Two Hawke's Bay Regional Councillors are being accused of racism after raising concerns about a deal the council has done with local iwi, Ngāti Kahugnunu.

Photo: RNZ / Rebekah Parsons-King

Hawke's Bay Regional Council's deal to loan 100,000 carbon credits to iwi is being described by councillors Debbie Hewitt and Fenton Wilson as "deeply concerning".

The loan lacked transparency, was rushed through without proper consultation and gave preferential treatment to iwi over other groups, they said.

However, those in favour of it including Ngāti Kahungunu chairman Ngāhiwi Tomoana have hit back at the accusations, describing its critics as racist.

The council voted last month to lend the carbon credits to iwi subsidiary Kahutia Limited Partnership. The credits were worth around $2.5 million.

They will be sold by to pay for planting 100,000 hectares of erosion-prone land, with the loan repaid with new credits after 10 years with interest of 2 percent. The iwi has put up Tautane Station - one of the country's biggest sheep and cattle farms - as collateral.

It is thought to be the first deal of its kind in New Zealand.

Kahutia managing director, former All Black Captain-turned-carbon-trader Taine Randell, approached the council with the idea last year after it signed an agreement with Ngāti Kahungunu to plant millions of trees throughout the region.

The deal was approved at a public council meeting on 19 December, the same day it sold Napier Port. All prior discussions on the loan were held confidentially.

Councillor Debbie Hewitt said she voted against the loan because she found the process and the deal "deeply concerning."

Key documents detailing the final agreement and legal advice were not given to councillors until 7pm on the night before that meeting, she said.

"I've had unsatisfactory answers from management and I do think the public should be aware of it because from where I'm sitting, it just doesn't pass the sunlight test."

She also questioned why the iwi was only being charged 2 percent interest when other groups that borrowed money from the council were charged up to 10 percent.

Councillor Fenton Wilson, who also voted against the deal, said he did not understand why it had to be discussed in secret and then "smashed through council under urgency before Christmas" at a time when everyone was occupied by the proposal to sell Napier Port.

"The chair has a very strong relationship with two of those [Kahutia] directors and he is on the record saying he didn't want to see a contestable process."

The two councillors also questioned why fellow councillor Tom Belford did not recuse himself from debates on the issue despite declaring a conflict of interest.

Mr Belford said he had a private agreement in place with Ngāti Kahungunu to plant trees on 25ha of his land and abstained from the final vote on 19 December, even though he gained "zero financial benefit" from the Kahutia deal.

"It's a fabrication of two or three councillors who don't like the idea of doing a partnership with our Māori partners. It's as simple as that," he said.

Ngāti Kahungunu chair and Kahutia director Ngāhiwi Tomoana agreed.

"The governance of institutions that have run our region for years have always kept Māori at bay. As soon as Māori put their hand up, and their resources, they think it's a trick, they think it's a rip off."

Racism was "definitely part" of the opposition to the deal, he said.

Councillor Hewitt disagreed.

"This has nothing to do with racism. It's about the leasing of 100,000 carbon units.

"What I do have an issue is the lack of transparency ... and this is a deal that's been done with preferential treatment."

Council chair Rex Graham said he had no qualms about the loan.

"I'm proud of this deal that our council has done directly with our iwi. They are partners in this region and we want to give preferential treatment."

Hawke's Bay Regional Council James Palmer said the deal was low-risk to ratepayers because it was guaranteed by the iwi's assets.

"This is a ground breaking commercial arrangement. We get land which might otherwise not be readily available to us, particularly Māori-owned land, put into trees.

The low interest rate covered the costs borne by the council to administrate the loan, he said.

No carbon credits would be lent until the iwi presented its final business case to the council in the next few months.