Councillors resolved last year to fund the relocation of 11 homes to higher ground, after a report estimated about 50 lives could be lost in the unlikely event Dungowan Dam suffered a “catastrophic” failure.

Dungowan residents expressed their concerns at the council’s proposed course of action, which included rezoning land downstream of the dam from residential to floodplain, at two public meetings earlier this year.

Landholders fear rezoning the land in order to prohibit further development around the dam will see property prices plummet and insurance premiums soar, with some quotes indicating homeowners could pay an extra $5000 to $6000 a year.

The residents’ concerns – coupled with comments NSW Water Minister Kevin Humphries made to The Leader in late January that the council had “panicked” and was pursuing the most “extreme” option in response to dam study – has prompted a rethink.

A report from TRC’s director of water enterprises, Bruce Logan, to be considered at tomorrow night’s meeting, recommends the council now informs residents it “is not prepared to offer to pay for the relocation of existing homes”.

Mr Logan suggests holding off until it receives clear guidance from the NSW water minister, which might not be Mr Humphries after Saturday’s election, about its “obligations and required actions” on the matter.

However, the report recommends that in the “interests of offering property owners the opportunity to seek 

closure”, the council could negotiate the outright purchase of any of the 11 properties identified at highest risk from flooding.

Tamworth mayor Col Murray said there were too many “balls in the air now”, such as a review of the NSW Dam Safety Committee’s risk analysis criteria and an earthquake assessment for Dungowan Dam due next year, for the council to proceed.

He said the council had received “conflicting” messages from Mr Humphries as to what its responsibilities under the NSW Dams Safety Act were in light of Hunter Water Australia’s report.

“We’ve sent him some questions, which he hasn’t got back to us with answers (on) yet, to help guide us through it,” he said.

“We’re sort of waiting on answers to those questions before we can move forward much.”

Peter Bagshaw, of the Dungowan Creek and Valley Water Users Association, said the community’s greatest concern was that the council would continue to forge ahead with the rezoning aspect of its original plan.

“We’re implacably opposed to any rezoning of the Dungowan Valley,” he said. 

“Basically, the whole contour of the valley, which is affected by the maximum possible flood – plus a dam break – is going to be rezoned to prevent any further building.

“It has implications for our insurance premiums because anyone who is in (the rezoned area) is probably not going to be able to get flood insurance and, at this stage, it is unclear whether Tamworth Regional Council’s insurance will cover it.

“It’s been a very poorly thought-out and executed strategy by the council.”

Councillors were advised last year that the relocation option was best, as engineering upgrades to the facility would not reduce the risk to residents and a new dam would cost an estimated $180 million.

The council has written to both state and federal governments requesting funding for a new dam, with Mr Logan saying in his report that “preliminary discussions” with the commonwealth “have not been dismissive”.