Agenda of Council Controlled Organisations Governance and Monitoring Committee

I hereby give notice that an ordinary meeting of the Council Controlled Organisations Governance and Monitoring Committee will be held on:

Date:

Time:

Meeting Room:

Venue:

Tuesday, 3 December 2013

1.00pm

Reception Lounge, Level 2
Auckland Town Hall
301-305 Queen Street
Auckland

Council Controlled Organisations Governance and Monitoring Committee

OPEN AGENDA

MEMBERSHIP

Chairperson	Penny Hulse
Deputy Chairperson	Calum Penrose
Members	Cr Anae Arthur Anae
	Cr Cameron Brewer
	Cr Dr Cathy Casey
	Member Precious Clark
	Cr Ross Clow
	Cr Linda Cooper, JP
	Cr Chris Darby
	Cr Denise Krum
	Cr Dick Quax
	Cr Penny Webster
	Member Glenn Wilcox
	Cr George Wood, CNZM
Ex-officio	Mayor Len Brown, JP

(Quorum 7 members)

Rita Bento-Allpress

Democracy Advisor

27 November 2013

Contact Telephone: (09) 307 7541

Email: rita.bento-allpress@aucklandcouncil.govt.nz

Website: www.aucklandcouncil.govt.nz

Council Controlled Organisations Governance and Monitoring Committee

03 December 2013

ITEM TABLE OF CONTENTS PAGE

1 Apologies 5

2 Declaration of Interest 5

3 Confirmation of Minutes 5

4 Petitions 5

5 Public Input 5

6 Local Board Input 5

7 Extraordinary Business 5

8 Notices of Motion 6

9 Annual Letters of Expectation for Council Controlled Organisations 7

10 Legacy CCOs Annual Report to 30 June 2013 91

11 Council Controlled Organisations - Board Observer Programme 185

12 Substantive Council Controlled Organisations (CCOs) and Tamaki Redevelopment Company Limited (TRC) - Shareholders' Annual General Meeting 189

13 New Zealand Local Government Funding Agency - Annual Report 191

14 Substantive CCO first quarter reports 259

15 Consideration of Extraordinary Items

PUBLIC EXCLUDED

16 Procedural Motion to Exclude the Public 429

C1 Tamaki Redevelopment Corporation Limited (TRC) - First Quarter Report (1 July - 30 September 2013) 429

C2 Mount Albert Grammar School Community Swimming Pool Trust - Trustee appointments 429

C3 Ports of Auckland Limited Director Appointments, Briefing by ACIL 429

C4 Council Controlled Organisations (CCOs) - Board Appointment : Watercare Services Limited (WSL) 430

C5 Appointments to a CO and legacy CCOs, establishment of a new Council Organisation Appointment Approvals Panel 430

C6 CCO Director Remuneration Review 2013 430

1 Apologies

At the close of the agenda no apologies had been received.

2 Declaration of Interest

Members are reminded of the need to be vigilant to stand aside from decision making when a conflict arises between their role as a member and any private or other external interest they might have.

3 Confirmation of Minutes

There are no minutes to be confirmed.

4 Petitions

At the close of the agenda no requests to present petitions had been received.

5 Public Input

Standing Order 3.21 provides for Public Input. Applications to speak must be made to the Committee Secretary, in writing, no later than two (2) working days prior to the meeting and must include the subject matter. The meeting Chairperson has the discretion to decline any application that does not meet the requirements of Standing Orders. A maximum of thirty (30) minutes is allocated to the period for public input with five (5) minutes speaking time for each speaker.

At the close of the agenda no requests for public input had been received.

6 Local Board Input

Standing Order 3.22 provides for Local Board Input. The Chairperson (or nominee of that Chairperson) is entitled to speak for up to five (5) minutes during this time. The Chairperson of the Local Board (or nominee of that Chairperson) shall wherever practical, give two (2) days notice of their wish to speak. The meeting Chairperson has the discretion to decline any application that does not meet the requirements of Standing Orders.

This right is in addition to the right under Standing Order 3.9.14 to speak to matters on the agenda.

At the close of the agenda no requests for local board input had been received.

7 Extraordinary Business

Section 46A(7) of the Local Government Official Information and Meetings Act 1987 (as amended) states:

“An item that is not on the agenda for a meeting may be dealt with at that meeting if-

(a) The local authority by resolution so decides; and

(b) The presiding member explains at the meeting, at a time when it is open to the public,-

(i) The reason why the item is not on the agenda; and

(ii) The reason why the discussion of the item cannot be delayed until a subsequent meeting.”

Section 46A(7A) of the Local Government Official Information and Meetings Act 1987 (as amended) states:

“Where an item is not on the agenda for a meeting,-

(a) That item may be discussed at that meeting if-

(i) That item is a minor matter relating to the general business of the local authority; and

(ii) the presiding member explains at the beginning of the meeting, at a time when it is open to the public, that the item will be discussed at the meeting; but

(b) no resolution, decision or recommendation may be made in respect of that item except to refer that item to a subsequent meeting of the local authority for further discussion.”

8 Notices of Motion

At the close of the agenda no requests for notices of motion had been received.

Council Controlled Organisations Governance and Monitoring Committee

03 December 2013

Annual Letters of Expectation for Council Controlled Organisations

File No.: CP2013/26476

Purpose

1. To seek approval for the 2014/2015 Letters of Expectation (LoEs) for the substantive Council Controlled Organisations (CCOs).

2. The draft LoEs are included as Attachments A – G, with a copy of the Shareholder Expectation Guide (SEG) included as Attachment H for reference.

Executive Summary

3. The LoEs are intended to inform the CCOs of council’s expectations, which in turn inform the development of the CCO’s Statement of Intent (SOI) for 2014-2017. This enables the council and the CCOs to refine respective behaviours, operations and service delivery on an annual basis.

4. The CCOs are also guided in the preparation of their SOIs by the Auckland Plan, the Long-term Plan (LTP), the Mayoral priorities for the Draft Annual Plan 2014/2015, and the Local Board Plans.

5. Significant strategic direction and operational governance has not been included in the LoEs as this is covered in other governance documents.

Recommendations

That the Council Controlled Organisations Governance and Monitoring Committee:

a) approve the Letters of Expectation for Auckland Council Investments Limited, Auckland Council Property Limited, Auckland Tourism Events and Economic Development, Auckland Transport, Regional Facilities Auckland Limited, Watercare Services Limited and Waterfront Auckland.

b) authorise the Mayor to approve the final 2014/2015 Letters of Expectation for the substantive Council Controlled Organisations, incorporating any changes agreed by this committee and minor editorial changes.

Discussion

6. In order to provide input into the SOI process, the council outlines its expectation for each substantive CCO in the LoE.

7. The LoEs focus on behaviours, roles and responsibilities, any issues identified by council, and some specific projects or outcomes.

8. In developing the draft LoEs, subject matter expert feedback from council officers was considered.

9. Significant strategic direction has already been provided to the CCOs through the completion of the various planning documents that have been approved by council (e.g. the Auckland Plan, Local Board Plans, the Economic Development Strategy, City Centre Master Plan, and the LTP). It is not considered necessary to repeat the relevant priorities from these planning documents in the LoE.

10. Council operational and governance imperatives on the CCOs that are enduring in nature are included in the SEG, and therefore not considered necessary to include in the LoE and SOI.

11. It is recommended that the draft LoEs be approved. However, Councillors may wish to refine the LoEs to address other areas of interest.

Consideration

Local Board Views

12. CCO governance and direction is the responsibility of the Governing Body. However, CCOs should consider the Local Board plans when developing their SOIs. In addition, the LoE asks that the CCOs have meaningful two-way dialogue with the local boards, and a commitment to considering issues raised by local boards.

Maori Impact Statement

13. The SEG requires the CCOs to take into account of the Independent Maori Statutory Board’s schedule of issues of significance and statutory Treaty of Waitangi provisions, and where appropriate engage with the board on these matters. In addition, the LoE asks that the CCOs improve the identification and reporting of initiatives that contribute to Maori outcomes in the Auckland Plan. The LoE also asks that CCOs outline how they will implement the Maori Responsiveness Framework within their SOI.

General

14. This report does not involve decisions that would trigger the council’s Significance Policy.

Implementation Issues

15. It is the responsibility of the CCOs and relevant council subject matter experts to ensure that the CCOs have an appropriate engagement in, and delivery of council policies, plans and strategies.

Attachments

No.	Title	Page
a	Draft Letter of Expectation Dec 2013 - ACIL	9
b	Draft Letter of Expectation Dec 2013 - ACPL	13
c	Draft Letter of Expectation Dec 2013 - AT	17
d	Draft Letter of Expectation Dec 2013 - ATEED	21
e	Draft Letter of Expectation Dec 2013 - RFA	25
f	Draft Letter of Expectation Dec 2013 - Watercare	29
g	Draft Letter of Expectation Dec 2013 - Waterfront Auckland	33
h	Shareholder expectation guide for CCOs	37

Signatories

Authors

Robert Irvine - Financial Planning Manager CCOs

Authorisers

Matthew Walker - Manager Financial Plan Policy and Budgeting

Doug McKay - Chief Executive

Council Controlled Organisations Governance and Monitoring Committee

03 December 2013

Legacy CCOs Annual Report to 30 June 2013

File No.: CP2013/26474

Purpose

1. The report provides an overview of the Legacy CCOs annual reports to 30 June 2013.

Executive Summary

2. In accordance with their Statements of Intent (SOI), the Contemporary Art Foundation, Te Puru Community Charitable Trust and COMET Auckland are required to submit an annual report for the year to 30 June 2013, by 30 September 2013.

3. Officers have reviewed the annual reports to 30 June 2013 and summarise the key points and issues following.

4. The Contemporary Art Foundation (formerly the Pakuranga Arts and Cultural Trust) are responsible for promoting and encouraging support for the arts for the benefit and enjoyment of the Auckland community. The foundation has made good progress against their objectives of meeting the diverse range of needs and expectations within this community.

5. Te Puru Community Charitable Trust is responsible for managing the community centre at Te Puru Park and to support sports, leisure, community and cultural groups in the Beachlands, Maraetai and Whitford communities.

6. COMET Auckland is a new trust established in June 2012. COMET Auckland was established when the City of Manukau Education Trust was re-settled, in order to allow a single entity to have a focus on education issues across the Auckland region. The former COMET trust had been confined to Manukau. COMET Auckland’s purpose is to undertake actions, programmes and initiatives that support education and improve educational outcomes for Auckland, and especially for communities of high educational need in Auckland.

Recommendation

That the Council Controlled Organisations Governance and Monitoring Committee:

a) receive the Annual reports of the Contemporary Art Foundation, Te Puru Community Charitable Trust and COMET Auckland.

Discussion

7. Contemporary Art Foundation (CAF)

Audit and Public Meeting

The annual report, attached at Appendix A, was received by Auckland Council on 25 September 2013. BDO Auckland has provided the independent report for the annual financial and non-financial accounts for CAF. The auditor advises both the financial statements and non-financial results comply with generally accepted accounting practices and fairly reflects the Foundations financial position, financial performance and service performance achievements against the performance targets for the year ended 30 June 2013. CAF will hold their public meeting to report actual performance against their budgets on 2 December 2013.

Financial performance

CAF has a net operating deficit of $21,116 at 30 June 2013 (budgeted loss $1,000). CAF had a total income of $638,579. The net loss of $21.1k (3% of revenue) is after a non-cash accounting entry for depreciation of $73k, which would otherwise mean the trust showed a $51.9k surplus (8.1% of revenue). The Total Trustees Funds is $2,916,089.

Performance measures

The performance targets are set by the Community Arts, Development and Culture group of Auckland Council and CAF report on a monthly basis to the team. In terms of visitor numbers, exhibitions, student participation and room hire CAF have achieved the targets set. CAF has exceeded performance targets in the areas of partnering with local and regional groups, usage by disabled or disadvantaged and provision of education and public programmes.

Highlights identified for 2012/2013 year include:

· CAF were presented with the Best Public Art Gallery 2012 award from Metro magazine (December 2012)

· CAF continue to engage with a number of schools in the area through the School programme delivering art exhibitions, learning experiences and pre-booked education to students in Years 1 to 13. Some of the schools that have participated throughout the 2012 -2013 year include Manurewa High School, Papaptoetoe Central, Te Kura Maori o Nga Tauwae, Anchorage Park School, The Gardens School, Sutton Park School, Pakuranga College, Somerville Intermediate and East Home Educators.

Other key issues (including contribution to Maori wellbeing)

During Matariki, CAF commissioned a new work for their billboard by London based Maori artist, Rachael Walters. A further work by part Fijian artist Luke Willis Thompson titled Between Memory and Trace focussing on Maori youth in Manurewa.

Council officers and Auckland Transport continue to meet with CAF to discuss the AMETI project (Reeves Road Flyover). Auckland Transport are currently assessing the impact the Flyover will have on the gallery and CAF’s ability to deliver services to the public. Council departments (Community Development, Arts and Culture, City Transformation and Community Policy and Planning) will continue to liaise with CAF throughout the project.

8. Te Puru Community Charitable Trust (Te Puru)

Audit and Public Meeting

The annual report, attached at Appendix B, was received by Auckland Council on 30 September 2013. Audit New Zealand has provided the independent report for the annual financial and non-financial accounts for Te Puru. The auditor advises both the financial statements and non-financial results comply with generally accepted accounting practices and fairly reflects the Trust’s financial position, financial performance and service performance achievements against the performance targets for the year ended 30 June 2013. Te Puru will hold their public meeting to report actual performance against their targets on 18 December 2013.

Financial performance

Te Puru’s budget signaled a small loss in the 2012-2013 year. However, both income and expenditure were higher than projected and a small profit was achieved. Te Puru has reported a surplus of $6,083 for the year ended 30 June 2013 on total income of $608,981 and total expenses of $602,899. In comparison to 2012, this is a reduction of surplus by $29,314. Expenditure on salaries, contract staff, insurance, repairs and maintenance and expenses for the clubrooms have increased compared to 2012.

Performance measures

Te Puru’s council funding is held in the Franklin Local Board budget and is managed by Parks, Sports and Recreation (South). A funding agreement is in place which sets out additional reporting Te Puru must provide (in addition to that required of all CCOs). Te Puru achieved its objectives relating to relationships with affiliate sports clubs, facility development and environmental footprint. Its objectives around promoting the vision of a Community Hub and developing the sports ground facilities were partially achieved.

Te Puru has made progress in separating strategic decision making and discussion from operational matters. Council staff have continued their efforts to work in a more coordinated way with both Te Puru’s board and management.

Te Puru has improved its engagement with its Affiliated Clubs through Partnership Agreements and regular User Group Meetings. Te Puru has attracted three new sports clubs during the year – athletics, baseball and hockey.

Other key issues (including contribution to Maori wellbeing)

Kevin Obern has replace Shane Mitchell as Chair of Te Puru (Shane Mitchell remains a trustee). The Trust also welcomed a new trustee, Yvonne Costar, who has taken on the role of Secretary.

Te Puru has expressed its aspiration to become an exempt CCO. The funding agreement provides a potential mechanism to ensure Auckland Council’s objectives are met, without the additional reporting requirements associated with being a CCO. Officers are working with the Trust to ensure the funding agreement and its associated reporting provide sufficient accountability for council funding.

Te Puru reflects consideration of Maori wellbeing through its mission statement. This includes a statement about development of effective communication and engagement and building capacity for activities that reflect a direction of inclusivity of Maori. As this forms part of the mission statement, there is no reporting on Te Puru’s progress against this objective during the year.

9. COMET Auckland (Comet)

Audit and Public Meeting

The annual report, attached at Appendix C, was received by Auckland Council on 26 September 2013. BDO Auckland has provided the independent report for the annual financial and non-financial accounts for COMET Auckland. The auditor advises the financial statements and non-financial results comply with generally accepted accounting practices and fairly reflects the Trust’s financial position and service performance against the performance targets for the year ended 30 June 2013. COMET Auckland will hold their public meeting to report actual performance against their targets on 16 October 2013.

Financial performance

For the year ended 30 June 2013 Comet has reported a surplus of $26,595 on total income of $742,543 and total expenses of $715, 948.

Performance measures

Comet has achieved its objectives as set by the 2012-2013 Statement of Intent. Highlights identified by Comet are:

· 21 Local Board snapshots summarising key data on education and skills in each area have been sent to each Local Board and key education stakeholders in each area.

· Whanau Ara Mua, Comet’s foundation-level family learning programme, has achieved significant success by increasing its delivery from 45 student places in 2012 to 150 in 2013. Sites are in Manurewa, Papakura, Henderson and Panmure.

· Comet are involved in two initiatives within the Tamaki Transformation Project including:

- leading inter-sector financial literacy collaboration through GEM (Growing Enough Money), a financial literacy programme aimed at building financial literacy, reducing household debt and developing financial management skills

- Tamaki Learning Village – facilitating community meetings on how to add value to the Tamaki education and skills ecosystem

Through work with Education Today publishers Comet are helping to produce a student magazine, Learning Auckland, which is written by and for students from Auckland primary, secondary and tertiary education. To date three issues have been published and distributed to Auckland secondary and intermediate schools. The magazine is proving to be a valuable way to give young people a voice around education issues.

Other key issues (including contribution to Maori wellbeing)

Comet’s Project Manager Maori Education, Hauauru Rawiri, has worked on a variety of programmes throughout the year and engaged with Manan Whenua, Matawaka/Taurahere and Maori organisations to support Maori education aspirations and initiatives. The focus of this role, to implement a Maori Programme of Action, has seen the development of a draft strategy having received input from Mana Whenua and Matawaka/Taurahere, and other stakeholders.

Local Board Views

10. The annual reports of all CCOs are provided to local boards for their information via the Local Board Services Department.

Maori Impact Statement

11. Legacy CCOs work directly within the local community and alongside local iwi. Specific information from each Legacy CCO relating to Maori wellbeing is referenced under key issues.

General

12. Legacy CCO Annual reports do no trigger the Significance Policy.

Implementation Issues

13. Feedback from the CCO Governance & Monitoring Committee will be forwarded on to Legacy CCOs.

Attachments

No.	Title	Page
a	Contemporary Art Foundation Annual Report to 30 June 2013	95
b	Te Puru Community Charitable Trust Annual Report to 30 June 2013	117
c	COMET Auckland Annual Report to 30 June 2013	157

Signatories

Authors

Josie Meuli - Advisor

Authorisers

Mark Butcher - Treasurer

Doug McKay - Chief Executive

Council Controlled Organisations Governance and Monitoring Committee

03 December 2013

Council Controlled Organisations - Board Observer Programme

File No.: CP2013/26475

Purpose

1. To update the CCO Governance and Monitoring Committee on the Board Observer Programme and appoint a member of the CCO Governance and Monitoring Committee to the Board Observer Appointment Panel.

Executive Summary

2. The former CCO Strategy Review Subcommittee (the Subcommittee), approved the establishment of the Board Observer Programme at the 4^th September 2013 meeting.

3. This programme will enhance the Appointment Policy objective of encouraging demographic and geographic diversity and the appointment of more women and minority groups to boards.

4. The Subcommittee delegated the appointment process to a Panel which currently includes the Chief Executive (or his representative) and Senior Council Officers from the Mayoral office and CCO Governance & External Partnerships Department.

5. Resolution (d) from the 4^th September 2013 Subcommittee meeting approved that a member from the CCO Strategy Review Subcommittee (or its equivalent), be part of the appointments panel for CCO Board Observer appointments.

6. This report requests a member from the CCO Governance and Monitoring Committee be appointed to the Board Observer Appointment Panel, to assist with the selection and interview of candidates.

Recommendation

That the Council Controlled Organisations Governance and Monitoring Committee:

(a) appoint […….] from the CCO Governance and Monitoring Committee to the Board Observer Appointment Panel.

Discussion

7. Auckland Council’s approach to CCO Board diversity is to widen the pool of candidates so that women, young people and people from a range of ethnic backgrounds, who have the right skills but perhaps have not come through the normal company director channels, have an opportunity to be considered as possible directors.

8. The current CCO board appointment process includes casting the net widely across a variety of channels including advertising and seeking nominations from appropriate sources such as Independent Maori Statutory Board, Ministry of Women and others.

9. The development of the Board Observer Programme will further advance the council’s diversity portfolio and the Board Observer Appointment Panel are delegated to interview and select a candidate for each CCO board in conjunction with the CCO Board Chair.

10. The programme anticipates introduction of each candidate to the CCO Governance and Monitoring Committee at the March 2014 meeting.

11. A proposed timeline and draft programme is attached at Appendix A. An update report and introduction of Board Observers will be provided to the CCO Governance & Monitoring Committee in the first quarter of 2014 with a further review proposed for early 2015.

12. CCO Chairs and their boards are pivotal to the success of this programme. The Chair will liaise closely with the Board Observer Appointment Panel during the candidate selection process. Board members are responsible for ensuring an appropriate programme is developed for the candidate including mentoring from specific board members (Chair, Deputy Chair, Subcommittee Chairs), training and networking opportunities are provided for the candidate.

Consideration

Local Board Views

13. Local Boards will have an opportunity to participate in the Expression of Interest process (Nomination email).

Maori Impact Statement

14. IMSB will have an opportunity to participate in the Expression of Interest process (Nomination email).

General

15. Board Observer role does not trigger the Significant policy.

Implementation Issues

16. The Board Observer Programme has no budget in the current 2013-2014 financial plan. CCOs are requested to incorporate the Scholarship amount of approximately $10,000 for their Board Observer candidate into their current board expenses.

Attachments

No.	Title	Page
a	Proposed Timeline and Draft Programme	187

Signatories

Authors

Josie Meuli - Advisor

Authorisers

Mark Butcher - Treasurer

Doug McKay - Chief Executive

Council Controlled Organisations Governance and Monitoring Committee

03 December 2013

Substantive Council Controlled Organisations (CCOs) and Tamaki Redevelopment Company Limited (TRC) - Shareholders' Annual General Meeting

File No.: CP2013/26473

Purpose

1. To approve a written resolution in lieu of an annual meeting of the Auckland Council’s Substantive Council Controlled Organisations (CCOs) and the Tamaki Redevelopment Company Limited (TRC).

Executive Summary

2. Section 120 of the Companies Act 1993 requires the board of a company to call an annual meeting of shareholders, to be held not later than six months after the balance date of the company.

3. All of the substantive Council Controlled Organisations, except for Auckland Transport, are companies registered under the Act (although Regional Facilities Auckland (RFA) is a charitable trust, Regional Facilities Auckland Limited is the corporate trustee of RFA). The balance date for these CCOs is 30 June each year.

4. Section 122 (1) of the Act permits shareholders to pass a resolution in lieu of an annual meeting.

Recommendations

That the Council Controlled Organisations Governance and Monitoring Committee:

a) agree that Councillor Penny Hulse, as chair of the CCO Governance and Monitoring Committee, be authorised as Auckland Council’s shareholder representative to execute a written resolution in lieu of an annual meeting of the shareholder for the following companies:

i) Auckland Council Investments Limited;

ii) Auckland Council Property Limited;

iii) Auckland Tourism, Events and Economic Development Limited;

iv) Auckland Waterfront Development Agency Limited;

v) Regional Facilities Auckland Limited; and

vi) Watercare Services Limited.

b) agree that Councillor Penny Hulse be authorised to execute any document or shareholder resolution on behalf of Council, and give any notifications to the CCOs as necessary or convenient to give effect to the foregoing resolutions.

c) agree that Councillor Penny Hulse, as chair of the CCO Governance and Monitoring Committee, be authorised by Auckland Council as its representative of the jointly owned company Tamaki Redevelopment Company Limited, to execute a written shareholders resolution in lieu of an annual meeting of the shareholder.

d) agree that Councillor Penny Hulse be authorised to execute any document or shareholder resolution on behalf of Auckland Council, and give any notifications to the jointly owned company Tamaki Redevelopment Company Limited as necessary or convenient to give effect to the shareholders foregoing resolutions.

Discussion

5. The Companies Act 1993 requires that companies hold an annual meeting of its shareholders. The relevant company constitutions also contain this requirement.

6. Both the Act and constitutions allow the companies to forgo holding such a meeting if all the business required to be conducted at the meeting is done by written shareholder resolution.

7. Section 122(1) of the Act permits the shareholder to pass a written resolution in lieu of a meeting of the shareholder, if such a resolution is signed by not less than 75 per cent of shareholders entitled to vote on the resolution. Such a resolution is as valid as if it had been passed at an annual meeting of the shareholder.

8. Due to the administrative nature of the business to be conducted at the annual meeting of the shareholder and Auckland Council being the sole shareholder (or in the case of TRC, joint shareholder), it is considered appropriate that this is done by way of written resolution. It is anticipated that the written resolution will simply waive the requirement to hold a shareholders’ annual meeting.

9. The relevant companies must hold the annual meeting of shareholders not later than six months after the balance date of the company. The balance date of all of the relevant companies is 30 June 2013. The CCO Governance and External Partnerships (CCOG&EP) department has prepared the appropriate resolutions to ensure compliance with the statutory timeframes.

Consideration

Local Board Views

10. Governance of CCOs and Council Organisations (COs) is a Governing Body responsibility therefore this report does not raise any issues for Local Boards to consider.

Maori Impact Statement

11. This report does not raise any issues of significance or adverse impacts for Maori, nor does it raise any issues that will be of benefit to Maori.

General

12. This report does not trigger the Significance policy.

Implementation Issues

13. CCO G&EP will prepare appropriate documentation and resolutions during December, to ensure compliance with the statutory timeframes.

Attachments

There are no attachments for this report.

Signatories

Authors

Josie Meuli - Advisor

Authorisers

Mark Butcher - Treasurer

Doug McKay - Chief Executive

Council Controlled Organisations Governance and Monitoring Committee

03 December 2013

New Zealand Local Government Funding Agency - Annual Report

File No.: CP2013/26791

Purpose

1. To provide comment on the New Zealand Local Government Funding Agency Limited (LGFA) 2012/13 annual report, and the 2013/14 first quarter report.

Executive Summary

2. LGFA was established to optimise debt funding terms and conditions for participating local authorities. LGFA is owned by 30 Local Authorities, and the New Zealand Government. Auckland Council currently holds 8.29% of LGFA shares.

3. LGFA estimates that by 30 June 2013 LGFA was saving AA rated councils such as Auckland Council approximately 30 bps in annual interest costs on a five year security.

4. LGFA has six performance targets within its SOI. Four targets were achieved in 2012/13.

5. LGFA assets grew by approximately $1.5 billion in 2012/13. LGFA had loaned approximately $2.5 billion to participating local authorities as at 30 June 2013.

6. LGFA has paid a dividend to shareholders ahead of its original business case forecasts.

7. The first quarter report indicates that the LGFA is continuing to perform well, although market influences have impacted on two of LGFA’s performance measures.

Recommendation/s

That the Council Controlled Organisations Governance and Monitoring Committee:

a) receive the annual report of New Zealand Local Government Funding Agency Limited (LGFA) noting that:

i) The LGFA achieved 4 of the 6 non-financial performance targets that could be measured during the 2012/13 financial year.

ii) The LGFA paid a dividend of $1.515 million to shareholders including $113,078 to Auckland Council.

b) receive the LGFA 2013/14 first quarter report, noting that:

i) The company is continuing to perform well, with the performance targets that LGFA has a high degree of control over being achieved.

ii) Market conditions have impacted on LGFA’s performance in relation to the estimated interest cost savings, and average cost of funds relative to NZ Government Stock (NZGS).

Discussion

8. Auckland Council uses LGFA as a source of borrowing alongside other sources including offshore borrowing and domestic bond issues to retail and institutional investors.

9. The primary objective of the LGFA is to optimise the debt funding terms and conditions for Participating Local Authorities (PLAs). Among other things, this includes:

a) Providing debt to PLAs at the lowest possible interest rates commensurate with the relevant maturity.

b) Making longer-term borrowings available to PLAs.

c) Enhancing the certainty of access to debt markets for PLA, subject always to operating in accordance with sound business practice.

2012/13 - Annual report

10. A copy of the LGFA’s 2012/13 Annual Report can be found at Attachment A.

11. The company had loaned $2.5 billion to participating local authorities at year end.

12. LGFA in 2012/13 has paid a full dividend of $1.515 million to shareholders which is ahead of its original business case forecasts.

13. Total operating expenses exceeded the 2012/13 SOI forecast due to higher than forecast asset growth, which led to a proportional increase in the LGFA’s issuance and on-lending costs. Overall, operating costs were contained to $3.0 million, 10% above the forecast $2.7 million.

14. On 30 November 2012, 12 new council shareholders joined the original 18 local authorities and the Crown who were foundation members of LGFA. In addition, a further nine councils joined LGFA between February 2013 and April 2013, either as borrowers and guarantors, or as borrowers only. In all, 39 local authorities are eligible borrowers of LGFA (as at 30 June 2013), which is estimated to represent over 90% of local government sector debt.

Performance measures

15. The LGFA’s results against its current performance targets are summarised below:

Current performance targets	Target	Result	Outcome
Average cost of funds relative to NZGS	<0.50%	0.84%	Not achieved
Average base on-lending margin above LGFA’s cost of funds	<0.40%	0.26%	Achieved
Annualised operating overheads	<$3.2 million	$3.0 million	Achieved
Lending to participating councils	>$900 million	$2,481 million	Achieved
Number of shareholder councils	³30	30	Achieved
Number of eligible borrowers	³40	39	Not achieved

16. The LGFA has attributed the non-achievement of the performance target relating to the average cost of funds on the following:

a) A new May 2021 bond was introduced at the May 2013 tender. While this reflected council demand for funding, longer dated bonds price at a relatively higher margin above NZGS than shorter dated bonds.

b) Market uncertainty following a sharp rise in global bond yields during June 2013 adversely affected LGFA’s margins at the 19 June 2013 bond tender.

Another performance target for the LGFA was that there would be at least 40 eligible borrowers by 30 June 2013. As at 30 June, there were 39 approved borrowers. However, three councils had also been approved as borrowers by the LGFA Board, but had not completed the necessary legal documentation to become members of the LGFA by financial year end. When this is completed, there will be a total of 42 eligible borrowers.

17. LGFA undertook 9 bond issues during the 2012/13 financial year, raising a total of $835 million for shareholding councils. As at 30 June 2013, Auckland Council had borrowed a total of $860 million from the LGFA, with $510 million borrowed in the 2012/13 financial year.

18. LGFA estimates that by 30 June 2013 LGFA was saving AA rated councils such as Auckland Council approximately 20-30 bps in annual interest costs on a December 2017 maturity and 30 bps in annual interest on a March 2019 maturity.

2013/14 – First quarter report

19. A copy of the LGFA’s first quarter report can be found at Attachment B.

20. The KPI measures over which the LGFA has a high degree of control (average margin charged over cost of funds, issuance and operating expenses, and lending to councils) were achieved during the quarter.

21. The KPIs which have a high degree of market influence were not achieved during the quarter, due to market conditions. The average cost of funds was 0.97% greater than NZGS, against a SOI target of less than 0.50%. Also, the estimated interest cost savings to LGFA borrowers was 0.23%, against an SOI target of at least a 0.30% saving.

22. However, a bond tender after the end of the period has indicated that market conditions may be improving. This should lead to an improvement in these market influenced performance indicators during the year.

23. The Annual General Meeting was held on 19 November. At the AGM, Craig Stobo and Paul Anderson were re-appointed as directors. Craig Stobo retained his role as chair of the board.

Consideration

Local Board Views

24. The LGFA annual report has been provided to local boards for their information via the Local Boards Services Department.

Maori Impact Statement

25. The funding Auckland Council can access through the LGFA can be used by the Council to fund projects, including projects that benefit Maori. The LGFA therefore has an indirect, rather than direct, impact on Maori wellbeing.

General

26. This report does not trigger the Significance Policy.

Implementation Issues

27. There are no implementation issues associated with this report.

Attachments

No.	Title	Page
a	LGFA Annual Report 2012/13	195
b	LGFA First Quarter Report 2013/14	247

Signatories

Authors

Alastair Cameron - Principal Advisor CCO Governance and External Partnerships

Authorisers

Mark Butcher - Treasurer

Doug McKay - Chief Executive

Council Controlled Organisations Governance and Monitoring Committee

03 December 2013

Substantive CCO first quarter reports

File No.: CP2013/26798

Purpose

1. This report introduces reports from each substantive Council Controlled Organisation (CCO) for the 3 months to 30 September 2013.

Executive Summary

2. This report is part of the regular quarterly reporting to CCO Governance and Monitoring Committee by the substantive CCOs on their financial and service performance.

3. These reports support the consolidated group financial statements for the 3 months to 30 September 2013, to be presented to the Finance and Performance Committee.

4. Normally representatives of the CCO would appear before the Committee to present the results and answer questions from committee members. With the formation of the new CCO Governance and Monitoring Committee following the local body elections, the agenda for the first meeting is full. Further, the meeting is to be held almost three months after the end of the reporting period. For these reasons the CCOs will not present their results. If committee members have questions arising from the reports, officers will take these and report back to the members.

At each future quarterly report, the CCOs will appear before the Committee.

Recommendations

That the Council Controlled Organisations Governance and Monitoring Committee:

a) receive the report from Auckland Council Investments Ltd noting:

i) The improved surplus of $28.6 m due to higher dividends from AIAL and lower tax expense; and

ii) the return on Council’s Diversified Financial Asset portfolio is ahead of the benchmark.

b) receive the report from Auckland Council Properties Ltd noting:

i) The operating surplus of $10 m is $2.2 m better than budget. This is a timing difference that will even out during the year.

c) receive the report from Auckland Tourism, Events and Economic Development noting:

i) An operating surplus of $2.4 m has been achieved against a budget deficit of $1.4 m.

d) receive the report from Auckland Transport noting:

i) A lower than expected operating surplus due to reduced NZTA capital income resulting from the current level of capital spend; and

ii) capital expenditure of $115.9 m is $57.3 m less than forecast.

e) receive the report from Regional Facilities Auckland noting:

i) The operating deficit before tax of $0.7 m is $0.4 m better than budget, due to improved revenue and cost control; and

ii) the capital expenditure programme of $2.7 m is in line with budget.

f) receive the report from Watercare Services Limited noting:

i) The operating deficit before revaluation of derivatives is $1.5 m, an improvement on the budget; and

ii) that capital expenditure for the quarter is 93% of budget.

g) receive the report from Waterfront Auckland noting:

i) That WDA incurred a small operating loss of $1.3 m in line with budget; and

ii) that capital expenditure $7.7 m was 89% of budget.

Discussion

5. In line with current reporting obligations it is the responsibility of the board of each CCO to keep the committee, as the shareholder, informed of operating and financial performance, and abreast of risks. The individual reports from each CCO discharge these responsibilities.

6. None of the reporting CCOs have a significant variance from budget, nor have highlighted significant risk.

Consideration

Local Board Views

7. This report is for the Council Group. Local Boards receive reports specific to their area.

Maori Impact Statement

8. Individual reports include CCOs contribution to Maori outcomes as specified in the Statements of Intent.

General

9. There are no financial or resourcing issues arising from the adoption of this report.

Implementation Issues

10. There are no implementation issues.

Attachments

No.	Title	Page
a	Auckland Council Investments Limited Q1 2014 report	263
b	Auckland Council Property Limited Q1 2014 report	277
c	Auckland Tourism, Events and Economic Development Q1 2014 report	297
d	Auckland Transport Q1 2014 report	329
e	Regional Facilities Auckland Q1 2014 report	351
f	Watercare Services Limited Q1 2014 report	377
g	Waterfront Auckland Q1 2014 report	413

Signatories

Authors

Robert Nelson – Financial Controller

Authorisers

Kevin Ramsay - Manager Finance, Auckland CFO

Doug McKay - Chief Executive

Council Controlled Organisations Governance and Monitoring Committee

03 December 2013

Exclusion of the Public: Local Government Official Information and Meetings Act 1987

That the Council Controlled Organisations Governance and Monitoring Committee:

a) exclude the public from the following part(s) of the proceedings of this meeting.

b) agree that Debra Lawson, Chief Executive Tamaki Redevelopment Corporation Limited (TRC), Shelley Katae, CFO TRC, and the TRC Board Chair (tbc), be permitted to remain for the Confidential item C1: Tamaki Redevelopment Corporation Limited (TRC) – First quarter report (1 July – 30 September 2013), because of their knowledge of the issue, which will help the Committee in its decision-making.

c) note that Peter Haynes, Chair Albert-Eden Local Board, will be in attendance for the Confidential item C2: Mount Albert Grammar School Community Swimming Pool Trust – Trustees appointments.

c) agree that Gary Swift, Chief Executive ACIL, be permitted to attend the Confidential item C3: Ports of Auckland Limited Director Appointments, Briefing by ACIL, because of his knowledge of the issue, which will help the Committee in its decision-making.

The general subject of each matter to be considered while the public is excluded, the reason for passing this resolution in relation to each matter, and the specific grounds under section 48(1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution follows.

This resolution is made in reliance on section 48(1)(a) of the Local Government Official Information and Meetings Act 1987 and the particular interest or interests protected by section 6 or section 7 of that Act which would be prejudiced by the holding of the whole or relevant part of the proceedings of the meeting in public, as follows:

C1 Tamaki Redevelopment Corporation Limited (TRC) - First Quarter Report (1 July - 30 September 2013)

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

Ground(s) under section 48(1) for the passing of this resolution