Philip Osborne February 2015

The application proposed by Gelita Ltd seeks to address issues of offensive and objectionable odour released into the surrounding environment. The application seeks to address this issue over an extended timeframe during which the economic costs associated with this odour nuisance are to be borne by external parties such as the local residents and commercial enterprises such as the Tannery. The efficient utilisation of resources seeks to maximise the net benefit to the community. As such it is essential that consideration is given to the economic costs of this proposal and the effect on the efficient utilisation of other resources such as the Tannery. While accepting that Gelita generates economic activity for the Christchurch economy decisions pertaining to the process by which this activity is achieved come at a cost. As such it is important to understand the relative levels of these costs and the potential to avoid, remedy or mitigate these impacts. ECONOMIC CONSIDERATIONS

GELITA ECONOMIC IMPACTS In terms of the potential economic impacts of this application two sectors have been assessed, the immediate residents and the inevitable impacts upon amenity and the commercial impacts upon the Tannery. Both residential and commercial complaints have been commonplace following the breaching of Gelita’s conditions. House prices have been utilised in international research to show the impact upon residential amenity. Adopting these results indicates an impact on immediate residential prices of between $7.8m and $11.6m. A second contingent valuation method extrapolated for local conditions would suggest an impact of $675,000 per annum. Commercial impacts restricted to the costs incurred by the Tannery. Based on a comparison of past sales there is a clear impact on the competitiveness and viability of the Tannery businesses. With estimated sales of over $50m per annum the impacts of Gelita’s odour emissions are estimated at: –Loss of Gross Profit of $2.4m per annum –Loss of Rental income $250,000 per annum (loss of capital value $3.75m)

OTHER ECONOMIC CONSIDERATIONS When considering economic efficiency it is also important to have consideration for dynamic efficiency, that is efficiency over time. The medium to longer term economic impacts of the Gelita continuing to effect the local environment include: –Decreased residential quality through loss of amenity and development potential –Continued decline in property prices –Loss of commercial viability (potential loss of Tannery as a viable location which was instigated under unique circumstances) –Loss of visitor spend –Decreased retail quality –‘Flow-on’ impacts of losses to local suppliers

CONCLUSION Gelita’s application would allow its operations to continue to benefit from processes that create impacts beyond those permitted and incur significant economic costs on the local economy. The lack of certainty expressed by Annex Development’s experts in terms of Gelita’s long-term ability to meet the conditions will impact upon residential and commercial decisions that will in themselves have costs. It is fundamental when considering this application that the level and long-term significance of these costs are considered. From an economic efficiency standpoint the avoidance, mitigation or remedying of these costs is vital.