantee value linked to the size and capital value of the scheme might be appropriate.
The two examples he put forward were a guarantee cap of $1000 a ha ($6.563 million) or a cap of 15% of the capital value ($5.34 million).
The company's application to the district council said a reduced level of funding - $15 million over five years, for example - might be workable.
Mr Melhopt's recommendation to the council had three parts: firstly that the council decide whether it should support the creation of a loan guarantee policy; secondly, what value criteria and maximum term should be set for any future guarantee; and thirdly, that the council, subject to approval of the above, decide whether or not to support Tarras Water's request.
He also noted that Tarras Water was still to sign off on some key documents - its constitution and water supply agreement.
