Agenda of Finance and Performance Committee

I hereby give notice that an ordinary meeting of the Finance and Performance Committee will be held on:

Date:

Time:

Meeting Room:

Venue:

Thursday, 19 March 2015

9.30am

Reception Lounge
Auckland Town Hall
301-305 Queen Street
Auckland

Finance and Performance Committee

OPEN AGENDA

MEMBERSHIP

Chairperson	Cr Penny Webster
Deputy Chairperson	Cr Ross Clow
Members	Cr Anae Arthur Anae	Cr Calum Penrose
	Cr Cameron Brewer	Cr Dick Quax
	Mayor Len Brown, JP	Cr Sharon Stewart, QSM
	Cr Dr Cathy Casey	Member David Taipari
	Cr Bill Cashmore	Member John Tamihere
	Cr Linda Cooper, JP	Cr Sir John Walker, KNZM, CBE
	Cr Chris Darby	Cr Wayne Walker
	Cr Alf Filipaina	Cr John Watson
	Cr Hon Christine Fletcher, QSO	Cr George Wood, CNZM
	Deputy Mayor Penny Hulse
	Cr Denise Krum
	Cr Mike Lee

(Quorum 11 members)

Crispian Franklin

Democracy Advisor

13 March 2015

Contact Telephone: (09) 890 8114

Email: crispian.franklin@aucklandcouncil.govt.nz

Website: www.aucklandcouncil.govt.nz

TERMS OF REFERENCE

Responsibilities

This committee will be responsible for monitoring overall financial management and the performance of the council parent organisation and the financial monitoring of the Auckland Council Group. It will also make financial decisions required outside of the annual budgeting processes. Key responsibilities include:

· Financial management

· Approval of non-budgeted expenditure

· Write-offs

· Acquisition and disposal of property relating to the Committee’s responsibilities

· Monitoring achievement of financial and other measures of performance and service levels

· Recommending the Annual Report to the Governing Body

Powers

(i) All powers necessary to perform the committee’s responsibilities.

Except:

(a) powers that the Governing Body cannot delegate or has retained to itself (see Governing Body responsibilities)

(b) where the committee’s responsibility is limited to making a recommendation only

(ii) Approval of a submission to an external body

(iii) Powers belonging to another committee, where it is necessary to make a decision prior to the next meeting of that other committee.

(iv) Power to establish subcommittees

EXCLUSION OF THE PUBLIC – WHO NEEDS TO LEAVE THE MEETING

Members of the public

All members of the public must leave the meeting when the public are excluded unless a resolution is passed permitting a person to remain because their knowledge will assist the meeting.

Those who are not members of the public

General principles

· Access to confidential information is managed on a “need to know” basis where access to the information is required in order for a person to perform their role.

· Those who are not members of the meeting (see list below) must leave unless it is necessary for them to remain and hear the debate in order to perform their role.

· Those who need to be present for one confidential item can remain only for that item and must leave the room for any other confidential items.

· In any case of doubt, the ruling of the chairperson is final.

Members of the meeting

· The members of the meeting remain (all Governing Body members if the meeting is a Governing Body meeting; all members of the committee if the meeting is a committee meeting).

· However, standing orders require that a councillor who has a pecuniary conflict of interest leave the room.

· All councillors have the right to attend any meeting of a committee and councillors who are not members of a committee may remain, subject to any limitations in standing orders.

Staff

· All staff supporting the meeting (administrative, senior management) remain.

· Only staff who need to because of their role may remain.

Local Board members

· Local Board members who need to hear the matter being discussed in order to perform their role may remain. This will usually be if the matter affects, or is relevant to, a particular Local Board area.

IMSB

· Members of the IMSB who are appointed members of the meeting remain.

· Other IMSB members and IMSB staff remain if this is necessary in order for them to perform their role.

CCOs

Representatives of a CCO can remain only if required to for discussion of a matter relevant to the CCO.

1 Apologies

An apology has been received from Cr Anae.

2 Declaration of Interest

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

3 Confirmation of Minutes

That the Finance and Performance Committee:

a) confirm the ordinary minutes of its meeting, held on Thursday, 19 February 2015, as a true and correct record.

4 Petitions

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

5 Public Input

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

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

6 Local Board Input

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

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

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

7 Extraordinary Business

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

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

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

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

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

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

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

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

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

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

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

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

8 Notices of Motion

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

Finance and Performance Committee

19 March 2015

Retrofit Your Home Programme - Financial Assistance Increase 2014/2015 Financial Year

File No.: CP2015/01512

Purpose

1. This report seeks approval for an increase in the financial assistance for the regional Retrofit Your Home (RYH) programme for the 2014/2015 financial year. This is required to meet demand from homeowners in the current year as the existing financial capacity is likely to be exhausted by April 2015.

Executive Summary

2. The Retrofit Your Home (RYH) programme provides financial assistance to homeowners to install clean heating and insulation to increase the sustainability and liveability of their houses. This in turn reduces emissions from open fire use and contributes towards achievement of the Air Quality National Environmental Standards.

3. The RYH programme operates on a cost-neutral basis. The income and costs have been modelled to demonstrate that over the life of the programme the cost of providing this additional financial assistance facility will be fully recovered from participating homeowners. The modelling predictions are verified by the last three years’ operational costs and income results that confirm RYH is cost-neutral over the life of the programme.

4. Homeowners can access up to $5,000 financial assistance per property. This assistance is repaid to Council through a targeted rate over nine years, with interest and an administration fee. This administration fee is used to cover programme operating costs including all direct programme staff salaries, marketing, evaluation, monitoring and programme development.

5. This year there has been strong public demand for the RYH programme and council has already approved $5.4 million worth of financial assistance for clean heat and insulation.

6. The $6 million financial assistance facility approved in the Long-term Plan (LTP) for the current financial year is likely to be exhausted by April 2015. If the current uptake trend continues, $3 million in additional financial assistance will be needed to ensure continuity of supply to the end of the current financial year.

7. This requested increase in financial assistance facility is in line with requests over the past two years: $2 million in additional financial assistance facility was approved in 2012/2013 and $3 million in 2013/14.

8. Council will incur no additional costs by increasing the financial assistance facility as these costs are recovered through an interest charge included in the targeted rate. Further, the additional financial assistance can be accommodated within the existing operational budget.

9. Given ongoing customer demand, staff are working to size the total programme for the draft LTP 2015-25. This sizing will include consideration of the appropriate level of debt to be associated with the programme, and therefore the annual limit of the financial assistance facility.

Recommendation

That the Finance and Performance Committee:

a) Approve an increase in the financial assistance facility available for the Retrofit Your Home programme from $6 million to $9 million for the 2014/2015 financial year to meet demand.

b) Notes that staff are reviewing the sizing of the programme for the Long-term Plan to identify an appropriate balance between meeting customer demand for financial assistance and the level of council debt.

Discussion

10. The RYH programme was launched in July 2011 with a $5 million financial assistance facility after a successful pilot programme in Auckland. Due to public demand the financial assistance available in this pilot year was increased and the programme was subsequently incorporated into the Long-term Plan (LTP), with a financial assistance facility of $6 million per year.

11. Customers select their retrofit supplier/s from a list of approved suppliers who quote for the work. Council pays the suppliers directly once the work has been completed and audited (through EECA’s national work quality audit programme). This amount is then transferred to the property as a targeted rate repaid over a nine year period or sooner if the owner wishes.

12. All suppliers to the programme have been chosen through a competitive selection process that evaluates product effectiveness, price, service method, track record, resources and technical capacity. Council also monitors supplier performance in terms of customer service and price through customer surveys and price audits.

13. The initial selection process was conducted by the Energy Efficiency and Conservation Authority (EECA) who advertised nation-wide for suppliers.

14. To ensure participation within the RYH programme is open to any qualifying suppliers, council issued its own Request for Proposals (RFP) in November 2014 to “refresh” the choice of suppliers available to customers. The selection process will be complete by April 2015 and is likely to result in up to five additional suppliers being added to the current 15 approved suppliers for the Auckland region. The intention is to make this “refresh” an annual process.

15. Since 2011 more than 11,500 households have had retrofit interventions completed by suppliers and application numbers received each year have continued to grow.

16. In the past two years the Finance and Performance Committee has approved an annual increased financial assistance facility for RYH twice (by $2 million in 2012/2013 and $3 million in 2013/2014) to meet demand.

17. Long-term demand for the RYH programme is expected to remain strong over the remaining seven years of assistance included in the current LTP. This expectation is based on current trends and the 2012 estimate of 400,000 inadequately insulated homes in the Auckland region.

Current Year Demand and Trends

18. In the current financial year there has been strong public demand for retrofit incentives with 2,171 applications received to date. This demand follows a similar seasonal pattern to the two previous years. As shown in Figure One, application numbers peaked in September 2014 with 500 applications received and fell to a seasonal low in January 2015 with 153 applications received. It is expected that, as in previous financial years, the number of applications received per month will increase between March and June 2015 in preparation for the colder weather.

Figure One: Retrofit Application Numbers by Month

19. Financial assistance provided for the year to date is nearly $5.4 million. As shown in Figure Two below, based on application numbers, it is now estimated that the financial assistance facility will require another $3 million this year for projected customer demand to be met.

Figure Two: Retrofit Financial Assistance Uptake trend

Future projections of the cost and income from RYH to Council

20. Increasing the financial assistance facility available to home-owners for home retrofitting interventions represents an increased level of debt to council in the short-term. However, as shown in Figure Three, modelling of the uptake, costs and income from RYH shows that over the life of the programme this debt will be fully recovered and the RYH programme will be cost-neutral to council.

21. The projected uptake, cost and recovery model for the programme shown in Figure Three is over 19 years, this being the 10 year LTP timeframe, plus a further nine year close out period. This ‘close out’ period is because even once financial assistance has ceased being offered to homeowners, those receiving assistance in the last year of the ‘active’ programme will still have up to nine years to repay their assistance (the maximum term of the loan) via their targeted rate.

Figure Three: Retrofit cost and income modelling

22. The first three years of the programme (2011/2012, 2012/2013, 2013/2014) shown in Figure Three are actual costs and income figures. Costs and income for future years, shown as dotted lines, are projected based on the current RYH financial operating model. The RYH model is informed by the current demand and uptake of RYH assistance at $9 million per annum, assistance repayment terms, interest charges, rate of voluntary repayment and programme operational costs.

23. As the RYH programme operates on a cost neutral basis, the RYH financial model includes all programme operating costs (direct staff salaries, marketing, evaluation and monitoring, and programme development) which are covered by an administration interest charge of one per cent associated with all applications for financial assistance.

24. The RYH financial operating model has been verified using actual programme data from the first three years of the programme. These are provided in Table One below, noting that the figures for 2011/2012 are for the pilot year (in the west only), where no targeted rate was struck until 2012/2013. All repayments received in 2011/2012 were voluntary.

Table One. Financial assistance provided and repaid through RYH from 2011/2012 to 2014/2015

Financial Year	Annual Financial Assistance provided	Financial Assistance repaid^*	Closing level of debt
2011/2012	$6,790,000	$111,066	$6,912,697
2012/2013	$7,678,000	$1,168,676	$13,670,047
2013/2014	$8,742,000	$2,508,951	$20,164,297
2014/2015 to date	$5,400,000	$3,774,486	$25,641,332

*Voluntary repayment plus principal.

25. The RYH operating model assumes that council will achieve a zero per cent default rate. Risks to recovery are low. General rates have a recovery rate of 98 per cent. The recovery rate for retrofit financial assistance is expected to be even higher as rates payment histories are checked as part of the RYH application process and only those applicants with a good repayment history are approved.

26. To date the actual recovery of RYH financial assistance supports this assumption and a number of homeowners are electing to make voluntary payments to pay off their loan more quickly. Based on the actual voluntary repayments received over the past three years, a voluntary repayment rate of six per cent is assumed in the model.

27. Overall, while increasing the financial assistance facility to homeowners will represent an increased debt liability to council over the LTP peaking at $35 million in 2020, it will not have a significant impact on council’s financial position in the longer term.

Options

28. The only alternative to council increasing the financial assistance provided through the RYH programme as recommended is a “do nothing” option. This would mean the financial assistance would be fully expended before the end of the financial year (currently projected to be in April). Suppliers, applicants and potential customers will be informed that applications cannot be approved until July 2015.

29. The risks associated with this option are:

· Auckland Council’s brand may be compromised because customers are unhappy with the delay in approval and, consequently, their interventions. This may be further exacerbated by the expected increase in enquiries in the build up to winter; and

· Council fails to capitalise on homeowner interest in investing in programme interventions that contribute to council outcomes (such as air quality improvements) in a timely manner. As a result, there will be less reduction in particulate emissions and greater risk that National Environmental Air Quality standards will not be met. Council will also be less likely to meet its target in the Auckland Plan to “Reduce air pollution emissions (PM10) by five per cent by 2016 (based on 2006 levels)…and achieve a further 20 per cent reduction by 2040.”

30. Given the risks associated with a “do nothing” option, it is recommended that council increases the financial assistance facility from $6 million to $9 million.

31. Programme uptake and customer demand for the provision of financial assistance continues to exceed the $6 million approved in the draft LTP 2015-25. Staff are working to size the programme, and in particular the appropriate level of debt, for the LTP.

Consideration

Local Board Views and Implications

32. Local boards have generally indicated interest in and support for, the RYH programme however specific local board views have not been sought in the preparation of this report.

33. Local boards have demonstrated support for initiatives to improve the energy efficiency and liveability of Auckland homes in the past. For example, for the last two financial years the Rodney Local Board has provided funding to Ngati Whatua o Kaipara for a housing project to retrofit homes from Hobsonville Airbase for the local iwi with insulation and energy efficient heating. The Maungakiekie-Tamaki Local Board also allocated funds in the 2012/13 financial year to improve the quality of rental housing in the local board area.

Maori Impact Statement

34. There is widespread uptake of the programme across the region, however no data is available (or collected) on the programme’s specific impacts on Maori.

35. Home insulation is included in the Independent Māori Statutory Board’s Māori Plan for Tāmaki Makaurau. As described above, some Auckland iwi are also involved in delivering local board programmes focused on improving the energy efficiency of homes used by local iwi.

General

36. The recommendations contained within this report falls within the Finance and Performance Committee’s delegated authority. The decision and options outlined here meet the objectives of sections 76-82 of the Local Government Act.

Implementation Issues

37. There are no significant operational issues with implementing the recommendations in this report as the additional financial assistance can be accommodated within the existing operational budget.

38. Council will incur no additional costs by increasing the financial assistance facility as these costs are recovered through an interest charge included in the targeted rate.

Attachments

There are no attachments for this report.

Signatories

Authors

Gael Ogilvie Manager Environmental Services

Viv Sherwood, Manager Catchment Management and Incentives

Authorisers

John Dragicevich - Manager Infrastructure and Environmental Services

Dean Kimpton - Chief Operating Officer

Kevin Ramsay - Chief Financial Officer

Finance and Performance Committee

19 March 2015

Service Property Optimisation

File No.: CP2015/03484

Purpose

1. To define asset optimisation and the process to achieve optimisation, including obtaining approval to a development approach and funding model that will incentivise decision makers and business owners to more proactively deal with council’s service property.

Executive Summary

2. Long-term assets held for service purposes are fully optimised when they:

· Are the right number, of the right type, in the right location with an optimum service mix

· Deliver required levels of service to the Auckland community at an optimum operational and capital cost

· Deliver wider strategic benefit to the Auckland community beyond immediate service provision E.g. town centre regeneration etc.

3. Economic realities have promoted a critical review of expenditure across council in order to reduce or slow down capital and operational outlay and optimise investment decisions.

4. There is also a greater focus on the realisation of value from assets no longer required for service purposes.

5. However potentially significant opportunities in the service portfolio remain untapped due to the perception that no local benefits are returned from the release of underperforming, but potentially valuable, local service property. As a result, less than optimal and often costly service property remains held and their latent value is not realised.

6. A new approach to the way service property is developed and funded proposes to alter the balance of incentives to decision makers by providing the opportunity to create direct local benefits.

7. The approach, currently called ‘service property optimisation’ is self-funding, maximises efficiencies from service assets, and maintains levels of service whilst releasing property for sale or development. A key element of the proposal is that service property is ‘optimised’ and that sale proceeds are locally reinvested to advance approved projects or activities on a cost neutral basis.

8. Optimisation will contribute to a number of broader strategic outcomes and is a step towards implementing Auckland Council Property Limited’s (ACPL’s) expanded development role. The overall objective is to facilitate, enhance and speed up strategic objectives such as housing and town centre development activity, to release latent property values, and to create better value from service property by optimising property needs.

9. Subject to the development of business rules, this report recommends that service property optimisation is a resourceful and constructive way to facilitate housing and regeneration, and to balance progress with affordability. Over time it will engender a willingness to move out of underutilised property and reallocate resources to property that is fit for purpose. Approval of this proposal will enable existing and proposed opportunities to be actively advanced.

10. The asset sales programme will continue and expand, based on release of non-service property for this purpose, with funds directed by the Governing Body towards funding the LTP capital program.

11. Auckland Transport (AT) is not part of this proposal however ACPL is working constructively with AT to identify assets for “optimisation”.

12. In the event that the proposed policy is approved ACPL will undertake a significant engagement with Local Boards to communicate the proposition and the benefits to local communities.

Recommendation/s

That the Finance and Performance Committee:

a) agree:

i) that the Council’s Revenue and Financing Policy be amended to allow for sales proceeds resulting from optimisation of service property assets to be reinvested into eligible local projects.

ii) that eligible reinvestment projects would be those contemplated in current or future years of the Long Term Plan (LTP) and/or those noted in the relevant Asset Management Plan (AMP) or be consistent with qualifying business strategies or plans formally adopted to guide council’s future service provision and to inform LTP/AMP processes (e.g. The Community Facility Network Plan).

b) note that the ongoing asset sales program, based on the sale of non-service property, provides the Governing Body with funds towards LTP projects and also frees up development sites.

Comments

Context for this report

13. The Auckland Plan explains that to facilitate housing, regeneration and intensification activities, council will need to use a range of strategic and financial tools to stimulate development. Council’s adopted Property Strategy illustrates a “just in time” approach to property ownership, in contrast to land-banking or retaining property as an investment. The Housing Action Plan seeks to enhance council’s ability to partner with others to promote housing developments on council owned land, through a range of approaches, as well as giving greater weight to the use of council land for housing, alongside or in place of other council services.

14. As the Auckland Council evolves there is a greater strategic requirement to reallocate capital from lower priority assets to higher priority areas. This has become particularly vital in the current economic environment.

15. Council holds a great deal of underperforming property that could facilitate housing and mixed-use development within its service portfolio without a detrimental effect on service delivery. Opportunities include selling, amalgamating, co-locating and intensifying service property, i.e. service property optimisation.

16. In light of this and other economic realities, council businesses are undertaking a number of critical reviews in order to reduce or slow down capital outlay. Identifying efficiencies, altering approaches to levels of service, deferring planned capex, co-locating service delivery, including commercial uses that are complementary and divesting of non-strategic assets are examples of business responses underway.

17. Despite these efforts, significant opportunities within the service portfolio are likely to remain untapped due to the general local board view that no local benefits are returned from the release of underperforming but potentially valuable, local service property. As a result, less than optimal and often costly service properties remain held, and their latent value is not realised.

18. Taking an incentivised approach that levers asset ownership and capitalises on organisational scale is a step towards achieving service property optimisation.

The Current Situation

19. In most cases, council owned property forms the base platform for service delivery. The operational control, management and funding responsibilities for property are shared across a range of council departments, local boards and Council Controlled Organisations (CCOs). While shared responsibilities and delegations influence property use, formal and statutory decisions are directed by the Governing Body.

20. Where property is not delivering any funded service it is categorised as non-service and sold by ACPL. Such sales increasingly deliver wider strategic and/or commercial value to council, freeing up sites for development that is normally delivered via negotiated development agreements.

21. Council’s current policy requires that all regional, local and transport asset sale proceeds are credited to the consolidated fund to offset debt, effectively assisting in funding councils LTP capital investment programme. The current LTP notes that sale proceeds may be allocated to fund alternative strategic priorities on a case by case basis. In reality, no current service property is being freed up to support the general asset sales target. Within the current regime this is unlikely to change.

22. Local boards, council service departments, community groups and ratepayers are direct or indirect beneficiaries and stakeholders of council property ownership. Stakeholders of public property will often foster a claim to the use and ownership of council property, regardless of their functional performance and decisions concerning the use and fate of council property often attract a large degree of interest.

23. The approach to asset sales to date has focussed on liquidating surplus assets where there is no current funded service i.e. “non-service” property. As mentioned above, local boards are reluctant to support asset sales where council’s funding policy provides no guarantee that the sale proceeds of a local asset will be locally returned. The loss of an asset is seen as a direct drop in the value of the board’s portfolio, and a decline in the board’s ability to deliver/maintain a level of service to its constituency. Isolated decisions concerning the functional use of local service property can become protracted or conversely, proceed without the benefit of a network overview or specific property expertise that could provide more optimal solutions.

24. This impasse has the effect of stifling innovation, dis-incentivising property stakeholders, and diminishes the ability for council to effectively capitalise on property in its property dealings. It is a situation which has been a key business issue for some time and it is one that is continuing to grow in significance, particularly within the current economic realities.

The Proposed Solution

25. As council businesses are increasingly required to do more with less, they are seeking to prioritise efforts and align investments across a range of sectors, activities and assets. Looking forward, there is a clear need for a more creative approach to the way service property is utilised, developed and funded. Opportunities such as replacing current service assets in a more modern form via the private sector, co-location, intensification or the closure and release of the site for sale to deliver strategic value e.g. housing, must be given greater weight.

26. The service property optimisation proposal is designed to enable these outcomes and is a step towards implementing ACPL’s expanded development role by matching opportunities, commercial and strategic, with optimal service provision.

27. Optimisation seeks to alter the balance of incentives to those local boards and communities prepared to deal constructively with underperforming service-assets, by providing the opportunity to receive direct local benefits and tap into efficiencies. A key element of the proposal is that service property is ‘optimised’ and sale proceeds are locally reinvested to advance approved projects or activities on a cost neutral basis. For this to happen there will need to be a change to councils existing Revenue and Finance Policy.

28. The overall objective is to facilitate, enhance and speed up housing and town centre development activity, to release latent property values, and to achieve improved community outcomes. Optimisation proposals would apply to service facilities that are identified as being underutilised, undercapitalised, in need of upgrading and where there is market demand for redevelopment or intensification. Intensification could be residential, commercial or mixed use. Optimisation proceeds would be reinvested into other local projects anticipated in the LTP. Most importantly, projects will be driven by and firmly underpinned by commercial principles and drivers and will focus on capital and operational efficiencies.

29. Optimisation may take form in various ways, such as:

a) Co-location and upgrade: two service activities, located separately on underperforming assets are relocated onto a third service site, which is upgraded to deliver three clustered services. The two vacant assets are realised to fund this work.

b) Intensification and mixed use: the air space above a service activity is sold for residential development. The sales proceeds are used to fund the construction of a new purpose built service facility on the ground floor with a basement car park.

c) Direct reinvestment: A small, poorly located and underutilised pocket park is realised for housing. The sales proceeds are used to complete a planned coastal walkway 3-years ahead of schedule.

30. Optimisation proposals would be guided by the following principles:

a) Optimisation is a cross-council-portfolio approach targeting suboptimal service assets.

b) Projects will deliver service and strategic outcomes, such as housing and urban regeneration.

c) Optimisation will equal or enhance existing levels of service, but with reconfigured assets.

d) Optimisation will have nil impact on existing rate assumptions.

e) Optimisation will capture additional (uncharted) value opportunities.

f) Optimisation will reduce holding costs of property and generate latent value and/or return.

g) Optimisation provides an opportunity for local boards to directly reinvest in Auckland Plan strategic directions and activities within in their LB area benefitting the local community.

h) Reinvestment will advance planned LTP projects and current business strategies and plans.

31. Eligible reinvestment projects would be those contemplated in current or future years of the LTP and/or those noted in the relevant AMP. Qualifying business strategies or plans would be those formally adopted to guide council’s future service provision and to inform LTP/AMP processes (e.g. The Community Facility Network Plan).

32. Given its incentivising ‘ring-fenced’ funding model, proceeds from optimisation activity are not designed to supplement the general consolidated fund as non-service asset sales do; however it will generate other efficiencies, and there is room for flexibility on this matter as final business rules are yet to be developed.

How is Optimisation different from Asset Sales?

33. As noted, optimisation is where a site is currently being used to provide a funded service, and where use is sub optimal. It involves adding activity/development to the site, or disposal of it, with projects reallocated to another service asset in that Local Board’s area. On the other hand, asset sales are, and will continue to be, from property which is non-service i.e. no funded service is involved. Asset sales also include, for example, sale of development opportunities on non-local assets, such as the Downtown car park site and the Aotea block. Proceeds from asset sales are for general Council revenue.

In order to achieve new, higher LTP targets, the Governing Body will need to be fully supportive of sales of non-service property.

34. The optimisation of council’s portfolio in this manner will create the following benefits for council and the community:

a) Community Facilities will be replaced, upgraded or optimised, and become fit-for-purpose at little or no new capital outlay to council/ratepayers. In many cases this may enable the upgrading or delivery of community facilities well ahead of the programming in council’s LTP.

b) Council’s service property portfolio will become more efficient. Underperforming assets will have increased utility and efficiency, with lower maintenance costs and lower property operating costs as well as improved service delivery benefiting from co-location of other complementary services or commercial activities.

c) Latent value, that currently provides little if any return, will be realised from council’s portfolio for the direct benefit of the local community.

d) Positive development by the private sector will be actively promoted through council having direct influence over total site redevelopment strategic and commercial outcomes.

e) In the majority of cases this will result in intensification of land use, particularly residential, and in many cases will boost the resident population of town centres.

f) Optimisation will free up a vast range of undercapitalised development opportunities such as air space, full sites, or part sites.

The Benefits

35. The service property optimisation concept has been socialised with senior management across council and support for the proposal to date has been encouraging. The task of project execution planning, finalising eligibility criteria and developing the business rules that will oversee optimisation proposals is at an early stage, and requires further consideration and engagement with principle business owners.

Auckland Transport Assets

36. Auckland Transport assets are not part of this optimisation proposal however ACPL are working cooperatively with AT in respect of assessing optimisation opportunities that can deliver optimised service, commercial and strategic benefit.

Consideration

Local Board views and implications

37. Local Board views have not been sought in this respect however the implications of the application of “service property optimisation”, particularly the local investment of released funds, is positive for local communities as it will deliver new and improved service provision within Local Board areas.

38. In the event that the proposed policy is approved ACPL will undertake a significant engagement with Local Boards to communicate the proposition and the benefits to local communities.

Māori impact statement

39. The implication of the application of “service property optimisation”, particularly the local investment of released funds, is positive as it will deliver new and improved service provision for local communities.

Implementation

40. ACPL is in the process of finialising a cross-council project execution plan that will see the coordinated roll out of the optimisation concept across the business owners, Auckland Council Property Department, Finance and ACPL. The plan will include process improvements and business rules, to enable optimisation and a process to integrate the concept within business as usual.

41. ACPL will undertake a significant engagement with business owners and Local Boards to communicate the proposition and the benefits to council service provision and local communities.

Attachments

There are no attachments for this report.

Signatories

Authors

Allan McGregor - Manager Property Asset Development Auckland Council Property Limited

Authorisers

David Rankin – Chief Executive Auckland Council Property Limited

Matthew Walker - Manager Financial Planning, Policy and Budgeting

Kevin Ramsay - Chief Financial Officer

Finance and Performance Committee

19 March 2015

Submission to the Weathertight Homes Resolution Service Amendment Bill 2015

File No.: CP2015/03752

Purpose

1. To seek the Committee’s approval to submit on the Weathertight Homes Resolution Service Amendment Bill 2015 and approval of the draft submissions dealing with the proposed technical changes and policy change around eligibility to the Financial Assistance Package.

Executive Summary

2. Auckland Council is a participating territorial authority (PTA) in the Financial Assistance Package (FAP). The FAP is a crown led scheme that channels resources that would otherwise be used in litigation into repairing leaky homes and where the crown contributes 25% of the repair cost. The FAP is encapsulated in the Weathertight Homes Resolution Services Act 2006 (WHRS Act 2006).

3. The Weathertight Homes Resolution Service Amendment Bill 2015, an amendment to the WHRS Act 2006, has had its first reading in the House of Representatives. The Bill has now been referred to Local Government and Environment Committee for consultation and is to be reported back to the House by 31^st July 2015.

4. The Bill contains a policy change which seeks to expand the FAP for a limited number of owners previously considered ineligible. Other than this proposed policy change there is no intention within the Bill to expand or change the FAP, rather the aim to clarify and validate certain aspects that may be open to interpretative challenges.

5. Draft Auckland Council submissions on the Bill have been prepared and are attached to this report for Committee for review and approval.

Recommendation/s

That the Finance and Performance Committee:

a) agree that Auckland Council submits on the WHRS Amendment Bill 2015.

b) agree that the draft submissions attached be approved and that the final wording is approved by the Deputy Mayor and Chair of this Committee.

Comments

6. Auckland Council is a participating territorial authority (PTA) in the Financial Assistance Package (FAP). The FAP is a crown led scheme that channels resources that would otherwise be used in litigation into repairing leaky homes and where the crown contributes 25% of the repair cost. Where a claimant can meet certain criteria they may also qualify for 25% contribution from a PTA, such as Auckland Council. The FAP is a time-limited scheme that comes to an end in July 2016.

7. The empowering provisions of the FAP sit within the Weathertight Homes Resolution Services Act 2006 (WHRS Act 2006). The main purpose of the Weathertight Homes Resolution Service Amendment Bill 2015, is covered by the three points outlined below.

8. Firstly, to remove doubt about the validity of the criteria in clauses 1B and 1C of the Contribution Criteria. Clauses 1B and 1C are two of a number of criteria a person needs to meet, in order to become a qualifying claimant under the FAP to receive financial contributions to agreed repairs from the crown, and in some cases the relevant PTA.. The contribution criteria was created by notice published under the authority of the Act in the Gazette on 28^th July 2011 and recent consideration of clause 1B and 1C raised the question as to whether these two clauses would be better located in the WHRS Act to remove any questions of inconsistency.

9. Secondly, to deem certain claims previously determined ineligible, on the basis of the meaning of the term “built”, to be eligible claims. The Supreme Court decision in Osborne v Auckland Council [2014] 1 NZLR 766 (SCNZ) held that the word “built” in s14(a) of the WHRS Act 2006 was intended to be construed by reference to the expression building work in s393 of the Building Act 2004, which encompassed certifications rather than the plain meaning of the word “built”. Claimants must meet a series of statutory criteria including that the claim must be made within 10 years of the date on which the affected structure was “built”. Therefore, the Bill deems those claimants who were found ineligible on the previous interpretation of “built”, but who would have been found eligible had the decision been made based on the Supreme Court interpretation of ‘built”, to now be eligible.

10. Thirdly, to widen the definition of qualifying claimants in s125B to include claimants that are actively progressing claims. In order to qualify for the FAP a notice to proceed must be issued. There are a number of steps that must be taken prior to being able to issue a notice to proceed. As the WHRS Act 2006 sets a deadline for the FAP to 23^rd July 2016, claimants who wish to access the FAP must have progressed their claim to notice to proceed stage by this date. The Bill makes an amendment to the definition of qualifying claimants to ensure that claimants actively progressing to the notice to proceed stage will be in a position to make application by the deadline and continue to progress under the scheme after 23^rd July 2016.

11. The Bill has been referred to the Local Government and Environment Committee for consultation and is due to be reported back to the House of Representatives by the 31^st July 2015. Opportunity to make submissions is available for a limited period of time and it is highly recommended that Auckland Council takes the opportunity to submit and be heard on this Bill.

12. It is noted that other than the proposed change regarding the term “built”, the explanatory note of the Bill makes it very clear there is no intention to expand or change the FAP, rather to clarify and validate certain aspects that may be open to interpretative challenges. Certain revisions to the language used in the Bill is desirable from Council’s perspective and the draft submissions incorporating these technical language revisions are attached for approval. In relation to the Policy change relating to the term “built”, it does expand the FAP for a limited number of owners previously considered ineligible. However, each individual owner already has an alternative remedy available via a judicial review of their eligibility decision should this amendment not proceed or not in its current format.

Consideration

Local Board views and implications

13. As a result of limited timeframe, there has been no engagement with local boards on this matter.

Māori impact statement

14. As a result of limited timeframe, there has been no engagement with Mana Whenua or Mataawaka on this matter.

Implementation

15. The final approved submission will be sent to the Local Government and Environment Committee. It is recommended that Auckland Council send representatives to speak to its submission. Council will continue to work with the Ministry of Business, Innovation and Employment (MBIE) to deliver the FAP as it stands under the current provisions within the WHRS Act 2006.

Attachments

No.	Title	Page
a View	Draft Submission WHRS Amendment Bill	27

Signatories

Authors

Sally Grey – Manager Claims

Authorisers

Dean Kimpton - Chief Operating Officer

Kevin Ramsay - Chief Financial Officer

Finance and Performance Committee

19 March 2015

Bi-monthly business improvement and performance report

File No.: CP2015/03575

Purpose

1. To provide an outline of council’s performance against the delivery targets for the 2014/2015 capital works programme and to inform councillors of the customer centric design review of our regulatory services and the development of an integrated approach to consents.

Executive Summary

2. At the end of 2014 the chair of the Finance and Performance committee and councillors asked that more detailed reporting on council performance was presented to the committee at regular intervals from 2015.

3. The purpose is to provide councillors with information on how council is tracking against delivery of key operational activity or improving business processes and services to achieve the strategic outcomes of council and improve customer experience.

4. This bi-monthly business improvement and performance reporting on one or two issues or themes will complement the existing monthly performance report (MPR), which primarily focuses on financial performance, performance measure trends and metrics against annual plan key performance indicators. The reports and/or presentations will only cover activity of Auckland Council. Performance reporting and monitoring of Auckland Council Controlled Organisations (CCO) will continue to occur at the CCO Governance and Monitoring Committee.

5. This first bi-monthly business improvement and performance report in 2015 involves two presentations to the committee. Firstly, staff will provide an overview on how council is performing against the delivery targets for the 2014/2015 capital works programme. The new approach to capital works project management and the project gateway system will be highlighted. Information on the transition to the new 2015 – 2025 Long Term Plan capex programme will also be addressed as part of this presentation.

6. The second presentation will provide information to the committee on the customer centric design review of our regulatory services and the development of an integrated approach to consents and compliance. Improving resource and building consent processes and customer experience is a priority. The review will build on changes and improvements already made to consenting and compliance processes and further changes will have the customer at the centre of how we do business.

7. No decisions are required as a result of this report. However, at the end of the presentations the committee will be asked for feedback on issues they would like to see presented on during 2015.

Recommendation/s

That the Finance and Performance Committee:

a) receive the report and presentations.

Comments

8. n/a

Consideration

Local Board views and implications

9. Local Boards have not been consulted in the development of this report. However, relevant information from the bi-monthly business improvement and performance reports presented to this committee will also be presented to local boards chairs at their monthly local board chairs forum. Work is currently underway with local boards to improve local service delivery and enable communities to more easily delivery locally funded or community led projects.

Māori impact statement

10. Maori have not been consulted in the development of this report however, engagement with iwi, mana whenua and mataawaka will continue to take place as part of policy development, programme delivery and project processes.

11. Improvements to council service delivery and operational performance will improve outcomes for all Aucklanders, including Maori. Specific reporting on Maori transformational activity and expenditure is presented to this committee on a quarterly basis and identifies the specific contribution of projects and activities to lifting Maori social and economic wellbeing.

12. Council’s chief executive is leading the Maori Responsiveness Executive Leadership Group to support the Maori transformational shift LTP process and ensure delivery on council’s commitments to Maori.

Implementation

13. n/a

Attachments

There are no attachments for this report.

Signatories

Authors

Crispian Franklin - Democracy Advisor

Authorisers

Dean Kimpton - Chief Operating Officer

Kevin Ramsay - Chief Financial Officer

Finance and Performance Committee

19 March 2015

Auckland Council Group half year financial results to 31 December 2014

File No.: CP2015/00388

Purpose

1. This report discloses the financial performance of the Auckland Council Group for the six months to 31 December 2014.

Executive Summary

2. This report is part of the regular quarterly reporting to the Finance and Performance Committee on the Council’s Group financial performance for the year to date.

The Auckland Council financial results for the six months to 31 December 2014 were reported to the Finance and Performance Committee in February. The Council Controlled Organisations reported their individual performance to the CCO Governance and Monitoring Committee on Tuesday, 3 March 2015.

Recommendation/s

That the Finance and Performance Committee:

a) receive the report.

Discussion

3. The report discloses the financial results for the Auckland Council Group for the six months to 31 December 2014.

The chair and deputy chair were delegated by this Committee to authorise the release of a similar report to the New Zealand Stock Exchange on 27 February, as required by the listing rules.

These results were authorised and released to the New Zealand Stock Exchange at around 12.30pm on Friday, 27 February 2015.

The attached Financial Report includes a financial commentary page which highlights key results and comments.

Consideration

Local Board Views and Implications

4. This report is for the Council Group. Each Local Board receives a report specific to their area.

Maori Impact Statement

5. The report is limited to financial performance. Council’s contribution to Maori outcomes will be reported in the annual report.

General

6. There are no financial or resourcing implications arising from the adoption of this report.

Implementation Issues

7. There are no implementation issues.

Attachments

No.	Title	Page
a View	Auckland Council Group Financial Report December 2014	35

Signatories

Authors

Francis Caetano - Group Financial Controller

Judy Kerling - PA to Group Financial Controller

Authorisers

Bruce Gardiner - Acting Manager Finance

Kevin Ramsay - Chief Financial Officer