Agenda of Finance and Performance Committee

Finance and Performance Committee

25 February 2016

Disposals recommendation report

File No.: CP2016/01008

Purpose

1. This report seeks approval to sell five non-service council owned properties that Panuku Development Auckland (Panuku) considers suitable for sale.

Executive Summary

2. Panuku is required to identify properties from within council’s portfolio that may be suitable for potential sale to a combined value of $40 million by 30 June 2016. Panuku and Auckland Council’s Corporate Finance and Property team work collaboratively on a comprehensive review process to identify such properties. Capital receipts from the sale of surplus properties will contribute to all Auckland Plan outcomes by providing the council with an efficient use of capital and prioritisation of funds to achieve its activities and projects.

3. The first property presented in this report, comprises approximately half of 10 Ambrico Place, New Lynn, was which acquired by the Waitakere City Council for development purposes. The New Lynn Kindergarten is located on half of this site. The balance of the site is vacant and has been the subject of the rationalisation process. Consultation with council and its CCOs, iwi authorities and the Whau Local Board has now taken place. No alternative service uses have been identified and the feedback received has been supportive of the proposed divestment of this site. Should a resolution be obtained approving disposal of the vacant half of this site, Panuku will seek to achieve a medium density housing development on the property. Site specific detail, including information and feedback gathered through the rationalisation process is contained in Attachment A of this report.

4. The second property presented in this report, 474 Ellerslie-Panmure Highway, Mt Wellington is a 962m² residential property that was acquired for road widening purposes. Consultation with council and its CCOs, iwi authorities and the Maungakiekie-Tamaki Local Board has now taken place. No alternative service uses have been identified and the feedback received has been supportive of the proposed divestment of this site. Property specific detail, including information and feedback gathered through the rationalisation process is contained in Attachment B of this report.

5. The third property presented in this report, 6/20 Allenby Road, Panmure is a residential unit that was acquired to assist in the relocation of a landowner whose previous property was acquired for a public work. Consultation with council and its CCOs, iwi authorities and the Maungakiekie-Tamaki Local Board has now taken place. No alternative service uses have been identified for this property and the feedback received has been supportive of the proposed divestment of this site. Property specific detail, including information and feedback gathered through the rationalisation process is contained in Attachment C of this report.

6. The fourth property in this report, 72B Delta Avenue, New Lynn is a 361m² vacant site that an adjoining landowner is partially encroached on. This site was originally owned by the New Lynn Borough Council. Consultation with council and its CCOs, iwi authorities and the Whau Local Board has now taken place. No alternative service uses have been identified and the feedback received has been supportive of the proposed divestment of this site. Site specific detail, including information and feedback gathered through the rationalisation process is contained in Attachment D of this report.

7. The fifth property presented in this report, 211 Blockhouse Bay Road, Avondale is a vacant strip of land. Consultation with council and its CCOs, iwi authorities and the Whau Local Board has now taken place. No alternative service uses have been identified for this site and the feedback received has been supportive. Site specific detail, including information and feedback gathered through the rationalisation process is contained in Attachment E of this report.

Recommendation/s

That the Finance and Performance Committee:

a) approve, subject to the satisfactory conclusion of any required statutory processes, the disposal of the land at:

i) part of 10 Ambrico Place, New Lynn comprised of an estate in fee simple comprising approximately 1,500m² (subject to survey) more or less being half of Lot 1 Deposited Plan 346020 contained in certificate of title CFR188748;

ii) 474 Ellerslie-Panmure Highway, Mt Wellington comprised of an estate in fee simple comprising approximately 962m² more or less being part Lot 5 Deposited Plan 18650 contained in certificate of title NA476/99;

iii) 6/20 Allenby Road, Panmure comprised of an estate of stratum in freehold more or less being Unit F, AU6 and a half share in AU15, Deposited Plan 104442 contained in certificate of title NA57C/1489;

iv) 72B Delta Avenue, New Lynn comprised of an estate in fee simple comprising approximately 361m² more or less being section 1 Survey Office Plan 63156 contained in certificate of title NA71D/679;

v) 211 Blockhouse Bay Road, Avondale comprised of an estate in fee simple comprising approximately 219m² more or less being Lot 3 Deposited Plan 145431 contained in certificate of title NA86B/273;

b) agree that final terms and conditions be approved under the appropriate delegations.

Comments

8. Panuku and the Auckland Council’s Corporate Finance and Property team work collaboratively on a comprehensive review process to identify properties in the council portfolio that may be suitable to sell. Once identified as a potential sale candidate Panuku takes the property through a multi stage engagement process.

9. The first phase of the process involves engagement with all council departments and relevant CCOs. The engagement establishes whether a property is needed for a future funded project or whether it must be retained for a clear strategic purpose. This is determined by an expression of interest (EOI) process whereby officers can request that all or part of a property is retained. Alternatively officers may request that the property be encumbered or covenanted as part of the disposal process. If the EOI sets out a robust financial analysis and evidence based rationale to retain the properties, then the EOI is endorsed.

10. If however the reasoning is more subjective a thorough business case is required. An inter-disciplinary steering group comprised of senior managers meets to assess the business cases. This provides an opportunity for properties to be considered in a cohesive and integrated manner by relevant council departments and CCOs.

11. The Heritage Unit is invited prior to the EOI process to flag any sites of particular archaeological merit that need to be assessed further. Panuku also engages with the Closed Landfills and Contaminated Land Response team prior to the EOI process commencing to ensure any possible contamination issues that may be associated with a property are identified. The EOI process also provides the Maori and Strategy Relations team the opportunity to flag any issue that is of particular relevance to Maori in connection with the potential disposal of a site.

12. Once a property has been internally cleared of any service requirements, Panuku then consults with Local Boards, Ward Councillors, Mana Whenua and the Independent Maori Statutory Board.

13. All sale recommendations must be approved by the Panuku board before a final recommendation is made to the Finance and Performance Committee.

Consideration

Local Board views and implications

14. Local boards are informed of the commencement of the rationalisation process for specific properties. Following the close of the EOI period, relevant local boards are engaged with. Panuku attend workshops with the relevant local board and provide information about properties being rationalised in its local board area. A report is subsequently prepared for the local board business meeting so that its views can be formalised.

15. If a local board wishes to retain a site, its views are considered by Panuku and if necessary referred to relevant council departments for consideration. The local board may be asked to prepare a business case which sets out the service need that will be met by retaining the site, along with how the service use will be funded. Panuku and relevant council departments or CCOs work with local boards in preparing the business case. The business case is then considered by the cross council steering group. If the business case is accepted and funding is identified, the property is transferred back to the service portfolio. If the business case is not accepted, the business case is included in the report to the governing body for a political decision.

16. The views of the relevant local boards about the subject sites are contained in Attachments A to E of this report.

Māori impact statement

17. The importance of effective communication and engagement with Māori on the subject of land is understood. Panuku has a robust form of engagement with mana whenua groups across the region. Each relevant mana whenua group is contacted independently by email based on a contact list which is regularly updated. Each group is provided general property details, including a property map, and requested to give feedback within 15 working days. Contacts are sent reminder notices a week out from the due date, and alerted of the passing of the due date in the week following if no feedback has been submitted. Confirmation of any interest expressed is sent in writing and recorded for inclusion in the disposal recommendation report. A feedback spreadsheet is provided to facilitate responses. Any requests for extensions of a due date are handled on a case by case basis.

18. Panuku’s engagement directs mana whenua to respond with any issues of particular cultural significance the group would like to formally express in relation to the subject properties. We also request express notes regarding any preferred outcomes that the group would like us to consider as part of any disposal process.

19. From discussions with our Māori and Strategy Relations team we are developing an understanding of what could amount to a ‘matter of significant cultural relevance’ to Iwi. We are also developing a range of reasonable outcomes that could be employed when such a matter of cultural significance is raised in relation to a potential disposal property. Possible outcomes could include commemoration or physical acknowledgment in the form of plaques or other mutually agreed means of recognition. In the event of any issues of particular cultural significance being raised, Panuku will work with the relevant council departments to assess the merits of any such requests and keeps the interested parties informed along the way.

20. Mana whenua groups are also invited to express potential commercial interest in any sites and are put in contact with Panuku’s Development team for preliminary discussions if appropriate to the property. This facilitates the groups’ early assessment of the merits of a development opportunity to their Iwi. In the event a property is approved for sale all groups are alerted of the decision, and all groups are alerted once a property comes on the market.

21. Lastly a report is presented to the Independent Māori Statutory Board ahead of presenting any recommendations to sell to the Finance and Performance Committee detailing how Māori have been engaged throughout the process.

Implementation

22. As part of the overall review process each property is also legally assessed to see if there are any impediments to sell or if there is a prescribed legal way in which it must be sold. The last stage of the process is triggered once a resolution to sell is obtained. This involves a robust ‘add value’ assessment as part of the development of the final sales strategy. There is specific attention applied to the possible suitability of the site for housing purposes.

Attachments

No.	Title	Page
a View	Part of 10 Ambrico Place, New Lynn property information	15
b View	474 Ellerslie-Panmure Highway, Mt Wellington property information	19
c View	6/20 Allenby Road, Panmure property information	23
d View	72B Delta Avenue, New Lynn property information	27
e View	211 Blockhouse Bay Road, Avondale property information	31

Signatories

Author

Letitia McColl, Senior Advisor Portfolio Review, Strategy and Engagement, Panuku Development Auckland

Authorisers

David Rankin – Director, Strategy and Engagement, Panuku Development Auckland

Sue Tindal - Group Chief Financial Officer

Finance and Performance Committee

25 February 2016

Auckland Council Performance Report for the period 1 July 2015 to 31 December 2015

File No.: CP2015/27449

Purpose

1. This report provides an overview of the Auckland Council parent performance results for the period 1 July 2015 to 31 December 2015.

Executive Summary

2. The performance results presented in this report are for the Auckland Council parent, not the group. The group financial results will be presented to the Finance and Performance Committee at the March 2016 meeting.

The report includes an overview of the highlights and achievements in the key areas to achieve organisational objectives. There are a range of highlights and achievements over the quarter which includes the following:

· Phase 1 of the Nelson Street Cycleway, ‘Te Ara I Whiti’, was opened to the public on 3 December 2015. This is a project jointly delivered by the NZ Transport Agency, Auckland Council and Auckland Transport.

· The new inorganics service has been running since September in North Shore, Waitakere and Rodney. Feedback will be applied to the region wide launch, starting February 2016.

· Onehunga foreshore opened in November, creating enduring public access to the Manukau Harbour and providing new facilities and recreation areas.

Performance measure results

3. During the preparation of the Long-term Plan 2015-2025 (LTP) the levels of service and associated performance measures were reviewed. There were some significant changes, which included a refocussing and reduction in the number of measures. A review process is currently underway for performance measures, to ensure all underlying systems and processes are robust and will meet external audit requirements at year end.

4. The results presented here represent the measures with results available to date. In this quarter, we are reporting results on 57 per cent of the total number of LTP measures. The remaining performance measures are dependent on annual surveys (31 per cent) or data is collected once a year (12 per cent).

5. The half-year results show that 68 per cent of the targets were achieved, 10 per cent substantially achieved and 22 per cent did not achieve the target. The majority of measures that did not achieve the target are within the regulatory activity, where the expectation is that performance will improve as a result of an improvements programme currently being implemented.

6. The report includes information about the year-end outlook for performance measure results. This is indicative, based on current information and work plans over the rest of the financial year. The overall year-end outlook is a slightly improved result compared to results reported to date.

Financial performance results

7. The financial performance results provide an indication of how the organisation is performing against the budget and associated financial risks. The half year net operating financial results are largely on track compared to budget, with a favourable $6 million variance to budget. The budget for the year includes a challenging target for efficiency gains. Work is underway to progress a range of initiatives to achieve the target.

8. Capital delivery performance is largely on track with a $175 million investment completed to date. There are, however, some delays being experienced in the commercial property and community facilities project portfolios.

9. Treasury management performance is included in the report. Total gross debt of $6.8 billion aligns to LTP projections. The average funding costs of debt is tracking in line with the budgeted levels.

10. The Diversified Financial Assets (DFA) portfolio totaled $329 million at the end of the second quarter. The LTP performance measure relating to this portfolio is a long term rolling average return compared to the reference portfolio. The return since the formation of the Auckland Council in November 2010 is 9.9 per cent compared to a 10.1 per cent return on the reference portfolio for the same period.

Recommendation/s

That the Finance and Performance Committee:

a) receive the Auckland Council Performance report for the period 1 July 2015 to 31 December 2015.

Comments

11. This report provides an overview of the Auckland Council parent performance results for the period 1 July 2015 to 31 December 2015. The group financial results will be presented to the Finance and Performance Committee in March 2016.

Highlights and achievements

12. An overview of key highlights and achievements for the second quarter are summarised here. These are sorted by the service delivery themes as expressed in the LTP.

Auckland development

13. Nine new Special Housing Areas (SHA's) within Tranche 8 have been approved by council's Governing Body. This brings the total number of SHA's to 106, with a potential yield of 48,019 sites and dwellings.

14. North West Mall at Westgate opened successfully 1 October 2015.

15. Future Urban Land Supply Strategy approved by the Auckland Development Committee.

16. Adoption of Auckland Growing Greener - te pai me te whai rawa o Tāmaki, our commitment to environmental action and green growth.

17. The 2015 Auckland Plan Annual Implementation Update was made public in December 2015.

18. Alcohol ban areas review completed by all local boards. Full details on alcohol bans are available to the public on the council website.

19. Delivered two community recruitment events for the Māori and Pasifika Trades Training, to assist learners aged 16-40 to gain practical qualifications leading to employment.

20. Arts and Culture Strategic Action Plan (Toi Whītiki) published and adopted to recognise the important role culture and the creative sector plays in bringing the city together now and in the future.

21. Phase 1 of the Nelson Street Cycleway, ‘Te Ara I Whiti’, was opened to the public on 3 December 2015. The project is a key part of the Government’s Urban Cycleways Programme and has been jointly delivered by the NZ Transport Agency, Auckland Council and Auckland Transport. Māori artist Katz Maihi and iwi were involved throughout the urban design stages to include Maori designs and ensure the path has a distinctly New Zealand identity. Construction of phase 2 of the cycleway, which extends from Victoria Street West to Quay Street, is planned for early/mid 2016.

Environmental management and regulation

22. Bylaws review completed, with 150 plus legacy bylaws being replaced with around 30 Auckland-wide consistent bylaws.

23. Mentoring of over 1,250 food operators has taken place in 2015, to assist businesses to comply with the new Food Act requirements. 250 food operators received these sessions in either Mandarin, Cantonese or Korean languages.

24. Animal Management held a community event, “Walkies”, where city workers were encouraged to interact with shelter dogs available for adoption during their lunch break. The primary objective of the event was to raise awareness of shelter dogs and Auckland Council’s role in dog adoptions. We received a great amount of positive comments.

25. New recycling collection will commence in Rodney, Waitakere and North Shore from 1 July 2016, which will provide a consistent region-wide commingled (paper, cardboard and recyclables in one bin) collection service.

26. The new inorganics service has been running since September in North Shore, Waitakere and Rodney. To date all targets are in line the business expectations, with 40 per cent of material collected being diverted from landfill. Feedback from this phase will be applied to the region wide launch, which starts from February 2016.

27. A regional user pays refuse bag was launched on 1 November 2015 in Waitakere, North Shore, Papakura, and Franklin. The orange bag will create a uniform, value for money price for residents and aims to increase the council’s market share.

28. A preferred site has been identified for a Community Recycling Centre (CRC) for the central area on Great North Road. It is anticipated the new facility will open in 2017.

29. Released ‘The Health of Auckland’s Natural Environment In 2015’. In-depth information is provided on Auckland’s natural environment, with the latest monitoring results outlined.

30. The national earthquake drill Shake-out (Drop, Cover and Hold) was held in October 2015. 440,082 Aucklanders registered to participate.

31. The contract for the Artillery Drive Stormwater Tunnel has been awarded and construction is due to start in February 2016. The project will decrease the extent of flooding upstream of the McLennan Park ponds and enable residential development of the Takanini Greenfield Area.

32. Demand for Building Control Services continues to grow strongly with Q2 lodged consent volumes up 15 per cent compared to Q2 FY15 (this equates to an average increase of approximately 300 consents per month). Inspection volumes are slightly lower that Q2 FY15 (5 per cent) indicating potential capacity constraints with the building industry (this is undergoing further analysis to accurately determine) and demand for property information continues to grow strongly up 15.7 per cent vs Q2 FY15. A number of key initiatives are in progress to meet the surge in demand, and include the new consenting process design, online consenting (Phase 3 went live in late January 2016), mobile technology has now been fully deployed, inspection allocation tool implementation plan and the completion of the technical staff remuneration review.

33. Resource Consents – Over the last two financial years we have registered a total increase in resource consents of approximately 20 per cent (17 per cent in 2013/2014 and 3 per cent in 2014/2015). The number of resource consents received during the first six months of 2015/2016 has increased by 9.1 per cent compared to the same period last year. This indicates that the market is continuing to grow and is likely to result in an increase in building consents.

Parks, community and lifestyle

34. Ambury Farm Day was held in October 2015 with 32,000 people attending.

35. Approximately 10,000 people attended the Parnell Festival of Roses in November 2015.

36. The Heritage festival ran from 29 September 2015 to 11 October 2015 with a diverse range of events delivered.

37. More than 70 events were held as part of Urbanesia, a two-week festival celebrating contemporary Pasifika arts and culture in Auckland.

38. Sculpture in the Gardens at the Botanic Gardens has been well attended during December 2015 with around 92,000 visitors to the site. The event runs until March 2016.

39. Libraries ran a programme of activities to mark four Pacific language weeks - Tuvalu, Fiji, Niue and Tokelau.

40. Tōia Library and Pool and Leisure centre in Ōtāhuhu is proving popular with the local community. The numbers attending regular programmes has increased by 63 per cent.

41. Auckland Libraries: Dare to Explore / Kia Māia te Whai summer programme, which encourages children to take an adventurous approach to reading, ran in December 2015-January 2016. There was an increase of 23 percent in the number of registrations compared to last year.

42. Te Oro (Glen Innes Music and Arts Centre) was recognised at the National Best Design Awards 2015.

Studio One Toi Tū.

43. Waiheke Island was voted Lonely Planet – World’s fifth best region and Conde Nast – Fourth best island in the world.

44. The renovated playground at Myers Park was awarded top honours at the Resene Total Colour Awards.

45. Opening of Waterview Reserve. The playground is the heart of recreational activity and its re-build is one of the colourful and fun parts of the Waterview Connection motorway project.

46. Onehunga foreshore opened in November 2015, creating enduring public access to the Manukau Harbour and providing a number of new facilities and recreation areas within walking distance of the Onehunga town.

Governance and support

47. The Our Auckland website went live at the beginning of October 2015. This is a new online hub for council news, events, and social media.

48. Standard and Poor's affirmed Auckland Council credit ratings at AA/A-1+. Outlook remains stable. Moody's affirmed Auckland Council's Aa2 stable credit rating.

49. KangaNews (Australasian market information website for global borrowers and investors) awarded Auckland Council as the New Zealand Issuer of the Year.

50. December 2015 saw the one-year anniversary of the Bledisloe Lane Service Centre. Customer interactions have increased by 25 per cent since the service centre moved.

Performance measures

51. For each of the activities delivered by the council, the LTP includes level of service statements and associated performance measures. This section provides interim results showing how we are tracking on the performance measures for the second quarter ended 31 December 2015. The year-end performance results will be reported in the Annual Report and will be audited. The quarterly results presented here are not audited.

52. There is a significant change to the performance measures that are included in the new LTP. The Business units are working to ensure robust systems and processes are in place to ensure quality results are reported against performance measures. The number of measures has reduced by over 50 per cent compared to the previous year.

53. The results presented here represent the measures with results available to date. In this quarter, we are reporting on 57 per cent of the total number of LTP measures. The remaining results are dependent on annual surveys (31 per cent) or data is collected once a year (12 per cent).

54. For the first time, this report includes information about the year-end outlook for performance measures. This is indicative, based on current information and work plans over the rest of the financial year. The overall year-end outlook is a slightly improved result compared to results reported to date.

55.

Results show that 40 measures (68 per cent) achieved the targets set, six measures (10 per cent) achieved a result close to target (termed ‘substantially achieved’), and 13 measures (22 per cent) did not achieved their targets.

The majority of measures that did not achieve the targets are within the regulatory activity, where the expectation is that performance will improve in future months, as a result of an improvements programme currently being implemented.The next graphs provide a summary of key performance measures for the quarter. Further detailed information can be found in appendix 1.

56. The next graphs provide a summary of key performance measures for the quarter. Further detailed information can be found in appendix 1.

57. The symbols below are used to summarise the results. These align with the symbols used in the Annual Report.

Achieved	Substantially achieved	Not achieved but progress made	Not achieved

58. Percentage of registered food premises graded annually

59. Percentage of high risk alcohol premises inspected annually

60. Percentage of urgent animal management complaints such as dog attacks responded to within one hour

61. Percentage of noise complaints responded to within 30 minutes for urban areas or 60 minutes for rural areas

62. Number of dwellings and sites consented towards Auckland housing targets

63. Percentage of building consent applications processed within 20 days

64. Percentage of non-notified resource consent applications processed within 20 working days

65. Percentage of notified resource consent applications processed within 70 working days

66. Domestic kerbside refuse (kilograms per capita per annum)

67. The median response time (in hours) to attend a flooding event, from the time that Auckland Council receives notification to the time that service personnel reach the site

68. Facility utilisation – utilisation at peak times for council managed community centres and venues for hire

69. Facility utilisation – utilisation at off-peak times for council managed community centres and venues for hire

70. Percentage of community facilities bookings used for health and wellbeing related activity

71. Number of visits to library facilities per capita

72. Number of library items borrowed (millions)

73. Rolling 10-year return for diversified financial assets portfolio, compared to reference portfolio

Financial performance results

74. This next section provides an overview of the financial performance results for the council for the six months ended 31 December 2015.

$millions	YTD Actual	YTD Revised Budget	YTD Variance	FY Revised Budget	FY Annual Plan	YE Out- look
Operating revenue	236	236	-	519	513
Operating expenditure	1,028	1,038	10	2,047	2,027
Net operating expenditure	792	802	10	1,528	1,514
Rates revenue	1,575	1,579	(4)	1,584	1,584
Net operating surplus/(deficit)	783	777	6	56	70
Net non-operating surplus/(deficit)	(127)	(63)	(64)	(275)	(275)
Net surplus/(deficit)	656	714	(58)	(219)	(205)

75. Year-to-date (YTD) results: The overall result shows a surplus of $656 million, which is $58 million unfavourable compared to the YTD budget. The net operating result included in this of $783 million is $6 million favourable compared to budget.

76. The full rates generation income is recognised at the beginning of the year due to the revenue recognition requirements of the current accounting standards (International Public Sector Accounting Standards). This early revenue recognition of rates revenue results in a large surplus at the beginning of the year which reduces as the year progresses.

77. Operating revenue: The overall result to date is in line with budget. Additional dividend income revenue, higher regulatory services revenue and property rental revenue are offset by losses incurred on the Diversified Financial Assets (DFA) portfolio of $19 million (due to a downturn in the market).

78. Rates revenue: is slightly below budget mainly due to lower penalty income than budgeted.

79. Operating expenditure: is $10 million (0.1 per cent) favourable to budget. This is mainly due to expenditure expected to be incurred later than originally planned across a number of areas.

80. Non-operating surplus/deficit: is $64 million unfavourable compared to budget which is mainly due to accounting (non-cash) adjustments related to fair value of treasury derivatives portfolio of $63 million together with lower development contributions income than budgeted of $13 million offset by higher vested assets revenue than budgeted.

81. Net operating performance results by theme

The next table provides a split of the net operating result by each of the LTP themes.

The net operating results presented by theme shows YTD underspends across all the themes except for ‘Governance and support’. The underspends are largely due to expenditure expected to be incurred later than planned. For ‘Governance and support’ the unfavourable variance of $4 million is largely due to organisational efficiency targets budgeted for in the LTP which have not been achieved to date. The LTP includes a challenging target for efficiency gains for the council for the year. Work is underway to progress a range of initiatives to achieve this target, such as strategic procurement, fleet management, shared services, workforce management etc.

82. Net operating result by theme

$million	YTD Actual	YTD Revised Budget	YTD variance		FY Revised Budget	FY Annual Plan
Auckland development	71	76	5	6%	154	142
Economic and cultural development	43	46	3	6%	92	91
Environmental management and regulation	142	146	4	2%	301	288
Parks, community and lifestyle	232	233	1	0%	472	469
Transport	194	195	1	0%	389	389
Governance and support	110	106	(4)	(3%)	120	135
Net operating expenditure	792	802	10	1%	1,528	1,514
Rates revenue	1,575	1,579	(4)	0%	1,584	1,584
Net operating surplus	783	777	6	0%	56	70

83. Capital delivery performance

In the first half of the year there was $175 million of capital investment completed which is 30 per cent of the full programme approved for the year of $578 million.

84.

85. Capital delivery performance by theme

$million	YTD Actual	YTD Revised Budget	YTD variance	FY Revised Budget	FY Annual Plan	% Complete
Auckland development	33	72	39	159	101	21%
Environmental management and regulation	39	34	(5)	102	112	34%
Parks, community and lifestyle	65	80	15	221	256	29%
Governance and support	38	42	4	96	85	39%
Capital expenditure	175	228	53	578	554	30%

Capital delivery performance to date is largely on track except for some areas where there have been delays and projects are expected to be delivered later than originally planned. The commercial property portfolio (part of the Auckland development theme) is underspent due to delays mainly related to timing of strategic development projects. The community facilities portfolio (part of the Parks, community and lifestyle theme) is underspent due to delays across a number of projects which include Uxbridge Arts Centre, Albany community hub, Hobsonville community house and land acquisitions.

86. Balance sheet performance

$million	Actual as at December 2015	Projected per LTP June 2016	Actual audited June 2015
Assets
Property, plant and equipment	12,167	12,077	12,064
Other assets and investments	24,886	23,992	24,161
Less Liabilities
Borrowings	6,755	7,175	6,557
Other liabilities	1,349	1,175	1,396
Net assets (ratepayers’ equity)	28,929	27,719	28,272

87. Property, plant and equipment - Asset revaluations at the year ended 30 June 2015 resulted in asset values higher than projected in the LTP.

88. Other assets and investments – the increase in this category is mainly due to an increase in Accounts Receivable category for rates, being the rates generation billed for the full year upfront and expected to reduce across the year as each rates instalment becomes due.

89. Total gross debt at the December 2015 was $6.8 billion and forecast debt is expected to be in line with the LTP.

90.

Treasury management

91. Treasury management information can be found in Appendix 3 - Treasury report. This report includes treasury compliance information together with information about the performance of treasury activities against benchmarks.

92. The focus of the treasury team continues to be on minimising funding costs, managing liquidity and interest rate risk, diversifying the investor base and lengthening the term of debt. The council was fully compliant with all treasury management policy limits at 31 December 2015.

93. Funding costs - the year to date average cost of funds was 5.15 per cent which aligns with the budgeted level of 5.19 per cent.

94. The DFA portfolio totaled $329 million at the end of the second quarter. The LTP performance measure relating to this portfolio is a long term rolling average return compared to the reference portfolio. The return since the formation of the Auckland Council in November 2010 is 9.9 per cent compared to a 10.1 per cent return on the reference portfolio for the same ended 31 October 2015.

95. Debtor’s management information can be found in Appendix 7. Rates debt collection at 31 December is largely on track and progressing well when compared to the prior years.

96. Further information available in the appendices to this report include:

Appendix 1 – Performance measure information

Appendix 2 – Auckland economic update

Appendix 3 – Treasury report

Appendix 4 – Professional services expenditure information

Appendix 5 – LGOIMA information

Appendix 6 – Customer service information

Appendix 7 – Debtors information.

Consideration

Local Board views and implications

97. Local Boards receive their own reporting for their respective areas. The second quarter local board performance reports have been enhanced to improve reporting on the LTP performance measures. The aim here is to provide an early indication to the local boards as to how performance is tracking against targeted levels.

Māori impact statement

98. The report details some high level activities delivered in the second quarter 2015/2016, of which there are several initiatives with positive impacts on, or for, Maori. While this is not a complete list, key activities with positive impacts on and for Maori include:

99. Delivered two community recruitment events for the Māori and Pasifika Trades Training, to assist learners aged 16-40 to gain practical qualifications leading to employment.

100. Phase 1 of the Nelson Street Cycleway, ‘Te Ara I Whiti’, was opened to the public on 3 December 2015. The project is a key part of the Government’s Urban Cycleways Programme and has been jointly delivered by the NZ Transport Agency, Auckland Council and Auckland Transport. Māori artist Katz Maihi and iwi were involved throughout the urban design stages to include Maori designs and ensure the path has a distinctly New Zealand identity. Construction of phase 2 of the cycleway, which extends from Victoria Street West to Quay Street, is planned for early/mid 2016.

Implementation

101. There are no financial or resourcing implications arising from receipt of this report.

102. Quarterly reporting on performance is not a legal requirement and there are no legislative implications from the receipt of this request.

Attachments

No.	Title	Page
a View	Performance report appendices December 2015	49

Signatories

Author

Jenny Livschitz - Manager Corporate Performance and Reporting

Authorisers

Kevin Ramsay - General Manager Corporate Finance and Property

Sue Tindal - Group Chief Financial Officer

Finance and Performance Committee

25 February 2016

Te Toa Takitini Māori responsiveness portfolio report-quarter two

File No.: CP2015/27870

Purpose

1. To report quarter two results for the 2015/16 Māori transformational shift activity and co-governance and co-management activity budget.

2. To report quarter two results for the Treaty of Waitangi Audit response work programme.

Executive Summary

Māori Transformational Shift Activity

3. In the 2015/2016 financial year, 44 programmes, projects, or activities with a combined budget of $9,131,000 have been identified as Māori transformational shift activity and will contribute to ‘significantly lift Māori social and economic well-being’. Quarter two financial data reported a minor increase to this budget. The revised figure is $9,142,000

4. Year to date (YTD) expenditure for the 2015/2016 second quarter Māori transformational shift activity was $2,468,000 against an YTD budget of $2,904,000. This indicates a variance of $458,000 or 16 per cent. A majority of the variance can be attributed to grant based funding yet to be paid and projects yet to commence. The decreased variance for quarter two against last quarters reported variance of $860,000 is mostly the result of budget re-forecasting within the Whai Tiaki Programme (includes cultural investment fund – marae development, papakainga). This spend is forecast for quarter four subsequent to grant application processes occurring in quarter three. Staff will continue to monitor the remaining quarters and meet with managers to ensure priorities stay on track.

Co-governance Activity

5. Eight activities totalling $6,036,000 have been identified as co-governance or co-management activities for 2015/2016. These activities are delivering on the priorities agreed in council’s 2015-2025 Long-term Plan.

6. YTD expenditure for the second quarter co-governance and co-management activity was $1,442,000 against an YTD budget of $2,862,000. This indicates a variance of $1,420,000. The majority of this relates to delays in the development of the Integrated Management Plan for the Tūpuna Maunga o Tāmaki Makaurau Authority ($1,195,000) and some to delays in capital projects. Hui will be convened during quarter three with relevant managers to discuss whether budget reforecasting or reprioritisation needs to occur.

Treaty Audit Programme

7. The Treaty of Waitangi Audit response work programme sits within the Whai Tika – Effectiveness for Māori programme of Te Toa Takitini.

8. Te Tiriti o Waitangi Audit Report 2015 includes a “Summary of Recommended Actions”, in which 25 Action Groups are linked to specific recommendations. Each action group has a set of closure criteria and when these are met the Waharoa Group will jointly agree to close the action (see table four).

9. The Waharoa group, is comprised of representatives from Internal Audit, Te Waka Angamua and the IMSB Secretariat; its role is to monitor progress and apply criteria for closure of action groups and each related Treaty Audit recommendation.

10. There has been continued progress with prioritised quarter two actions. Good progress has been made with the Treaty Audit action group of Māori Responsiveness Planning. Four pilot Māori Responsiveness Plans have been completed, seven are in varying stages of development and four were begun in January. The Hearings Policy action group is complete.

2016/17 Annual Plan

11. The 2016/2017 Annual Plan budget is year two of the 10-year funding envelope set by the Long-term Plan (LTP)

On 22 October 2015, the Finance and Performance Committee:

d) agreed that council, as part of the Annual Plan process, identify the resources reallocated to the new projects identified in Te Toa Takitini portfolio for 2016/2017 (that are not currently included in the three year statement of Māori transformational shift activities expenditure) and report on the list of projects and resources to the Finance and Performance Committee on 12 April 2016.

e) noted that a detailed report on projects and resources for Te Toa Takitini portfolio for 2016/2017 will be presented to the Independent Māori Statutory Board and Governing Body in May 2016.

12. Te Toa Takitini workshops have generated ideas for potential new Māori transformational shift initiatives. Programme conveners will test these ideas in discussion with the Executive Leadership Group prior to their potential inclusion into the Annual Plan process.

13. The Executive Leadership Group will workshop on 18 March 2016 to consider the proposed new Māori transformational shift initiatives for potential inclusion in the Annual Plan, prior to the reporting deadline above

Reporting and Monitoring

On 19 November 2015, the Finance and Performance Committee agreed:

c) that future reporting on Māori transformational shift activities (including future consolidated Te Toa Takitini reporting) include, as far as can be accurately captured, the number of persons who have been affected by or participated in activities, and the benefits of the activity based on the user feedback.

14. Work stream leads of Te Toa Takitini will work with activity owners and the Independent Māori Statutory Board secretariat to discuss and agree on initiatives where there is a means to fulfil the resolution for the remainder of the 2015/2016 financial year, as well as identify how this reporting can be integrated into the 2016/2017 financial year.

15. As part of improving the financial reporting and monitoring of Te Toa Takitini, staff will be providing budget forecasts for future quarterly expenditure. The quarter three report will include a budget forecasts for quarter four.

Recommendation/s

That the Finance and Performance Committee:

a) receive the quarter two Te Toa Takitini Māori responsiveness portfolio report.

Comments

2015/16 Māori Transformational Shift Activity overview

16. Forty-four projects or activities with a combined budget of $9,142,000 have been identified as Māori transformational shift activity and will contribute to ‘significantly lift Māori social and economic well-being’. In addition, eight activities totaling $6,036,000 have been identified as co-governance or co-management activities for 2015/2016. These activities are delivering on the priorities agreed in council’s 2015-2025 Long-term Plan.

Māori Transformational Shift Activity	Opex $000	Capex $000	Budget 2015/16 $000
Whai Rawa – Economic Development	1,125	0	1,125
Whai Painga - Māori Social Well-Being	1,330	0	1,330
Whai Tiaki - Māori Cultural Well-Being	5,634	359	5,993
Whai Tika- Effectiveness for Māori	644	0	644
Whai Tahinga –Treaty Settlement	50	0	50
GRAND TOTAL	8,783	359	9,142

Table One

17. Year to date (YTD) expenditure for the 2015/2016 second quarter Māori transformational shift activity was $2,468,000 against an YTD budget of $2,904,000. This indicates a variance of $458,000 or 16 per cent. A majority of the variance can be attributed to grant funding yet to be paid and the commencement of some projects. Last quarter reported a variance of $860,000. The decreased variance for quarter two is the result of budget re-forecasting and the provision of grants for public events within the Whai Tiaki and Whai Rawa programmes. Staff will continue to monitor the remaining quarters and meet with managers to ensure priorities stay on track.

Māori Transformational Shift Activity	Dec YTD 2015/2016 $000
Activities	Annual Budget FY16 $ 000	YTD Q2 Actuals $000	Variance
Whai Rawa – Economic Development	1,125	328	262
Whai Painga - Māori Social Well-being	1,330	447	129
Whai Tiaki - Māori Cultural Well-being	5,632 (Opex)	1,314	166
Whai Tiaki - Māori Cultural Well-being	359 (Capex)	243	(126)
Whai Tika- Effectiveness for Māori	644	133	27
Whai Tahinga –Treaty Settlement	50	3	0
OPEX TOTAL	8,783	2,225	584
CAPEX TOTAL	359	243	(126)
GRAND TOTAL	9,142	2,468	458

Table Two

2015/16 Co-governance and co-management overview

18. Auckland Council also partners with various mana whenua entities in delivering co-governance and co-management activities. These activities also deliver on the priorities agreed in Council’s 2015-2025 Long-term Plan and are reported separately from Māori transformational shift activity. Eight activities totaling $6,036,000 have been identified as co-governance or co-management activities for 2015/2016, as shown in table 3.

19. YTD expenditure for the second quarter co-governance and co-management activity was $1,442,000 against an YTD budget of $2,862,000. This indicates a variance of $1,420,000. The majority of this relates to delays in the development of the Integrated Management Plan for the Tūpuna Maunga o Tāmaki Makaurau Authority ($1,195,000) and some to delays in capital projects. Hui will be convened during quarter three with relevant managers to discuss whether budget reforecasting or reprioritisation needs to occur.

Co- governance and co management activity

Opex

Capex

Budget 2015/16

$000

Co-governance-co-management

3,371

2,665

6,036

GRAND TOTAL

6,036

Table three

Summary of Whai Rawa - Māori Economic Well-being activity

20. The Whai Rawa programme consists of projects and initiatives that contribute to Māori Economic well-being. Seven initiatives have been identified. The narrative below provides highlights from quarter two activity. Further detail of activity and expenditure is located in appendix A.

Quarter two highlights

· Māori Signature Event -Te Herenga Waka festival planning

· Waka Development programme

· Māori Economic Forum activities.

Key priorities for the third quarter 2015/2016

· Delivery of the Tamaki Herenga Waka Festival on Auckland Anniversary weekend 2016

· Initiate Māori business ecosystem research in partnership with the Independent Māori Statutory Board (IMSB)

· Ongoing support for Māori tourism initiatives and operators over the high season.

· Māori Economic Forum – ATEED has confirmed that the next Māori economic forum will be in May 2016.

Summary of Whai Painga - Māori Social Well-being activity

21. The Whai Painga programme consists ofprojects and initiatives that contribute to Māori social well-being. Six initiatives have been identified. The narrative below provides highlights from quarter two activity. Further detail of activity and expenditure is located in appendix A.

Quarter two highlights

· Māori sport and recreation plan (draft )Te Whai Oranga o Tāmaki Makaurau, was presented to both the Roopu Manaaki of Active Auckland and One Voice governance group.

· Iron Māori

· Māori housing policy review.

Key Priorities for the third quarter 2015/2016

· Progress Early Years Project

· Progressing projects associated with Whare for Life

· Progressing Māori housing policy review to meet programme milestone

· To deliver social wellbeing outcomes for Māori, to assess opportunities for achieving multiple outcomes using the joined up framework provided by Te Toa Takitini

· Progressing Māori Responsiveness Plans across the Operations Division to better target existing activities for Māori outcomes

· Deliver Iron Māori.

Summary of Whai Tiaki- Māori Cultural Well-being activity

22. The Whai Tiaki programme consists of projects and initiatives that contribute to Māori cultural well-being. Thirty initiatives have been identified. The narrative below provides highlights from quarter two activity. Further detail of activity and expenditure is located in Appendix A.

Quarter two highlights

· Waitangi Day events – Hayman Park, Takaparawhau, Hoani Waititi Marae

· Marae development- maintenance

· Para Kore ki Tāmaki-Zero Waste Marae

· Māori Public Art- project with Ngāti Tamaoho.

Key Priorities for the third quarter 2015/2016

· Incorporate cultural wellbeing indicators work with outcomes assessment and gap analysis.

· New proposals / ideas – concepts and business case development

· Establishing a programme of work within the kaitiaki theme, suitable for collaborative partnerships (governance/ design and management / delivery).

· Establishing a Whai Tiaki Community of Practice to enable sharing of knowledge, resources, addressing performance issues. This work is closely linked with the development on the Māori Engagement Hub Proposal and the Māori information Portal in the Whai Tika Portfolio.

· Marae development.

· Capacity contracts.

Summary of Whai Tika- Effectiveness for Māori

23. The Whai Tika programme is made up of two distinct workstream’s the Treaty of Waitangi Audit response work programme and the Effectiveness for Māori programme. The narrative below provides highlights from quarter two activity. Further detail of activity and expenditure is located in Appendix A.

24. Quarter two highlights –Effectiveness for Māori

25. Whai Tika: Effectiveness for Māori workshops identified priority initiatives that would improve whole of council’s Māori responsiveness, these initiatives were seen as transformational. For the next 2-3 years three initiatives will be given particular focus. These initiatives are at their beginning stages of development. Detailed project plans, business cases and reporting lines will be further developed in the next quarter.

· Māori engagement hub.

· Increasing Diversity and Leadership programme.

· Learning application.

Treaty Audit Response Work Programme

26. The Waharoa Group is functioning well it is comprised of representatives from Internal Audit, Te Waka Angamua and the IMSB Secretariat, its role is to monitor progress and apply criteria for closure of action groups and each related Treaty Audit recommendation.

27. Te Tiriti o Waitangi Audit Report 2015 includes a “Summary of Recommended Actions”, in which 25 Action Groups are contained and these are linked to the specific recommendations of the audit report. Each action now has a set of closure criteria and when these are met the Waharoa Group will jointly agree to close the action (and the linked Treaty Audit Recommendation). When all actions within a group are complete, the Action Group can be closed. Table four outlines progress to date on the Te Tiriti O Waitangi Audit Report 2015

Action Groups

Open

Closed

Good progress made against action group Māori Responsiveness Planning. Two individual actions within the action group have been completed, five are near completion.

The Hearings Policy action group is complete

Table 4

28. For more detailed narrative of progress with quarter two Treaty Audit action priorities see Appendix A.

Key priorities for the third quarter 2015/2016

29. The Treaty Audit response work programme 2015/16 prioritised the following actions be completed by the end of the third quarter 2015/16:

· Taonga Management Policy

· Mana whenua participation in resource consents – Natural Resources Policy

Summary of Whai Tahinga -Treaty of Waitangi Settlements activity

30. The Whai Tahinga programme Māori transformational shift activity supports Treaty settlement activity and is a multi-faceted programme of work. Six initiatives have been identified. The narrative below provides highlights from quarter two activity. Further detail of activity and expenditure is located in Appendix A.

Quarter two highlights

· Constructive engagement with Crown and mana whenua groups in Treaty settlement negotiations where Auckland Council interests are involved. Crown re-commenced negotiations with Marutūāhu Iwi, Ngāti Rehua, and Ngāti Tamaoho

· Draft Tūpuna Maunga o Tāmaki Makaurau Integrated Management Plan released for informal public feedback

· Memorandum of understanding signed with Northland Regional Council, Kaipara District Council and Whangarei District Council establishing Kaipara Moana Negotiations Working Party

· Manukau Harbour Forum hui with mana whenua, building relationships and common understanding of environmental and other issues affecting Manukau Harbour

· Ongoing work of co-governance entities such as Parakai Recreation Reserves Board, Ōrākei Reserves Board and others.

Key priorities for the third quarter 2015/2016

· Public notification for formal consultation on Tūpuna Maunga o Tāmaki Makaurau Integrated Management Plan in February 2016

· Kaipara Moana Negotiations Working Party – coordinate councils’ position in regard to Kaipara negotiations to engage strategically with Ngāti Whātua and Crown as appropriate

· Facilitate further engagement between Manukau Harbour Forum and mana whenua groups

· Ensure implementation responsibilities are met under Te Kawerau ā Maki Claims Settlement Act 2015

· Ongoing work across council family on development and implementation of co-governance and partnering relationships with mana whenua groups, including in natural resources space.

Summary of co-governance and co-management activity

31. YTD expenditure for the second quarter co-governance and co-management activity was $1,442,000 against an YTD budget of $2,862,000. This indicates a variance of $1,420,000. The majority of this relates to delays in the development of the Integrated Management Plan for the Tūpuna Maunga o Tāmaki Makaurau Authority and some to delays in capital projects.

· Ngāti Whātua Ōrākei Reserves Board (opex). Eighty Seven percent of the annual budget is dedicated to the maintenance of the Whenua Rangatira and Pourewa (via Ngāti Whātua Ōrākei Whai Maia Ltd). The maintenance contract expired in October 2015. The contract for service has been going well. A new five year contract is currently being negotiated with Ngāti Whātua. This is due to be signed in January/February 2016

· The Ngāti Whātua Ōrākei summer kaitiaki/rangers commenced their summer patrol of Okahu Bay and Reserve

· The draft Pourewa Creek Recreation Reserve Management Plan was signed off and is due to be notified in the third quarter of 2016

· Tūpuna Maunga o Tāmaki Makaurau Authority (opex). Work on the Integrated Management Plan for the maunga Work has commenced, with a completion date of June 2016.

Key priorities for the third quarter 2015/2016

· Formal notification of the Integrated Management Plan for the Tūpuna Maunga o Tāmaki Makaurau Authority.

Consideration

Local Board views and implications

32. Local boards through their advisors have been consulted in the identification of local board Māori transformational shift activity. Local boards will be included in the business partnering process to support the implementation of the monitoring and reporting system Māori transformational activity.

Māori impact statement

33. This report provides information on the quarter two activities for 2015/2016 identified as Māori transformational shift activity. This report also provides information on the quarter two activities identified as co-governance or co-management. These activities are delivering on the priorities agreed in council’s 2015-2025 Long-term Plan.

34. The Treaty of Waitangi Audit response work programme enables the council to strengthen their responsiveness to Māori through targeted actions and improvements.

Implementation

35. Te Waka Angamua and Finance staff to meet with managers/owners of projects that have not used forecasted budgets to ascertain whether reprioritisation or reforecasting needs to occur.

Attachments

No.	Title	Page
a View	Detailed Activity and Expenditure Report and Treaty Audit recommendations	91

Signatories

Authors

Shane Cook - Kaihautu Whakatuturu Puni - Senior Maori Effectiveness Advisor

Sarah Howard - Manager Effectiveness for Maori

Authorisers

Johnnie Freeland - Paearahi Matua - Manager

Phil Wilson - Governance Director

Sue Tindal - Group Chief Financial Officer

Finance and Performance Committee

25 February 2016

135 Albert Street Cladding

File No.: CP2016/02038

Purpose

1. To provide an update on the 135 Albert Street cladding, and seek approval to bring forward existing budgets so as to mitigate risk.

Executive Summary

2. An issue exists regarding the cladding on 135 Albert Street, and more specifically the degradation and/or inadequacies of the fixing systems holding the stonework in place. Appropriate due diligence at the time of purchase identified an issue and was part of the negotiation on price, however subsequent more invasive work has found the issue to be worse than originally expected. This is not unusual for a 25 year old building, and has no impact on the structural soundness of the building.

3. The safety of staff, tenants and visitors to the building and surrounding area is paramount and so immediate works have been, and continue to be, undertaken to mitigate any risks. This has involved fencing outside the building to create a restricted area, and is proposed to next involve hanging scaffold at the top of the building and a reinforced working platform above the podium.

4. Although budget was set aside for works around this issue after purchase, this was put out into later years as there was no information to indicate that urgency was required. To facilitate these safety and enabling works (enabling as the working platform will also become the base for works on the building’s columns) this budget of $4.7 million needs to be brought forward to the current financial year.

5. In parallel to these safety and enabling works, a detailed design will also be undertaken to address the substantive works required to address the issue around stonework fittings. This is expected to be completed within a month.

6. A steering group including four Executive Lead Team members has been established to ensure ongoing oversight of this project. Regular reporting is proposed to go to the Audit and Risk Committee, to monitor the risks and mitigations of what is a material capital project of Council. In addition any budget requests will be taken to the Finance and Performance Committee and any material procurement decisions to the Tenders and Procurement Committee.

Recommendation/s

That the Finance and Performance Committee:

a) receive the update on 135 Albert Street cladding.

b) approve the bringing forward of budget totalling $4.7 million from 2017-2025 to the current financial year for the purpose of funding safety and enabling works.

Comments

Background

7. Council purchased the building in 2012 for $104 million. The valuation supporting the purchase price took account of current assessed degradation of the building based on its age, and was further reduced in relation to the value of other required work identified during the due diligence process.

8. In relation to the building façade, the due diligence report detailed some corrosion evident in the stone fixings, which it assessed as being caused by water ingress behind the stones. It noted that an allowance should be made to investigate and repair where required, the buildings glazing and cladding system, and in particular noted the requirement to replace the silicone sealant around the windows and the stones.

9. ASB Properties Ltd and Albert Street Developments Ltd (a Fletcher owned company) who were the original owners of the building, have advised that construction warrantees in relation to the water-tightness are now expired. There were several changes in ownership prior to Council buying the building from Brookfield Multiplex Funds Management Ltd and as is standard under the circumstances, no warranties were provided at the time of purchase. It is most unlikely that any guarantees in relation to building materials are still in place however this will continue to be explored.

10. The business case which supported the purchase of the building identified a requirement to spend up to $53.42 million to optimise the building for council use. About $24.5 million of this cost related directly to the fit out works on the floors, including the IT costs and soft fit out. The remainder was for lifecycle renewal works and upgrades of the building plant and lighting systems (based on a business case that demonstrated significant annual savings), project design and management costs, and fees and margins. Some of this work was brought forward from future years to optimise the cost of the work and future impacts on building occupants.

11. Funding of $4.2 million was also identified in the business case as being required to address known issues with the building façade, although not all of this needed to be spent immediately. This was assigned into the current and future LTP years.

Subsequent Investigations

12. The Due Diligence inspections of the structure of the building were carried out by Mott MacDonald in 2012. This work included a largely visual inspection of the stonework at the podium level (which was accessible), and also included some Boroscope imaging of the fixings behind the stone. The inspection work able to be carried out as part of the due diligence process was restricted to areas that were easily accessible, and did not allow for the removal of stone to inspect the fixings. This was deemed to be appropriate as to go any further would have been cost prohibitive.

13. In 2013, during the refurbishment project, Mott MacDonald were engaged to carry out a more “invasive” review of the stonework, including the removal of some stone at the podium level to further review the quality of the fixings and to design a specific solution. The work identified quality issues in relation to the fixings, including:

· non-standard fixing design

· insufficient, missing or loose bolts/pins, etc.

· inadequate or missing packing which means that the pins are supporting the weight of the stones

· some deflection in the fixings, support rails and stone

· corrosion in bolts, support rails

· some stone has no mechanical fixing, and is adhered using epoxy with an uncertain life-cycle.

14. Many of these issues seemed to have been present since the building was constructed.

15. The report recommended the removal of stone at the podium level (and potentially stone in other areas), repair of the fixings, and the re-installation of the stone or a stone equivalent. The report also recommended further investigations are carried out up the building tower.

16. Additional investigation up the tower columns was carried out in 2014 by Mott MacDonald working with a special stonework firm, European Stone Masons. The work involved both Boroscope investigation and removal of some sample stone on four columns. The outcome of this work was mixed – on some columns the fixings appeared reasonably sound; other columns shared similar issues to those previously observed.

17. It appeared from the subsequent report that the earlier Boroscope investigations had understated the extent of the degradation problem. Concern was expressed in the report about the potential for stone displacement in extreme wind conditions, especially from the tower columns. The report recommended that the remedial work on the stonework fixings should extend to the columns.

18. In 2015 the same firms were engaged to further understand the extent of the façade problems and to recommend actions required to address the issues. Previous findings in relation to the column stone were endorsed and the report recommended the complete removal of stone from all of the “ladder” and “isolated” columns to repair the fixings (eight columns in all).

19. The report also made reference to some stonework, particularly at the top of the building and in and around the foyer area, which was only held in place using an epoxy adhesion system. The report questioned the ongoing strength and viability of this system over time, and suggested that this stone should also be removed and re-fixed.

20. In November 2015 façade engineers from GHD were engaged to review the current findings and propose remedial actions. Their report concluded that there was reason for concern, but the extent of the problem could not be finally ascertained without the removal of all of the stone from the building. The report concluded that further intrusive works would be a very costly and labour-intensive operation. The report commented that there may not be a significant difference between the cost of these further investigative works and complete replacement of the stone façade panel, due to the required access equipment.

21. The report highlighted risks associated with the faulty or inadequate fixings and concluded that while there was no definitive evidence of imminent collapse, clearly there was significant cause for concern. The review engineers believed, from the investigations carried out so far, there was a high potential risk of a stone panel falling from height. They acknowledged that the probability of a stone falling is not known, but that the impact if this did happen would create a significant health and safety risk to users of the building and the general public below.

Addressing Health and Safety Concerns

22. Health and safety for staff, tenants and the public has been at the forefront of the actions to date.

23. World class risk assessment and management protocols have been used to determine the level of risk, to formulate robust plans and solutions, and deal with problems before they are an issue. A project team that involved the combined talents of designers, engineers, contractors and council staff has been established to respond to the health and safety issues and to develop well thought out solutions for council’s consideration.

24. The formal risk profile identifies a moderate risk. This reflects the relatively low likelihood that a stone will fall from the building as a result of the deficiencies in the fixings currently identified, but with the possibility of life-threatening consequences should a stone fall.

25. Fencing to restrict access around the building was installed in December 2015. A hanging scaffold will be constructed shortly to provide additional protection from a stone panel falling from the top levels of the building, where some stone is attached only through an epoxy system. A working platform is currently being designed that will capture anything that may fall either before or during the project works.

26. The initial design and construction works to provide a safe working platform for contractors, and to protect staff and the public during the project works, will require that the funding put aside to address the façade issues is brought forward into the current year. This request is formalised in the recommendations in this report.

Options going forward

27. The Peer Review report from GHD outlined four options available to council, as follows:

· Do nothing – this is not considered to be a viable option.

· Undertake further comprehensive intrusive investigations – this would be expensive and time consuming due to the access requirements of such a tall structure. The proposed remedial work would not be known until the end of the investigation.

· Repair/Replace the existing stone cladding - remediate and repair the stonework in the process of carrying out further investigation to minimise the programme and the cost associated with the works.

· Replace the existing stone cladding with a lightweight alternative – this approach may provide several benefits to the remediation project due to its speed of construction, material cost and availability. The lighter weight of the substitute product and its relative familiarity in the industry make both the construction and maintenance of the façade easier and safer to achieve. It would enable a warranty to be given for the work, which will give council more security in relation to the future performance of the cladding.

28. A project team is in place in order to manage the design and construction of the enabling and safety works. The project team is rigorously testing these options, with the intention of making a recommendation on the most effective methodology going forward.

29. Access to the tower is an important project constraint and considerable effort will be undertaken to find the most cost effective solution for this issue. It also represents a significant safety consideration.

30. The team reports to a steering committee that includes four council Executive Lead Team members and specialist property staff. The steering team is monitoring the risks and mitigations of what is a material capital project of Council.

31. Investigations work, design works and methodologies for the logistics of this project are on-going with the project team meeting weekly to update and agree further work as the solutions evolve into the final plans.

32. Any further budget requests as a result of this work will be taken to the Finance and Performance Committee, and any material procurement decisions to the Tenders and Procurement Committee. Regular reporting back on the risks and mitigations relating to the project works will be presented to the Audit and Risk Committee.

Consideration

Local Board views and implications

33. Local Board views have not been sought in this case as there are no implications for local boards with this regional corporate building.

Māori impact statement

34. No direct impacts on Maori have been identified in relation to this request and resulting safety and enabling works. With the implementation of any substantive works following a detailed business case, work will be undertaken to ensure that they are consistent with the existing Maori design features incorporated into the building, especially in the lobby area.

Implementation

35. If approved work will continue at pace to mitigate any risks identified in relation to the cladding on this building. In parallel a detailed business case for required substantive works will also be prepared, and the options and costs brought back to this committee for approval.

Attachments

There are no attachments for this report.

Signatories

Authors

John O’Brien - Manager Corporate Property

Andrew Hollis - Project Manager

Authorisers

Kevin Ramsay - General Manager Corporate Finance and Property

Sue Tindal - Group Chief Financial Officer

Finance and Performance Committee

25 February 2016

Budget Update

File No.: CP2016/00111

Purpose

1. This report is provided as required. It collates decisions required of the Finance and Performance Committee on changes to the budgets, and provides a financial context within which the decisions can be made.

Executive Summary

Release of Birkenhead off-street parking fund

2. Contribution was collected by the former North Shore City Council and held in a reserve for the provision of off street parking in Birkenhead. Auckland Council inherited this reserve at the time of amalgamation and must use it in accordance with the purpose for which the money was collected. The reserve has a current balance of $496,880.

3. The Kaipātiki Local Board advocates for the reserve fund to be applied towards the Rawene Public Carpark upgrade (minutes in Attachment A), which is part of the Birkenhead Town Centre Revitalisation Programme. The carpark upgrade is estimated to cost $470,154. The board is seeking this committee’s approval for releasing this amount from the reserve.

4. Staff from Legal and Risk consider the intended use of the fund meets the purpose of the reserve. The release of the reserve would lead to a very minor impact on the current year result and the rates requirement for 2016/2017, due mainly to the ongoing depreciation cost. Staff recommend the committee approves the release $470,154 from the reserve fund and allocate it to the Rawene Public Carpark upgrade in Birkenhead.

Miscellaneous remission: inorganic collection 2015/2016

5. The council introduced an annual regional on-property inorganic collection service for the 2015/2016 year. This was funded by including $22.77 (including GST) in the Waste Management Targeted Rate for each household. Around 230,000 properties will not be offered the service in the 2015/2016 financial year, and will therefore be provided with a remission of $22.77 under the Miscellaneous Remissions Scheme in the fourth quarter rates notice.

6. The remission will be partially met by a reduction in the operational budget of Waste Solutions, and would result in a $1.5 million adverse impact on the operating result of the current year, due to unrecovered overheads. Staff recommend the committee approves $1.5 million of unbudgeted expenditure.

135 Albert Street cladding

7. A separate report on this agenda presents issues with the cladding of the administration building at 135 Albert Street. It recommends bringing forward $4.7 million of capital budget from 2017-2025 to the current financial year to carry out initial works urgently. The proposal, if approved, would increase the current year borrowing by $4.7 million, and would lead to a minor impact on the current year operating result and the general rates funding requirement for 2016/2017.

Wharf infrastructure works

8. The confidential agenda of this meeting contains a funding request for wharf infrastructure capital works at a net cost of up to $860,000. The recommendation, if approved, would increase the current year borrowing by up to $860,000, and would not materially affect the general rates funding requirement for 2016/2017, due to the debt servicing being spread over the long economic life of the asset.

Recommendation/s

That the Finance and Performance Committee:

a) agree that $470,154 of the Birkenhead off-street parking reserve be released to fund the Rawene Public Carpark upgrade, with any ongoing consequential operational expenditure managed within existing budget.

b) approve $1.5 million of unbudgeted expenditure, being the net cost of the remission for inorganic service not offered, and

c) agree that the council’s budgets be updated to reflect the financial implications of the above decisions and decisions on items 14 (135 Albert Street Cladding) and C1 (Wharf infrastructure works) of this agenda.

Comments

Release of Birkenhead off-street parking fund

9. The Kaipātiki Local Board has endorsed the Birkenhead Town Centre Revitalisation Programme which incorporates the Kaimataara o Wai Manawa project (formerly referred to as the Le Roy’s Lookout project) and the Birkenhead Mainstreet upgrade. The two initiatives rely on combined budget for funding. The board has identified the priority as the Kaimataara o Wai Manawa project. Therefore, the mainstreet upgrade initiatives are not fully funded and are staged to be delivered if funding becomes available going forward.

10. The Rawene Public Carpark upgrade has been included in the stage one works of the Birkenhead Mainstreet upgrade. This would result in a demonstrable increase in utilisation of the existing parking spaces through a number of ways. Parking time restrictions are proposed to be introduced (180 minutes for 106 spaces), whereas physical improvements would make the carpark more attractive to use and better connected to both Mokoia Road and the Birkenhead Library. Improved signage will make the carpark more visible to visitors to Birkenhead Town Centre. The cost of physical works is estimated to be $470,154.

11. The board has recently identified the Birkenhead off-street parking fund as a potential funding source for the carpark upgrade. This fund was collected by the former North Shore City Council and held in a reserve for the provision of off-street parking in Birkenhead. Auckland Council inherited this reserve at the time of amalgamation and must use it in accordance with the purpose for which the money was collected. The fund has a current balance of $496,880. Legal and Risk department has advised that the fund can be used for the Rawene Public Carpark upgrade and Rawene Road pedestrian crossing.

12. The Kaipātiki Local Board has resolved to support the allocation of the Birkenhead off-street parking fund to the Rawene Public Carpark upgrade (minutes in Attachment A). The board advocates to the Finance and Performance Committee for $470,154 of the reserve fund to be released for the carpark upgrade. The approval of this committee is being sought.

13. The proposal would lead to a very minor impact of $2,316 on the current year result and $5,438 on the rates requirement for 2016/2017, due mainly to the ongoing depreciation cost. Staff recommend the committee approve releasing $470,154 from the reserve fund and allocating it to the Rawene Public Carpark upgrade in Birkenhead.

Miscellaneous remission: inorganic collection 2015/2016

14. The council introduced an annual regional on-property inorganic collection service for the 2015/2016 year. The service was funded by the inclusion of $22.77 (including GST) in the Waste Management Targeted Rate for each household. Around 230,000 properties will not be offered the service in the 2015/2016 financial year. All properties will have been offered the service by the end of November 2016. Every property will be offered the service in the 2016/2017 year.

15. Those properties that will not be offered the service in the 2015/2016 year will be provided with a remission of $22.77 (including GST) under the Miscellaneous Remissions Scheme in the fourth quarter rates notice. This will be met partially by a reduction in the operational budget of Waste Solutions, and would result in a $1.5 million adverse impact on the 2015/2016 operating result, due to unrecovered overheads. Staff recommend the committee approves $1.5 million of unbudgeted expenditure.

135 Albert Street cladding

16. A separate report on this agenda presents issues with the cladding of the administration building at 135 Albert Street. It recommends bringing forward $4.7 million capital budget from 2017-2025 to the current financial year to carry out urgent initial works. The proposal would increase the current year borrowing by $4.7 million, and would lead to a minor impact on the current year operating result and the general rates funding requirement for 2016/2017.

Wharf infrastructure works

17. The confidential agenda of this meeting contains a funding request for wharf infrastructure capital works at a net cost of up to $860,000. The recommendation, if approved, would increase the current year borrowing by up to $860,000, and would not materially affect the general rates funding requirement for 2016/2017, due to the debt servicing being spread over the long economic life of the asset.

Overall budget impact

18. The table below shows the financial impacts of the budget changes considered on this agenda. The impacts include:

· $7.5 million increase in net borrowing for 2015/2016

· $1.7 million impact on the group result for 2015/2016

· $449,000 additional general rates requirement for 2016/2017. The projected average general rates increase would remain at 3.2 per cent.

Estimated financial impacts on Auckland Council Group

$000	Closing Group Net Borrowing	Group Net Surplus/(Deficit) After Tax	General Rates		Cumulative % rates increase
	2015/2016	2015/2016	2016/2017	% increase	Cumulative % rates increase
Long-term Plan 2015-2025 budget (2015/2016)	7,806,305	226,448	1,488,482		3.2027%
Cumulative impact from decisions since 1 July 2015	-13,405	-527	0	0.0000%
Current position	7,792,900	225,921	1,488,482		3.2027%
October proposals
Release of Birkenhead Off-street Parking Funds	470	-2	5	0.0004%
Miscellaneous remission: inorganic collection 2015/2016	1,500	-1,500	82	0.0058%
135 Albert Street cladding	4,656	-127	303	0.0213%
Wharf infrastructure works	860	-23	58	0.0041%
Potential Position	7,800,386	224,269	1,488,931		3.2343%

Consideration

Local Board views and implications

19. The Kaipātiki Local Board met on 9 December 2015 and passed a resolution to advocate to the Finance and Performance Committee for the amount of $456,833 to be released and allocated to the Rawene Public Carpark upgrade. This was based on the understanding that $456,833 was the current balance in the reserve. The board was prepared to fund a shortfall of $13,321 to meet the total cost of the upgrade at $470,154.

20. However, more up to date information reveals the balance of the reserve is $496,880, which is sufficient to fund the full cost of the upgrade. The Chair of the Kaipātiki Local Board has been notified of this, and has verbally agreed that the board would advocate for $470,154 to be released instead.

Māori impact statement

21. There has been considerable engagement with local iwi over a two-year period as the Birkenhead Town Centre Revitalisation Programme was developed. All iwi have been briefed on the Rawene Public Carpark project as part of that engagement and iwi have endorsed the outcomes being delivered.

Implementation

22. Budgets would be amended in core financial systems and used for internal management reporting, regular reporting to councillors and financial control for the 2015/2016 financial year.

Attachments

No.	Title	Page
a View	Resolution KT/2015/188 - Allocation of reserve Birkenhead Parking Funds	119

Signatories

Authors

Neil Huang - Senior Analyst

Jordan Hamilton – Finance Graduate

Authorisers

Michael Burns - Budget Consolidation & Financial Modelling Manager

Matthew Walker - GM Financial Strategy and Planning

Sue Tindal - Group Chief Financial Officer

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

KT/2015/188	Allocation of reserve Birkenhead Parking Funds
FILE REF	CP2015/24467
AGENDA ITEM NO.	14

Author	Mike Giddey - Democracy Advisor
Authoriser	Sue Tindal - Group Chief Financial Officer