Agenda of Great Barrier Local Board

Great Barrier Local Board

09 April 2014

Great Barrier Island Telecommunications Status Update and Overview

File No.: CP2014/04975

Purpose

1. The purpose of this report is to update the Great Barrier Local Board on current telecommunications activities on Great Barrier Island, and to inform the Board on current telecommunications developments and opportunities. Discussion includes:

· A brief overview of Great Barrier Island’s key infrastructure activities including infrastructure / service providers and their roles and responsibilities

· A current status update on the Great Barrier Island Mobile Voice and Broadband project

· An overview of the Ministry of Business Innovation and Employment (MBIE) Remote Schools project, including coverage outcomes and potential impact on the Mobile Voice and Broadband project.

Executive Summary

2. In January 2014 the Great Barrier Local Board requested an update and overview of the telecommunications initiatives and environment on the island.

3. The Mobile Voice and Broadband project is progressing with all necessary approvals received for the Medlands site and approvals underway for the Okiwi site.

4. In addition to the Local Board funded Mobile Voice and Broadband project, the Ministry of Business Innovation and Employment has contracted Araneo to deliver broadband access to Great Barrier Island’s remote schools that are out of reach of conventional rural broadband coverage.

Recommendation/s

That the Great Barrier Local Board:

a) Receives the report

b) Notes the complementary nature of the Mobile Voice and Broadband and Remote Schools projects in providing diverse internet access options in Okiwi

Discussion

5. Chorus owns and maintains the copper infrastructure that provides landline telephone access to Great Barrier Island residents and businesses. This infrastructure is connected to the Auckland mainland at Omaha via Digital Microwave Radio (DMR), which is a dedicated wireless link. This link has recently been upgraded to improve the stability of Chorus’ network and is expected to resolve recent connectivity issues in the north of the Island.

6. The upgrade included antenna replacements and was carried out without any unplanned disruption. The new equipment withstood the impacts of cyclone Lusi and has remained stable since the upgrade. Council officers are available to relay any additional queries or comments to Chorus if required.

7. Mobile text, data and voice coverage is provided to parts of the Island by Vodafone and Telecom. Vodafone’s Rural Broadband Initiative (RBI) open access tower at Okupu provides 3G broadband coverage to Claris and backhaul signal for the Medlands site.

8. The open access nature of the RBI tower means that any telecommunications provider can attach their equipment on the tower on standard wholesale terms. This means that a number of mobile and wireless operators could choose to locate their equipment on this tower to provide wireless internet and/or voice services to Okupu and Claris.

9. Due to the more bespoke and challenging nature of the Mobile Voice and Broadband project, the two new repeater sites at Medlands and Okiwi are Vodafone only sites and are built to become part of Vodafone’s mobile network. These sites are smaller repeaters and are only able to accommodate one set of telecommunications equipment.

10. As per the Mobile Voice and Broadband agreement, the sites will be operated and maintained by Vodafone for a minimum of fifteen years. All on-going operational costs will be met by Vodafone. As part of the National Vodafone network these sites will benefit from future technology upgrades.

11. The Remote Schools Project is a Ministry of Business Innovation and Employment (MBIE) initiative to provide internet access to New Zealand’s most remote schools. Araneo (a subsidiary of TeamTalk) have the contract to provide internet access to Great Barrier Island’s three schools.

· Internet access will be provided to Okiwi, Kaitoke and Mulberry Grove schools

· The backhaul signal is provided through Vodafone’s RBI tower at Okupu

· The technology provided is Wi-Fi and includes an element of community coverage

· Araneo will offer wholesale access to retail Wi-Fi suppliers. Farmside (also a subsidiary of TeamTalk) is one of Araneo’s nationwide rural suppliers and has expressed interest in providing retail services over this network. Indicative pricing is provided in Attachment A of this report.

· Schools are expected to receive dedicated upload speeds of 2Mbps and download speeds of 10Mbps.

Consideration

Local Board Views

12. The Local Board has expressed support for the expansion of telecommunications services on the Island. The Board has also expressed a desire that infrastructure development is consistent with local amenity values and to avoid the proliferation of cell-site infrastructure.

13. The local Board has also expressed concern about potential overlaps of coverage initiatives at Okiwi. Officer advice to the Board is that the two projects are complementary and provide a level of diversity and redundancy in internet access provision in the north of the Island. The benefit of network redundancy and diversity was demonstrated through the use of the Vodafone network during the January 2013 bush fire at Okupu, during which the local emergency radio network failed.

Maori Impact Statement

14. Ngāti Rehua Ngātiwai Ki Aotea has been engaged by Vodafone to assess the impact on the required location for the Okiwi site. Support has been expressed for the project, recognising the positive impact that improved coverage will have on the Okiwi community.

15. Ngāti Rehua Ngātiwai Ki Aotea has requested that Council officers continue to investigate internet access options for Motairehe and Kawa Marae.

General

16. Funding issues for the Mobile Voice and Broadband project have been resolved:

· The remainder of the Medlands fund will be invoiced before the end of the current financial year. There is no further risk to Medlands funding

· The Okiwi fund has been deferred to the 2014 / 2015 financial year and will be available for the completion of the Okiwi site.

17. The Medlands site is scheduled for completion by mid-April 2014.

· All required approvals have been obtained and Vodafone has ‘right to build’

· Equipment for the build has arrived in New Zealand

· Vodafone has begun preparations for the build including organising access requirements with quarry operators Fulton Hogan

· Council officers will work with Vodafone and the Local board to arrange communications and public announcements prior to the completion of the build.

18. The Okiwi site is scheduled for completion by June 2015, but is expected to be complete in advance of this date.

· Vodafone have engaged with Ngāti Rehua Ngātiwai Ki Aotea regarding access to the Okiwi site. Discussions as to whether the site is subject to the Treaty of Waitangi settlement process and therefore concession responsibilities are continuing.

· Vodafone will shortly begin the process of applying for the required concession and peppercorn lease with the Department of Conservation on this basis.

· Once the concession is granted, work will begin on final design and resource consent application stages of the Okiwi site.

19. The Remote Schools project being implemented by Araneo is underway.

· Araneo have approval for two sites from the Department of Conservation and one site with a private landowner as per the attached map in Appendix B.

· The sites are less than 3 metres tall and are not expected to significantly impact amenity values or contribute to proliferation of cell-sites and fall within district planning rules.

· In order to deliver coverage to Mulberry School, Araneo will require access to an Auckland Council Parks site. Advice is currently being sought regarding access permissions and processes to implement this site.

Implementation Issues

20. Implementation of the Okiwi site is subject to:

· Vodafone being granted a site concession on a peppercorn / token lease basis by the Department of Conservation

· Successful resource consent application following successful grant of concession

21. Remote schools coverage to Mulberry Grove School is dependent on access to a site on Auckland Council reserve land. There is a risk that existing Auckland Council Parks policy may prevent new telecommunications infrastructure being built on reserve land. Council officers are currently seeking advice on this issue and will brief the Local Board once information is available.

Attachments

No.	Title	Page
a View	Indicative Farmside rural broadband pricing	11
b View	Araneo remote schools repeater locations	13

Signatories

Author

Anthony Acres - Advisor

Authorisers

John Nash - Senior Local Board Advisor

Tim Watton - Manager Regional Digital Policy Implementation

Harvey Brookes - Manager Economic Development

Great Barrier Local Board

09 April 2014

Auckland Transport Report - April 2014 - Great Barrier Island

File No.: CP2014/05847

Purpose

1. The purpose of the report is to respond to local board requests on transport-related matters and to provide information to Elected Members about Auckland Transport (AT) activities in the local board area.

Executive Summary

2. This report covers matters of specific application and interest to the Great Barrier Local Board and its community; matters of general interest relating to Auckland Transport activities or the transport sector; and relevant Auckland Transport media releases for the information of the Board and community.

3. In particular, this report provides an update on;

• Board Transport Capital Fund updates

• Jenny’s Road

• Media interests

Recommendation/s

That the Great Barrier Local Board:

a) Receive the report of Ivan Trethowen, Elected Member Relationship Manager, Auckland Transport.

Discussion

Reporting Back

Board Transport Capital Fund

4. At the Local Board meeting on the 12 March 2014 the Board were provided with a list of potential Local Board Transport Capital Fund projects.

5. The below table outlines an up-date as to decisions by the Board and to the progress of the projects.

Table 2: Great Barrier Local Board project update for Board approval:

Resolution # GBI/2013/234

Resolution # GBI/2014/20

ID#

Project Description

Progress/Current Status

221

Mulberry Grove School Footpath

Shoal Bay Rd

· ROC estimated Option A at $83,000

· ROC estimated Option B at $64,000

There are two options as there is a boundary issue along the school frontage.

· Option “A” is to build a path that would encroach onto the school property, requiring easement from Ministry of Ed

· Option “B” is a new footpath within the road reserve of which would require widening on the north side

Board has requested further consultation between School reps, LB rep and AT

220

Aotea Play Centre Carpark

Kaitoke Lane

· ROC estimated at $8,700

Metal existing grass area

Board approved construction of this project 12 March 2014

211

Hector Sanderson Road

Broken the 1.7km into sections, “A” to “K”

· “A” ROC estimated at $24,000

· “B” ROC estimated at $6,000

· “C” ROC estimated at $41,000

· “D” ROC estimated at $63,000

· “E” ROC estimated at $4,700

· “F” ROC estimated at $36,000

· “G”ROC estimated at $3,500

· “H”ROC estimated at $58,000

· “I” ROC estimated at $13,000

· “J” ROC estimated at $59,000

· “K”ROC estimated at $53,000

Total ROC for project estimated at $361,200

1.7km stretch of Footpaths

The ROC does not include;

· Resource, tree and building consent costs

· Cost fluctuations

· Land Purchase/lease agreements

Board requested further details on this project i.e Plans, drawings, costs etc

222

Fitzroy Wharf parking

· ROC – Unable to determine at present

Auckland Transport is still looking at options, every option investigated to date suggest a huge cost for the benefit of a few cars.

This is still a work in progress

Board to consider a recommendation not to proceed

Note: ROC = rough order of costs; FEC = firm estimate of cost)

Jenny’s Road Stage One Great Barrier Island

6. The former Auckland City Council agreed to seek resource consent on behalf of the land owners to build a 1.12km road to enable access.

7. Resource Consent to build the road was granted by the Environment Court in December 2007 with a consent timeframe of five years, with an extension granted for an additional five years in 2011.

8. Auckland Transport undertook a procurement process for the construction of Stage One Jenny’s Road on Great Barrier Island. This project features in Auckland Council’s Long Term Plan (LTP) 2013/14 ($409, 564) and 2014/15 ($451,204).

9. This project will be constructed over two financial years due to the requirements of the Resource Consent conditions, and the availability of local aggregate from Blackwells Quarry and the availability of local resources and labour.

10. Project deliverables include:

• Construction of approximately 310 metres of concrete road (steep terrain areas only);

• Construction of approximately 810 metres of sealed flexible pavement;

• Installation of an arrestor bed;

• Installation of timber retaining walls;

• Installation of stormwater devices; and

• Extensive landscaping.

11. As part of the Resource Consent requirement, an Archaeological report was required for the full length of the proposed road alignment prior to any earth works commencing.

12. This report has been submitted to Auckland Transport, resulting in environmental management plans being developed with the successful contractor.

13. Works on this project started in early March 2014 and are progressing as planned.

Media

Jump in Public Transport Patronage

14. January saw a jump of three point three per cent in the number of people using public transport in Auckland.

15. The number of trips on rail was up seven point six per cent in January compared to the same month last year.

16. Auckland Transport’s Group Manager, Public Transport, Mark Lambert says the increase for rail is pleasing considering the disruption to services in January because of on-going work to electrify the rail network.

17. The Northern Express bus service saw a rise in patronage of seven per cent, while the number using all other bus services was up just under five per cent compared to January 2013.

18. Auckland Transport has been running promotions to encourage more people on the North Shore to use the Northern Express.

19. Ferry patronage was down in January. One of the reasons for the drop in the numbers using ferries was the poor weather over the holiday period.

20. On an average weekday some 236,000 trips are taken on public transport in the region and Aucklanders are now travelling on more than 200,000 AT HOP cards.

AT HOP Cracks 200,000

21. Aucklanders are now travelling on more than 200,000 AT HOP cards.

22. AT HOP is a smart-card which can be used for travel on trains, ferries and the majority of buses across the region.

23. Auckland Transport has been progressively introducing the system across different transport modes and a multitude of operators and this process is virtually complete.

24. AT’s chief operations officer Greg Edmonds says the 200,000 card milestone comes with 95 per cent of the roll-out – due for the end of March – completed.

25. Mr Edmonds says that under the second phase of the integrated ticketing programme, a new Fares Policy will be developed. This will involve a review of fare structures (e.g. stage-based, zonal, distance-based), investigation of different fare products and passes, and pricing levels.

26. For more information call Auckland Transport on 09-3664467 or go to: www.ATHOP.co.nz

Fast facts:

· On an average weekday some 236,000 trips are taken on public transport in the region.

· More than 3 million trips each month are made using the AT HOP card.

· On an average weekday buses in Auckland travel some 164,000 km – the equivalent of flying from Auckland to London nine times.

27. You can read the full terms of use of the AT HOP cards, the registered prospectus relating to the AT HOP cards and other information regarding the AT HOP cards on our website or at the Transport Information Centre, Britomart

Consideration

Local Board Views

28. The Board’s views will be incorporated during consultation on any proposed schemes.

Maori Impact Statement

29. No specific issues with regard to the Maori Impact Statement are triggered by this report.

General

30. The activities detailed in this report do not trigger the Significance Policy. All programs and activities are within budget/in line with the Council’s Annual Plan and Long Term Plan documents and there are no legal or legislative implications arising from the activities detailed in this report.

Implementation Issues

31. All proposed schemes are subject to prioritization, funding and consultation.

Attachments

There are no attachments for this report.

Signatories

Author	Ivan Trethowen – Auckland Transport Elected Member Relationship Manager
Authoriser	Jonathan Anyon – Auckland Transport Elected Member Relationship Team Manager

Great Barrier Local Board

09 April 2014

Local Board Transport Capital Fund – Overview of Total Programme for the Current Local Boards

File No.: CP2014/05807

Purpose

1. The purpose of this report is advise all twenty-one Local Boards of the current status of the Local Board Transport Capital Fund Programme, in particular the need to urgently identify new project proposals that will enable the total budget that needs to be spent in the electoral term of the current Local Boards to be spent by the end of June 2016.

Recommendation/s

That the Great Barrier Local Board:

a) That the report be received.

b) That all Local Boards urgently identify new project proposals for the Local Board Transport Capital Fund programme by 31 August 2014 so that subsequent initial assessment, detailed design including consultation and statutory approvals, and construction can be completed by 30 June 2016.

Discussion

Background

2. The total annual budget for the Local Board Transport Capital Fund is $10M. This was assigned to the twenty-one Local Boards based on population, except for the Waiheke and Great Barrier Local Boards who received nominated sums.

3. The programme commenced in September 2012 following resolution of the use of the fund by the Auckland Council Strategy and Planning Committee in August 2012.

Budget Considerations

4. One of the requirements of the Local Board Transport Capital Fund is that the budgets must be spent within the same electoral term. Budgets can be moved from year to year within the electoral term, subject to Auckland Transport having the ability to manage the cash flow, but carry forwards to subsequent political terms are not allowed.

5. The total amount spent on Local Board Transport Capital Fund projects in the 2012-13 financial year was $1.3M. This was due to the late start of the programme in that year so Auckland Council was asked to relax the “no carry forward” rule in this inaugural year of the programme. This one-off carry forward of the unspent balance of $8.7M was subsequently approved.

6. Therefore the total budget that must be spent on Local Board Transport Capital Fund projects in the current political term is as follows:

· The carry forward from 2012-13 = $8.7M

· The 2013-14 Budget = $10M

· The 2014-15 Budget = $10M

· The 2015-16 Budget = $10M

This is a total of $38.7M

7. In order to fully spend this amount by 30 June 2016 the following spending profile will be required.

· 2013-14 Forecast = $8.6M (actual current forecast)

· 2014-15 Forecast = $10.1M (latest forecast)

· 2015-16 Forecast = $20.0M (latest forecast)

8. The 2013-14 figure is the currently expected end of year result for 2013-14. The end of the 2013-14 financial year is the end of the second year of the four year Local Board Transport Capital Fund programme that needs to be completed by 30 June 2016, and only $9.9M of the $40M will be spent. i.e. only 25% spent in half the available time.

9. Conversely, the required spend in the last two years (2014-15 and 2015-16) is $30.1M, being a threefold increase in the spend compared to the first two years. At the current rate of spending this $30.1M target will not be achieved.

10. In addition, the current Local Boards are allowed to spend some or all of the 2016-17 Local Board Transport Capital Fund budget as their elected term finishes three months into this financial year on approximately 30 Sept 2016. This means there is an additional $10M available that could also be spent.

Value of Projects

11. Of the 228 proposals submitted to date 64 are not proceeding (not meeting criteria, funded elsewhere, deferred to future years, or not chosen by Local Boards). The total value of the remaining 164 projects that range from being in the initial assessment phase to having the construction fully complete is $14.9M.

12. Assuming that all of these projects are completed they represent only 37% of the total Local Board Transport Capital Fund programme that needs to be delivered in the current electoral term.

13. Conversely an additional $25.1M worth of projects need to be identified in order to deliver the programme by 30 June 2016.

Forward Planning to Ensure Programme Delivery

14. Additional project proposals need to be identified urgently by ALL Local Boards in order for the programme to be delivered on time.

15. As the spending of the budget is heavily weighted towards the 2015-16 financial year and to a lesser extent the 2014-15 financial year, the issue of Auckland Transport being able to manage the work in those years and the contracting industry being able to carry out the large volume of work become factors in the overall delivery of the programme.

16. Accordingly construction approval will be required for all projects in the programme by 30 May 2015 at the latest so that the last of the physical works construction of the works (in fact half of the whole programme) can be spread out over the entire 2015-16 financial year. Many of these approvals will be required much earlier in order to deliver $10M of work in the 2014-15 year.

17. In order to achieve the 30 May 2015 construction approval date, detailed design approval will need to be provided for all projects no later than 30 November 2014 in order to allow six months for detailed design including consultation and statutory approvals to be completed so that construction approval can be provided on time. As with the construction approvals, much of this detailed design has to happen much sooner in order to deliver the 2014-15 programme.

18. Accordingly the identification of new projects by ALL Local Boards to the total value of at least $25.1M needs to happen by 31 August 2014 at the latest in order for them to be assessed and project scopes and rough orders of cost provided back to the Local Boards for their consideration for detailed design approval. Ideally more projects need to be identified in case some don’t meet the necessary criteria.

19. As the four year programme budgets for each Local Board can be considered as a single budget there is opportunity for Local Boards to consider larger projects that can be funded over more than one year, or that are funded jointly between more than one Local Board. A fewer number of larger projects will be easier to manage and will make delivery of the programme much easier.

20. If the above programme timing is not met Auckland Transport cannot guarantee that the Local Board Transport Capital Fund programme will be able to be fully delivered in the current electoral term.

Project Management Process

21. The time required for managing the various stages of a project can vary significantly depending on the nature and size of the project.

22. Initial assessments of project proposals including the development of Rough Orders of Cost can be relatively quick in the case of simple projects such as new footpaths or the installation of new bus shelters where the work is straight forward and is carried out on a regular basis under other Auckland Transport work streams. In these cases typical costs are known and a turn-around of a few weeks can be achieved.

23. However other one-off projects that may have safety implications that require the gathering of data (site specific surveys, and information such as traffic counts) to determine whether or not the project meets traffic warrants, standards or regulatory requirements, or projects that require initial community input can take up to three months to assess.

24. Detailed design and the development of Firm Estimates of Cost can also vary significantly in terms of the overall time required. Some simple projects require very little design and can take a matter of a few weeks.

25. Other more complex projects require time to gather detailed site information, to carry out consultation with stakeholders, to carry out design including inputs from specialists, to apply for resource consents, and to obtain regulatory approvals such as traffic resolutions or speed limit changes. These projects can take more than six months to design.

26. Construction timeframes can vary significantly depending on the size of the project. Lead time to supply specialist materials for construction, often from overseas, can delay projects. Timing of works to avoid the wetter winter months can also impact on when tenders are let. Delaying of weather sensitive works to construct them at the right time of the year can impact on the overall timing of project delivery.

27. In addition, spreading out the delivery of the construction of works over the whole year can provide a more even workload to the contractors which can result in more favourable overall costs to AT and the Local Boards.

28. All of the above highlights that the timing of the various stages of projects can vary significantly. Straight forward projects can be delivered in a single year; whereas it is not possible to deliver more complex projects within a single year. Many of the Local Board projects fall into this second category.

Auckland Transport Programme Management Process

29. A review of the internal Auckland Transport processes has highlighted a number of improvements that will be made in order to assist with the delivery of this programme of work.

30. Timing of responses back to the Local Boards on initial assessments and on the completion of detailed designs will be monitored more closely to ensure there is no slippage in these approval processes.

31. Rough Orders of Cost and Firm Estimates of Cost will be provided in ranges of price rather than a single dollar figure because of the uncertainty of providing exact figures in the early stages of projects. Rough Orders of Cost carried out at the start of the project can vary by up to 30%, whereas Firm Estimates of Cost carried out in the detailed design phase can vary by 15%.

32. There are examples where previous estimates that have been provided have been too low and additional approvals have been required from the Local Boards. This has caused problems with the Local Board expectation of project costs. More care will be taken in future to provide accurate estimates.

33. It should be remembered that these figures are still estimates and the true cost of the work will only be known when the construction is complete. The reason for this is that there are many factors that can affect the final cost of a project compared to the Firm Estimate of Cost. Three of these are the tendered price from the contractor, unforeseen ground conditions, and relocation/protection of underground services. Every endeavour will be made to keep project costs within the approved budgets.

Consequences of not Delivering the full Programme

34. Auckland Transport CAPEX underspend including from within the Local Board Transport Capital Fund remains under sustained scrutiny by Auckland Council.

35. Auckland Transport is accountable for the current underspend on this significant budget allocation, and reports every quarter to Auckland Council on the accuracy of its CAPEX spend forecasts.

36. It is important that this fund is fully spent each year to ensure that neither its amount nor its process are put at risk when consistently reporting underspends to Council.

Summary of the Budgets and Project Values by Local Board

Local Board	Total Budget 2012-13 to 2015-16 (four years)	Total Value of all Approved Projects and Proposals Being Assessed	Value of New Projects Still to be Identified
Albert Eden	$2,659,732	$1,302,567	$1,357,165
Devonport Takapuna	$1,540,120	$1,104,960	$435,160
Franklin	$1,739,864	$946,555	$793,309
Great Barrier	$400,000	$278,476	$121,524
Henderson Massey	$2,993,512	$1,012,988	$1,980,524
Hibiscus and Bays	$2,399,540	$763,330	$1,636,210
Howick	$3,487,612	$1,147,000	$2,340,612
Kaipatiki	$2,318,064	$1,244,711	$1,073,353
Mangere Otahuhu	$2,071,016	$609,364	$1,461,652
Manurewa	$2,373,256	$472,116	$1,901,140
Maungakiekie Tamaki	$1,979,028	$800,000	$1,179,028
Orakei	$2,199,796	$852,633	$1,347,163
Otara Papatoetoe	$2,197,168	$1,098,584	$1,098,584
Papakura	$1,224,736	$904,747	$319,989
Puketapapa	$1,526,468	$373,000	$1,143,468
Rodney	$1,477,044	$733,000	$744,044
Upper Harbour	$1,348,264	$674,132	$674,132
Waiheke	$800,000	$211,943	$588,057
Waitakere Ranges	$1,324,608	$140,000	$1,184,608
Waitemata	$1,879,156	$192,470	$1,686,686
Whau	$2,071,016	$0	$2,071,016
TOTALS	$40,000,000	$14,862,576	$25,137,424

37. It should be noted that the possible spend of the 2016-17 budget is not included in the above figures.

Suggestions of Projects to be funded from the Local Board Transport Capital Fund

38. Attached is the Pick List of the types of projects that could be funded from the LBTCF programme that has previously been circulated to Local Boards for their information. This list will assist Local Boards to identify potential projects in their areas.

Consideration

Local Board Views

39. This report is for the Local Board’s action.

Maori Impact Statement

40. No specific issues with regard to the Maori Impact Statement are triggered by this report.

General

41. The activities detailed in this report do not trigger the Significance Policy, all programmes and activities are within budget/in line with the Council’s Annual Plan and LTP documents and there are no legal or legislative implications arising from the activities detailed in this report.

Implementation Issues

42. There are no implementation issues.

Attachments

No.	Title	Page
a View	Projects that could be considered by Local Boards	27
b View	Financial Updates for the individual Local Boards.	33

Signatories

Author

Phil Donnelly, Team Leader East, Road Design and Development, Capital Development Division, Auckland Transport

Authorisers

Andrew Scoggins, Group Manager Road Design and Development, Capital Development Division, Auckland Transport

Jonathan Anyon, Elected Member Relationship Team Manager, Auckland Transport

Great Barrier Local Board

09 April 2014

Great Barrier Island Small Local Improvement Projects (SLIPs) Programme 2013/2014

File No.: CP2014/04351

Purpose

1. This report provides an overview of the Great Barrier Local Board 2013/2014 Small Local Improvement Project (SLIP) programme and recommends projects for approval and commencement.

Executive Summary

Operational Expenditure	Total Budget	YTD Allocated (%)		Allocation Including Recommendations (%)		Remaining Budget
SLIPs Opex 2013/2014	$197,000	$135,726.25	69%	$132,426.25	67%	$64,573.75

Capital Expenditure	Total Budget	YTD Allocated (%)		Allocation Including Recommendations (%)		Remaining Budget
SLIPs Capex 2013/2014	$437,000	$301,069.65	69%	$301,069.65	69%	$135,930.35
Deferrals	$311,000	$150,201.86	48%	$150,202	48%	$160,798.14
Total Capex	$748,000	$451,271.65	60%	$451,271.65	60%	$296,728.49

2. The Great Barrier Island Local Board has $197,000 SLIPs operational funding and $437,000 SLIPs capital expenditure available to allocate in the 2013/2014 financial year.

A further $311,000 capital expenditure has been carried forward from previous years. This brings the available capital expenditure to a total of $748,000.

3. To date the Great Barrier Local Board has allocated $135,726.25 or 69% of their operational expenditure budget and $301,069.65 or 69% of their capital expenditure budget.

4. Approval of the recommendations in this report will allocate 67% of the available operational expenditure and 69% of the available SLIPs capital expenditure leaving $64,573.75 operational expenditure and $135,930.35 capital expenditure for scoping prioritisation at a workshop with the Local Board.

5. Further SLIPs funding reports will be put to the board for project approval and implementation.

Recommendation/s

That the Great Barrier Local Board:

a) Receives the Great Barrier Island SLIPs 2013/2014 programme update.

b) Cancels the following SLIP’s projects and returns the SLIPs 2013/2014 budgets for reallocation:

No	Project description	Capex/ Opex	Budget value
1.	Cross Road -63 Gray Rd native planting	Opex	$5,300

c) Approves the following projects for scoping from SLIPs 2013/2014 budgets, (noting projects approved for scoping may take 1 to 3 months to scope depending on the complexity of the projects involved):

No	Project Description
1	Whangaparapara Mural
2	Station Rock walkway Stage 2 Station Rock to Rosalie Bay walkway
3	Kawa & Motairehe rabbit control programme

The detail regarding the above projects is attached to this report as the Attachment B- “SLIPS Proposal forms for Great Barrier Local Board April 2014”.

d) Approves the following SLIPs projects for implementation during the 2013/2014 financial year and confirms the Project Spokesperson/s:

Project description

Capex/ Opex

Budget value

Local Board Spokesperson/s

Great Barrier maps design & print

Opex

Opex$2,000 2013/14

Opex $4,500 2014/15

TBC

e) Receives and acknowledges completion of the following projects during the 2013/2014 financial year:

No	Project description	Capex/ Opex	Budget value
1.	Port Fitzroy Pontoon	Capex	$14,400
2.	Port Fitzroy Mural	Opex	$8,500
3.	Okiwi Boardwalk	Capex	$11,600

The detail regarding the above projects is attached to this report as the Attachment A- “SLIPS Project Summary for Great Barrier Local Board April 2014”.

Discussion

6. Decisions from the board are being sought for the following:

7. Projects to be scope from SLIPs 2013/14 budgets:

The following SLIPs proposal forms have been received during this period, and are tabled for the boards consideration:

· Whangaparapara Mural

· Station Rock walkway Stage 2

· Kawa & Motairehe Rabbit Control

8. Approval is sought to fund the Great Barrier maps design and print. This project is described in Attachment A- “SLIPS Project Summary for Great Barrier Local Board April 2014”.

Consideration

Local Board Views

9. This report canvasses the views of the Great Barrier Local Board.

10. The recommendations contained within this report fall within the Local Boards delegated authority.

Maori Impact Statement

11. Parks and open spaces contribute significantly to Maori well-being, values, culture and traditions. Where any aspects of the proposed work programme are anticipated to have a significant impact on sites of importance to Tangata Whenua, appropriate consultation will follow.

General

12. Communities are impacted by SLIPs projects. They provide an opportunity for staff and elected representatives to engage with the communities on their specific needs. SLIPs staff will liaise directly with all residents and stakeholders impacted by any SLIPs or Discretionary funded projects to be delivered.

Funding for the proposed projects within this report would be obtained from the Great Barrier Local Board’s Small Local Improvement Project budget allocation. After allocating budget to all the projects listed in this report and elsewhere, the Great Barrier Local Board will still have SLIPs capital and operational funding remaining unallocated. Further reporting as part of the monthly work programme reporting will be used to determine what other projects the board may wish to fund.

SLIPs need to comply with all relevant legislation, including the Resource Management Act 1991, the Local Government Act and all Auckland Council policies.

Implementation Issues

13. All 2013/2014 projects should have budget allocated to them within the first quarter of the 2013/2014 financial year; to enable commencement and completion between prior to 30th June 2014.

14. Most projects will need eight months or more to be successfully delivered within the 2013/2014 financial year. Projects that have budget allocated to them with less then six months remaining within the current financial year, will be at risk of not being completed by 2013/2014 financial year end. As a result the project completion, as per the agreed delivery programme, may be deferred across into the following 2014/2015 financial year for completion.

15. Longer term projects will result in SLIPs capital funding being carried forward to the 2014/2015 financial year and these projects not being delivered within the 2013/2014 financial year.

16. Budgets for projects funded from 2013/2014 SLIPs operational expenditure must be fully expended within the 2013/2014 financial year.

17. The ability to spend/deliver outcomes is dependent on the availability of experienced staff or consultant project management resource.

Attachments

No.	Title	Page
a View	SLIPs Project Summary for Great Barrier Apr 2014	45
b View	SLIPs Proposal from for Great Barrier April 2014	51
c View	Projects Schedule April 2014	57

Signatories

Authors

Janine Field - SLIPS Project Portfolio Leader

Authorisers

Oliver Kunzendorff - Team Leaser SLIPs

Julie Pickering - Manager Asset Development & Business Support Central

Ian Maxwell - Manager Parks, Sports & Recreation

John Nash - Senior Local Board Advisor

Great Barrier Local Board

09 April 2014

Local board feedback on the Local Boards Funding Policy Review

File No.: CP2014/06277

Purpose

1. This report seeks formal feedback from local boards on the work to date on the Local Boards Funding Policy Review.

Executive Summary

2. Auckland Council is required to adopt a Local Boards Funding Policy. The current policy was developed within a context of retaining and reflecting legacy council service level and funding decisions. After three years more has been learned and a broader policy discussion can be undertaken.

3. The review seeks to find the most appropriate funding mechanisms for local board expenditure on asset based services such as parks, libraries, recreation and community facilities and non-asset based services (locally driven initiatives). During the course of the review, equity issues for asset based service levels have been raised, which cannot be resolved via the Local Boards Funding Policy. Resolving these issues will have implications that can only be addressed as part of the wider planning and budgeting process. The review recommends retaining the current funding model for asset based services, but considers options for changing to a fairer funding model for locally driven initiatives.

4. The timing for the review proposes public consultation in June 2014 to enable a policy to be adopted to form the basis of local board budgets for inclusion in the draft Long-term Plan 2015-2025. In order to meet that timeframe engagement with local boards needs to take place in March and April 2014. This will enable the council to consider local board views in determining a proposal for consultation with the public.

5. A report has been produced setting out options for the Local Boards Funding Policy and the key issues that need to be resolved. This report, ‘Local boards funding policy review’ is appended as Attachment A to this report, and will form the basis of engagement with local boards and governing body to inform decision making on the policy.

6. On 20 February 2014, the Governing Body agreed the parameters for engagement with local boards on the review of the local boards funding policy. These parameters include:

· no changes being made to the split between regional and local activities or to decision making responsibility for setting service levels for local activities

· time frame for the review

· structure of the policy that is to be considered

· Governing Body, via operational groups, will work on equity issues in regard to asset based service levels as part of long-term plan process

· options for a formula based funding allocation

· parameters for the use of local rates

· undertaking a review of the council rates remission and postponement legacy schemes that support community and sports related services, and natural, historic or cultural heritage, alongside the review of the Local Boards Funding Policy.

7. Informal engagement with local boards has been undertaken throughout February and March 2014, and formal feedback is now sought from local boards via resolution.

8. Following the engagement phase of the policy, all feedback will be presented to the Local Boards Funding Policy Political Working Party in early May, and subsequently the Governing Body when considering the draft policy for consultation in late May.

Recommendation/s

That the Great Barrier Local Board:

a) agree to consider the policy framework for the Local Boards Funding Policy Review and provide formal feedback on the issues discussed and other associated issues.

Discussion

9. At the 20 February 2014 meeting of the Finance and Performance Committee^{^[1]}, the following resolutions were passed to guide the engagement phase of the Local Boards Funding Policy:

a) agree with the following parameters for the review of the Local Boards Funding Policy for engagement with local boards based on the attached report “Local boards funding policy review”:

b) note that the review of the Local Boards Funding Policy will not change decision making responsibility for:

i) the split between regional and local activities

ii) the setting of service levels for local activities.

c) note that the proposed model for funding asset based services is the same model that is currently used.

d) note that the Local Boards Funding Policy cannot resolve issues relating to differing asset based service levels and that the issue will be considered as part of the planning process for the long-term plan

e) agree to adopt the policy by August 2014 to enable clarity in funding decision making to provide predictability of funding in the preparation of local board plans and budgets for the draft Long-term Plan 2015-2025. This will require the policy to be publically consulted on in June 2014.

f) agree that the policy improve alignment between funding and expenditure decisions, by having separate funding mechanisms for:

i) asset based services, such as parks and swimming pools, where service levels in each board area are primarily driven by the Governing Body decisions on the number, nature and location of such assets and the budget available for both capital and operational expenditure on these services.

ii) locally driven initiatives, where local boards undertake activities for the benefit of their local communities, and control decisions on services, service levels and costs. (This may include asset related service level improvements and capital investment within limits approved by the Governing Body).

g) agree that the costs of operating and maintaining asset based services (as defined in f) (i)); as well as the consequential operating expenditure (interest and depreciation) associated with Governing Body investment in local assets; will be funded from general rates, in accordance with asset management plans and the regional budgeting process

h) agree the next stage of the review will consider options for funding locally driven initiatives (as defined in f) (ii)) by either general rates allocated on a formula basis, local rates collected in each board area, or a mix of general rates allocation and local rates

i) agree that options for determining the relationship between the Governing Body and local boards for the use of local rates are:

i) local boards advocate to the Governing Body for local rates and the Governing Body makes the final decision.

ii) local boards make decisions on the use of local rates, within constraints of regional policy determined by the Governing Body, and the Governing Body implements these decisions.

j) agree that the council’s rates remission and postponement legacy schemes that support community and sports related services, and natural, historic or cultural heritage be reviewed alongside the Local Boards Funding Policy to:

i) ensure consistency between local grants schemes and rates relief schemes

ii) develop a regionally consistent rates remission and postponement policy. Consultation on amendments to the policy should be undertaken alongside consultation on the draft Long-term Plan 2015-2025.

k) agree to direct staff to consider service level equity issues for local asset based services as part of the development of the Long-term Plan and Asset Management Plans and engage with local boards on this and report back on a timetable.

10. A full discussion of the options for, and issues associated with, the development of the Local Boards Funding Policy can be found in the attached report “Local boards funding policy review”.

11. The following discussion summarises the issues related to the setting of parameters for engagement with local boards on the options for the funding policy.

Time Frame

12. The adoption of a Local Boards Funding Policy is likely to have an impact on the allocation of council budgets. It is recommended that the Local Boards Funding Policy be adopted by mid-August 2014. This would enable the council to prepare local budgets that reflect the new funding policy for public consultation in the draft Long-term Plan 2015-2025. Adopting the Local Boards Funding Policy in August will also provide local boards with clarity as to who has decision making authority on the level and source of funding for local activities during the finalisation of budgets for local board plans in September.

13. To meet this timeline, public consultation on the Local Boards Funding Policy would need to be carried out through a special consultative procedure undertaken in June 2014.

Scope: Policy structure

14. The Local Boards Funding Policy sets out how local activities are to be funded (the split between rates and fees and charges) and who should pay where rates are used. Decisions on service levels and how much funding is available are made when budgets are prepared each year. The review of the Local Boards Funding Policy does not set, or seek to change, decision making responsibility for:

· the split between regional and local activities

· the setting of service levels for local activities.

15. Expenditure on local activities can be either capital or operational in nature. Capital expenditure is debt funded, but the ongoing costs associated with this expenditure, such as interest charges, depreciation, staff, consumables and maintenance are operational costs. Local boards allocated capital funding to deliver governing body investment decisions on local assets, are also allocated the consequential operational expenditure associated with that capital expenditure. Operational expenditure is funded from local fees and charges and rates. The rate requirement is therefore gross operational expenditure, less fees, charges and other revenue.

16. The ability to undertake capital investment depends on the ability to service the subsequent operational costs. While the Local Boards Funding Policy focuses on funding of operating expenditure, it captures capital decisions by including the subsequent operating costs.

17. Good public policy links decisions on tax with decisions on expenditure (i.e. service levels). Where possible this review has identified where better alignment can be made between funding decisions and decisions on levels of service. This has resulted in a policy framework that differentiates between:

· asset based services such as those associated with parks, swimming pools and community facilities where the Governing Body makes decisions on the location, nature and number of local assets and matches this with funding

· locally driven initiatives, where local boards undertake activities for the benefit of their local communities, and control decisions on who gets funding and the services and service levels to be delivered.

18. The table following describes the Governing Body’s and local boards’ decision making roles in relation to asset based services and locally driven initiatives.

	Governing Body role	Local board role
Asset based services	· Allocates capital funding to local boards in accordance with its decisions on new local assets and major upgrades. · Decides approximate location, budget and scope for these projects · GB decisions on investment will be guided by regional strategies, which should identify funding priorities based on the need to address service gaps and growth	· Engaged and provide feedback on GB decisions · Engaged and provide feedback on regional strategies · Decide precise location of new assets · Agrees design of project within scope set by GB. Can propose to fund increases to project scope as locally driven initiatives · Oversees delivery of project
Asset based services	· Allocates operational expenditure to enable local boards to operate and maintain their local assets in accordance with the asset management plans · Approves asset management plans	· Engaged in development of asset management plans · Operate and maintain local assets in accordance with the asset management plans · Can fund asset related service level improvements as locally driven initiatives
Locally driven initiatives	Approve or reject locally driven projects that exceed Governing Body set limits on local board capital investment	· Can undertake capital projects within limits set by Governing Body · May undertake capital projects over limits set by Governing Body with approval from GB
Locally driven initiatives		· Decide services and service levels to be provided for community and allocates operating budgets accordingly · Oversee delivery of local services · Can fund asset related service level improvements

19. The review proposes that the existing model for funding asset based services be retained as there is no merit in alternative options for funding these. Under this model asset based services will continue to be funded from general rates. As the distribution of asset based service costs between boards does not align with factors such as local board population size, then funding on this basis will not ensure that local boards can maintain their asset base. There is also:

· a poor relationship between the user catchment for many asset based services and local board populations

· using local rates to fund asset based services would be inequitable, and for some boards unsustainable.

20. Under this funding model the Governing Body determines how much funding is available to fund agreed service level standards. The Governing Body also has the ability to set regional policies on fees and user charges such as free entry to swimming pools for under 17’s. Local boards undertake an advocacy role in changing agreed service levels and will be engaged in the development of the regional strategies on asset based services that will guide Governing Body decisions on future investment in assets.

21. Local boards also have decision making on how asset based services are delivered and operated in their board area. They may make decisions on the level of fees and charges within any regional policy set by the Governing Body. In doing so they receive the benefit of increased revenue or fund any shortfall from other funding sources.

22. During the course of the review, equity issues for asset based service levels have been raised which cannot be resolved via the Local Boards Funding Policy. Resolving these issues will have implications that can only be addressed as part of the wider planning and budgeting process and will be considered when developing the long-term plan. As part of this process, local boards will be engaged in the development of asset management plans (AMPs) that will determine service levels and capital programmes for asset based services. Engagement with local boards on the AMPs is currently planned to begin March 2014.

23. Under the current funding model, funding for locally driven initiatives reflects decisions on service levels made by former councils. The review has found that equity in funding for locally driven initiatives between local boards can be improved in one of three ways. These are by using:

· general rates allocated to local boards based on factors such as local board population size, possibly adjusted for factors such as deprivation and remoteness

· local rates collected within each board area

· a combination of general rates allocation and local rates.

24. Under a general rate allocation model the amount of locally driven initiative funding available to each local board is determined by the Governing Body. This is affected by decisions made by the Governing Body on the total level of locally driven initiatives funding available each year and the formula used to allocate this to each local board.

25. A general rate allocation model will see a redistribution of funding between local boards; some will receive more funding while others will receive less. A local board that receives less funding will then have the option to reduce expenditure or to seek an increase in revenue from fees and charges or from local rates.

26. Under a local rate model, funding for locally driven initiatives is provided entirely from a local rate. The level of funding required from the local rate is determined by the decisions on local fees, charges, services and service levels made by the local board. The local rate will show as a separate line item on the rates invoice.

27. A combined model will part fund locally driven initiatives via a general rate allocation with the remainder of the funding provided by a local rate.

28. The proposed Local Boards Funding Policy structure for funding operational expenditure is as follows:

Funding for asset based services

The cost of operating and maintaining asset based services is funded from general rates, and fees and charges revenue associated with individual assets. Funding is allocated to local boards in accordance with asset management plans and the regional budgeting process.

Funding for locally driven initiatives

Locally driven initiatives will be funded from local fees and charges associated with these activities, and from rates funding. There are three options for rates funding locally driven

initiatives:

· general rates allocated to local boards based on factors such as local board population size, possibly adjusted for factors such as deprivation and remoteness

· local rates collected within each board area

· a combination of general rates allocation and local rates.

29. The above structure for the funding policy was agreed by the Governing Body for engagement with local boards. The focus for engagement is on how to best fund the locally driven initiatives component of the policy.

Scope: how local rates are used

30. The use of local rates is an option under any funding model. The review of the local board funding policy provides the opportunity to have greater clarity in the roles that the Governing Body and local boards play in setting local rates. This is particularly relevant where funding decisions are aligned with decisions on levels of service. Legislation constrains this process in that only the Governing Body can set a rate. There are two options for determining the relationship between the Governing Body and local boards, these are:

· local boards advocate to the Governing Body for new local rates or changes to those set by the Governing Body, and the Governing Body makes the final decision. This is a similar process that is currently used for funding of local assets.

· local boards make decisions on the use of new local rates or changes to those set by the Governing Body, within constraints of regional policy determined by the Governing Body, and the Governing Body implements these decisions. This is a similar process that is currently used for local fees and charges.

31. The Local Boards Funding Policy is the appropriate place to set this relationship. The Governing Body agreed the above as relationship options for engagement with local boards.

Policy implementation: Capital expenditure

32. Local boards currently have budgets for capital expenditure from three sources:

· Governing Body investment decisions on local assets

· legacy capital projects inherited from the previous councils

· an allocation of capital funding for boards to use at their discretion, beginning in the 2012/2013 year.

33. Governing Body provided capital funds for investment in local assets are not discretionary for local boards. While each board has decision making on how specified projects are implemented within their area, projects must be delivered within the scope agreed by the Governing Body.

34. The review recommends that the Local Boards Funding Policy only allocates operational expenditure to local boards, and does not allocate capital expenditure. Local boards can still undertake capital projects within the limits set by the Governing Body, so long as they can fund the consequential operating expenditure (including depreciation and interest costs) from their operational budgets. Local boards would need to fund this expenditure either by reprioritising their existing budgets (through efficiencies or reduced service levels), or increasing their revenue from rates or fees and charges. This would see local boards funding capital investment in the same way as the Governing Body does.

35. The review recommends that the few remaining significant legacy capital projects be treated the same as Governing Body investment decisions. These funds will be considered nondiscretionary, on the basis that it was a Governing Body decision that these projects continue rather than be reviewed against regional priorities for investment. Consequential operating expenditure associated with these projects will be part of asset based service funding and will not impact on local board budgets.

36. The consequential operating expenditure associated with any remaining discretionary capital funds will be treated as funding for locally driven initiatives. This funding will therefore be included in any reallocation of funding for locally driven initiatives.

Scope: Locally driven initiatives - general rate allocation formula options

37. If the governing body determines the total level of funding to be raised through a general rate for locally driven initiatives, some form of allocation method or formula is required. The Strategy and Finance committee agreed at its May 2013 meeting that the following attributes of local boards be considered in the development of the funding policy:

· population

· deprivation

· factors related to rural/geographic isolation

· rates collected.

38. It is recommended that the general rate funding allocation formula be restricted to factors related to population, deprivation and rural/geographic isolation only.

39. Rates collected should not be used as a factor for allocating general rates funding. This is because general rates have an element of both tax and payment for services received. The distribution of rates across groups of ratepayers was a consideration in the development of the rating policy.

40. If funding local boards based on the level of rates collected in the local board area is desired, then local rates should be used. This would make explicit the link between and rates paid and services received, with each board area paying a local rate for the services undertaken by their board. It also directly links a local board’s decision making on service levels with decisions on the rate revenue required to be collected from their local community.

Scope: Transition

41. Under the proposed policy, locally driven initiatives can be primarily funded either through local rates, or by general rates allocated to boards based on factors such as population, or a mixture of the two.

42. A general rate allocation formula will result in significant change in the level of funding for some local boards. As such, the adoption of some form of transition process may be appropriate. The review process will present options for transitioning change as a result of the funding policy over three years, to align with the Long-term plan planning cycle.

43. The level of change associated with the adoption of local rates for funding locally driven initiatives is smaller. Local boards would also have the opportunity to adjust their local rates revenue requirement by adjusting their service levels. A transition process is unlikely to be of value in this case. However if a mixed funding model is adopted, using both general rates allocation and local rates, there may still be a need to transition the allocated portion of funding. Options for managing this change will be presented.

44. It is noted that Great Barrier Island local board will experience high levels of change in funding regardless of what funding model is adopted. Options for treating this board as a special case for funding will be presented by the review.

Policy implementation: Local fees and charges

45. Local boards have the right to set local fees and charges under the allocation of decision making. Under the proposed Local Boards Funding Policy framework, it is recommended that local boards will retain the benefit/bear the cost of any change in fees as a result of their decision making.

46. Local board decisions on fees and charges related to asset based services needs to be balanced against revenue expectations for those services. These revenue expectations inform the requirement for general rate funding for asset based services in the asset management plans. In this case, it is proposed that operating groups will advise boards on the expected revenue targets for their asset based services starting from the status quo. Local boards can adjust fees above or below the recommended target, and will then retain the benefit/bear the cost of any resulting change in expected revenue for the service.

47. In setting fees and charges, there is the risk that actual revenue will vary from expected revenue. If the revenue relates to an asset based service, the operating group will absorb any revenue variance, with any shortfall made up from the groups operating budget. The variance will then be used to inform revenue targets for the service in the following year.

48. The local board will bear the cost or retain the benefit of any variance in revenue related to locally driven initiatives.

Policy implementation: Rates remission and grants schemes

49. The council inherited from the former councils a number of mechanisms that support community and sports related services, and natural, historic or cultural heritage. These included the direct provision of services by the council, grants to third party organisations, and rates remission and postponement schemes.

50. In general the provision of these services and grant schemes have been classed as local activities, and continue to operate in those local board areas from which they originated. The rates relief schemes are part of the council’s rates remission and postponement policy, which is managed regionally, but continue to be available to qualifying properties within those former council areas that originally offered the schemes.

51. As a result of the council retaining these legacy services and schemes, local board areas are providing similar community services using varying delivery models:

· some boards have services, such as community facilities, provided directly by the council

· other boards have grants schemes directly controlled by the boards that are used to fund third parties to provide similar types of services, including the provision of community facilities; as well as to provide support to local community groups and other organizations

· in some board areas, community groups and other organisations have access to rates remission or postponement schemes that are not controlled by the local board in terms of eligibility criteria and approval.

52. The Local Boards Funding Policy has already considered the issue of the use locally controlled grants, compared to where services are being delivered by the council. It is proposed that under the policy, grants that are used to fund local facilities that in other areas are provided by the council, should be funded on the same basis as other asset based services. Grants that are used to fund more discretionary activities, such as one off grants to community groups, will be treated as locally driven initiatives, and be included in the pool of funding for these activities.

53. The Review of Community Assistance has now identified all sources of community funding assistance provided by the council, by local board area. This enables a review of the council’s rates remission and postponement schemes to be undertaken, to develop an approach to supporting community and other organisations that is consistent across the region.

54. The council’s rates remission and postponement policy should be regionally consistent. However most of the rates relief granted under the remission and postponement schemes for community and sports related services, and natural, historic or cultural heritage correspond to grants schemes relate to activities that have been treated as a local board responsibility when support is provided as grants. To ensure consistency, options for moving from rates based schemes to locally controlled grants schemes will be considered, though the financial impact of such a move will need to be assessed.

55. The Governing Body has agreed that the Auckland Council rates remission and postponement policy be reviewed alongside the development of the Local Boards Funding Policy to ensure consistency between local grants schemes and rates relief schemes, and to develop a regionally consistent rates remission and postponement policy.

56. Amendments to the rates remission and postponement policy will be publically consulted on alongside consultation on the Long-term Plan 2015-2025.

Engagement

57. Officers will be undertaking engagement with local boards on the Local Boards Funding Policy through March and April 2014. The attached report “Local boards funding policy review” will form the basis for engagement on the policy options.

Consideration

Local Board Views

58. This report has been considered by and includes feedback from the Local Boards Funding Policy Political Working Party (LBFP PWP).

59. The purpose of the working party is to provide a joint forum of the Governing Body and local boards to provide guidance and direction with respect to the development of the local board funding policy. This includes development of comprehensive and robust options for the funding of local activities within the Local Boards Funding Policy.

60. This report seeks formal feedback from local boards to be considered by the LBFP PWP in early May and will form part if the consideration by the Governing Body when it adopts the draft policy for consultation in late May.

Maori Impact Statement

61. There are two ways in which Maori could be impacted by the options discussed in this report, these are:

· under a general rate allocation model the level of locally driven initiative funding available to a local board may change

· under a local rate funding model the level of rates paid may change.

62. Maori population is not the same across all local boards. How this will impact on Maori will depend on changes to funding available to local boards and how local boards respond to these changes. This may result in more or less funding being available or lower or higher rates being charged. The impacts by local board will be explored more at the next stage when the draft policy is being considered for consultation.

63. Within a general rate allocation model the choice of attributes may also have an impact on Maori. Some attributes that can be used in the funding formula, for example deprivation, have a greater alignment with the population distribution of Maori. A funding formula that had greater emphasis on these attributes will provide more funding to local boards with higher Maori populations. How this would impact on Maori would depend on the local boards choose to use this funding.

64. The review of the Local Boards Funding Policy will not change the Maori freehold land rates remission and postponement policy.

Implementation Issues

65. There are no implementation issues associated with recommendations in this report.

Attachments

No.	Title	Page
a View	Local Boards Funding Policy Review	71
b View	Guidelines for local board feedback	121

Signatories

Authors

Aaron Matich - Principal Advisor Modelling

Andrew Duncan - Manager Financial Policy

Authorisers

Chris Carroll - Manager Planning and Policy

John Nash - Senior Local Board Advisor

Great Barrier Local Board

09 April 2014

Chapter 3: Allocation of decision making

31. This chapter details how the allocation of decision making has lead to the development of a proposed framework for the local boards funding policy.

Understanding the allocation of decision making

32. The starting point for developing the policy framework was an assessment of the level of decision control allocated to local boards and the governing body under the allocation of decision making, as set out in the table below.

Decision making category	Decision-making role for local boards	Budget parameters	Key driver of cost allocations
Drive and implement local initiatives	Locally based initiatives with full decision-making responsibility sitting at a local level (within any regional parameters that may be established).	None - Fully discretionary budget	Local boards
Implement governing body investment decisions	Local boards Implement governing body investment decisions	Implementation within parameters agreed as part of GB approval (scope, budget, general location, etc). Changes to budget or scope require GB approval. Unspent funds are returned to the GB where GB has provided specific project funding.	Governing Body
Deliver local activities through local facilities	Local boards are responsible for decisions about the use of and changes in the use of local facilities (within parameters set by the governing body).	In the short term there is limited discretion in budgets due to nature of staff costs and duration of contracts. Over the longer term, budgets are more discretionary as decisions are made on service providers, use of facilities and service levels.	Asset
Inform and monitor management of local assets	Local boards inform the development of asset management plans & regional procurement contracts and have decision-making responsibility for governing implementation	There is limited discretion to adjust budgets – generally reflecting decisions around timing, prioritisation and ensuring implementation is in line with expectations through approval of work programmes	Asset

33. It is clear from the table above that local board decision making on local expenditure is constrained where expenditure is driven by Governing Body investment decisions, or is related to the maintenance and operation of local assets. Considering these constraints alongside the available funding tools, and the key principles for the funding policy, has led to the development of a policy framework that is split between funding for locally driven initiatives and funding for local assets and regional initiatives.

Applying the allocation of decision making to local activities

34. Local activities have been analysed against the categories of decision making described in the previous table. The table below shows the resulting classification of local activities against the policy framework.

Policy Framework	Decision making category	Local Activities
Funding for locally driven initiatives	Drive and implement local initiatives	· Local events · Local arts and culture initiatives · Local business area planning & development · Local safety initiatives · Local environment & heritage protection (exc interest) · Local community development initiatives · Local recreational advice · Grants for local recreational organisations · Local parks - fully discretionary capex and opex budgets e.g. SLIPs, LIPs (excluding renewals & GB decisions) · Any other discretionary budgets
Funding for local assets and regional initiatives	Implement governing body investment decisions	· Legacy capex projects · New facilities · Major upgrades · Sportsfield capacity programme · Town centre transformation projects · Local parks investment · Any regional initiative that is to be delivered locally
	Deliver local activities through local facilities	· Local arts and culture facilities · Local community facilities · Local library facilities & services · Other local recreation facilities · Local aquatic, leisure & recreation facilities · Includes grants to third party providers of local facilities
	Inform and monitor management of local assets	· Local street environment and town centres · All renewals · Local parks capex and opex – excluding fully discretionary budgets (e.g. LIPs)

35. This analysis steps away from previous discussions of discretionary and non-discretionary activities as a basis of funding local boards. Instead it recognises that local boards have the ability to undertake activities that may be classed as non-discretionary, or have non-discretionary elements, such as staffing associated with community development initiatives.

36. A significant change as a result of this classification is that grants for third party run facilities are treated the same as council funded facilities, and are included under the category of funding for local assets. This is on the basis that local boards should be funded in the same way for equivalent services, regardless of whether the services are delivered by the council or through local grants to non-council providers.

Community, arts and cultural facilities

37. Currently a review of all community, arts and cultural facilities is underway, in preparation for the development of a regional strategy for these facilities. As part of this review, consideration will be given as to where different types of assets should sit in terms of local versus regional decision control. It may be that after this consideration, some assets are identified as being purely local in focus, for which a regional funding model may not be appropriate. In this case consideration could be given to the benefits of giving local boards’ greater control of these assets, and funding them as locally driven initiatives.

The review of community, arts and cultural facilities is scheduled to be completed in time to allow decisions to be made for the Long-term Plan 2015-2025. This will also allow sufficient time for changes to be incorporated into the local boards funding policy

Applying the allocation of decision making to local budgets

38. Local board budgets have been analysed against the types of local activities shown in decision making table, to classify budgets as either funding for locally driven initiatives, or funding for local assets or regional initiatives. This analysis has been used as the basis for modelling the impact of different funding models.

39. The results of this analysis are shown in the following tables.

Table: Local board net operating expenditure 2013/2014

Location	Funding for Locally Driven Initiatives ($)	Funding for Local Assets and Regional Initiatives ($)	Funding for Locally Driven Initiatives (%)	Funding for Local Assets and Regional Initiatives (%)
Albert-Eden	1,831,432	12,069,367	13.18%	86.82%
Devonport-Takapuna	1,584,292	14,129,084	10.08%	89.92%
Franklin	2,042,833	11,563,190	15.01%	84.99%
Great Barrier	1,789,806	1,524,796	54.00%	46.00%
Henderson-Massey	2,069,680	21,717,037	8.70%	91.30%
Hibiscus and Bays	1,469,157	17,580,660	7.71%	92.29%
Howick	2,264,120	22,690,629	9.07%	90.93%
Kaipatiki	1,897,278	12,531,361	13.15%	86.85%
Mangere-Otahuhu	1,801,166	15,198,578	10.60%	89.40%
Manurewa	1,630,167	11,898,060	12.05%	87.95%
Maungakiekie-Tamaki	1,725,116	16,665,702	9.38%	90.62%
Orakei	1,196,555	14,241,427	7.75%	92.25%
Otara-Papatoetoe	2,013,051	14,841,577	11.94%	88.06%
Papakura	1,427,097	11,714,946	10.86%	89.14%
Puketapapa	1,106,333	9,294,204	10.64%	89.36%
Rodney	1,279,862	16,630,513	7.15%	92.85%
Upper Harbour	1,422,242	12,218,950	10.43%	89.57%
Waiheke	1,075,746	5,741,756	15.78%	84.22%
Waitakere Ranges	2,061,203	8,522,586	19.48%	80.52%
Waitemata	2,509,925	34,106,775	6.85%	93.15%
Whau	1,791,071	11,471,066	13.51%	86.49%
All	35,988,130	296,352,260	10.83%	89.17%

40. Only net operating expenditure is shown above. This is because the focus of this report is on the rates funded component of local activities, and the options for funding this expenditure. Discussion of the treatment of local capital expenditure, and revenue including fees and charges, will be reported in February.

Great Barrier Local Board

09 April 2014

Chapter 5: Funding for locally driven initiatives

60. This chapter of the report sets out how locally driven initiatives will be funded under the proposed framework for the local boards funding policy.

Funding for locally driven initiatives

61. Local boards are able to undertake local activities for the benefit of their local board community. Locally driven initiatives can be described as those activities where local boards have a high level of discretion as to what services they undertake, and to what level they provide those services.

62. Current operating expenditure on activities classed as locally driven initiatives is $36 million. The allocation of this funding across local boards reflects legacy decisions, and is not aligned to factors such as board population size. The chart below shows that currently there is significant variance in the level of funding for local driven initiatives that each board receives per head of resident population. (The line in red shows the average per capita funding for these activities across the region).

63. There is also little relationship between the amount of funding each board receives and factors such as land area (an indication of population density/geographic isolation), deprivation and the amount of rates paid in each board area. The chart below shows how each board ranks in relation to these factors, and the level of funding they receive for locally driven initiatives. (Ranking 1 = the most or largest, 21 = least or smallest).

Board	Total funding for local initiatives	Per capita funding	Population size	Land area size	Deprivation Index ranking	General rates paid
Albert-Eden	8	18	3	17	12	4
Devonport-Takapuna	14	8	14	19	18	7
Franklin	5	5	13	2	16	12
Great Barrier	11	1	21	3	1	21
Henderson-Massey	3	16	2	9	8	9
Hibiscus and Bays	15	20	4	6	19	6
Howick	2	19	1	7	17	2
Kaipatiki	7	14	6	15	13	10
Mangere-Otahuhu	9	10	10	10	2	13
Manurewa	13	17	5	12	4	16
Maungakiekie-Tamaki	12	11	11	14	5	5
Orakei	19	21	7	16	21	3
Otara-Papatoetoe	6	9	8	13	3	15
Papakura	16	6	19	11	7	18
Puketapapa	20	15	15	21	10	17
Rodney	18	12	16	1	15	11
Upper Harbour	17	7	17	8	20	8
Waiheke	21	2	20	5	6	20
Waitakere Ranges	4	3	18	4	14	19
Waitemata	1	4	12	20	11	1
Whau	10	13	9	18	9	14

64. There are three options for funding locally driven initiatives:

· general rate allocated based on factors such as local board population

· local rates for each board area

· a mix of local rates and general rate allocation.

65. Deciding between the use of general rate allocation and local rates will depend on assessment of what a fair funding model is, and how this is best achieved by:

· funds being allocated regionally based on assessment of each board’s level of need relative to factors such as population or deprivation

· local communities paying for their local services through a local rate.

General rate funding allocation for locally driven initiatives

66. As locally driven initiatives are undertaken for the benefit of the local board community, it can be assumed that there will be a relationship between demand for these services, and the attributes of the local board area, such as population size.

67. Under a general rate allocation model, equity is measured by the share of funding each local board receives from the pool of funding available. As such, equity is defined by the formula that is used to allocate funds to the boards. By identifying factors that may impact local boards’ capacity to enhance well-being (for example population, or deprivation) and weighting the formula appropriately an equitable funding allocation can be achieved.

68. The Strategy and Finance committee agreed at its May 2013 meeting that the following attributes of local boards be considered in the development of the funding policy:

· population

· deprivation

· factors related to rural/geographic isolation

· rates collected.

69. Of these factors, rates collected is not relevant to the development of a funding allocation formula. The distribution of general rates reflects the council’s consideration of the appropriate balance the key principles of communities paying for benefits received and affordability of rates across the region. Using rates as factor for allocating local funding would undermine the basis upon which the rating policy was developed. The same affect can be achieved more transparently by using local rates, while giving local boards more control over the amount of revenue to be collected from their community. Higher rate paying areas would likely be better off with local rates as their general rate requirement would fall by more than the amount they would pay in local activity rate.

70. There is a clear relationship between demand for local services and the size of local populations. Population should therefore be the basis of any funding allocation formula. The definition of an equitable allocation formula then becomes a question of whether, and how much, a population based allocation needs to be adjusted to account for factors such as the level of relative deprivation and geographic isolation of some local boards.

71. To put this question into perspective:

· How much more funding do Otata-Papatoetoe, Mangere-Otahuhu and Great Barrier (the most deprived boards) need compared to Orakei, Davenport-Takapuna, Upper Harbour and Hibiscus and Bays (the least deprived)? What sorts of additional services are boards with more deprived populations reasonable expected to provide? To what extent should these issues be addressed regionally?

· How much more funding do boards like Rodney, Franklin, Waitakere, Waiheke and Great Barrier need compared to urban boards? What sorts of costs will rural or island boards have compared to urban boards in delivering local services? To what extent will these issues be addressed regionally?

72. For more information of the development of a general rate allocation formula based on factors including population, deprivation and geographic isolation, see Developing a general rate allocation formula following the next section in this chapter of the report.

73. In the main, local boards are currently funded for services levels inherited from the previous councils. There is little or no relationship between current funding levels current to local boards, and factors such as local board population, as local services have never previously been funded on this basis.

74. Moving to a general rate allocation model for locally driven initiatives will result in significant change in the distribution of funding for these activities between local boards. Options for managing change will be considered alongside the impacts of funding reallocation. In essence there are three options for managing change:

· no change management

· reallocation of funding is transitioned over a period of time

· additional funding is provided for locally driven initiatives to reduce the impact of reallocation of local board budgets.

75. Funding locally driven initiatives through a general rate allocation model does not change the distribution of rates across the region. Affordability of rates is a consideration in the development of the regional rating policy. Consequentially, it is not necessary to consider affordability as an issue when exploring general rate allocation models.

76. An analysis of the impacts of different allocations formulas, along with options for managing change, can be found in Chapter six of this report. For more information on local board demographics, see attached report Report 2: Local board areas attribute measures.

77. Note that local boards will still have the option of using a local rate to increase their funding if a general rates allocation model is chosen as the only mechanism for funding locally driven initiatives.

Local rates for funding locally driven initiatives

78. The second option for funding locally driven initiatives is local rates. Under this model each local board will be required to raise the funds for the local initiatives they choose to undertake through a local rate charged to their local board area. Local boards decide what services and levels of service they will provide, and the cost of delivery of those services. The board can then determine the level of rates they will need to charge their local ratepayers to pay for these services.

79. Local rates can be considered an appropriate mechanism for funding locally driven initiatives, because these activities are delivered for the benefit of each local board community. Using local rates aligns decision making by local boards on local services with decisions on revenue requirements.

80. Equity under a local rate funding model is defined as local communities pay for the services they receive. Those with more services pay more; those with fewer services pay less. Whether local boards can be defined as having an equitable capacity to enhance well-being under such a model depends on the affordability of local rates within each board area.

81. Under a local rate funding model, funding for those local activities classed as locally driven initiatives will be removed from the general rate requirement. Instead, each board area will be required to fund the cost of locally driven services within their board area. This will result in a shift in the incidence of rates between local board areas. Some boards may pay less for their combined general rates and local rate, others may pay more. The affordability of the change in rates requirement in each board area needs to be considered when assessing the equity of using local rates as a funding model.

82. A benefit of local rates over general rates funded models is that it gives local boards the ability to modify the level of rates paid by their local community. Cost savings made by a local board can be passed back to their local community.

83. For modelling purposes however, it has been assumed that each local board will collect its current level of expenditure on activities defined as locally driven initiatives through a local rate. A full analysis of rates models can be found in Chapter six.

Developing a general rate allocation formula

84. There are many funding models used in New Zealand and overseas that can provide examples of funding allocation formulas. Often the services being funded are clearly defined, such as funding for health or education services in New Zealand. In these cases allocation formulas are supported by sophisticated models that link population characteristics such as age, ethnicity and demographics to demand for healthcare and educational services. Measuring outcomes such as mortality rates and educational success enable the impact of differing allocation models to be assessed.

85. Overseas, examples of funding models can be found where the services to be funded are not fully defined. Examples include the transfer of funds from central to local or devolved governments in the United Kingdom, and from central to federal governments in Australia. In both these examples the funded entity undertakes a range of activities including health, social and security services where there is a strong relationship between population characteristics and demand for services. Funding allocation ranges from a highly complex funding model balancing need, costs and income in the transfer of funds from federal to state governments in Australia; to a simple apportionment based on population size for some of the UK funding models. The former is criticised for its complexity, cost, inaccuracy of its underlying assumptions and lack of transparency; the latter model is criticised for its not recognising differences in need. For a full summary of examples of these and other funding models in use around the world, see attached Report 3: Review of devolved funding model case studies.

86. Developing an allocation formula for the funding of locally driven initiatives for local boards is made difficult by the level of discretion that boards have in the types of activities they undertake. This means that it not possible to identify a direct relationship between cost of services within boards and factors such as the level of deprivation in each board.

87. It can be assumed that local boards will continue to offer the types of services that councils have provided to local communities, such as community development, local events, arts and cultural activities, protection of local heritage and improvements to public spaces and local facilities. However, there is very little evidential research available to quantify relationships between these types of activities and the characteristics of local board populations.

88. Instead the selection and weighting of factors for an allocation formula for locally driven initiatives will require judgement of the likely impacts different factors will have on demand for these types of services. In making this judgement, consideration needs to be given to the extent that particular factors are being addressed within local boards through other mechanisms, such as funding for local assets or by regional activities.

89. The table below sets out the relationships between demand for locally driven services and the three factors for consideration in an allocation formula, as well as the ways in which these factors may be addressed by other mechanisms.

Population
Measure	Local board resident population as defined by the Auckland Growth Model, which is derived from census data as well as information from consents, and council plans. Using the Auckland Growth Model enables any formula to be adjusted annually based on modelled growth in each board area.
Relationship to demand for locally driven initiatives	Population is the key driver of service demand, as such will be the basis of any funding allocation formula. The question is whether a population based allocation needs to be adjusted for other factors such as deprivation.
Other considerations	Non-resident populations, such as workers and visitors may also drive demand for local services, but are not included in the resident population measure. Information derived from census data on employee numbers by board area is available. However, the impact of worker populations varies between boards. Workers are clearly significant drivers of demand in the CBD, whereas demand for services in the large suburban industrial estates is lower due to the nature of employment in these areas. Visitor information is only available in some board areas, usually only in relation to the use of some council services, and is of variable quality. Non-resident service demand for local asset related services will be addressed through funding for local assets, which will reflect the level of user demand at different facilities. Local boards will need to consider the intended beneficiaries of services when deciding to undertake locally driven initiatives. Many of the activities local boards will be undertaking will be for the benefit of the resident community. Boards will need to consider the likely demand from non-residents when providing such services, as the Southern boards have in offering free swimming pool access to all adults. These boards consulted their community, and while acknowledging that the service will attract non-residents, decided there was sufficient benefit to their communities to fund this service. Often a community will choose to provide services such as events that seek to attract visitors to the local area, for the economic benefit that they bring. This raises the possibility of sponsorship from the local business community to support such activities. In general, most locally driven initiatives will benefit local resident communities. Non-resident demand is unlikely to be significant in most areas, and difficult to quantify for the purposes of funding allocation. Boards will be able to weigh the cost and benefits of non-resident use of services they are delivering. The main exception will be the Waitemata board, where non-resident populations (workers, students and visitors) outnumber residents, and are a significant driver of demand for services. The CBD area does have greater resources for addressing this demand, from regional facilities such as central library and Art Gallery, to the Heart of the City targeted rate for local improvements, as well as access to local sponsorships. A targeted rate to the business community may be an appropriate mechanism for recognising the driver of demands, and benefit local services have to local economy.
Deprivation
Measure	The Deprivation Index prepared for the Department of Health by Statistics New Zealand. The index is derived from census data, and is reviewed every five years following the census. A funding allocation formula would use the average deprivation index ranking for each board area. This means that a board that is similar sized populations with high and low levels of deprivation would have mid-range average level of deprivation. Deprivation is ranked from 1 = least deprived to 10 = most deprived.
Relationship to demand for locally driven initiatives	The Deprivation Index ranks areas based on a number of weighted factors including number of beneficiaries, household income, home ownership, employment, qualifications, overcrowding and access to telephones and cars. Compared to areas of low deprivation, areas identified as deprived have characteristic that may indicate a greater dependency on local services. Examples of these characteristics and are given below. · reduced ability to access services privately due to costs, for example a lack of computers in homes driving demand for council provided technology centres. · fewer resources available with communities to enable self organisation of community activities without support from council or other organisations. · reduced ability to access facilities outside the local area due to reduced access to transport · a correlation between deprivation and other community characteristics that may suggest a need for greater council support. For example, there is a link between deprivation, and youth populations - the five youngest board areas have a deprivation of 7 or higher. There is also an association with rates of disability, for example Manukau is home to 30 per cent of the region’s disabled population.
Other considerations	The deprivation index also informs central government decisions in relation to funding for health, education and social services. A number of community and charitable organisations work to address issues related to deprivation in poorer communities. The council is undertaking a number of regional initiatives that seek to improve issues related to deprivation including: · the Southern Initiative – focused on improving educational achievement, economic development, job growth, public transport, housing and social conditions in South Auckland · COMET – a CCO focused on improving educational outcomes across Auckland. The council’s regional strategy for community facilities will also consider the demand for different types of facilities across the region due to factors such as deprivation when identifying future investment priorities for local assets.
Geographic isolation or remoteness
Measure	For modelling purposes local board land area has been used as a measure for geographic isolation. When combined with local board population, this gives a measure of population density.
Relationship to demand for locally driven initiatives	There are two aspects of geographic isolation that increase the cost of service delivery: · low population dispersed over a large area, which may require the provision of smaller facilities/services in multiple locations, rather than fewer larger, centralised facilities/services in more urbanised areas · physical distance from population and economic centres, combined with reduced physical access, eg the Islands have no road access. This means increased cost of service delivery in terms of the cost of transporting of materials etc.
Other considerations	Increased costs related to local facilities or assets are addressed through regional funding for local assets. The current model sees Rodney funded for a library in each of its four main towns, which means it has one library per 13,500 people. This compares to the Auckland isthmus with 16 libraries, or one per 28,000 people. Great Barrier Island is serviced by a book ordering system providing access to the region library collection. The disparity in size and population between boards means that land area and population density are poor proxies for costs associated with geographic remoteness. Using land area sees Rodney (the largest board) receive 120 times the funding for Puketapapa (the smallest), and seven times the funding for Great Barrier. Using population density sees Great Barrier receive eight times the funding of Rodney, and 1200 times the funding of the most populous board, Waitemata.

Great Barrier Local Board

09 April 2014

Modelling

98. The following scenarios have been modelled to give an indication of the impact of the different options for funding the $35.99 million net operating expenditure that has been classified as being for locally driven initiatives.

A. General rate allocation: Each board is allocated a share of the total pool of funding for locally driven initiatives based on the size of the resident population in the board area. The amount of funding each board receives for locally driven initiatives changes.

B. General rate allocation: Each board is allocated a share of the total pool of funding for locally driven initiatives. The funds are allocated 80 per cent on resident population size, 10 per cent based on the deprivation index ranking of each board, and 10 per cent on land area. The amount of funding each board receives for locally driven initiatives changes

C. Local rates funded: Each board funds its current expenditure through a local rate charged to all ratepayers within the local board area. The amount of funding each board receives for locally driven initiatives remains unchanged.

D. Local rates funded: Each boards charges a local rate to generate the same amount of funding for locally driven initiatives as would be allocated on a population basis (as per scenario A). This means that funding each board receives for locally driven initiatives changes.

E. Mixed funding model: Each board is allocated a share of the total pool of general rate allocation for locally driven initiatives based on the minimum proportion of funding per resident population. The balance is funded through a local rate charged to all ratepayers within the local board area. The amount of funding each board receives for locally driven initiatives remains unchanged.

F. General rate allocation: Each board is allocated a share of the total pool of funding for locally driven initiatives. The funds are allocated 90 per cent on resident population size, 10 per cent based on the deprivation index ranking of each board. The amount of funding each board receives for locally driven initiatives changes

99. The scenario results on the following page provide an indication of the level of impact different funding options will have. Further modelling will be provided once funding options have been agreed. Modelling will be updated at the implementation of the policy to reflect budgets changes in the preparation of the Long-term Plan 2015-2025, and the release of updated census data.

100. The data shown in the scenario results tables is arranged according to the level of change experienced by the boards, with negative change shown in orange and positive change in blue. The boards at the top of the table have the largest negative impact (largest decrease in funding or largest increase in rates), the ones at the bottom have the largest positive change (increase in funding or decrease in rates.)

Scenario results:

Scenario A: Impact of reallocating total pool of current expenditure for locally driven initiatives based on the population size of each local board. Note that the coloured columns show the change in funding for locally driven initiatives (the proportion of the budget reallocated), and the overall change in total board budget (including the funding for local assets that is not reallocated in the model.)

General rate allocation based on 100% resident population
Local board	Current funding for locally driven initiatives (LDI)	Funding for LDI after reallocation	Change in LDI funding ($)	Change in LDI funding (%)	Change in total LB budget (inc funding for assets) (%)
Waiheke	1,075,746	200,310	-875,436	-81.4%	-12.84%
Waitakere Ranges	2,061,203	1,165,700	-895,503	-43.4%	-8.46%
Waitemata	2,509,925	1,665,287	-844,638	-33.7%	-2.31%
Franklin	2,042,833	1,527,306	-515,527	-25.2%	-3.79%
Papakura	1,427,097	1,068,162	-358,935	-25.2%	-2.73%
Upper Harbour	1,422,242	1,165,700	-256,542	-18.0%	-1.88%
Devonport-Takapuna	1,584,292	1,363,156	-221,136	-14.0%	-1.41%
Otara-Papatoetoe	2,013,051	1,910,321	-102,730	-5.1%	-0.61%
Mangere-Otahuhu	1,801,166	1,805,647	4,481	0.2%	0.03%
Rodney	1,279,862	1,287,029	7,167	0.6%	0.04%
Maungakiekie-Tamaki	1,725,116	1,736,656	11,540	0.7%	0.06%
Whau	1,791,071	1,817,541	26,470	1.5%	0.20%
Kaipatiki	1,897,278	2,043,545	146,267	7.7%	1.01%
Puketapapa	1,106,333	1,334,609	228,276	20.6%	2.19%
Henderson-Massey	2,069,680	2,607,363	537,683	26.0%	2.26%
Manurewa	1,630,167	2,060,197	430,030	26.4%	3.18%
Albert-Eden	1,831,432	2,350,433	519,001	28.3%	3.73%
Howick	2,264,120	3,047,475	783,355	34.6%	3.14%
Hibiscus and Bays	1,469,157	2,112,535	643,378	43.8%	3.38%
Orakei	1,196,555	1,929,354	732,799	61.2%	4.75%
Total	34,198,326	34,198,326	0

Scenario B: Impact of reallocating total pool of current expenditure for locally driven initiatives based on the population size of each local board, adjusted for land area and deprivation. Note that the coloured columns show the change in funding for locally driven initiatives (the proportion of the budget reallocated), and the overall change in total board budget (including the funding for local assets that is not reallocated in the model.)

Funding for locally driven initiatives allocated on 80% population, 10% land area, 10% deprivation
Local board	Current funding for locally driven initiatives (LDI)	Funding for LDI after reallocation	Change in LDI funding ($)	Change in LDI funding (%)	Change in total LB budget (inc funding for assets) (%)
Waiheke	1,075,746	491,549	-584,197	-54.31%	-8.57%
Waitemata	2,509,925	1,516,581	-993,344	-39.58%	-2.71%
Waitakere Ranges	2,061,203	1,289,772	-771,431	-37.43%	-7.29%
Upper Harbour	1,422,242	1,079,822	-342,420	-24.08%	-2.51%
Papakura	1,427,097	1,098,394	-328,703	-23.03%	-2.50%
Devonport-Takapuna	1,584,292	1,212,742	-371,550	-23.45%	-2.36%
Otara-Papatoetoe	2,013,051	1,825,567	-187,484	-9.31%	-1.11%
Whau	1,791,071	1,680,230	-110,841	-6.19%	-0.84%
Maungakiekie-Tamaki	1,725,116	1,645,141	-79,975	-4.64%	-0.43%
Kaipatiki	1,897,278	1,809,071	-88,207	-4.65%	-0.61%
Mangere-Otahuhu	1,801,166	1,760,869	-40,297	-2.24%	-0.24%
Franklin	2,042,833	2,238,593	195,760	9.58%	1.44%
Albert-Eden	1,831,432	2,062,327	230,895	12.61%	1.66%
Henderson-Massey	2,069,680	2,337,515	267,835	12.94%	1.13%
Puketapapa	1,106,333	1,266,433	160,100	14.47%	1.54%
Howick	2,264,120	2,604,847	340,727	15.05%	1.37%
Manurewa	1,630,167	1,912,054	281,887	17.29%	2.08%
Hibiscus and Bays	1,469,157	1,877,776	408,619	27.81%	2.15%
Orakei	1,196,555	1,654,466	457,911	38.27%	2.97%
Rodney	1,279,862	2,834,576	1,554,714	121.48%	8.68%
Total	34,198,326	34,198,325	0

Scenario C: Impact of removing funding for locally driven initiatives from general rates and funding this through a local rate. (Each board funds it current level of expenditure for locally driven initiatives)

Local driven initiatives funded through a local rate charged to all ratepayers in the board area
Local board	Current average 13/14 general rate	Average general rate if funding for LDI removed	Average local targeted rate for LDI (assuming current expenditure maintained)	Average combined rates	Change in total rates ($)	Change in total rates (%)
Waitakere Ranges	1,754	1,710	117	1,827	$73	4.2%
Waiheke	2,528	2,465	167	2,632	$104	4.1%
Papakura	2,003	1,953	88	2,041	$37	1.9%
Otara-Papatoetoe	2,489	2,427	100	2,526	$37	1.5%
Whau	2,172	2,117	76	2,193	$21	1.0%
Franklin	2,291	2,233	79	2,312	$21	0.9%
Manurewa	2,125	2,072	72	2,144	$19	0.9%
Mangere-Otahuhu	3,093	3,015	103	3,118	$25	0.8%
Henderson-Massey	1,957	1,908	59	1,967	$10	0.5%
Puketapapa	2,253	2,196	67	2,264	$11	0.5%
Kaipatiki	2,256	2,200	65	2,265	$8	0.4%
Devonport-Takapuna	3,355	3,271	74	3,345	-$10	-0.3%
Rodney	2,371	2,311	50	2,361	-$9	-0.4%
Upper Harbour	3,625	3,533	75	3,608	-$16	-0.4%
Albert-Eden	3,160	3,081	57	3,138	-$22	-0.7%
Howick	2,846	2,774	53	2,827	-$19	-0.7%
Maungakiekie-Tamaki	3,596	3,506	66	3,572	-$24	-0.7%
Hibiscus and Bays	2,424	2,363	42	2,405	-$19	-0.8%
Waitemata	4,511	4,398	54	4,452	-$59	-1.3%
Orakei	3,480	3,392	39	3,432	-$48	-1.4%
Average	2,807	2,737	71	2,807	0	0.0%

Scenario D: Impact of removing funding for locally driven initiatives from general rates, reallocating total pool of current expenditure for locally driven initiatives based on the population size of each local board, and funding this through a local rate.

Local driven initiatives funding reallocated by population and funded through a local rate charged to all ratepayers in the board area
Local board	Current average 13/14 general rate	Average general rate if funding for LDI removed	Average local targeted rate for LDI (assuming current expenditure reallocated)	Average combined rates	Change in total rates ($)	Change in total rates (%)
Whau	2,172	2,117	108	2,226	54	2.5%
Henderson-Massey	1,957	1,908	96	2,004	47	2.4%
Otara-Papatoetoe	2,489	2,427	99	2,526	37	1.5%
Waitakere Ranges	1,754	1,710	70	1,780	26	1.5%
Puketapapa	2,253	2,196	86	2,282	29	1.3%
Franklin	2,291	2,233	78	2,311	21	0.9%
Kaipatiki	2,256	2,200	74	2,273	17	0.8%
Hibiscus and Bays	2,424	2,363	77	2,440	16	0.7%
Manurewa	2,125	2,072	62	2,134	9	0.4%
Waiheke	2,528	2,465	69	2,534	5	0.2%
Mangere-Otahuhu	3,093	3,015	81	3,096	3	0.1%
Howick	2,846	2,774	70	2,844	-1	0.0%
Rodney	2,371	2,311	53	2,364	-6	-0.3%
Upper Harbour	3,625	3,533	75	3,608	-16	-0.5%
Albert-Eden	3,160	3,081	65	3,145	-15	-0.5%
Devonport-Takapuna	3,355	3,271	67	3,338	-17	-0.5%
Orakei	3,480	3,392	67	3,459	-21	-0.6%
Maungakiekie-Tamaki	3,596	3,506	64	3,570	-26	-0.7%
Papakura	2,003	1,953	33	1,986	-18	-0.9%
Great Barrier	1,468	1,431	17	1,448	-20	-1.4%
Waitemata	4,511	4,398	38	4,436	-75	-1.7%
Average	2,807	2,737	71	2,807	0	0.0%

Scenario E: Impact of funding a proportion of locally driven initiatives from general rate allocation, based on the current minimum per capita funding of locally driven initiatives for all local boards, and using a local rate to fund the balance.

Proportion of locally driven initiatives funded from general rates, based on minimum proportion of current funding for all local boards with the balance funded through a local rate
Local board	LDI funded via general rate allocation	LDI funded via local rate	Average local targeted rate for LDI (assuming current expenditure maintained)	Average combined rates	Change in total rates ($)	Change in total rates (%)
Waiheke	124,599	951,147	148	2,650	122	4.8%
Waitakere Ranges	722,585	1,338,618	76	1,812	58	3.3%
Papakura	664,430	762,667	47	2,030	26	1.3%
Franklin	947,939	1,094,894	42	2,309	19	0.8%
Otara-Papatoetoe	1,189,286	823,765	41	2,504	15	0.6%
Whau	1,129,676	661,395	28	2,178	6	0.3%
Mangere-Otahuhu	1,122,406	678,760	39	3,099	7	0.2%
Devonport-Takapuna	843,259	741,033	35	3,355	0	0.0%
Upper Harbour	726,947	695,295	37	3,624	-1	0.0%
Kaipatiki	1,266,342	630,936	22	2,255	-2	-0.1%
Rodney	802,550	477,312	19	2,365	-6	-0.2%
Puketapapa	825,812	280,521	17	2,247	-6	-0.3%
Manurewa	1,288,150	342,017	15	2,118	-7	-0.3%
Waitemata	1,030,811	1,479,114	32	4,497	-14	-0.3%
Maungakiekie-Tamaki	1,075,882	649,234	25	3,584	-12	-0.3%
Henderson-Massey	1,625,454	444,226	13	1,950	-7	-0.4%
Albert-Eden	1,453,894	377,538	12	3,139	-21	-0.7%
Howick	1,895,878	368,242	9	2,825	-21	-0.7%
Hibiscus and Bays	1,307,051	162,106	5	2,404	-20	-0.8%
Orakei	1,196,555	0	0	3,444	-36	-1.0%
Total	21,252,445	14,735,687	29	2,807	0	0.0%

Scenario F: Impact of reallocating total pool of current expenditure for locally driven initiatives based on the population size of each local board, adjusted deprivation. Note that the coloured columns show the change in funding for locally driven initiatives (the proportion of the budget reallocated), and the overall change in total board budget (including the funding for local assets that is not reallocated in the model.)

Funding for locally driven initiatives allocated on 90% population and 10% deprivation
Local board	Current funding for locally driven initiatives (LDI)	Funding for LDI after reallocation	Change in LDI funding ($)	Change in LDI funding (%)	Change in total LB budget (inc funding for assets) (%)
Waiheke	1,075,746	395,930	-679,816	-63.19%	-9.97%
Waitakere Ranges	2,061,203	1,184,070	-877,133	-42.55%	-8.29%
Waitemata	2,509,925	1,668,693	-841,232	-33.52%	-2.30%
Franklin	2,042,833	1,497,534	-545,299	-26.69%	-4.01%
Upper Harbour	1,422,242	1,144,345	-277,897	-19.54%	-2.04%
Papakura	1,427,097	1,175,105	-251,992	-17.66%	-1.92%
Devonport-Takapuna	1,584,292	1,334,035	-250,257	-15.80%	-1.59%
Otara-Papatoetoe	2,013,051	1,988,853	-24,198	-1.20%	-0.14%
Rodney	1,279,862	1,283,492	3,630	0.28%	0.02%
Whau	1,791,071	1,841,980	50,909	2.84%	0.38%
Maungakiekie-Tamaki	1,725,116	1,791,568	66,452	3.85%	0.36%
Kaipatiki	1,897,278	1,988,002	90,724	4.78%	0.63%
Mangere-Otahuhu	1,801,166	1,904,734	103,568	5.75%	0.61%
Henderson-Massey	2,069,680	2,558,494	488,814	23.62%	2.05%
Albert-Eden	1,831,432	2,276,182	444,750	24.28%	3.20%
Puketapapa	1,106,333	1,385,901	279,568	25.27%	2.69%
Howick	2,264,120	2,857,489	593,369	26.21%	2.38%
Manurewa	1,630,167	2,090,322	460,155	28.23%	3.40%
Hibiscus and Bays	1,469,157	2,008,476	539,319	36.71%	2.83%
Orakei	1,196,555	1,823,120	626,565	52.36%	4.06%
Total	34,198,326	34,198,326	0

Key findings from model analysis

Results of general rate allocation models

101. Allocating general rate funding to local boards based on factors such as population, deprivation and land area results in significant changes in the distribution of funding between local boards. This is to be expected, as funding is currently not equitably distributed between local boards in relation to any of the factors.

102. Rural boards, with the exception of Rodney, are significantly worse off under population based allocation models. Adjusting the allocation for the land area of the board reduces the impact of reallocation on rural boards, but results in a significant redistribution of funding to Rodney, the largest board area. The disparity in boards land areas, ranging from 224,651 Ha for Rodney, to 1,871 Ha for Puketapata, means that land area may not be an effective mechanism for adjusting funding to reflect increased need associated with geographic isolation.

103. Waitemata is worse off under a population allocation model. This reflects the fact that it has a large non-resident population relative to its resident population.

104. A purely allocation based funding method will result in changes to current levels of funding for some boards. In order to ensure that no board received less funding would require extra funds being made available and some form of transition process to eventually achieve equitable funding.

Results of local rate funding models

105. Maintaining the current level of local initiative funding would result in unaffordable increases in rates for Great Barrier Island Local Board. There would also be large changes for Waitakere Ranges and Waiheke. This is due to the relatively high levels current local initiative funding in comparison to the size of the local rating base.

106. Large changes in rates can be reduced by making corresponding changes to the levels of local initiative funding. This can be shown in scenario D where local rates were used to fund local initiatives to a level relative to local board population. This shows that there is relative correlation between population and the size of the rating base.

107. A mixed funding model would also result in large changes in rates if current levels of local initiative funding is maintained for those local boards. This reinforces the relative inequity that currently exists between local boards for local initiative funding.

Transition options

108. Under a local rate scenario the extent of changes in rates is driven by the budget decisions of the local board. To maintain existing levels of local initiative funding, under a local rate funding option, would mostly result in a one off overall change in rates of between -2% and 2%. Changes of this magnitude do not require transitioning. Should a local board wish to implement transitioning this can be accomplished by varying their local initiative budgets.

109. It is not feasible to increase the funding available to local boards via the general rate allocation method to a level sufficient to ensure that no local boards are worse off following reallocation of funding for local initiatives. This would require increases in rates outside of the limits imposed by the Financial strategy.

110. Irrespective of the allocation method used, under an allocation based approach, the changes in local initiatives budgets are likely to be significant. Some form of transition mechanism will be required. This will require further investigation should an allocation based funding method be chosen.

Great Barrier Local Board

09 April 2014

Chapter 9: Use of local rates to fund local board activities

139. This chapter discusses the issues to be considered when using local rates[3] to fund local board services.

Use of local rates

140. The Local Government (Rating) Act 2002 sets out the rating mechanisms available for rates and rating differentials. There is considerable discretion in how council complies with the provisions of the legislation including the extent to which different options are considered.

141. In developing the Revenue and financing policy and mix of rating tools used the council seeks to balance the following principles (based on the requirements of section 101 of the Local Government Act 2002):

· applying rates consistently across Auckland so similar properties pay similar rates

· aligning rates to the level of benefit received (where private benefit can be identified, services should be funded through user charges or targeted rates)

· minimising the impacts of change

· considering the affordability of rates within sectors of the community.

142. In addition, the council seeks to ensure the rates are easy to understand and simple and cost effective to administer.

143. When considering the use of local rates there are a variety of tools available. This gives considerable discretion in how the rates can be charged. For example, a local rate can be charged to properties in a certain area or receiving a particular service. This makes them particularly useful to fund local board activities.

144. Local rates can be applied differentially so that different categories of ratepayers pay a different rate. If a different rate is used, this is called a “rating differential”. Differential rates can be used as either a fixed rate or a rate in the dollar. The differential categories used do not need to be the same as those used for the general rate.

145. Local rates do not have to be based on property value and can be based on other factors. Liability for a local rate can be calculated using a variety of factors including value, size, the amount of paved area, and the provision or extent of provision of a service. Where possible the choice of factor used should be linked to the service being provided.

146. Services provided by local boards and the associated funding needs are reflected in the local board agreements each year. Default levels of services may be funded through a general rate or region wide targeted rates for transparency reasons. However because local boards sit in defined geographic areas then any specific rates funding requirements to meet increased levels of service should only be met via the use of local rates.

147. The key decisions required when considering the use of local rates to fund local board services are:

· Which services will be funded by local rates?

· Which categories of ratepayers will be liable for the rate?

· How liability for local rates will be calculated?

· How do they fit within the decision making framework?

Which services will be funded?

148. The issue of which services could be funded via local rates is covered in the broader discussion within the local board funding policy and is not addressed here. This report mainly focuses on how local rates could be applied if local activities are to be funded by local rates.

149. Local rates can take one of two main forms. They can be used to fund local services that generally benefit the local board area where the benefit cannot be linked to individual ratepayers. Alternately they can be used to fund a specific service where there is a link between the service being provided and the benefit received by individual ratepayers.

150. Which categories of ratepayer will be liable and how the liability of rates is calculated will vary depending on the service being funded. Consideration of this should take place in the context of the service being funded. However, local rates may not be appropriate if the associated administrative costs outweigh the increased transparency of using them.

Which categories of ratepayer will be liable?

151. Allocating costs to the groups that benefit most directly from services is perceived as fairer. Groups that do not use services, or who make less use of services end up paying less. However, there are some disadvantages, these include:

· allocation of costs primarily to user groups may fail to recognise any wider community benefits associated with a service

· allocation of costs can be made to groups who as a proportion benefit from the services, but this may not apply to individuals within the group. Different individuals may receive different levels of benefit from the services provided

· increased use of local rates and differentials increases complexity of the rating policy making it more difficult to understand and more costly to administer.

152. Local rates can be applied to reflect levels of benefit received but only to a certain extent. At the simplest level there are sometimes services that are only available to certain groups and it is unfair for people to pay for services that they do not receive. Therefore, a local rate applied only to properties receiving the service is the most effective way of reflecting the benefit principle in this situation.

153. The rating policy splits the rating base into three main differential categories. These are business, residential, and farm/lifestyle. Both of the residential and farm/lifestyle categories contain residences while the business category does not. Therefore it is appropriate to consider that both residential and farm/lifestyle properties reflect residents of local boards. Conversely, businesses are the primary beneficiary of services provided to non-residents as the presence of non-residents in the local board area benefit local businesses.

154. With the exception of local economic development, local board services are provided mainly to the benefit of residents. Local economic development mainly consists of funding business associations and these are funded via business improvement district rates. In which case there is a strong argument to fund local board services from residents.

155. However, in some local boards, eg: Waitamata, non-residents as well as residents receive benefit from local board services. The benefit received by non-residents primarily accrues to businesses. Therefore, in some cases, there is an argument to fund local board services from business ratepayers on a benefits basis.

156. Businesses also have greater ability to pay. This is because businesses are able to claim back GST from rates and to treat rates as a business expense. Therefore, from an affordability perspective, there is an argument to fund local board services from business ratepayers.

157. Which differential category is liable for local rates is dependant on the services that are provided by the local board. If the service is to residents then it is appropriate to charge residents, while if the service is to non-residents then it is appropriate to charge businesses. If the service is provided for the benefit of residents and non-residents then it is appropriate to charge both residents and businesses.

158. Using local rates to fund local board services may result in changes in the incidence of rates between business and non-business properties. An adjustment of the business differential and the long-term differential strategy may be necessary to maintain the overall proportion of rates from the business sector.

How will liability for local rates be calculated?

159. There are two main ways in which local rates can be charged. These are as a fixed charge per property or as a proportion of property value.

160. A fixed charge is usually used as a way of ensuring that all ratepayers contribute a certain minimum amount or where the benefit form services is equally distributed. A fixed charge reduces the rates on ratepayers with higher property values and increases rates on ratepayers with lower property values. When charged to businesses and residents it also will tend to move rates away from business towards residential properties.

161. The use of fixed charges within a local board shifts the incidence of rates between high and low value properties however the effects are limited to within the local board area. Setting a fixed rate within a local board does not impact on the incidence of rates to properties outside of the local board area.

162. The use of fixed charges across the region was a significant issue that the governing body considered when developing the new rating policy. The primary fixed rate tool is the UAGC which is applied region wide. Changing the level of UAGC shifts the incidence of rates between high and low value properties as well as between local boards. The level at which the UAGC was set was arrived at after balancing the principles outlined above.

163. Currently most local board services are funded via general rates. In developing the rating policy the governing body has given consideration on the appropriate balance between fixed and value based general rates. It has also given consideration on the appropriate balance of rates incidence between business and non-business. Should local rates be used to fund local activities that were previously funded via general rates then the governing body may seek to maintain the existing balance.

How do they fit within the decision making framework?

164. The governing body is solely responsible for making decisions on how rates are used as it alone has the power to set rates. This power cannot be delegated. Using local rates to fund local board services will need to be considered as part of a wider mix of rating policy tools and the final decision ultimately lies with the governing body. The process will be different depending on how the local rates are used.

165. To provide certainty to ratepayers, as part of the financial strategy, the council has determined limits on rate increases and the use of borrowing. It has also determined that where the user of a service can be identified and charged according to their use, then, within appropriate parameters, these users should be charged. Decisions on the use of local board funding tools must be consistent with the framework outlined in the financial strategy.

166. Local boards currently use local rates to fund specific services eg: funding for free access to swimming pools for adults. General funding for local services within each board area could be provided via a non-specific local rate that is set for each local board. A local rate in this form can be used to fund general activities undertaken by each local board in the same way the general rates are used to funds general activities undertaken by the council.

167. Legislation requires that any revenue generated by a local rate can only be used to fund local activities or services within the relevant board area. However, each board would be able to decide how this revenue is allocated between those services within the local board area.

168. The council will need to consult on and agree to the use and form of local rates during the development of the next long-term plan. Once the local rates are established any subsequent consultation process would focus on the amount of revenue sought from this source. They would form part of the standard local board agreement process each year and be part of the normal consultation process during the development of the Annual Plan. Savings made or increases in costs would directly reflect decisions made by each local board.

169. A local board might also wish to have local rates to fund specific services where there are ratepayers who receive an identifiable benefit from the service. In much the same way that the governing body uses targeted rates where the service is linked to private benefit. A local rate in this form would need to form part of the local board agreement and it would also come with the requirement to consult with those ratepayers directly affected by the rate.

170. In this case the local board would need to seek to adjust the revenue sought from this source using the local board agreement process. This would require a new local rate and consideration of the form it takes and who is liable will need to be established first by the local board and then agreed to by the governing body.

171. This type of local rate would be directly linked to the specific activity and could only be used for that purpose. The local board would not be able to re-prioritise the revenue and use it to fund alternate services.

Great Barrier Local Board

09 April 2014

Chapter 11: Implementation issues

181. This chapter discusses the issues that need to be addressed when implementing the local boards funding policy.

Planning and resourcing for locally driven initiatives

182. To allow the council to effectively manage its resources consideration needs to be given to the timing and co-ordination of locally driven initiatives.

183. In most cases, local driven initiatives are delivered on behalf of local boards by the council’s operational departments. At present, resourcing for these activities has largely followed legacy provision.

184. Local boards’ decisions to change existing service levels and to undertake new activities or projects will alter operational resource requirements over time. Local boards are not permitted under the LGACA 2009 to appoint, suspend or remove employees; however it is to be expected that some of the decisions they make on services will directly impact on council staffing requirements.

185. While most local driven initiatives will continue to be delivered by council as business as usual, decisions on significant changes to local services should consider issues of timing and resourcing. The outcome of these considerations will depend on the nature of the change being proposed, but may mean:

· large scale projects being coordinated through the council’s three yearly planning cycle

· access to specialist resources being coordinated across multiple local board areas, requiring local requests for these resources to be scheduled

· a requirement for local boards to commit to minimum or fixed durations for some projects to enable the council to effectively allocate or contract appropriate resources.

Budget errors

186. The local boards funding policy will be implemented using budget information prepared for the Long-term Plan 2015-2025. While every effort will be made to ensure the accuracy of the budget data for the policy, there is always the potential for errors to be identified after funding has been allocated.

187. The key issue that could arise is that either too much, or too little of current local expenditure is classified as being for locally driven initiatives, rather than asset related. The impact of any error will depend on whether local boards are funding through local rates or by an allocation of general rates, and if the change in funding is being transitioned over time.

188. If local boards are funding locally driven initiatives from local rates, they will be able to review the activities they undertake, and the level of revenue they need to raise from their community. If is not a significant problem if a particular project is later found to be an asset related activity, as it will then be governing body responsibility to ensure that the board is funded it from general rates, and the board can adjust it future revenue requirement accordingly.

189. It is more problematic if the Governing Body wishes to move responsibility for expenditure from being general rate funded, to being funded by the local board. Such an adjustment would need to be negotiated with the local board, who would have the right not to continue the activity if they do not wish to fund it. Any transition would need to align within the annual planning cycle, to enable the board to include adjustments in its required expenditure in its rate requirement.

190. Funding local boards for their locally driven initiatives from general rates will result in current expenditure for this activities being reallocated across local boards in accordance with a funding formula. This will result in significant change in the level of funding each board receives.

191. The level of change associated with potential funding reallocation options means that is likely that the application of funding change will be transitioned over three or more years. Any initial issues with expenditure being misidentified as locally driven initiatives (to be reallocated) or asset related (not reallocated) can be resolved through the transition process.

192. The main issue under this scenario is if asset related expenditure is incorrectly identified as a locally driven initiative, and therefore able to be reallocated. In this case a local board may find that it is receiving insufficient funding to maintain it local assets. If an error of this nature is found after funding has been allocation, then it should be the governing body, to resolve the funding shortfall in the interim, until the issue can be corrected as part of the transition of the funding policy.

Budget overruns

193. In previous planning cycles, costs for local activities have been subject to repeated review and amendment as a result of adjustments to budgets by operational departments. It is proposed that alongside the implementation of the local boards funding policy, a charging model for the delivery of local services is adopted.

194. This would see operating departments committing to deliver specified services for local boards, at a specified cost. The costs will be identified in the local board budget, and the operating department is then required to deliver the service. Once costs have been committed to the budget, they should not be revised within the same budgeting cycle, unless there is request to change the scope of the deliverables.

195. Under this model, operating departments will have a responsibility to accurately cost local services. Any cost overruns as a result of inaccurate forecasting or errors by the operating department will need to be met from the department’s budget.

196. Operating departments should identify any potential uncertainty when costing projects, and agree with the local board the appropriate course for resolving these. Changes to the scope and cost of the project during the course of implementation will need to considered and agreed by the local board.

197. Any changes to local board budgets as a result of decisions by the local board, such as changes to the scope of a project, will need to be met from the local budget.

Allocation of corporate overheads

198. A proportion of the council’s operating costs are associated with internal council services, such as information services, property and democracy services. These costs are in part driven by the deliverables of the operational areas of the council. Where appropriate, these costs are allocated as corporate overhead to the relevant operational activities or projects. This provides a more accurate view of the cost to the council of undertaking these activities.

199. Just under half of local activity operating expenditure is corporate overhead. Corporate overhead allocation has been included in all modelling provided in this report. This means that any overhead costs associated with locally driven initiatives is included in the models showing options for allocating funding between boards. Similarly, models showing the impact of funding locally driven initiatives through local rates assume local board expenditure includes the associated cost of corporate overhead.

200. Giving local boards responsibility for funding corporate overhead associated with locally driven initiatives gives a clearer view of the costs associated with local decisions. Costs for services provided by operational departments will include corporate overhead as appropriate.

Change in funding for local activities over time

201. Under the existing local boards funding policy, expenditure on local activities is budgeted to increase at the council’s rate of inflation. No allowance for growth has been made. Individual board budgets may have significant change year to year, reflecting the timing of legacy projects.

202. Under the proposed funding model, the governing body is responsible for funding local assets. Decisions on future investment in local assets should reflect demand for services as a result of population growth, as well as the need to harmonise existing service levels where appropriate. This investment will be largely funded from general rates, though some types of growth driven investment, such as local parks in new housing areas, will be funded from development contributions^{^[4]}.

203. How funding for locally driven initiatives changes over time will depend on the funding mechanism chosen. If these activities are funded through local rates, then the amount collected in each board area will automatically grown in accordance with growth in the local rating base. Each board will also be able to adjust the level of rates to be collected from their board area when deciding their annual rate requirement.

204. If local boards are funded through an allocation of general rates, then the total amount of funds available for allocation each year will be decided by the governing body. The amount of change for individual local boards will depend on the formula used to allocate funds, and how often the factors underlying the formula are adjusted.

205. It is expected that local board population size will be the key driver of any funding allocation formula. The Auckland Growth Model provides annual projections of population growth by local board, based on census data, council plans and building consents. This information would enable the funding allocation to be adjusted annual reflect growth in local communities. If this approach is adopted however, the total pool of funding allocated annually should be increased for overall population growth. If funding is not increased for growth, local boards with slower than average population growth will experience declining funding year on year.

206. Other factors that may be used in the funding allocation formula, such as the deprivation index are reviewed every five years alongside the census. There is insufficient data to assess change in these factors between census surveys. Furthermore, such factors are used to indicate relative demand for funding between boards, rather than necessarily indicating a need for greater overall funding for local initiatives. The use of non-population based factors for funding allocation should be reviewed every five years following the release of the relevant census data.

Capital expenditure for local assets

207. To ensure council investment is optimised, regional capital investment should be viewed as being attached to projects, rather than local boards. If a project is delayed, then any capital expenditure, and consequential operating expenditure allocated to the project is not available for the local board to utilise.

208. Instead, to ensure the council delivers significant capital projects as efficiently as possible, the expenditure may be used to advance other capital projects in the interim. Decisions on the changes to the timing of Governing body initiated capital projects lie with the Governing Body, local boards will be consulted through the normal process of decision making.

209. Renewals budgets are another area that may benefit from a more regional approach to the management of funds. At present, renewal funds are allocated to local assets over the long term planning cycle based on models of the expected replacement life cycle for different asset classes. There may be a variance between the expected timing for the renewal of an asset, and its actual life span - some assets may perform better than expected, while others will need replacement sooner than expected.

210. Money allocated for asset renewal can only be used for renewals. To ensure optimal use of renewals funds, it is proposed that that the allocation of renewal budgets be managed regionally, to ensure that the council’s renewal of local assets is optimised across all local boards, and all asset classes. This will mean that when the council develops it annual work programme for renewals, planned expenditure will be reviewed against actual current need for asset replacement, and reallocated accordingly.

211. Under this model, local boards will be consulted on expected renewal expenditure within their board areas as part of the development of Long-term Plan and the Asset Management plans. Boards will also be consulted on the development of the annual work programme for renewals in their area, and will retain decision making when there is need to assess competing priorities for their local assets.

Ultimately, the council is legally required to renew its asset base and the decision to renew an asset should be determined by its condition. Political decision making should primarily relate to whether assets are retained or not, or upgraded or altered, with asset renewals being a business as usual activity for the council

Great Barrier Local Board

09 April 2014

Chapter 12: Rates remission and postponement policy

212. This chapter discusses the need to review the Auckland Council rates remission and postponement policy alongside the review of the local boards funding policy to ensure consistency in the approach to supporting community and other organisations.

213. The Auckland council has eleven legacy rates remission and postponement schemes for community and heritage activities that need to be reviewed. There is a significant overlap between the purpose of these rates relief schemes and grants schemes controlled directly by local boards. It is proposed that these rates remission and postponement schemes be reviewed alongside the development of the local boards funding policy to ensure that funding for these activities is consistent across local boards.

Legacy remission and postponement schemes

214. The Auckland Council provides ten rates remission and postponement policies inherited from the previous councils that provide some level of rates relief for community and sporting organisations, and land with environmental, historic or cultural value. Each policy is only available to properties within the former council area that offered it. The council also offers a rates postponement for commercial properties on Great Barrier Island that may be considered as a local rather than regional scheme.The table below summarises these remission and postponement policies:

Rates remission schemes for community and sporting organisations
Former Council	Applies to	Value of remission	Amount ($) (2013/14)	No of properties
Auckland Regional	Community, sporting and other organisations	5-10% of the rates	$101,061	127
Franklin District	Community, sporting and other organisations	50-100% of the rates	$105,135	48
North Shore City	Community, sporting and other organisations	Up to 100% of the rates	$734,667	44
Rodney District	Organisations (sports, recreation and welfare) that benefit residents of Rodney	50-100% of the rates	$144,005	54
Total rates remitted			$1,084,868	273
Rates postponement scheme for community and sporting organisations
Former Council	Applies to	Value of postponement	Amount (total $)	No of properties
Manukau City	Sports Clubs	Postponement of difference in rates if development potential of property excluded from the rateable value	$85,654	2
Total rates postponed			$85,654	2
Rates remission schemes for heritage activities
Former Council	Applies to	Value of remission	Amount ($) (2013/14)	No of properties
Auckland City	Land covenanted for conservation purposes	Up to 100% of the rates for the covenanted area	$36,652	24
Auckland Regional	Land protected for natural or historic or cultural conservation purposes.	Up to 10% of the rates for the protected area	$8,946	31
Franklin District	Land protected for natural conservation purposes	Up to 100% of the rates for the protected area	$7,465	13
Papakura District	Land protected for natural conservation purposes	Up to 100% of the rates for the protected area	$0	0
Rodney District	Land protected for natural or historic or cultural conservation purposes.	Up to 100% of the rates for the protected area	$19,059	32
Total rates remitted			· 72,122	· 100
Rates postponement scheme for commercial properties
Former Council	Applies to	Value of remission	Amount (Total $)	No of properties
Auckland City	Commercial properties on Great Barrier Island	Up to 100% of the rates for the covenanted area	$2,752	4
Total rates postponed			$2.752	4

215. As can be seen from the table, the amount of rates relief available, and the criteria for eligibility, varies significantly across Auckland. Not all types of remission are available in all local board areas.

216. While the objectives of the remission schemes largely fall within the scope of local activities, the rates and postponement remission policy and its administration is a regional responsibility. Local boards have not had input into the design of the schemes or their application.

Grants schemes

217. The council also inherited a range of legacy grants schemes from the former councils. Apart from a few regional funds, control of these grants schemes passed to those local boards in whose areas they were originally offered. The level of grants funding transferred to local boards varies significantly.

218. The purpose of the legacy grants schemes varied between the former councils, though most support objectives similar to those underpinning the rates remission schemes described above. This includes providing support to a range of organisations, such as community support services, sports and recreation clubs and local arts groups. Other schemes seek to encourage the preservation of the natural environment or other heritage features.

219. Local boards that have inherited legacy grants schemes usually have discretion over the types of activities they support, or whether to utilise funds for other activities. Boards that did not inherit legacy grants schemes are still able to provide grants from other discretionary funds or by reprioritising their budgets.

220. In some areas, such as in Auckland City, grants schemes were a direct replacement for earlier remission schemes for community organisations, and may be explicitly granted to cover rates related costs of those organisations.

221. In other cases legacy grants schemes reflect differences in funding models between the former councils. This is the case for the former northern councils, who often used grants to third party organisations to deliver services which were provided directly through council owned facilities in other areas.

222. Under the proposed local boards funding policy, local grants schemes that support the provision of facility based services which are provided directly by the council in other areas, will be funded on the same basis as council owned local assets. In this case, boards will be funded from general rate for the cost of providing these grants.

223. Other local grants schemes are classed as funding for locally driven initiatives, under the proposed policy. These funds are considered to be discretionary for local boards. It is these latter schemes that are comparable to the rates remission schemes that support community organisations and heritage activities.

224. The table below shows indicative figures for 2013/2014 grants budgets that will be treated as part of locally driven initiatives funding. It includes community related rates remissions and annual contestable grant funding, but does not include recurring grants. The figures shown also incorporate the regional funding delegated to joint funding committees of local boards through the interim community funding programme, as this provides a truer picture of ‘current state’ local grants funding.

225. Work is currently underway to separate recurring grants supporting discretionary activities and non-asset-based outsourced community services, from recurring grants supporting asset-based outsourced community services (i.e. grants to third parties operating Council-owned facilities). Asset-based recurring grants will be held at the regional level alongside other asset-related expenditure, while all other local recurring grants will form part of locally driven initiatives funding.

226. This information has been drawn from the review of Council’s ‘total community investment’, currently being undertaken by Community Policy and Planning. The purpose of the review is to consistently categorise and quantify all community related expenditure. Findings from this review will be discussed with local boards as part of workshops on the Community funding policy scheduled for March.

227. The proposed local boards funding policy seeks to reallocate funding for locally driven initiatives across local boards, or to fund these activities through local rates. It is therefore proposed that the rates remission schemes for community and sporting organisations and heritage activities be reviewed alongside the development of the local boards funding policy. This is to ensure there is consistency in how these activities are funded across local boards.

Reviewing the rates remission and postponement schemes for community and sporting organisations and for heritage activities

228. It is proposed that the scope of the review be limited to those ten legacy rates remission and postponement schemes that provide support for community and sporting organisations and for heritage activities. The review will also consider the rates postponement scheme for commercial properties on Great Barrier Island. All other rates remission schemes will not be included in the review.

229. There are two key principles that should underpin a review of the schemes for community and heritage activities. These are:

· the rates remission policy should be consistent across the region, as it is a regional policy

· responsibility for decisions related to local activities should belong to local boards

230. The first step in reviewing the remission and postponement schemes will be to assess the remissions/postponements that have currently been granted under the policy against the both the allocation of decision making, and the criteria used to define locally driven initiatives under the proposed local boards funding policy.

231. While the objectives of the remission and postponement schemes generally fall within the remit of local decision making, there may be elements of the schemes, such as support for heritage activities, where a regional scheme may be appropriate. It may also be the case that some of the remissions for facilities may fall within the definition of support for local assets under the local boards funding policy. Support for such facilities should be included in the regionally allocated funding for local assets.

232. The review will look at options for harmonising the remission and postponement schemes. This may include options for a regional remission policy, but will also consider options for replacing the schemes with local and/or regional grants schemes. There are advantages in moving from rates relief schemes to grants schemes, as the latter allows:

· greater decision control for local boards on how funds should be utilised for the benefit of their local communities

· greater transparency and accountability as to how support is given and for what purpose

· the ability to offer support to organisations who are not ratepayers

· funds for local rates remission and postponement schemes can be incorporated into the local boards funding policy on the same basis as grants used for the same or similar purposes.

233. There may be costs associated with moving from rates remission and postponement schemes to grants schemes. These will be assessed as part of the review.

234. It is proposed that the review of these remission and postponement schemes be coincide with the development local boards funding policy. Any proposed amendments to the rates remission and postponement policy will be consulted on alongside the Long-term Plan 2015-2025, so that changes can be implemented alongside the implementation of the local boards funding policy.

Chairperson	Izzy Fordham
Deputy Chairperson	Susan Daly
Members	Jeff Cleave
	Judy Gilbert
	Christina Spence

Constraint	Impact
Allocation of decision making	The Governing body has responsibility for significant decisions related to new local assets, major upgrades and change of use of existing local access, procurement and regional networks including the library collection, sports grounds, and recreational facilities.
Inherited asset base	Assets are not equally distributed in relation to local board boundaries. Local board budgets reflect geographic variance in the distribution of assets.
Financial strategy	The local board funding policy operates within limits set by the financial strategy; include limits on rates increases and debt ratio limits.

Chapter 1	Background to the local boards funding policy
Chapter 2	Principles for the local boards funding policy
Chapter 3	Allocation of decision making
Chapter 4	Funding for local assets and regional initiatives delivered locally
Chapter 5	Funding for locally driven initiatives
Chapter 6	Modelling the funding options
Chapter 7	Managing changes to local board funding
Chapter 8	Local fees and charges
Chapter 9	Use of local rates to fund local board activities
Chapter 10	Capital expenditure
Chapter 11	Implementation issues
Chapter 12	Rates remission and postponement policy