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, 17 September 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)

Mike Giddey

Democracy Advisor

11 September 2015

Contact Telephone: (09) 890 8143

Email: mike.giddey@aucklandcouncil.govt.nz

Website: www.aucklandcouncil.govt.nz

Please note: Any attachments listed within this agenda as “Under Separate Cover” can be found at the Auckland Council website http://infocouncil.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

· Development of the 2016/17 Annual Plan and amendments to the LTP including:

- Local Board agreements

- Financial Policy related to AP (recommendation to the Governing Body)

- Setting of rates (recommendation to the Governing Body)

- Preparation of the consultation document and supporting information for the LTP and Annual Plan (recommendation to the Governing Body)

· Financial policy outside the LTP and AP

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 (section 2)

(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.

Independent Māori Statutory Board

· Members of the Independent Māori Statutory Board who are appointed members of the committee remain.

· Independent Māori Statutory Board members and staff remain if this is necessary in order for them to perform their role.

Staff

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

· Other 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.

Council Controlled Organisations

· Representatives of a Council Controlled Organisation can remain only if required to for discussion of a matter relevant to the Council Controlled Organisation.

1 Apologies

Apologies from Cr CE Brewer, Cr GS Wood, Deputy Mayor PA Hulse and Deputy Chairperson Cr RI Clow have been received.

2 Declaration of Interest

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

3 Confirmation of Minutes

That the Finance and Performance Committee:

a) confirm the ordinary minutes of its meeting, held on Thursday, 20 August 2015, including the confidential section, 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 7.7 provides for Public Input. Applications to speak must be made to the Democracy Advisor, in writing, no later than one (1) clear working day 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 6.2 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 one (1) day’s 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 6.1 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

17 September 2015

Auckland Regional Amenities Funding Act (ARAFA) Funding Model Review - Evaluation Report

File No.: CP2015/18106

Purpose

1. To consider options arising from the Auckland Regional Amenities Funding Act 2008 (ARAFA) Funding Model review (the review).

Executive Summary

1. Auckland Council initiated a review of the funding model under the Auckland Regional Amenities Funding Act 2008 (the Act) in the context of Auckland Council’s establishment. Auckland Council approved the Terms of Reference of this review on 26 February 2015 (GB/2015/5).

2. The review sought to determine whether the funding model remains fit for purpose and to identify any changes that enhance its effectiveness. The review did not consider which organisations should receive funding under the Act.

3. In addition to the status quo, six different options were developed that sought to address the identified issues. These options were endorsed by the Finance and Performance Committee on 18 June 2015 (FIN/2015/50) and have now been evaluated.

Preferred Option

4. The recommended option is to establish a framework to define ‘sustainable funding’ and implement medium term plans that will enhance the Act’s annual decision-making process.

5. This framework would define sustainability in the context of the Act, how it is substantiated, the information required to determine sustainability for each amenity, and other related matters.

6. The Funding Board will be responsible for leading the process to develop and establish this framework. The work required to develop the framework should be scoped to determine the associated time frames and costs.

7. Once the framework is established, each amenity would follow the agreed process to develop a medium term (suggested 3-5 year) plan, which would consider:

i. Appropriate levels of reserves an amenity would be able to build-up and maintain to help manage the peaks and troughs of its funding requirements.

ii. The level of surpluses an amenity needs to generate in order to meet its future funding requirements, including for capital projects.

iii. Outline the planned levels of service that the amenities intend to provide, and how projected needs will be met.

iv. Strategic outcomes that the amenity is looking to achieve.

8. Once the framework is established the council would make a new funding principle under section 22 of the Act. The principle would require the Funding Board to have regard to any medium term plans that have been agreed when making its annual funding decisions.

Recommendation/s

That the Finance and Performance Committee:

a. note the evaluation of options and conclusions drawn from the Auckland Regional Amenities Funding Act 2008 Funding Model review.

b. endorse the development of a framework for sustainable funding as the preferred option for the Auckland Regional Amenities Funding Act 2008 - Funding Model review.

c. request Auckland Council staff to continue to work with the Funding Board and the amenities to develop an implementation plan for the framework and report back regarding costs and time frames.

d. note that developing and establishing a framework for sustainable funding may result in a new funding principle being added to those that need to be considered in implementing the Auckland Regional Amenities Funding Act 2008.

Comment

9. The Auckland Regional Amenities Funding Act 2008 (the Act) established a model for providing adequate, sustainable and secure funding to the specified regional amenities. The Act also ensured that the former councils of the Auckland region contributed to that funding. Following amalgamation in 2010, Auckland Council is the sole funder under the Act.

10. Auckland Council initiated a review of the Acts funding model in the context of Auckland Council’s establishment, having regard to the legislative framework for local government. Auckland Council approved the Terms of Reference for this review on 26 February 2015, which stated that the overall objective of the review is:

“to achieve long term sustainable affordable and predictable funding of the existing amenities while recognising the Council’s purpose and responsibilities under the Local Government Act 2002 and other legislation.”

11. The review sought to determine whether the funding model remains fit for purpose and to identify any changes that enhance its effectiveness. The review started from the premise that council would provide funding to the regional amenities, and sought to find the best model to provide that funding.

12. This review did not consider which organisations should receive funding under the model. Such considerations were outside the scope of the terms of reference. However, a number of different options for funding models were evaluated as part of the review. One of the considerations when evaluating these different options was whether the funding model was flexible enough to allow amenities to be added or removed from the model.

13. It was agreed from the outset that council staff would work with representatives of the amenities, and consult with the Funding Board, when undertaking the review. A series of meetings and workshops were held with the amenities representatives during the course of the review. There were also meetings and workshops with the Funding Board, and other parties involved or interested in the funding of not-for-profit organisations.

14. Working with a range of stakeholders helped to develop an understanding of the current funding model from different perspectives – funder, recipient, and the bodies that administer the Act. The views of the various parties have informed the review.

Issues

15. A number of issues were identified with the current model of which the following emerged as the most significant through the review:

i. The Act explicitly prevents funding being provided for capital expenditure. However, some of the amenities have significant requirements for capital funding. This has caused issues in the past, as funds that could have been used for operating expenses were put towards capital projects.

ii. The Act requires the Funding Board to provide “adequate, sustainable, and secure” funding to the amenities. What is “adequate” funding for each amenity is determined through the annual application process, which largely focuses on the needs of the amenity in the following financial year. This limits consideration of longer term plans when making the annual funding decisions, and does not provide the best understanding of what is financially sustainable for each amenity over the medium term.

iii. Whilst Auckland Council is compelled to provide funding to the amenities, the opportunities for Auckland Council to ensure funding is directed towards its highest priority strategic outcomes and goals for the region are relatively weak.

Options

16. In addition to the status quo, six different options were developed that sought to address the identified issues. These options covered a spectrum, ranging from enhancements to the status quo that could be implemented within the framework of the Act, through options that required amendments to the current legislation, and one option that would repeal and replace the Act. The options were endorsed by the Finance and Performance Committee on 18 June 2015 (FIN/2015/50). They were evaluated against the following criteria, endorsed by the Finance and Performance Committee on 21 May 2015 (Fin/2015/33):

· Financial sustainability and certainty

· Affordability

· Independence and continuity

· Accountability and transparency

· Administrative efficiency

· Alignment of outcomes and goals

· Fairness

· Flexibility.

17. During the evaluation phase, the status quo was used as the benchmark against which the different options were assessed.

Evaluation

18. The evaluation of the different options is summarised:

i. The Status Quo (Option 1) is not a preferred option as available enhancements have been identified.

ii. The Pathway to Capital (Option 2) is not a preferred option as applications can be made to Auckland Council, perceptions that additional funding would be provided by Auckland Council, the potential retreat of other funders, and the ability of the preferred option to alleviate the issues.

iii. The Sustainable Funding component (of Option 3) is the preferred option under which a framework will be developed and established to define ‘sustainable funding’ and implement medium term plans that will enhance the Act’s annual decision-making process.

It is preferred as it can clarify and strengthen the rationale underpinning the funding model, clarify appropriate reserves and surpluses (alleviating concern about capital expenditure), supports better alignment of strategic goals and outcomes and communication between the key stakeholders and their relationships.

iv. The Alignment/Groups (option 4) is not a preferred option as it is unworkable, potentially inconsistent with the Act and the risk of confusing accountabilities limits further gains.

v. The Baseline + CPI (option 5) is not a preferred option as it was incomplete, of indeterminate effect and rated poorly when considered against criteria.

vi. The Strong Funder (Option 6) and is not a preferred option due the perception that Auckland Council was exercising greater control and taking greater responsibility than intended, the potential retreat of other funders, improvement has been identified within the Act, and insufficient clarity that the benefits of legislative change would outweigh the significant costs.

vii. The Auckland Council Dedicated Fund (Option 7) is not a preferred option due to the potential risk to continuity of funding and the amenities financial sustainability, the time and resources to effect the legislative change without sufficient clarity that the benefits would outweigh the likely significant cost and the availability of benefits by alternative, less costly means.

Preferred Option

19. The evaluation determined that overall the current funding model is fit for purpose and improvements are available through the sustainable funding component of this option without recourse to legislative change. The Sustainable Funding component of Option 3 is the preferred option.

20. During the evaluation phase this option was refined in response to discussions with key stakeholders and analysis of the requirements of the Act. The refined option that has been developed is to establish a framework to define ‘sustainable funding’ and implement medium term plans that will enhance the Act’s annual decision-making process.

21. In undertaking the review, the question of what ‘sustainability’ meant in the context of the funding model and the amenities was a recurring question that became central to the review.

22. A consensus emerged amongst the key stakeholders (amenities representatives and the Funding Board) about the value of clarifying levels of sustainable funding in the context of each amenity. The Funding Board indicated that it has considered this matter on several occasions and are of the view that implementation of the Act has reached a point where undertaking this work is feasible and would deliver practical benefits in terms of clarity and focus for funding and performance management.

23. Financial sustainability is at the heart of the Act. The Act is also focused on the annual funding process determining the funding to be provided to the amenities in the following year. One of the most significant improvements that could be made to the current funding model is to undertake additional work to help determine what is required to make the amenities financially sustainable in the medium term (3 – 5 years depending on the nature of the amenity).

24. To help determine what is required for the amenities to be financially sustainable, it is envisaged that the individual amenities would develop medium term plans that can then be discussed with the Funding Board and council. These discussions would provide greater clarity about the planned activities of the amenities (and potential alignment to council objectives), proposed levels of service, future activities that may require additional funding, appropriate levels of reserves and surpluses, and any planned capital projects that may have an impact on operating funding requirements.

25. Once these plans have been developed, and approved by the Funding Board, they could be used as a guide to future funding decisions.

Observations

26. In reaching these conclusions the following observations were made in regard to the Act and its funding model.

27. This review represents a continuation of a consideration of issues and options in 2012 which resulted in the inclusion of a new funding principle.

28. From this review it is considered drivers for change are less likely to arise from within the funding model itself than from outside it; notably with regard to current and future membership under the Act from external stakeholders and from within sectors to which individual amenities may belong.

29. Given the complexity and commitment required in terms of time and resources it is considered that (all things being equal) legislative change should not be undertaken lightly, with implication that any change sought would most likely be significant.

Consideration

Local Board views and implications

30. At the time of writing, input was received by sixteen local boards. Two local boards expressed the view that the criteria and the options provided a sound basis for the review. Seven local boards received the report or resolved that they were unable to provide meaningful feedback in the absence of the evaluation.

31. Local input covered the spectrum of ideas canvassed in the options. Some local boards opted for specific options discussed under each option. Two local boards supported option 1, two boards supported option 3, and one board supported option 4 (in the absence of legislative change) or option 7 (with legislative change). Two local boards directly supported option 7 while another indirectly provide support through referencing some of its components parts. There was no support for option 2, option 5 or option 6.

32. Specific comments addressed operational and capital expenditure, support for the purpose of the Act, the relationship between Auckland Council (as funder) and the amenities (as funder recipients), alignment of strategic outcomes and goals, membership and support for other organisations who may not be members, contestability of funder and support for specific amenities.

33. Accountability, transparency, certainty of funding and levels of service were referred to. The newness of the legislation, skills and experience of the Funding Board and stability were discussed. So was alignment with the Auckland Council’s long term Plan/Annual Plan process.

34. One board requested that the Auckland War Memorial Museum and the Museum of Transport and Technology be included in the review. Membership was an issue referred to by five local boards.

35. These matters have been considered and incorporated into the evaluation.

Māori impact statement

36. Enquiries were made of mana whenua in March 2015 to ascertain whether the ARAFA funding model review held any interest. No interests were identified.

37. Viewing work on the ARAFA Funding Model review through Whiria Te Muka Tangata: The Māori Responsiveness Framework as a lens, no statutory or treaty obligations nor direct Māori or value Te Ao Māori outcomes were identified as affected by the review.

38. When reporting on the options, representatives of the Independent Māori Statutory Board (IMSB) spoke to the need for inclusion of organisations representing Māori arts and culture, or community groups within the Act’s specified amenities. These comments are noted but are unable to be actioned through this process as they are beyond the scope of this review.

Implementation

39. The Funding Board will be responsible for leading the process to develop this framework. The work required to develop the framework should be scoped to determine the associated time frames and costs.

40. Once the framework is established, each amenity would follow the agreed process to develop a medium term (suggested 3-5 year) plan. These plans should consider matters such as:

i. Appropriate levels of reserves an amenity would be able to build-up and maintain to help manage the peaks and troughs of its funding requirements.

ii. The level of surpluses an amenity needs to generate in order to meet its future funding requirements, including for capital projects.

iii. Outline the planned levels of service that the amenities intend to provide, and how projected needs will be met.

iv. Strategic outcomes that the amenity is looking to achieve.

41. Once the framework is established the council would create a new funding principle under section 22 of the Act. The principle would require the Funding Board to have regard to any medium term plans that have been agreed when making its annual funding decisions.

42. Auckland Council staff will continue to work with the Funding Board and the amenities on the development of the implementation plan and report.

Attachments

No.	Title	Page
a View	Evaluation Report	15

Signatories

Authors

Wayne Brown - Lead Strategic Advisor Strategic Scanning

Alastair Cameron - Principal Advisor CCO Governance and External Partnerships

Authorisers

Jacques Victor - GM Auckland Plan Strategy and Research

Jim Quinn - Chief of Strategy

Matthew Walker - Acting Chief Financial Officer

Finance and Performance Committee

17 September 2015

Government Broadband Investment - Digital Enablement Plan

File No.: CP2015/15854

Purpose

1. The purpose of this report is to:

· seek endorsement of Auckland Council’s Digital Enablement Plan (the Plan) for submission to the Ministry of Business, Innovation & Employment (MBIE) in support of the MBIE’s funding allocation process for broadband infrastructure

· introduce the next steps in Auckland Council’s rural broadband work programme and seek input from elected members.

Executive Summary

2. In March 2015 the Ministry of Business, Innovation & Employment (MBIE) announced $210 million of additional funding to extend Ultrafast Broadband (UFB), $100 million to extend the Rural Broadband Initiative (RBI), and $50 million to address mobile coverage black spots.

3. MBIE announced that funding would be allocated through a contestable process. The first part of this was for local authorities to identify and prioritise communities that would benefit from an infrastructure upgrade. Auckland Council completed this and submitted the information in a Registration of Interest – Support on 10 July 2015.

4. The latest information from MBIE indicates that announcements on areas to receive new broadband or mobile investment will be made when deployment contracts are finalised. This is likely to take place in the first half of 2016 for UFB, and the second half of 2016 for RBI and the Mobile Black Spot Fund.

5. As part of the funding allocation process MBIE has invited local authorities to submit a Digital Enablement Plan by 18 September 2015. This Plan is intended to outline what a local authority would do to support the uptake and use of better broadband where it is made available. Commitments in this Plan will help to inform MBIE’s decision on which areas will receive investment.

6. With oversight from the Rural Broadband Working Party, staff have developed a Digital Enablement Plan that supports community enablement and business growth. This draws on existing activity from across the council family with a focus on access to broadband and technology, digital skills, and awareness.

7. In developing the Digital Enablement Plan the council has identified that government funding will not be sufficient to address all of the broadband issues in rural Auckland. To that end staff, working with the Rural Broadband Working Party, have started exploring what else the council can do to support better rural broadband. This ‘rural broadband work programme’ looks at what council can do to support better access to broadband in rural Auckland, and focuses on building the case for further telecommunications industry and central government investment.

Recommendation/s

That the Finance and Performance Committee:

a) endorse the Digital Enablement Plan, inclusive of minor amendments and changes the Committee makes, for submission to the Ministry of Business, Innovation & Employment on 18 September 2015

b) request staff to work with the Rural Broadband Working Party to continue to develop Auckland Council’s rural broadband work programme.

Comments

Funding Allocation Process for Government Investment in Broadband

8. Despite government investment in Ultrafast Broadband (UFB) and the Rural Broadband Initiative (RBI) there continue to be communities that experience limited access to good quality broadband. These are concentrated in rural areas. In March 2015 government announced additional funding to address these issues.

9. $210 million was announced to extend the UFB footprint from 75 percent to 80 percent of New Zealanders, and $100 million was announced to extend RBI coverage. A new $50 million Mobile Black Spot Fund (MBSF) was also announced to address black spots in mobile coverage. This funding will be allocated by central government through a contestable process.

10. On 10 July 2015 Auckland Council submitted a registration of interest to MBIE highlighting communities that would benefit from investment. This was endorsed by the Regional Strategy and Policy Committee on 2 July 2015 (resolution number REG/2015/53).

11. The next step for local authorities is to submit a Digital Enablement Plan that outlines commitment to supporting the uptake and use of broadband. Digital Enablement Plans are not mandatory; however they form a key part of MBIE’s decision making process.

12. The final allocation of funding will be informed by the registration of interest and the Digital Enablement Plan. This is expected to be announced in the first half of 2016 for UFB, and the second half of 2016 for RBI and the mobile black spot fund. Following this funding will then be made available to the successful supplier(s).

13. MBIE’s final decision will take into account:

· local authorities’ commitments to supporting the deployment of infrastructure

· the scope and scale of issues in the communities that are identified

· the economic and social impact of addressing those issues

· local authorities’ commitment to support the uptake and use of broadband in their digital enablement plan.

Auckland Council’s Digital Enablement Plan

14. A Digital Enablement Plan is a way for local authorities to outline activities that support the uptake and use of better broadband (UFB and RBI) and the technologies and services that that enables. These activities can be planned or underway. Likewise, the Plan can draw on existing council plans and strategies.

15. MBIE has indicated it expects activity in the Plan to cover commitment to leadership, community enablement, and business growth. Auckland Council’s Plan (see attachment one) addresses all three of these areas. However, while the council’s Plan includes discrete community enablement and business growth activities, leadership is instead embedded in the approach to implementing the Plan. Rather than establishing a programme of work parallel to and competing with existing digital enablement activity, Auckland Council is demonstrating leadership by focusing on coordination and oversight.

16. This reflects the fact that Auckland Council’s Digital Enablement Plan draws on existing plans and strategies, and activities that are already underway or already being scoped. This is only possible because of the extensive activity already underway across the council family.

17. The community enablement and business growth activities that have been included in Auckland Council’s Digital Enablement Plan focus on:

· access – making broadband and digital technology more accessible

· skills – supporting people to develop the skills they need to use digital technology

· awareness – helping people understand broadband and digital technology, and make informed decisions.

18. While a key role of the Digital Enablement Plan is to support the case for further government investment in broadband infrastructure, Auckland Council’s Plan is also applicable:

· in areas that will not receive investment

· in areas that have already received investment e.g. areas that received funding under the first round of UFB and RBI

· across both urban and rural Auckland.

19. The only activity that is out of scope of the Plan is addressing the undersupply of broadband infrastructure and services. Council is responding to this issue separately under the rural broadband work programme and so there are no activities addressing this in the Digital Enablement Plan.

Next Steps – Rural Broadband Work Programme

20. Despite government investment, rural communities continue to experience limited access to broadband, and a lower quality of service, compared with their urban counterparts. These issues persist because of:

· lower population density – this means a lower return on investment which in turn has meant less investment in building and maintaining infrastructure

· industry sweating assets – infrastructure is usually outdated and over-subscribed which results in a high contention ratio i.e. demand for bandwidth is higher than the infrastructure can support

· limited consumer recourse – consumers can lay a complaint against internet service providers but not network operators, meaning a connection can be terminated but not upgraded

· government’s definition of broadband – the focus continues to be on download speed with no reference to a minimum speed or network stability

· no service obligation – there is no Telecommunications Service Obligation (or any other mechanism) requiring network operators to make broadband available to all properties.

21. While providing telecommunications infrastructure is not core business, the council has an important role to play in advocating for rural communities. The focus of this advocacy is on building a case for further investment, from the telecommunications industry and government, in rural broadband infrastructure. Success depends on a detailed understanding of scope and scale of coverage issues.

22. Accordingly next steps for Auckland Council in the proposed work programme include:

· filling in the gaps in our understanding of rural broadband issues and demand

· building relationships with telecommunications network operators and understanding the barriers to investment in broadband infrastructure in rural areas

· facilitating relationships between rural communities and the telecommunications industry

· advocacy to central government around the need for further investment and / or regulation in support of better broadband for rural communities.

Consideration

Local Board views and implications

23. Since the announcement of the UFB and RBI programmes in 2011 all Local Boards have shown an interest in broadband, and what they can do to help realise the associated benefits.

24. All rural Local Boards have been updated about government’s investment programme and are positive about the prospect of additional government funding. They have noted that this is an opportunity to address some of the persistent quality of service issues experienced by many rural communities. Local Board input has helped identify communities that would benefit from an infrastructure upgrade.

25. The Digital Enablement Plan supports the case for investment in those communities. The activity in the Plan will be able to be implemented in rural communities as better broadband services become available.

26. Local Boards will have an important role to play as Council’s rural broadband work programme develops. This is likely to include:

· informing the understanding of rural broadband issues

· facilitating relationships between communities and network operators.

Māori impact statement

27. Access to broadband is critical for social and economic inclusion in rural and remote communities. For rural Papakainga better broadband will be fundamental. Without it residents will not have equitable access to education, healthcare, public services, and employment opportunities as these move online.

28. Better broadband also has the potential to transform rural Marae. As community hubs, connected Marae will be better equipped to engage children and young people. Connections will also enable exploration of the role of Marae in the 21^st century.

29. All of these opportunities depend on people using services that are made available. To that end the Digital Enablement Plan includes community enablement activity that will benefit rural Māori, and business growth activity that will benefit rural Māori businesses.

30. Central government timeframes for the Digital Enablement Plan (and for the Registration of Interest) have limited the council’s ability to complete robust community engagement, including with Māori. However, the council recognises the importance of engaging with Māori to ensure the broadband services that are available are appropriate.

31. As an interim measure staff have engaged with both Te Waka Angamua and The Independent Māori Statutory Board. Te Waka Angamua has provided advice about engaging Mana Whenua, and staff sought input from Mana Whenua as part of the Registrations of Interest process. Some input was received from Te Kawerau a Maki and Ngati Rehua. It is most likely that input was not provided by other groups because of the short timeframes.

32. Staff have sought and received comments on the Digital Enablement Plan from the Independent Māori Statutory Board (IMSB). It is expected that input from IMSB will also be important in shaping the rural broadband work programme.

33. As the rural broadband work programme develops there will be fewer time constraints and staff intend to build relationships with Mana Whenua and Mataawaka.

Implementation

34. On 24 March 2015 the Economic Development Committee passed resolution number ECO/2015/9 establishing the Rural Broadband Working Party (Councillors Anae, Cashmore, Cooper, and Webster).

35. This working party has responsibility for overseeing Council activity that supports better broadband in rural Auckland. Initial activity has included developing Auckland Council’s Registration of Interest – Support in response to additional government funding for UFB and RBI.

36. Current activity includes:

· developing a Digital Enablement Plan in support of the Registration of Interest

· developing alternative options for Council to support better broadband in rural Auckland.

Digital Enablement Plan

37. Auckland Council’s Digital Enablement Plan draws on existing activity across the council family. This means the Plan will be implemented through Council’s ‘business as usual’ activity. The groups responsible for implementing the Digital Enablement Plan include:

· Auckland Council Business Improvement Districts Team

· Auckland Council Communications and Engagement Department

· Auckland Council Libraries & Information Department

· Auckland Council Resource Consents, Major Infrastructure Projects Team

· Auckland Tourism, Events & Economic Development

· Auckland Transport Road Corridor Delivery Team

· Auckland Transport Travel Demand Team.

38. The main functions of the Plan are coordination and oversight. By leveraging existing activity no additional funding is required.

Attachments

No.	Title	Page
a View	Auckland Digital Enablement Plan	85

Signatories

Authors

Robert Lundberg - Digital Advisor

Anthony Acres - Digital Advisor

Authorisers

Jacques Victor - GM Auckland Plan Strategy and Research

Jim Quinn - Chief of Strategy

Matthew Walker - Acting Chief Financial Officer

Finance and Performance Committee

17 September 2015

Approval of and recommendation for adoption of the 2014/2015 Annual Report and Summary Annual Report for Auckland Council and Group

File No.: CP2015/14176

Purpose

1. Receipt of the draft 2014/2015 Annual Report and Summary Annual Report for Auckland Council and Group and recommendation of adoption to the Governing Body.

Executive Summary

2. The Governing Body, at the meeting to be held on 24 September 2015, will receive for adoption the 2014/2015 Annual Report and Summary Annual Report for Auckland Council and Group.

3. Preparing and publishing an Annual Report is a legislative requirement. The Full Annual Report (FAR) and Summary Annual Report (SAR) covering the year to 30 June 2015 has been prepared by Council Officers and audited by Audit New Zealand. The FAR and SAR compares and comments on the performance of Council and Group against budgets and operating targets set in the Annual Plan.

4. The Audit and Risk Committee will review the report at its meeting on 15 September 2015 and will provide its recommendation to this Committee.

Recommendation/s

That the Finance and Performance Committee:

a) note the confirmation by the Audit and Risk Committee that the audit process has been completed satisfactorily; and

b) agree to recommend adoption of the 2014/2015 Full Annual Report and Summary Annual Report to the Governing Body subject to editorial and technical changes to the document to be approved by the Chief Financial Officer and the Chairperson.

Comments

5. The Local Government Act 2002 requires Auckland Council to prepare and adopt a FAR and SAR each year. Auckland Council is also required under the New Zealand Stock Exchange listing rules to publish an annual report. The FAR, SAR and Financial Statements for the year to 30 June 2015 have been prepared by Council Officers and audited by Audit New Zealand on behalf of the Auditor-General.

6. The Audit and Risk Committee reviews the quality of the FAR and SAR, the processes used by management, and compliance with legislation and the financial reporting standards. They also review the audit risk process with the Office of the Auditor-General and Audit New Zealand. The Audit and Risk Committee will carry out their review on 15 September 2015.

7. The terms of reference for the Finance and Performance Committee includes recommending the Annual Report to the Governing Body. This report enables the committee to execute that responsibility.

8. The FAR and SAR is for the Auckland Council Group. The Group is the result of consolidating Auckland Council and all of its CCOs. For legislative compliance purposes the financial statements of Auckland Council entity are also included. All budgets and performance targets are those set out in the 2014/2015 Annual Plan.

9. During the year the CCO Governance and Monitoring Committee monitored the performance of the group through the reporting of quarterly consolidated financial results and quarterly reporting by Auckland Council and the substantive CCOs. The FAR and SAR follows the same pattern and completes the reporting for the financial year to 30 June 2015. At the 1 September 2015 meeting the CCO Governance and Monitoring Committee received reports for the substantive CCOs. The Finance and Performance Committee received a report on the performance of Council at the meeting held on 20 August 2015.

10. On 28 August 2015 Council released preliminary results to the New Zealand Stock Exchange as required by listing rules. The release was approved by the Chair and Deputy Chair of the Finance and Performance Committee under delegation. The preliminary announcement was provided to all Councillors at the time of release.

11. The FAR and SAR documents (which were not available at the time of compiling the agenda and will be circulated prior to the meeting) are currently undergoing a final review by Audit New Zealand and may be subject to some editorial and technical changes prior to final submission to the Governing Body and subsequent publication.

12. The format of the FAR and SAR package has been amended this year. The year’s FAR consists of three volumes; Overview, Themes and Groups of Activities – Volume 1, Local Boards – Volume 2 and Financial Statements – Volume 3.

Consideration

Local Board views and implications

13. The FAR includes a section featuring the achievements in each local board area. Local boards were engaged to collect and review this information and each Chair has prepared a statement which is included in the FAR.

Māori impact statement

14. The FAR and SAR covers all aspects of Council’s governance and public accountability. The reports include commentary on Council’s contribution to outcomes for Māori, the role of and contribution from the Independent Māori Statutory Board and Council’s Te Waka Angamua – Māori Strategy and Relations Department.

Implementation

15. There are no implementation issues.

Attachments

No.	Title	Page
a	Draft Summary Annual report (Under Separate Cover)
b	Draft Annual report volume 1 (Under Separate Cover)
c	Draft Annual report volume 2 (Under Separate Cover)
d	Draft Annual report volume 3 (Under Separate Cover)

Signatories

Author

Francis Caetano - Group Financial Controller

Authorisers

Kevin Ramsay - General Manager Finance

Sue Tindal - Chief Financial Officer

Finance and Performance Committee

17 September 2015

Rating small accommodation providers

File No.: CP2015/16141

Purpose

1. This report recommends that no change be made to the rating treatment of residential properties used for commercial accommodation purposes.

Executive Summary

2. Providers of commercial temporary accommodation such as hotels and motels are charged business rates. Residential parts of these properties, such as on-site manager’s accommodation, are charged residential rates, and an additional UAGC.

3. Many smaller accommodation providers operating from residential properties are charged residential rates. This includes small bed and breakfast operations and private holiday homes that are available for rent for only part of the year. The council charges business rates where there is a clearly identifiable separate part of the property that is used for commercial accommodation.

4. The Motel Association’s submission to the Long-term Plan noted the disparity in rating treatment between motels and residential providers of accommodation. They have requested the council consider rating smaller accommodation providers on the same basis as motels.

5. The council identifies ratepayers and establishes rating liability based on data that is verifiable and tangible such as:

· land titles, building consents, resource consents and licenses

· physical characteristics of the premises or business activity.

Decisions are therefore not perceived as arbitrary, can be applied consistently and are repeatable.

6. There is a lack of tangible markers to identify the extent to which small accommodation properties are put to commercial use. Residential consents apply to properties that accommodate fewer than six guests, and there is usually no physical change to the property when accommodation is offered. Unlike other multi-use properties, it is difficult or impossible to identify a separate part of the property being used for accommodation in order to apply a rating apportionment.

7. The council could apply a fixed apportionment or targeted rate to small accommodation properties. This would ensure smaller accommodation providers make an additional contribution to the council’s costs. However, this would not be connected to the impact they have on council services nor to their ability to pay. Some small and infrequent operators would pay as much as those operating on a more permanent basis and at a larger scale.

8. Staff recommend that there be no change to the rating of accommodation providers operating from residential premises. This will ensure that the rating system continues to determine liability based on verifiable and tangible factors. The council will continue its current process of investigating commercial activity operated from residential premises to ensure they are being rated appropriately.

9. The Motel Association also requested that motels be charged one Uniform Annual General Charge (UAGC) where there is on-site manager’s accommodation rated separately on a residential basis. Staff recommend that motels continue to be charged a UAGC for each separately used part of the property as this is consist with the treatment of all other multi-use properties.

Recommendation/s

That the Finance and Performance Committee:

a) not recommend any change to the rating treatment of residential properties used for commercial accommodation purposes.

Comments

Background

Motel Association submission to Long-term Plan 2015-2025

10. The Motel Association submission to the Long Term Plan raised the concern that many of their competitors (BnBs and holiday homes for rent) were paying residential rates and were not required to meet the same building standards or undertake regular compliance checks. They considered that the council should charge other providers of short term accommodation business rates. They also argued that motels should pay only one UAGC where there is on-site manager’s accommodation rated separately on a residential basis.

11. At its meeting on 7 May 2015 the Budget committee resolved to direct staff to report back on rating options for motels and other temporary accommodation.

Current rating treatment

12. The table below sets out the differences between small and large accommodation providers:

	Large accommodation providers	Small accommodation providers
Includes	Hotels, motels, lodges and BnBs able to accommodate 6 or more guests	BnBs able to accommodate no more than 5 guests, holiday homes where the whole property is rented
Compliance	Must comply with building code standards for communal accommodation, and undertake annual compliance checks	Built to residential standards; no annual compliance checks
Separately used parts	Separate identifiable part of the property used to accommodate guests	Often do not have an identifiable separate part for accommodation (at times properties will be fully residential use, at other times commercial use).
Rated as	Business (any separate residential part of the property e.g. manager’s or owner’s accommodation rated as residential and charged a separate UAGC)	Residential if no separate part (Can be part charged as business if identifiable separate part used for accommodation)

Discussion

13. Commercial accommodation providers benefit from council investment in regional facilities, major events, regional parks, visitor services. They can claim back GST and treat rates as an expense. It is reasonable that they are charged business rates. Council identifies large accommodation providers through the consenting process. Valuers can identify the part of the property used for commercial accommodation through inspections.

14. Small accommodation providers receive the same benefits as larger providers, to the extent that they are run on a commercial basis. Some properties may be rented on a very limited basis however. Operations with turnover less than $60,000 per annum may not be GST registered. Holiday homes that are vacant for much of the year could also be considered to receive less benefit from council services than occupied residential properties.

15. Small accommodation providers are primarily residential in nature. These properties are only required to meet residential building standards, so are not identified through the consenting process. While such properties can be found through accommodation websites, it can be difficult to establish the extent to which any property is used for commercial purposes. Unlike other types of commercial activity, there is a lack of physical characteristics to determine whether the property is being used for residential or commercial purposes.

16. Small accommodation properties generally do not have identifiable parts of the property used exclusively for accommodation. As such it is not possible to apply a rating apportionment for the commercial areas of the property. The only way to rate these properties would be by applying a fixed apportionment, or a targeted rate. This approach is problematic because the amount of rates charged would not relate to level of commercial activity being undertaken. A property rented out for a couple of weekends each year would pay the same another property with high levels of occupancy.

17. While there are equity reasons to levy business rates on small accommodation providers there are substantial administrative issues with levying a rate on this activity. The lack of verifiable and tangible identifiers to establish the extent to which properties are used for commercial purposes makes it difficult to ensure that such a rate is being applied in a consistent and equitable manner.

18. Auckland Council’s rating of small accommodation properties is consistent with other New Zealand councils. Only Queenstown Lakes District Council (QLDC) targets these properties. It does this by treating the operation of small bed and breakfasts and holiday lets as an activity under the district plan that requires registration. These properties are then defined as being 75 per cent residential and 25 per cent accommodation for rating purposes. Accommodation properties are charged more for general, recreation and events and roading rates than residential properties. They are also rated for tourism promotion.

19. The QLDC approach resolves the issue of identifying liability for rating. It also provides a mechanism to encourage compliance, as failure to register may attract fines. QLDC reporting notes difficulties in identifying qualifying properties, and that some properties are only rented on a very limited basis, such as when normally resident owners are themselves on holiday. Identification of properties is made easier by QLDC setting a very low threshold for registration. Any property let for more than two nights in a year required to register.

Amending the Unitary Plan to require registration of small accommodation providers

20. The Council could opt to follow the Queenstown Lakes District Council in its treatment of small accommodation properties. This would require the Council to provide for small bed and breakfast accommodation and homes available for short term rentals as permitted activities in the Unitary Plan, with a permitted activity control requirement that these businesses register with the council. Requiring small accommodation providers to register under the Unitary Plan would enable the council to define the level of activity that requires registration, and to apply penalties for non-compliance. The council could then charge these properties either business rates based on a fixed apportionment of each property’s value, or a fixed targeted rate.

21. The Unitary Plan is not due to become operative until the end of the next year at the earliest, but may not become operative for another three to four years. At this stage of the process, amendments to the Plan require the Council to make legal submissions supported by evidence to the Hearings Panel for the Plan. The Panel then decides whether to include the amendments. Alternatively the Council can choose to wait until the Plan is operative and then initiate a Plan change.

Charging motels one UAGC only

22. Staff do not consider that motels should be exempt the additional UAGC that applies where the manager’s accommodation is rated as residential. This treatment is consistent with approach to other types of multi-use properties which also receive multiple UAGC charges. It ensure that business owners who live in on-site accommodation are treated the same as those who have a residential property located elsewhere. The council will continue its current process of investigating commercial activity operated from residential premises to ensure they are being rated appropriately.

Consideration

Local Board views and implications

23. This report recommends no change in policy so there are no implications for Local Boards.

Māori impact statement

24. This report recommends no change in policy, so there are no implications for Māori.

Implementation

25. There are no implementation issues arising from this report.

Attachments

There are no attachments for this report.

Signatories

Authors

Beth Sullivan - Principal Advisor Policy