I hereby give notice that an ordinary meeting of the Finance and Performance Committee will be held on:
Date: Time: Meeting Room: Venue:
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Thursday, 17 March 2016 9.30am Reception
Lounge |
Finance and Performance Committee
OPEN AGENDA
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MEMBERSHIP
Chairperson |
Cr Penny Webster |
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Deputy Chairperson |
Cr Ross Clow |
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Members |
Cr Anae Arthur Anae |
Cr Calum Penrose |
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Cr Cameron Brewer |
Cr Dick Quax |
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Mayor Len Brown, JP |
Cr Sharon Stewart, QSM |
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Cr Dr Cathy Casey |
Member David Taipari |
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Cr Bill Cashmore |
Member John Tamihere |
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Cr Linda Cooper, JP |
Cr Sir John Walker, KNZM, CBE |
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Cr Chris Darby |
Cr Wayne Walker |
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Cr Alf Filipaina |
Cr John Watson |
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Cr Hon Christine Fletcher, QSO |
Cr George Wood, CNZM |
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Deputy Mayor Penny Hulse |
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Cr Denise Krum |
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Cr Mike Lee |
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(Quorum 11 members)
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Mike Giddey Democracy Advisor
11 March 2016
Contact Telephone: (09) 890 8143 Email: mike.giddey@aucklandcouncil.govt.nz Website: www.aucklandcouncil.govt.nz
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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.
Finance and Performance Committee 17 March 2016 |
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ITEM TABLE OF CONTENTS PAGE
1 Apologies 7
2 Declaration of Interest 7
3 Confirmation of Minutes 7
4 Petitions 7
5 Public Input 7
6 Local Board Input 7
7 Extraordinary Business 8
8 Notices of Motion 8
9 Presentations from the Auckland Regional Amenities Funding Board 9
10 Disposals recommendation report 11
11 Extending Auckland Council's Guarantee of Eden Park Trust's $40 million ASB bank facility 27
12 Built Heritage Acquisition Fund: Vos Yard - six monthly progress report 31
13 Auckland Regional Amenities Draft Funding Plan 2016/2017 - Approval of annual grant 35
14 Museum of Transport and Technology - 2016/2017 Funding Levy 45
15 Auckland War Memorial Museum Funding 2016/2017 : Approval of the Annual Grant 99
16 Impact Assessment of the Region-wide Swimming Pool Pricing Policy 153
17 Contributions Policy 159
18 Auckland Council Group half year financial results to 31 December 2015 181
19 Tamaki Infrastructure Investment
This report will be provided in an addendum agenda.
20 Treasury Management Policy 189
21 Alternative Sources of Financing work programme 199
22 Diversified Financial Asset Portfolio and Insurance 203
23 Information and Communications Technology (ICT)
This report will be provided in an addendum agenda.
24 Reports Pending Status Update - 17 March 2016 209
25 Consideration of Extraordinary Items
PUBLIC EXCLUDED
26 Procedural Motion to Exclude the Public 217
C1 Securities Update 217
1 Apologies
Apologies from Cr R 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, 25 February 2016, including the confidential section, as a true and correct record.
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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 March 2016 |
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Presentations from the Auckland Regional Amenities Funding Board
File No.: CP2015/27849
Purpose
1. To provide an opportunity for the amenities of the Auckland Regional Amenities Funding Board to present to the Committee on their work programme, key achievements and aspirations for the future.
Executive Summary
2. The following amenities of the Auckland Regional Amenities Funding Board will present:
(i) Auckland Philharmonia Orchestra
(ii) New Zealand Opera
That the Finance and Performance Committee: a) thank the representatives from Auckland Philharmonia Orchestra and New Zealand Opera for their attendance and the information provided.
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There are no attachments for this report.
Signatories
Author |
Mike Giddey - Democracy Advisor |
Authoriser |
Sue Tindal - Group Chief Financial Officer |
Finance and Performance Committee 17 March 2016 |
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Disposals recommendation report
File No.: CP2016/01516
Purpose
1. This report seeks approval to sell three 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. 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 a rooftop car park and a share in a ground floor car park and lift at 146-152 Great South Road, Papakura. These were acquired by the Papakura District Council for public car parking purposes. The owner of the balance of the property has approached Auckland Council about reacquiring the parts of 146-152 Great South Road, Papakura that are currently in council ownership. Consultation with council and its CCOs, iwi authorities and the Papakura Local Board about this property has now taken place. The results of the rationalisation process are that the subject parts of this property are not required for service purposes. The Papakura Local Board and relevant iwi do not oppose the proposed disposal of the subject areas of 146-152 Great South Road, Papakura. As the council owned parts of 146-152 Great South Road, Papakura are not required for current or future service requirements, disposal is recommended. If this is approved, Panuku we will seek to dispose of the council owned parts of this property to the owner of the balance of the property, which intends to investigate options for using the entire site for a mixed use development. 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, Section 1 SO 417727 Middleton Road, Drury, is a long, landlocked piece of stopped road that is currently leased to Winstones Quarry for quarrying purposes. Consultation with council and its CCOs, iwi authorities and the Franklin Local Board has now taken place. No alternative service uses have been identified for this site through the rationalisation process and the feedback received has been supportive of the proposed divestment. As this site is not required for current or future service requirements, disposal is recommended. Should this proposal be approved, the site could only be disposed of to Winstones Quarry, which owns the adjoining land, currently lease this parcel of land and have expressed an interest in purchasing this site. Site 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, part of Horseshoe Bush Road (aka Section 1 SO 68946, Lime Access Road), Dairy Flat is a stopped road that is currently leased to Waste Management NZ Ltd. Consultation with council and its CCOs, iwi authorities and the Rodney Local Board has now taken place. No alternative service uses have been identified for this property through the rationalisation process and the feedback received has been supportive of the proposed divestment of this site. As this property is not required for current or future service requirements, Panuku recommends that it be divested. Should this be approved, this site could only be sold to Waste Management NZ Ltd which owns the adjoining land, lease this site and have expressed interest in purchasing it. Site specific detail, including information and feedback gathered through the rationalisation process is contained in Attachment C of this report.
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 146-152 Great South Road, Papakura comprised of an estate of Stratum in Freehold more or less being Unit H comprising approximately 3413m2, a 1/9 share in Accessory Unit 1 comprising approximately 1255m2 and a 1/2 share in Accessory Unit 2 comprising approximately 12m2, Deposited Plan 163462 contained in certificate of title NA98C/387; ii) Middleton Road, Drury comprised of an estate in fee simple comprising approximately 9939m2 more or less being Section 1 SO 417727 contained in certificate of title CFR 484772; iii) part Horseshoe Bush Road (also known as Lime Access Road), Dairy Flat comprised of an estate in fee simple comprising approximately 2.2840 hectares more or less being Section 1 SO 68946 contained in certificate of title NA118B/596. b) agree that final terms and conditions be approved under the appropriate delegations.
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Comments
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.
11. 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
12. 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.
13. 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.
14. The views of the relevant local boards about the subject sites are contained in Attachments A to C of this report.
Māori impact statement
15. 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.
16. 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.
17. 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.
18. 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.
Implementation
19. 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.
No. |
Title |
Page |
aView |
146-152 Great South Road, Papakura property information |
15 |
bView |
Section 1 SO 417727 Middleton Road, Drury property information |
19 |
cView |
Part of Horseshoe Bush Road (aka Section 1 SO 68946, Lime Access Road), Dairy Flat property information |
23 |
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 17 March 2016 |
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Extending Auckland Council's Guarantee of Eden Park Trust's $40 million ASB bank facility
File No.: CP2016/03803
Purpose
1. To provide an update on Eden Park Trust’s (EPT) financial position and to seek approval to extend (i) the council’s guarantee of EPT’s $40 million ASB loan and (ii) to extend the principal repayment holiday on council’s $6.5 million loan.
Executive Summary
2. Council has provided EPT with a guarantee on their $40 million ASB bank facility and a $6,544,550 direct loan. The guarantee was established in 2010 and extended in 2012 and 2014 when the terms came up for review (GB/2012/120 and Fin/2014/39 refers).
3. Council has shared security with ASB over all of EPT’s titles, which were valued at approximately $280 million at 31 October 2015.
4. The ASB bank facility matures on 30 November 2017. Under the terms of the agreement the facility can be extended, subject to ASB’s agreement, provided the extension is sought at least 15 months prior to the facility’s maturity and council’s guarantee is extended to cover the additional term of the facility. Therefore, any extension will need to be executed prior to 31 August 2016.
5. ASB have proposed extending the facility until 30 September 2019 on the condition that council extend their guarantee until 1 October 2019.
6. Council’s loan to EPT has an interest rate below the ASB bank facility. Therefore, to allow EPT to repay the ASB bank facility ahead of the direct loan, the Guarantee Side Deed allows a principal repayment holiday on council’s direct loan for the term of the guarantee.
7. Staff have reviewed EPT’s annual report for the year ending 31 October 2015. EPT are currently forecast to meet interest obligations, fund direct operational expenditure and remain compliant with interest rate cover covenants. However, based on EPT’s revenue and expenditure plans there is currently no capacity to materially reduce debt, address major maintenance issues or fund depreciation.
8. Staff recommend extending the expiry date of council’s guarantee of EPT’s ASB bank facility and the principal repayment holiday on the $6,544,550 loan to 1 October 2019. Extending the guarantee provides a platform of financial stability for EPT.
9. The ability of Eden Park to repay its loans, as well as meeting future operational and capital expenditure, is dependent on its ability to increase revenue and reduce costs. Council, ATEED, Auckland Transport and RFA have been in discussions with the EPT Board on options. The recent NRL Nines events are an excellent example of a joint initiative. Staff will continue to work with the EPT Board to examine options in time for the 2017/18 Long-term Plan.
10. If council does not extend the guarantee, ASB will not extend the facility. Staff believe EPT will find it difficult to refinance the facility elsewhere. This will impact EPT’s ability to operate as a going concern and impact on council if the guarantee is called.
That the Finance and Performance Committee: a) approve delegation to the Group Chief Financial Officer to approve the terms to extend Auckland Council’s guarantee for Eden Park Trust’s $40 million ASB Extendible Term Committed Cash Advances Facility Agreement to 1 October 2019. b) approve delegation to the Group Chief Financial Officer to approve the terms of the Guarantee Side Deed to extend the principal repayment holiday of Auckland Council’s $6,544,550 loan to Eden Park Trust to 1 October 2019. |
Comments
Analysis
11. Prior to the Rugby World Cup (RWC) 2011, EPT’s total debt was $18.5 million, of which $6,544,550 was owed to Auckland City Council arising from various loan agreements dating back to 1999. These loans transferred to Auckland Council at amalgamation.
12. As part of the RWC 2011 preparations, the stadium received a significant upgrade, which was mainly funded by a government $190 million loan (later converted to a grant), a $10 million grant from the Auckland Regional Council and a $40 million loan from ASB. The ASB bank facility was guaranteed by Auckland City Council, which subsequently transferred to Auckland Council.
13. Since the RWC, EPT has met all direct operational maintenance expenditure and interest obligations. However, while EPT meets all of its loans obligations, it does not generate sufficient profits to be able to materially reduce debt levels, deal with major maintenance issues or fund depreciation. The opportunities to increase revenue through attracting new stadium based business are relatively limited due to market appeal and resource consent conditions. Extending council’s loan guarantee will not materially alter this situation.
14. Auckland Council has recorded a provision of $14 million in relation to the guarantee in the 31 December 2015 financial statements.
Rationale for extending council’s guarantee of EPT’s $40 million ASB bank facility
15. As at 29 February 2016, council’s total financial exposure to EPT was $46,544,550. The recommendation to extend the guarantee does not increase council’s financial exposure to EPT above current obligations.
16. In the event that council’s guarantee is called upon, council has sufficient security over EPT’s assets to ensure council’s position is adequately covered.
17. Staff recommend that council extend its guarantee of the ASB bank facility because:
· EPT require the $40 million facility to operate as a going concern.
· ASB will not approve the extension of the facility without a council guarantee.
· EPT will find it difficult to refinance the facility elsewhere.
18. An alternative to extending council’s guarantee would be to establish a $40 million credit facility between council and EPT. Staff do not recommend this option at this point in time as:
· The cost involved with establishing, monitoring and operating a direct credit facility would be greater than extending the ASB facility and maintaining council as guarantor.
· Maintaining ASB as the lender means ASB also monitor EPT’s credit risk. While the council’s financial exposure to EPT will remain the same under a direct lending scenario, the higher level of monitoring reduces council’s risk.
19. As council already guarantees EPT, the costs and benefits outlined below remain unchanged if the guarantee of the ASB bank facility is extended until 1 October 2019.
20. The benefits of supporting the guarantee are:
· Council is promoting and supporting a major Auckland regional facility, which would otherwise find it difficult to operate as a going concern without council’s financial backing. In the event that EPT was not a going concern, it is probable that council would be expected to intervene, or provide alternative facilities for major events.
· Major events held at Eden Park provide economic benefits to the Auckland region.
· Events held at Eden Park provide a social, recreational and sporting benefit to Aucklanders.
· On a smaller scale, council receives benefits from EPT as compensation for providing the guarantee, including free signage and advertising rights, complementary room hire and acknowledgement of support on the EPT website.
21. The cost of providing the guarantee is the counterparty credit exposure to council during the term of the guarantee. Factors mitigating this risk include:
· Council’s financial exposure is known and limited.
· The ASB bank facility and guarantee restricts EPT from being able to undertake additional borrowing without council approval.
· Council has security over approximately $280 million of EPT’s titles.
· The credit risk of EPT is monitored and managed by both ASB and council.
· The ASB bank facility requires EPT to meet monthly, quarterly and annual reporting requirements. This allows for regular and timely monitoring of EPT’s ability to meet their financial obligations.
· The ASB bank facility outlines terms for council to terminate the guarantee prior to maturity.
· The ASB bank facility and guarantee have been in place for six years. During this time EPT have met all their financial obligations under the ASB bank facility.
22. EPT continue to meet their interest rate cover covenants.
Rationale for extending the principal repayment holiday of the direct loan
23. When the guarantee was provided, council also provided a principal repayment holiday on the $6,544,550 direct loan to allow EPT to prioritise debt repayments on the ASB bank facility which carries a 0.915 percent higher interest rate than the direct loan.
24. Staff recommend extending the principal repayment holiday to 1 October 2019 to align with the extension of the guarantee.
Longer Term Financial Positon
25. Previous committees have requested that staff and the EPT examine options to improve Eden Park’s financial position with the aim of reducing outstanding debt levels. Discussions have been held between Eden Park, the council, RFA, ATEED and Auckland Transport on a range of opportunities covering shared facilities management, increasing the number of revenue generating events, sponsorship and integrated travel management. Parties are also mindful of the existing resource consent obligations and any future Unitary Plan decisions that could impact on the type and number of events. These discussions are ongoing.
Consideration
Local Board views and implications
26. Local Board views have not been sought as the recommendations relate to financial obligations of the council and not a local board.
Māori impact statement
27. There are no identifiable Māori impacts relating to the decision required.
Implementation
28. There are no implementation issues.
There are no attachments for this report.
Signatories
Author |
John Bishop - Treasurer & GM Transaction Services |
Authoriser |
Sue Tindal - Group Chief Financial Officer |
Finance and Performance Committee 17 March 2016 |
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Built Heritage Acquisition Fund: Vos Yard - six monthly progress report
File No.: CP2015/25323
Purpose
1. At the July 2015 Finance and Performance Committee meeting, the Committee agreed to support the proposal to commit $2.3 million of the Built Heritage Acquisition Fund (BHAF) for the restoration costs for Vos Yard, Wynyard Quarter. The purpose of this paper is to provide the first required update to the Committee for the period of July 2015 to March 2016.
Executive Summary
2. At the July 2015 Finance and Performance Committee meeting, the Committee received a paper which made the following recommendations:
That the Finance and Performance Committee:
a) support the proposal to commit $2.3 million of the Built Heritage Acquisition Fund for the restoration costs for Vos Yard.
b) advise Waterfront Auckland (now Panuku Development Auckland) that this commitment can only be drawn down once Waterfront Auckland has raised the balance of the funding ($2.4 million) and has advised the Committee.
c) advise Waterfront Auckland that this commitment expires December 2017.
d) require Waterfront Auckland to report to the Finance and Performance Committee on progress on a six monthly basis.
3. The vision for the project remains the creation of an engaging visitor experience - a centre on Auckland’s waterfront that brings to life New Zealand’s strong maritime history. The refurbished yard will house the restoration and maintenance of wooden boats, and public facilities will be incorporated to showcase and transfer skills to new generations. The Yard will be a place for the telling of stories and for celebrating and continuing Auckland’s rich maritime heritage – both Pakeha and Māori.
4. Over the past six months Panuku Development Auckland (previously Waterfront Auckland) has commenced the establishment of a restoration plan for the asset and assisting in raising the balance of the required development costs from both the private sector as well as philanthropic and community funders. Panuku has engaged a project manager on a short term basis to lead stakeholder engagement, a refresh of the business plan, and an assessment of the fundraising plan, and has also secured interim tenants for the space.
5. Discussions are underway with potential fundraising “champions” for the project. It has been identified that securing private or philanthropic support should be the primary objective and then subsequently building relationships and seeking support from the major charitable trusts.
That the Finance and Performance Committee: a) receive this Built Heritage Acquisition Fund: Vos Yard – six monthly progress report.
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Comments
6. Significant work has been undertaken in the last two months in terms of re-engaging the support of key stakeholders, including clarifying the amount and terms of Council funding, which has been very favourably received. Council investment in this project has created a huge sense of confidence and has enabled the furthering of work and conversations that are critical to the success of this project.
7. In December 2015, Panuku engaged Susanne Ritzenhoff from Creative Pathways Ltd. to update the business case for the Percy Vos boatyard (Vos boatyard), review the fundraising plan with a particular focus on the capital fundraising, and re-engage with stakeholders and supporters of the project, all with the aim of galvanising support (strategic, operational and financial) for the project.
8. Since the previous reporting date (December, 2015) Panuku Development Auckland has re-engaged with a number of key stakeholders, including the Percy Vos Trust, The Classic Yacht Association, NZ Marine Training, a number of potential patrons, and a wide group of wooden boat builders and classic wooden boat owners.
9. Sir Bob Harvey has been invited and accepted the role as a patron for this project. Sir Bob is very supportive and keen to ensure the capital fundraising is going to start within the next month to ensure the currently gained momentum can be capitalised upon.
10. Current focus is on securing a small number of high end donations. The background research has taken place, as well as first conversations to allow initial approaches. Once over 50 % of the funding has been secured, an application for Lottery capital projects can be made. A wider and more public “pledge” campaign is envisaged once 80% of the funding has been secured. To complete the fundraising campaign, gaming trusts can be approached for a reminder of a number of smaller components within the development.
11. The concept and first draft of the fundraising collateral has been developed with a final document expected for approval by mid-March.
12. The Percy Vos Trust remains committed to the project and is currently determining which function within the development of the Vos yard they can realistically fulfill. Depending on the outcome a formation or engagement of an independently run Trust might be necessary to lead the project through the development phase. Finalising this will be a key focus for the month of March.
13. Interim users have been engaged in terms of ensuring use and security of the Yard prior to development – including various wooden boat owners working on individual, small scale projects, Fresh Concept Ltd (who have taken a medium term tenancy on the first floor) and Nga Whaotapu o Tamaki Makaurau (who have taken a medium term tenancy on the ground floor).
14. Opportunities and potential models around ensuring a focus on education and outreach have been identified and connections have been made within the Industry Training Organisation sector to gauge interest and support for the project on an ongoing basis.
Consideration
Local Board views and implications
15. The Waitemata Local Board resolved at its 9 July 2013 meeting to strongly support, in principle, the restoration of the Vos Yard through the BHAF. A workshop has been set for 29 March 2016 to update the Board and obtain their feedback on the project.
Māori impact statement
16. As part of the work achieved to date with regards interim users, Nga Whaotapu o Tamaki Makaurau has taken a medium term tenancy on the ground floor, where they will work on various projects that they are engaged with. This provides an opportunity to trial the space with multiple users, skills and craft forms, begin conversations with regards the relationship between Iwi and the project, and also provide a consistent space for Nga Whaotapu as they strengthen their work in the protection of carvers and their art form.
17. Panuku Development Auckland is now undertaking an investigation process with Mana Whenua with regards place making activities and opportunities within the Wynyard Quarter, as well as Panuku’s other development sites. Both interim use and future planning for the Vos Yard will be made a part of these conversations.
Implementation
18. Key Goals for the next period (April to July 2016) are:
· Finalise funding collateral
· Approach high end donors
· Finalise and agree on principles of the organisational structure
· The identification of appropriate charitable trust board members
· Finalise financials for the revised business plan
There are no attachments for this report.
Signatories
Author |
Frith Walker – Manager Place Making, Place Shaping Directorate, Panuku Development Auckland |
Authorisers |
Rod Marler – Director Place Shaping, Place Shaping Directorate, Panuku Development Auckland Sue Tindal - Group Chief Financial Officer |
Finance and Performance Committee 17 March 2016 |
|
Auckland Regional Amenities Draft Funding Plan 2016/2017 - Approval of annual grant
File No.: CP2016/02760
Purpose
1. To consider the proposed total levy recommended in the Auckland Regional Amenities Funding Boards 2016/2017 Funding Plan.
Executive Summary
2. The Funding Board was established under the Auckland Regional Amenities Funding Act 2008 (the Act). The purpose of the Act was to establish a mechanism to provide adequate, sustainable, and secure funding for the specified Amenities that provide arts, educational and rescue services throughout the Auckland region. The Amenities are:
· Auckland Observatory and Planetarium Trust Board
· Auckland Philharmonia
· Auckland Regional Rescue Helicopter Trust
· Auckland Theatre Company Limited
· Coast Guard Northern Region Incorporated
· New Zealand Maritime Museum Trust Board
· New Zealand Opera Limited
· Surf Life Saving Northern Region Incorporated
· The Auckland Festival Trust
· Watersafe Auckland Incorporated
3. Following consideration of public submissions, the Auckland Regional Amenities Funding Board (the Funding Board) has submitted it’s 2016/2017 Funding Plan to Auckland Council for consideration.
4. The Funding Plan proposes a total levy for 2016/2017 of $16,142,000 representing an increase of $994,100 (or 6.5 per cent) over 2015/2016. However, a like for like comparison (refer Table 2) with last year is difficult as the Auckland Rescue Helicopter Trust (ARHT) did not make a funding application for 2015/2016, although council approved a capital grant of $450,000 as part of the Long-term Plan (LTP) process. ARHT has made an application for the 2016/2017 Funding Plan. If the LTP capital grant is added to the 2015/2016 levy, the proposed increase for the 2016/2017 funding levy is 3.5 per cent in real terms.
5. The Funding Board are recommending a 1.7 per cent increase in the Funding Board remuneration (Attachment B). No additional budget is required as the Funding Board will absorb the proposed increase within the current administration budget request ($315,000). The Finance and Performance Committee need to decide whether to approve this increase as shown below:
· Chair from $29,000 to $29,500;
· Deputy Chair from $21,750 to $22,125 ; and
· Directors from $14,500 to $14,750
6. The Governing Body considered the draft Funding Plan at its 18 February 2016 meeting and approved council’s submission to the Funding Board. Following consideration of submissions, the Funding Board has proposed no changes to the draft levy.
7. Under the Act Auckland Council’s role is to approve or reject the total levy. In making this decision, Auckland Council must have regard to the Act’s funding principles.
8. Auckland Council does not make the decisions relating to the allocation of funding to the individual Amenities. That is the role of the Funding Board, and as required under the Act, their decision-making is independent of Auckland Council.
9. If Auckland Council rejects the proposed levy, the matter must be referred to arbitration. The arbitrator would determine the total levy, but not the allocations to the individual Amenities.
10. Council staff have reviewed the Funding Plan, and discussed it and the Amenities funding applications with the Funding Board. Staff consider that the Funding Plan is consistent with the funding principles, and the proposed levy should be approved.
That the Finance and Performance Committee: a) approve the 2016/2017 levy of $16,142,000 recommended by the Auckland Regional Amenities Funding Board. |
Comments
11. The following table sets out the timeline for the 2016/2017 funding process:
Table 1. 2016/2017 Auckland Regional Amenities Funding Process |
|
22 September 2015 |
Amenities submit funding applications to the Funding Board. |
18 January 2016 |
Funding Board publically notifies draft Funding Plan. |
19 February 2016 |
Deadline for submissions on the draft Funding Plan. |
1 March 2016 |
Funding Board submissions hearing. Funding Board considers submissions, and makes any amendments it considers appropriate to the draft Funding Plan. The Funding Board then submits the Funding Plan to Auckland Council together with details of the proposed levy. |
17 March 2016 |
Auckland Council considers the Funding Plan (having regard to the funding principles), and either approves or rejects the proposed levy. |
No later than 30 April 2016 |
If Auckland Council approves the Funding Plan, the Funding Board meets to deliberate on and adopt its Funding Plan and fix the levy. |
1 July 2016 |
Auckland Council pays the levy to the Funding Board. |
12 August 2016 |
Last date to distribute grants to Specified Amenities. |
12. On 18 February 2016, the Governing Body approved council’s submission on the draft Funding Plan. The key points of council’s submission were:
· Acknowledge the Funding Board and Amenities for their contribution to Auckland.
· Note that after a period of significant increases, most of the Amenities should now be reaching a level of funding that provides a degree of sustainability and large increases should not be required in the future. Council asks the Funding Board to progress the recommendation with the Amenities from 2015 council-ARAFB review (examine sustainable funding for each Amenity).
· Note the increase to ratepayer funding since the Act came into force, including future years funding requests as indicated by the Amenities.
· Ask that the Funding Board ask the Amenities to maintain a focus on accessing alternative revenue streams.
· Ask the Funding Board to monitor any impacts of the Arts Festival annualisation.
· Note the Funding Boards request for increased remuneration.
13. The proposed programme for the 2016/2017 funding plan includes examining the parameters of sustainable funding. The Funding Board and the Amenities will consider how best to progress this work.
14. Staff will work with the Funding Board to progress the project over the 2016/2017 Funding Plan year. An update will be provided to the committee in the second quarter of 2017.
15. Following consideration of the public submissions, the Funding Board has finalised its 2016/2017 Funding Plan. The Funding Board is proposing to make the following grants to the Amenities:
2016/2017 Proposed Allocation of Grants to Specified Amenities |
||||||
Amenity |
Grant Allocated by Funding Board 2015/2016 |
Amenity Funding Application 2016/2017 |
Provisional Allocation of Grant 2016/2017 |
Year on Year Change |
% |
|
Auckland Arts Festival |
$3,305,000 |
$3,425,000 |
$3,325,000 |
$20,000 |
0.61 |
|
Auckland Philharmonia |
$3,042,000 |
$3,210,000 |
$3,092,000 |
$50,000 |
1.64 |
|
Auckland Regional Rescue Helicopter* |
0 |
$694,828 |
$450,000 |
$450,000 |
|
|
Auckland Theatre Company |
$1,450,000 |
$1,750,000 |
$1,490,000 |
$40,000 |
2.76 |
|
Coastguard Northern Region |
$683,400 |
$698,000 |
$698,000 |
$14,600 |
2.14 |
|
New Zealand Opera |
$875,000 |
$1,147,500 |
$975,000 |
$100,000 |
11.43 |
|
Stardome Observatory and Planetarium |
$1,209,000 |
$1,499,000 |
$1,389,000 |
$180,000 |
14.89 |
|
Surf Life Saving Northern Region |
$1,234,000 |
$1,324,000 |
$1,266,000 |
$32,000 |
2.59 |
|
Voyager – New Zealand Maritime Museum |
$2,025,000 |
$2,225,000 |
$2,092,500 |
$67,500 |
3.33 |
|
Watersafe Auckland |
$1,050,000 |
$1,050,000 |
$1,050,000 |
$0 |
0 |
|
Total |
$14,873,400 |
$17,023,328.00 |
$15,827,500 |
$954,000 |
6.41 |
|
Funding Board Administration |
$315,000 |
|
$315,000 |
|
0 |
|
Portion of levy funded by Funding Board** |
$40,000 |
|
|
|
|
|
Total Levy payable by Auckland Council |
$15,148,400 |
|
$16,142,500 |
|
6.56 |
*ARHT did not make application to the 2015/2016 Funding round.
**The Funding Board approved an additional allocation to Stardome of $40,000 more than was originally allocated in the draft 2015/2016 Funding Plan. This was paid from the Funding Board’s retained earnings.
16. The final Funding Plan will not be available in time to go out with this agenda. However, it will be tabled at the committee meeting (or distributed earlier if available) for discussion. A letter from the Chair, Vern Walsh is attached at Appendix A, detailing the 2016/2017 funding request as approved by the Funding Board at its 1 March 2016 meeting.
Main features of the draft Funding Plan
Auckland Regional Helicopter Trust
17. ARHT did not to make an application to the Funding Board for the 2015/2016 Funding Levy. As part of the Long-term Plan a capital grant of $450,000 was made to the ARHT towards the purchase of a new rescue helicopter.
18. ARHT has applied to the Funding Board for $694,828 for 2016/2017 Funding Levy. The Funding Board has made a provisional allocation of $450,000.
Stardome Observatory and Planetarium (Stardome) and New Zealand Opera (NZO)
19. Two of the ten Amenities are receiving higher percentage increases to their grants than the remaining eight Amenities.
20. Stardome received an additional one-off payment of $150,000 in 2014/2015 to finance a strategic review. The Funding Board have proposed an additional sum of $180,000 over the 2016/2017 grant towards implementing the first stages recommended in the Strategic Review of Operations, completed in 2014/2015.
21. As a result of improved governance and management policies, NZO is now embarking on the implementation of its strategic plan, which includes developing new audiences in Auckland by presenting “boutique” operas in collaboration with other organisations such as the ASB Waterfront Theatre and the Auckland Arts Festival. This work will help to raise revenue for the NZO. The Funding Board has proposed an increase of $100,000 to NZO to assist with this work.
Administration and Board member fees
22. The Act provides that Auckland Council must decide how much to pay each member of the Funding Board after considering a recommendation from the Funding Board.
23. Auckland Council must decide to pay an amount that is appropriate having regard to both the public purpose of the Board’s functions and the extent of public funding of the Board’s operations.
24. The Funding Board are recommending a 1.7 per cent increase to board remuneration for board members, chair and deputy chair (refer to the letter at Attachment A).
25. The table below shows the remuneration increases approved by Auckland Council in previous years:
|
Initial (2008) |
2013 |
2014 |
2015 |
2016 (yet to be approved) |
Chair |
$20,000 |
$24,000 |
$28,000 |
$29,000 |
$29,500 |
Deputy Chair |
$15,000 |
$16,250 |
$17,500 |
$21,750 |
$22,125 |
Board Member |
$12,000 |
$13,000 |
$14,000 |
$14,500 |
$14,750 |
26. Any additional remuneration would be absorbed within the current administration fee therefore no additional increase to the levy is required.
27. For future remuneration reviews, Auckland Council recommends that the Funding Board consider the approach outlined within the Council Controlled Organisations Governance Manual. This approach includes a triennial remuneration review benchmarked against similar entities and applying a moderate (median) increase across the three year period.
Roles and Responsibilities
28. The Funding Board and council have defined roles under the Act. The Funding Board must review the Amenities funding applications, and make determinations on the level of funding for each of the specified Amenities for the year. When doing so, the Funding Board must have regard to the funding principles and other requirements of the Act. The Funding Board must then make a recommendation to Council on the total amount of the levy for the year.
29. Council’s role is confined to approving or rejecting the total levy amount, having regard to the funding principles. Under the Act, Council does not have a role in decisions relating to how the funding provided to the Funding Board is allocated between the individual Amenities.
30. The Act specifies that the Funding Board has been established as a body independent of council. Council’s role is in the provision of annual funding, not in the decision-making of how the funds are allocated between the Amenities.
31. Should the council (having regard to the funding principles) decide to reject the proposed total levy, the dispute must be referred to an independent arbitrator. The Act does not allow for renegotiation of the proposed amounts, the matter must be referred to an arbitrator in the first instance.
Consideration of the Funding Plan against the funding principles
32. The funding principles are attached in full at Attachment B. The most relevant funding principles are as follows:
· The primary purpose of the funding is to contribute to the expenses that the specified amenity must incur to provide its facilities or services.
· Funding is not available for any part of facilities or services that the specified amenity provides outside of the Auckland region.
· Funding is not available for capital expenditure.
· Funding is available only if the specified amenity has made all reasonable endeavours to maximise their funding from other available funding sources.
33. Council staff have reviewed the Funding Plan against the funding principles and have discussed the Amenities funding applications and the Funding Plan with the Funding Board.
34. Following this review, and the discussion with the Funding Board, it is considered that the Funding Plan is consistent with the funding principles. It is therefore recommended that the proposed levy set out in the Funding Plan be approved by Auckland Council.
Budget Update
35. Details of the levy being sought by ARAFB are $16,142,500. Additional reports to this committee note the levy requests from the Auckland War Memorial Museum (AWMM) and the Museum of Transport and Technology (MOTAT).
Organisation |
Levy Paid 2015/2016 |
Levy requests 2016/2017 |
MOTAT |
$12,287,000 |
$13,100,000 |
Funding Board |
$15,148,400 |
$16,142,500 |
AWMM |
$28,970,000 |
$29,840,000 |
Total |
$56,405,000 |
$59,082,500 |
Long Term Plan Budget |
|
$58,399,430 |
Consideration
Local Board views and implications
36. Decision-making and oversight in respect of regional activities is the responsibility of the Governing Body.
Māori impact statement
37. The Amenities make positive contributions to Māori wellbeing. The contribution varies for each amenity. The Amenities are involved in the provision of services in the following areas: safety, rescue, education, arts and culture.
38. One of the Independent Māori Statutory Board’s “issues of significance” is that Council fails to fully recognise and respect the perspective of Māori when making decisions, as Māori are not adequately represented on council decision-making bodies.
39. Whilst the Funding Board is not a council decision-making body, the Auckland Regional Amenities Funding Act requires that the Funding Board must have one member who represents the interests of Māori in the Auckland Region. This ensures a Māori perspective in the decision-making of the Funding Board.
Implementation
40. There are no implementation issues associated with this report.
No. |
Title |
Page |
aView |
ARAFB Letter of Recommendation |
41 |
bView |
Principles of the Act |
43 |
Signatories
Author |
Josie Meuli - Senior Advisor |
Authorisers |
Alastair Cameron - Principal Advisor CCO Governance and External Partnerships Phil Wilson - Governance Director Sue Tindal - Group Chief Financial Officer |
Finance and Performance Committee 17 March 2016 |
|
Museum of Transport and Technology - 2016/2017 Funding Levy
File No.: CP2016/03025
Purpose
1. To consider the 2016/2017 levy for the Museum of Transport and Technology (MOTAT).
Executive Summary
2. The MOTAT board have prepared and consulted on their draft annual plan for the 2016/2017 financial year. The draft plan sets out the proposed funding levy sought from the council.
3. Under the Advisory and Management Agreement between Regional Facilities Auckland (RFA), RFA is the appointed advisor to Auckland Council for the annual MOTAT funding process. RFA has made a submission on the MOTAT draft annual plan.
4. It is RFA’s role to consider and make recommendations to the council on the statutory levy proposed by MOTAT. This report considers RFA’s recommendation on the proposed levy.
5. Under section 21 of the Act, the MOTAT Board may make a levy against Auckland Council for the purposes of funding its activities (including maintenance, operations, and development).
6. The MOTAT annual plan proposes a levy of $13.1 million, an increase of 6.6 percent ($813,000). This is below the cap provided for within the legislation. RFA supports the levy requested by MOTAT for the 2016/2017 year.
7. MOTAT’s key priorities for the increased levy include the:
· management of MOTAT’s collections;
· additional staff to ensure that MOTAT has the right people and resources in place to achieve its strategic objectives;
· finalising the MOTAT Athfield Masterplan and the associated business case;
· upgrading MOTAT’s Information and Communication Technology and Customer Relationship Management Systems; and
· rebranding the museum to clearly define the transport aspects that includes a focus on Kiwi technology, innovation and ingenuity from the Auckland region.
That the Finance and Performance Committee: a) approve the 2016/2017 Museum of Transport and Technology levy of $13.1 million, as recommended by Regional Facilities Auckland. b) ask the Museum of Transport and Technology to place an increased focus on generating non-rates revenue. c) advise the Museum of Transport and Technology that Auckland Council must agree council’s funding of any major capital redevelopment of the Museum, before any funding for future levy requests in respect of the master plan (2017 and beyond) is considered. d) note the concerns raised by Regional Facilities Auckland regarding the Museum’s decision to undertake it’s own board appointments rather than continue with the joint board appointment programme. |
Comments
8. MOTAT operates under the MOTAT Act 2000. Under section 21 of the Museum of Transport and Technology Act 2000, the MOTAT Board must prepare a draft annual plan each year, outlining its:
· significant policies, objectives and activities;
· performance targets and other measures;
· indicative costs, including remuneration costs, and funding sources; and
· the indicative levy on Auckland Council for that financial year.
9. Under section 21 of the Act, the MOTAT Board may make a levy against Auckland Council for the purposes of funding its activities (including maintenance, operations, and development).
10. Pursuant to the Advisory and Management Agreement between RFA and Auckland Council, RFA has been appointed Council’s advisor for MOTAT’s annual funding process. RFA has made submissions on Auckland Council’s behalf to MOTAT.
Process of RFA submission and Levy recommendation to Auckland Council
11. As Council’s appointed advisor, RFA must consider the MOTAT Draft Annual Funding Levy, make appropriate submissions to the plan and, following the museum’s public meeting and consideration, receive the proposed plan. Under the Advisory agreement RFA must recommend to the council whether to approve the MOTAT Funding Levy.
12. The RFA submission through it’s Letter of Expectation reflected six areas of focus for MOTAT for the 2016/2017 year, these included:
(i) Strategy: a focus on and delivery of the strategy with a particular emphasis on the future business model.
(ii) Collaboration: the preparation and delivery of a business case for the development of MOTAT’s Master Plan working with RFA and Auckland Council.
(iii) Performance measures: The continuation of performance measures as agreed in the previous year’s plan, to show progress and demonstrate improvements in a number of areas.
(iv) Promoting Auckland’s Maori Identity: acknowledging Auckland Council priorities in this area and continuing to develop relationships with Iwi.
(v) Governance: Working with RFA and Auckland Council on considering changes to the legislation, to ensure that it is fit for purpose and can keep pace with the changes in Auckland.
(vi) Revenue sources: requesting a focus on growing revenue from sources other than the ratepayer levy. There is a performance measure relating to this focus.
13. During the development of the MOTAT Draft Annual Plan, consideration was given to accelerating the funding for the MOTAT Athfield Masterplan, including significant additional funding for the major infrastructure projects.
14. RFA advised through its submission that Masterplan work could be more appropriately progressed through the development of a joint RFA-MOTAT business case to the Auckland Council, and if approved, considered as part of the 2017-18 MOTAT Annual Plan consideration.
15. In addition to RFA’s recommendation, Auckland Council advises MOTAT that it must agree council’s funding of any major capital redevelopment of the Museum, before any funding for future levy requests in respect of the master plan (2017 and beyond) is considered.
16. MOTAT have agreed to the recommendation outlined in RFA’s submission. Following completion of the public submission process council have received RFA’s Letter of Recommendation. A copy is attached at Appendix A.
17. Council must now consider RFA’s recommendation outlining the MOTAT request for funding it’s 2016/2017 Annual Plan.
MOTAT Draft Annual Plan 2016/2017
18. The MOTAT Draft Annual Plan, attached at Appendix B, proposes a levy of $13.1 million, a 6.6 percent ($813,000) increase from 2015/2016. This is below the cap provided for within the legislation.
19. MOTAT’s key priorities for the increased levy include the:
· review of the collection and its care;
· ensuring that MOTAT have the right people, systems and other resources in place to achieve the objectives outlined in the Strategy and Plan;
· development of the Athfield Plan into a Masterplan and undertaking the preparatory work in relation to the initial projects selected by MOTAT Board under that plan;
· upgrading MOTAT’s Information and Communication Technology and Customer Relationship Management Systems;
· rebranding the museum to clearly define the transport aspects that includes a focus on Kiwi technology, innovation and ingenuity from the Auckland region; and
· refreshment of existing core exhibitions and development of new exhibitions and experiences.
Budget Issues
20. The levy being sought by MOTAT is $13,100,000. Additional reports to this committee note the levy requests from the Auckland Regional Amenities Funding Board (Funding Board) and the Auckland War Memorial Museum (AWMM).
Organisation |
Levy Paid 2015/2016 |
Requested Levy 2016/2017 |
MOTAT |
12,287,000 |
$13,100,000 |
Funding Board |
15,148,400 |
$16,142,500 |
AWMM |
28,970,000 |
$29,840,000 |
Total |
56,405,000 |
$59,082,500 |
Draft Annual Plan Budget |
|
$58,399,430 |
Board Appointments to MOTAT
21. Regional Facilities Auckland works closely with the MOTAT Board and the museum's management in relation to the achievement of the Auckland Plan and MOTAT's 2014/2019 strategy.
22. Regional Facilities Auckland also recommends to Auckland Council board appointments for six of the ten MOTAT Board members. The MOTAT Society appoints four of the MOTAT board members.
23. Throughout 2008 and in 2013, difficulties within the MOTAT Board were traversed in the public domain. In order to address this Regional Facilities Auckland and the MOTAT Society agreed to a joint board appointment process. This has worked well since 2013.
24. In particular this gave the MOTAT Board the stability it needed to develop, agree and implement a strategy that is aligned to the Auckland Plan, the Councils Arts and Culture Strategy and ensures that the museum remains relevant to the Auckland Community and New Zealand.
25. The MOTAT Society has recently advised Regional Facilities Auckland that it now intends to go its own way in the appointment of members to the MOTAT Board.
26. Regional Facilities Auckland is concerned that this may lead to a return of issues experienced at Board level previously and could put the Councils investment in MOTAT at risk.
27. Regional Facilities Auckland is working closely with the MOTAT Board and the museum's management to see how this risk can be mitigated.
Consideration
Local Board views and implications
28. Decision making and oversight in respect of regional activities is the responsibility of the Governing Body.
Māori impact statement
29. MOTAT has the ability to make positive contributions to Māori wellbeing, and to deliver on Auckland Plan outcomes relating to effective communication and engagement with Māori.
30. MOTAT have agreed to continue to build its relationship with Ngati Whatua and support the delivery of Auckland Council’s Te Toa Takitini work programmes.
31. The impact of the Museum’s work will assist in promoting Auckland’s Māori identity and point of difference in the world.
Implementation
32. Once the funding levy is approved, transfer of funds will be processed through the usual mechanisms.
No. |
Title |
Page |
aView |
RFA letter to Auckland Council : MOTAT Annual Plan |
49 |
bView |
MOTAT Annual Funding Plan 2016-17 |
51 |
Signatories
Author |
Josie Meuli - Senior Advisor |
Authorisers |
Alastair Cameron - Principal Advisor CCO Governance and External Partnerships Phil Wilson - Governance Director Sue Tindal - Group Chief Financial Officer |
Finance and Performance Committee 17 March 2016 |
|
Auckland War Memorial Museum Funding 2016/2017 : Approval of the Annual Grant
File No.: CP2016/04090
Purpose
1. To consider the 2016/2017 levy for the Auckland War Memorial Museum (AWMM).
Executive Summary
2. AWMM operates under the Auckland War Memorial Museum Act 1996 (the Act). The Act includes a levy process to ensure the Museum has sufficient funding to perform its statutory obligations. Under the Act, Council is obliged to fund the museum
3. Agreement on the levy must be reached by the statutory deadline of 30 April. If no agreement can be reached, the parties must go to arbitration.
4. The board of AWMM have prepared their draft annual plan for the 2016/2017 financial year. The draft plan sets out the proposed funding levy sought from Auckland Council.
5. AWMM’s draft annual plan proposes a total levy of $29,840,000, representing an increase of $869,000 (or 3 per cent increase) over the 2015/2016 levy. The total proposed levy is made up of operational costs of $20,795,000 and $9,045,000 for future capital expenditure.
6. Under the Advisory and Management Agreement, RFA is the appointed advisor to Auckland Council (the council) for the annual funding process. RFA’s role is to consider and make recommendations to the council on the statutory levy proposed by the museum. RFA recommends that council approve funding for the operational costs included in AWMM’s proposed levy.
7. AWMM’s plan for 2016/2017 includes continuing to deliver exhibitions onsite, offsite and online for all people across Auckland. The Plan outlines continuing to:
· deliver across all 21 local boards;
· grow collections online;
· enrich online cenotaph data;
· co-develop consistently with iwi, hapu and whanau; and
· make each dollar count.
8. AWMM’s Organisational Business Plan (OBP), attached at Attachment A, outlines a 10-year forecast, prioritising future investment decisions (capital projects) planned for the period 2016-2025. The OBP outlines a proposed $166 million capital programme over this period.
9. AWMM has approximately $60 million in its Asset Replacement Reserve, providing the museum the ability to undertake some capital works. The OBP indicates the museum intends to spend $20 million on capital projects in 2016/2017.
10. Council and RFA staff are working with AWMM to obtain more detail relating to the capital expenditure programme. These discussions will also explore alternatives to funding the capital expenditure via the levy.
11. AWMM is of national as well as regional significance yet receives no government funding for its programmes. This report recommends that the chair of the Finance and Performance Committee write to the Minister for Arts, Culture and Heritage, Hon. Maggie Barry to begin discussions on this issue.
12. The council ask that AWMM continue to focus on generating non-rates revenue, reducing its reliance on rate-payer funding.
That the Finance and Performance Committee: a) note that the total levy applied for by the Auckland War Memorial Museum is $29,840,000. b) approve funding for the operational costs for the Auckland War Memorial Museum being $20,795,000 as recommended by Regional Facilities Auckland. c) note that the Auckland War Memorial Museum is progressing a $166 million programme of capital project works over the ten year period commencing 2016-2025. d) note that council staff are working with the Auckland War Memorial Museum to obtain more detail around the capital projects and investigate opportunities for alternative funding including debt funding. e) delegate the chair and the deputy chair of the Finance and Performance Committee authority to agree the terms for funding the capital requirements for the Auckland War Memorial Museum. f) authorise the chair of the Finance and Performance Committee to write to the Minister for Arts, Culture and Heritage, Hon. Maggie Barry requesting a discussion about potential government funding for Auckland War Memorial Museum. |
Comments
13. The museum operates under the Auckland War Memorial Museum Act 1996. The Act requires the Board to adequately maintain, manage and develop the museum (Section 12 (d)).
14. The Act puts in place a levy process to ensure the Museum has sufficient funding to perform the minimum obligations imposed on the Museum Board by the Act. Council is obliged to fund the museum.
15. Agreement on the levy must be reached by the statutory deadline of 30 April. If no agreement can be reached the dispute may be referred to an independent arbitrator appointed by both council and AWMM (or Minister of Local Government) who will determine the levy, taking into account the minimum obligations placed on the board.
16. The legislation requires the museum to publish its draft annual plan and publically consult on the levy request being made to Auckland Council.
2016-17 Auckland War Memorial Museum Annual Plan
17. AWMM’s draft annual plan proposes a total levy of $29,840,000 representing an increase of $869,000 or a three per cent increase over the 2015/2016 levy.
18. The total levy request of $29,840,000 is made up of the operational costs $20,795,000 and $9,045,000 of capital expenditure.
19. Auckland Council’s funding represents approximately 79 per cent of the museum’s total revenue. Other revenue-producing activities total $7.923 million, of which other grants revenue equates to one per cent. The proposed total levy increase for council in 2016/2017 is three per cent more than 2015/2016 ($869,000).
20. AWMM’s plan is to continue to deliver exhibitions onsite, offsite and online for all people across Auckland. The Plan notes the following key criteria including
· deliver across all 21 local boards;
· grow collections online;
· enrich online cenotaph data;
· co-develop consistently with iwi, hapu and whanau; and
· make each dollar count.
21. AWMM’s capital works programme is discussed below.
RFA’s Advisory and Management Agreement
22. Pursuant to the Advisory and Management Agreement between RFA and Auckland Council, RFA has been appointed council’s advisor for the Museums’ annual funding process. RFA has made a submission on Auckland Council’s behalf and AWMM have considered this along with all other submissions received.
23. RFA has assessed the levy proposed by the museum and made its recommendation to Auckland Council. RFA’s recommendation is that council approve funding for the operational costs for the AWMM being $20,795,000. RFA’s letter of recommendation is attached at Attachment B. A copy of AWMM’s OBP is attached at Attachment A and their annual plan is attached at Attachment C.
AWMM’s proposed Capital works programme
24. AWMM have published their OBP with a high-level 10-year forecast prioritising future investment decisions (including capital projects) planned for the period 2016-2025. The OBP indicates a capital programme total of $166 million over this period.
25. AWMM have ranked projects in its capital project programme as either vital, essential and desirable works. The vital component equates to $106 million, essential $43 million and desirable $16 million. The largest area of capital spend is across the museum’s long-term infrastructure and development of its galleries
26. AWWM’s OBP outlines its Asset Replacement Reserve (ARR) which totals approximately $60 million. The museum plan to use the ARR to fund part of the capital programme. The graph below shows the museum’s forecast funding for the 10-year OBP.
.
27. Council staff and RFA are working with AWMM to get more detail around the capital projects and investigating opportunities for alternative funding including debt funding.
28. It is recommended that the chair and deputy chair of this committee be delegated authority to agree the terms for funding the capital requirements for the AWMM.
Alternative funding sources
29. The council ask that the museum continue to focus on generating non-rates revenue to assist with the delivery of its activities. Likewise, the AWMM should continue its efforts to find other sources of funding for its capital programme.
30. AWMM is of national as well as regional significance yet receives no government funding for its programmes.
31. This report recommends authorising the chair of the Finance and Performance Committee to write to the Minister for Arts, Culture and Heritage, Hon. Maggie Barry to begin discussions on this issue.
Budget Update
32. Details of the operational levy payable to the museum are $20,795,000. Additional reports to this committee note the levy requests from the Auckland Regional Amenities Funding Board (Funding Board) and the Museum of Transport and Technology (MOTAT).
Organisation |
Levy Paid 2015/2016 |
Proposed Levy 2016/2017 |
MOTAT |
12,287,000 |
$13,100,000 |
Funding Board |
15,148,400 |
$16,142,500 |
AWMM |
28,970,000 |
$29,840,000 |
Total |
56,405,000 |
$59,082,500 |
Draft Annual Plan Budget |
|
58,399,430 |
Consideration
Local Board views and implications
33. Decision making and oversight in respect of regional activities is the responsibility of the Governing Body.
Māori impact statement
34. AWMM have the ability to make positive contributions to Māori wellbeing, and to deliver of Auckland Plan outcomes relating to effective communication and engagement with Māori.
35. AWMM have agreed to continue to build its relationship with iwi by co-developing exhibitions with iwi, hapu and whanau.
36. The impact of the museum’s work will assist in promoting Auckland’s Māori identity and point of difference in the world.
Implementation
37. Following approval of the recommended component of the proposed funding, levy payment will be made through the usual channels.
No. |
Title |
Page |
aView |
Auckland War Memorial Museum Organisational Business Plan 2016-2025 |
103 |
bView |
Regional Facilities Auckland - Letter of Recommendation |
121 |
cView |
Auckland War Memorial Museum Funding Plan 2016/17 |
123 |
Signatories
Author |
Josie Meuli - Senior Advisor |
Authorisers |
Alastair Cameron - Principal Advisor CCO Governance and External Partnerships Phil Wilson - Governance Director Sue Tindal - Group Chief Financial Officer |
Finance and Performance Committee 17 March 2016 |
|
Impact Assessment of the Region-wide Swimming Pool Pricing Policy
File No.: CP2015/23944
Purpose
1. To provide a summary of the impact of the region-wide swimming pool pricing policy, which delivered free access for children 16 years of age and under. Approval is sought to circulate the full impact assessment to local boards
Executive Summary
2. On 2 April 2013, Auckland Council implemented a region-wide swimming pool pricing policy (the pricing policy) whereby children 16 years of age and under received free access to all council-owned swimming pools.
3. A detailed report (Attachment A), requested by the committee in 2012, presents an assessment of the impact of the pricing policy across the network of council-owned pools.
4. The pricing policy achieved its goal to provide equitable access for children to swimming pools across Auckland. However, the achievement of other outcomes was mixed. The number of visits by children and adults at most council-owned pools increased for an 18 month period and then reverted to baseline trends after this period.
5. Based on these results and the above Auckland data, it is reasonable to conclude that the removal of user charges for children was not sufficient, in isolation, to drive long-term increased participation in swimming, or regular on-going visits to council-owned pools.
6. The introduction of user charges for adult admissions to some council-owned pools, which previously provided free access, had a negative impact on overall participation rates. Both adult and child visitor numbers declined in these local board areas. There has also been a small, but statistically significant, decline in Māori participation rates. Pools situated in local board areas that introduced a targeted rate to maintain free access for adults have maintained relatively constant participation levels.
7. There are some limitations to the impact assessment and a range of confounding factors could have influenced the results. For example, weather patterns and pool-specific promotions influence swimming pool use.
8. It is recommended that the committee circulate the impact assessment to local boards.
That the Finance and Performance Committee: a) agree to circulate the Impact Assessment of the Region-wide Swimming Pool Pricing Policy 2013-2015 (Attachment A) to all local boards for their information and to inform the 2017/18 Annual Plan process. |
Comments
Background
9. In June 2012, after considering four pricing scenarios through the Long-Term Plan 2012-2022, the governing body adopted the new region-wide pricing policy. Previously swimming pools operated under different legacy pricing controls. The pricing policy provided for:
· universal free access for children 16 years of age and under at all council-owned swimming pools
· no charge for school groups to book space on school days between 9:00 a.m. and 3:00 p.m.
· no charge for groups serving children 16 years and under to book space during operating hours.
10. The pricing policy did not harmonise other user or service charges across the network of council-controlled pools. Local boards can provide free entry for adults provided they meet all the requirements of a special consultative procedure and can fund the financial implications.
11. The pricing policy was implemented on 2 April 2013 with a goal to “enable all children to access aquatic facilities, promote a sense of belonging, provide equity of access and help raise the level of children’s swimming abilities.” This goal aligns with the council’s vision and strategic direction to accelerate the prospects of children and young people, and promote individual and community wellbeing through participation and excellence in recreation and sport.
12. The introduction of the pricing policy resulted in three types of pricing changes.
a) Type of pricing change |
b) Number of facilities |
c) Introduced free access for children 16 years and under and adults continue to pay the same entry charge |
d) 16 facilities across the north, central, and west local board areas |
e) Introduced charges for adults 17 years and over and children continue to receive free access |
f) 3 facilities within the Manurewa and Howick local board areas |
g) Retained free access for all age-groups funded by a local targeted rated introduced by two local boards |
h) 3 facilities in the Ōtara-Papatoetoe and Māngere-Ōtāhuhu local board areas |
Impact Assessment
13. At its meeting in November 2012, the Finance and Strategy Committee requested a report on “the implementation of the policy including levels of participation, particularly in the legacy Manukau City Council area, after a 12 month period.”
14. Swimming pool facilities operate as a network throughout Auckland. To understand the impact of the pricing policy across and within the network, staff prepared a detailed impact assessment on all 27 aquatic facilities across the region.
15. The assessment looked at the impact on use of aquatic facilities, including visitor numbers, the overall financial impact, and the impact on catchments, user profiles, behaviour and attitudes. Data was collected over the period between October 2012 and March 2015.
16. The assessment provides a robust analytical approach for evaluating impacts compared to what could be achieved by reporting on number of visits to facilities alone.
17. The attached report presents the impact of the pricing policy across:
· the network of all council-owned swimming pools
· clusters of pools which are grouped according to the pricing changes implemented
· each individual swimming pool.
18. The Olympic Pools and Fitness Centre and Mt Albert Aquatic Centre form part of the network, but are not council-controlled. There was no pricing change at these pools. These pools retained charges for both children and adults. However, they were included in the impact assessment because they effectively act as a ‘control group’.
Network Impact Results
Pool visits
19. Following implementation of the pricing policy, there were higher numbers of visitors to council-owned pools across the network. There was a 10 per cent increase in total visits in the first summer following implementation of the pricing policy. However, this increase was not sustained beyond 18 months and reverted to baseline trends.
User profile and behaviour
20. There has been a small decrease in the proportion of children visiting council-owned pools over the long-term following the introduction of the pricing policy. Children now account for 54 per cent of total pool users, down from 60 per cent.
21. Lap swimming and participation in swimming lessons increased while ‘recreational’ swimming decreased. This may indicate improvement in the swimming skills and abilities of some children as well as the result of increased adult visits. Uptake of other services such as spa/sauna activities also increased.
22. Across the network the proportion of Māori users decreased from 14 per cent to 12 per cent. This is largely attributed to the introduction of adult user charges in council-owned pools that previously provided free access to both children and adults. This cluster of pools also experienced a decrease in Chinese users, from 10 per cent to five per cent, and an increase in European users from 50 per cent to 59 per cent.
Financial Results
23. Operational practices implemented alongside the pricing policy helped deliver a surplus of $635,709 in 2013/2014. This was higher than initial estimates. Increased uptake of value-added services such as swimming lessons and spa/sauna activities added to the overall size of the surplus.
Cluster Impact Results
24. The pricing policy had a variable impact across clusters of pools, which are grouped according to the pricing changes implemented, as outlined below.
Cluster |
Impact |
Introduced free access for children (16 facilities) |
Short-term increase in visits that returned to baseline levels after 18 months In response to a survey 48per cent of users stated that access to the pools was more affordable |
Maintained free access for children, but introduced adult user charges (3 facilities) |
42% decline in visits in the first six months following the policy change Visitor numbers started to show signs of recovery after 18 months In response to a survey 44% of users stated that access to the pools was less affordable Increase in swimming lessons |
Maintained free access for children and adults (3 facilities) |
Reduction in the proportion of children in the user profile from 65% to 57% Increase in swimming lessons and decrease in recreational swimming |
No change: Independently owned and operated pools that retained user charges for children and adults (2 facilities) |
User profile, behaviour, catchment areas and visits remained relatively constant |
Individual Pool Impact Results
25. A high level summary of the impacts of the pricing policy on each swimming pool over the study period is outlined below. Detailed analyses are included in the individual facility assessments in section six of the attached impact assessment.
Pool |
Type of pool |
Children as a proportion of users |
Total visits |
|
i) Introduced free access for children |
||||
j) Birkenhead |
k) Indoor/Outdoor |
l) Increased |
m) Increased |
|
n) Cameron |
o) Indoor |
p) No change |
q) Small increase |
|
r) Franklin |
s) Indoor |
t) Increased |
u) Small increase |
|
v) Glen Innes |
w) Indoor |
x) No change |
y) Small increase |
|
z) Glenfield |
aa) Indoor |
bb) Decreased |
cc) Variable |
|
dd) Jubilee |
ee) Outdoor |
ff) No change |
gg) Small increase |
|
hh) Lagoon |
ii) Indoor/Outdoor |
jj) Small decrease |
kk) Increased |
|
ll) Massey Park |
mm) Indoor/Outdoor |
nn) No change |
oo) Increased |
|
pp) Onehunga |
qq) Indoor/Outdoor |
rr) No change |
ss) Small increase |
|
tt) Parnell |
uu) Outdoor |
vv) No change |
ww) Increased |
|
xx) Point Erin |
yy) Outdoor |
zz) Small decrease |
aaa) Variable |
|
bbb) Stanmore Bay |
ccc) Indoor |
ddd) No change |
eee) Small increase |
|
fff) Takapuna |
ggg) Indoor |
hhh) No change |
iii) Minimal |
|
jjj) Tepid Baths |
kkk) Indoor |
lll) No change |
mmm) Small increase |
|
nnn) West Wave |
ooo) Indoor |
ppp) No change |
qqq) Increased |
|
rrr) Whiteside |
sss) Outdoor |
ttt) Increased |
uuu) Increased |
|
vvv) Maintained free access for children, but introduced adult user charges |
||||
www) Lloyd Elsmore |
xxx) Indoor |
yyy) No change |
zzz) 20 per cent decrease |
|
aaaa) Manurewa |
bbbb) Indoor |
cccc) No change |
dddd) 60 per cent decrease |
|
eeee) Totara Park |
ffff) Outdoor |
gggg) No change |
hhhh) 70 per cent decrease |
|
iiii) Maintained free access for children and adults |
||||
jjjj) Moana-Nui |
kkkk) Indoor/Outdoor |
llll) No change |
mmmm) Variable |
|
nnnn) Otara |
oooo) Indoor/Outdoor |
pppp) No change |
qqqq) Variable |
|
rrrr) Papatoetoe |
ssss) Indoor/Outdoor |
tttt) Decrease |
uuuu) Variable |
|
Limitations and Risks
26. There are some limitations to the impact assessment, including:
· children aged between 10-16 years can go to the pool alone but were not able to be interviewed in the catchment studies if they were under 15 years old
· the short timeframes covered by the surveys and visitor numbers make it difficult to discern long-term trends
· reliable data is not available prior to 2012
· financial data to measure the long-term impact of the pricing policy has not been collected beyond 2013/14.
27. To address some of the uncertainty related to identifying emerging trends, staff reviewed additional visitor data from April 2015 to January 2016. This data shows that the number of visits across the network remain fairly consistent with the study data and follow seasonal fluctuations. The number of visits at pools that introduced adult charges show similar levels to the previous seasons and have not recovered.
28. There is a risk that a range of confounding factors could have influenced the results. The location, quality of facilities, weather patterns and pool-specific promotions contribute to swimming pool use. However, static visitor numbers across the two independently operated pools suggest that these factors may have had relatively low levels of influence.
Conclusions
29. The pricing policy achieved its goal to provide equitable access for children to swimming pools across Auckland.
30. The number of visits by children and adults at most council-owned pools increased for an 18 month period and then reverted to baseline trends after this period. These results mirror the outcomes of a free pool access policy introduced in England between 2009 and 2010 where participation briefly increased but then reduced in the second half of the year.
31. Based on these results and the above Auckland data, it is reasonable to conclude that the removal of user charges for children was not sufficient, in isolation, to drive long-term increased participation in swimming, or regular on-going visits to council-owned pools.
32. The introduction of user charges for adults at some council-owned swimming pools has been a barrier to participation of both children and adults. Whereas pools situated in local board areas that introduced a targeted rate to maintain free access for adults have maintained relatively constant participation levels.
Next Steps
33. The full impact assessment with individual pool reports will be circulated to local boards for their information and to inform the 2017/18 Annual Plan process.
Consideration
Local Board views and implications
34. Local board views were sought on swimming pool pricing scenarios as part of the development of the Long-term Plan 2012-2022. Local boards were then informed about the implementation and implications of the pricing policy in November-December 2012.
35. All local boards must adhere to the pricing policy to provide universal free access to children 16 years of age and under. Local boards have a degree of discretion on fees and charges at local swimming pools for adults and for other activities, provided a proposal for change meets all the requirement of a special consultative procedure and any financial implications are managed within the local board budget.
Māori impact statement
36. The pricing policy was expected to contribute to improved wellbeing among Māori communities by providing free access for young people to aquatic facilities where individuals can participate and learn water skills.
37. Māori make up 15 per cent of the New Zealand population but account for 22 per cent of all drowning incidents over the last five years.
38. In 2013, Māori made up 14 per cent of users at swimming pools, compared to nine per cent of the population. The impact assessment showed that this proportion of Māori users dropped to 12 per cent in 2014 across the network. The decrease is most evident at swimming pools that introduced adult charges. There was a decrease from 25 per cent to 18 per cent in the cluster of pools introducing adult charges. However, the proportion of Māori users participating in lap swimming increased from 16 per cent to 19 per cent. There was a similar increase in swimming lessons from 12 per cent to 15 per cent.
No. |
Title |
Page |
aView |
Impact Assessment (Under Separate Cover) |
|
bView |
Individual Pool Reports (Under Separate Cover) |
|
Signatories
Authors |
Paul Marriott-Lloyd - Team Leader Deanna McLoughlin - Principal Policy Analyst |
Authorisers |
Kataraina Maki - GM - Community & Social Policy Jim Quinn - Chief of Strategy Sue Tindal - Group Chief Financial Officer |
Finance and Performance Committee 17 March 2016 |
|
File No.: CP2016/03118
Purpose
1. This report recommends the adoption for consultation of the Contributions Policy 2015 Variation A to increase the number of funding areas for parks and stormwater.
Executive Summary
2. At its meeting on 8 May 2015 the Budget Committee directed staff to undertake further work on the refinement of parks (reserve acquisition, reserve development and community infrastructure activities) funding areas and report back in October 2015 to align with Annual Plan timings. Changes to the Local Government Act 2002 mean that the council is no longer required to consult on changes to its Contributions Policy as part of its annual and long-term plan processes. Any changes to the policy agreed to after consultation will come into effect from 1 July 2016.
3. Staff recommend that the council consult on an increase in the number of funding areas for stormwater from 22 to 36 and for parks from four to 26. These changes reflect:
· geographic characteristics of stormwater and parks (reserve acquisition, reserve development and community infrastructure activities) usage;
· growth priority areas;
· desire for a stronger connection between where development contributions are collected and spent; and
· retention of flexibility to amend plans to accommodate changes in the pattern of planned growth.
4. Consultation with affected parties, primarily developers, will take place in April 2016.
That the Finance and Performance Committee: a) adopt for consultation a Proposal to amend to the funding areas for Stormwater, Reserve Acquisition, Reserve Development and Community Infrastructure in the Contributions policy and other minor amendments. b) agree the process for consultation as set out in the report. c) delegate to the Group Chief Financial Officer the power to appoint staff to attend the consultation event and hear the views of interested parties.
|
Comments
Background
Current policy
5. The contributions policy describes how:
· council funds the cost of investment in infrastructure to support the growth of Auckland; and
· cost is shared between ratepayers and developers and amongst different types of developments.
6. The contributions policy sets out:
· capital projects the council will fund from development contributions in each activity (transport, parks, stormwater) in each funding area; and
· how much each type of development (e.g. residential and commercial) will be charged.
7. Alongside the Long-term Plan 2015-2025 consultation process the following changes were proposed to the contributions policy:
· increasing the number of funding areas for stormwater and transport; and
· introducing funding areas for parks (reserve acquisition, reserve development and community infrastructure activities).
8. During consultation feedback expressed concern that funds were not spent in the area from which they were collected.
Principles
9. The council considers the following factors in determining development contributions funding areas:
· Principles set out in the Local Government Act 2002 including:
o demand for services by different development types;
o benefit received by different development types and existing ratepayers; and
o geographical differences in infrastructure requirements.
· Differences in the expected cost and timing of the provision of growth related infrastructure across the region.
· Flexibility to change plans to adjust which projects proceed and at what time to respond to changes in actual growth demand.
Discussion
10. Further work has been undertaken on the funding areas for stormwater and parks. This work is recommending an increase in the number of funding areas for the associated activities.
11. The increase in the number of funding areas will provide confidence to developers and ratepayers that development contributions will be invested in assets to serve growth in the areas where the funding is raised. The funding areas have been retained at a sufficient size to allow the flexibility to adjust plans in response to changes from the forecast patterns of growth. This will also allow the council to create new funding areas to respond to and manage developments that have unique characteristics. Increasing the number of funding areas will reduce planning flexibility but the limitations this presents is outweighed by the benefit of more closely aligning funding to expenditure.
12. The changes proposed for these activities are set out below.
Stormwater
13. For stormwater it is proposed to increase funding areas from 22 to 36 to:
· reflect differences in expected investment based on the capacity of existing infrastructure;
· hydrology and topography of each area; and
· account for Growth Priority Areas.
14. See below for Stormwater Funding Areas:
Stormwater Funding Areas |
Ararimu |
City Centre GPA |
East Coast Bays |
Flatbush GPA |
Metro Manukau GPA |
Manurewa Papakura GPA |
Greater Takapuna GPA |
Greater Tamaki GPA |
Helensville |
Otahuhu GPA |
NORSGA GPA |
Pukekohe GPA |
Tamaki East |
Tamaki West 1 |
Tamaki West 2 |
Tamaki West 3 |
Wairoa |
Waitakere Ranges |
Waitemata North |
Waitemata Northwest |
Waitemata West |
Waiuku |
Warkworth |
Urban Akld Non GPA |
Urban Auckland |
Hibiscus Coast |
Inner West Triangle GPA |
Kumeu / Huapai |
Mahurangi |
Manukau Central |
Manukau North |
Manukau South |
Manukau West |
Other Auckland |
Parks
15. For parks (reserve acquisition, reserve development and community infrastructure) it is proposed to increase funding areas from four to 26. The proposed funding areas will:
· reflect differences in expected investment based on the capacity of existing infrastructure; and
· reflect the geographical patterns of use of local parks.
16. The proposed tier structure for these funding areas has been designed to align with planned investment in different types of reserves and community infrastructure.
· Tier 1 Auckland wide funding area will fund regional parks and the regional network of sports fields
· Tier 2 sub-regional facilities that serve users from a wider catchment than the localised Tier 3 funding areas. This includes premier parks as well as a programme of park acquisition that aren’t yet able to be allocated to a specific localized tier 3 funding area.
· Tier 3 Localised funding areas will fund investment in local parks and community infrastructure in each of the 22 identified funding areas.
Tier |
Funding areas for reserve acquisition, reserve development and community infrastructure |
Tier 1 |
Auckland Wide |
Tier 2 |
Greenfield |
Tier 2 |
Urban |
Tier 2 |
Rural |
Tier 3: Greenfield |
Warkworth |
Tier 3: Greenfield |
Dairy Flat |
Tier 3: Greenfield |
Whenuapai / Kumeu |
Tier 3: Greenfield |
Westgate / Redhills |
Tier 3: Greenfield |
Scott Point |
Tier 3: Greenfield |
Flatbush |
Tier 3: Greenfield |
Takanini |
Tier 3: Greenfield |
Opaheke / Drury |
Tier 3: Greenfield |
Hingaia |
Tier 3: Greenfield |
Paerata / Pukekohe |
Tier 3: Urban |
Hibiscus |
Tier 3: Urban |
North Shore |
Tier 3: Urban |
West |
Tier 3: Urban |
Central |
Tier 3: Urban |
South (West) |
Tier 3: Urban |
South (East) |
Tier 3: Rural |
Rural North Upper |
Tier 3: Rural |
Rural North Lower |
Tier 3: Rural |
Rural West |
Tier 3: Rural |
Rural South West |
Tier 3: Rural |
Rural South East |
Tier 3: Rural |
Rural Islands |
17. The breakdown of funding areas that are proposed to be included in the contributions policy recognise variations in costs to achieve council’s provision standards for parks between rural areas, greenfield developments and the existing urban area. For example:
· in greenfield development areas funding is required to both acquire land and develop new parks;
· in existing urban areas there is more focus on developing existing parks to support higher usage rates rather than acquiring new land; and
· rural areas have a different level of service than urban areas – for example, we do not consider all residents should live within walking distance to a neighbourhood park.
Definitions
18. A new definition of ‘Household’ and a minor change to the definition of ‘Dwelling or dwelling unit’ is proposed to provide additional clarification for what type of residential developments may be charged development contributions.
Alternative options
19. Consideration was given to two alternative options:
· reverting to the large regional and sub-regional funding areas for stormwater and parks used prior to the amendments made in May 2015; or
· retaining the funding areas for stormwater and parks used in the operative policy.
20. Both alternatives provide greater flexibility for the council to adjust project choice and timing to reflect changes in the patterns of growth from initial forecasts. They are also very simple to administer. However, both were rejected because they do not reflect:
· the geographic characteristics of the demand for, and use of, the parks and stormwater services;
· the desire of the community to see a closer relationship between where development contributions are collected and spent; and
· closer alignment to the government changes in the LGA (Amendment Act 2014) including the principles and purposes of contributions.
Consideration
Significance of Decision
21. Adoption of a variation of the contributions policy is not a significant decision.
Consultation
22. The council is required to consult on amendments to the Contributions policy under section 82 of the Local Government Act 2002. Consultation with the public will occur in April 2016. A consultation document, including the proposed policy variation is attached to this report and will be publicly available on Shape Auckland. A period of one month will be provided for consultation so that members of the public can provide feedback.
23. An opportunity will be provided for interested parties to present their views in person. Developers will be formally invited to this event. This report recommends that staff be delegated authority to hear the views of interested parties. Councillors will be advised of the event so that they may attend if they wish.
Local Board views and implications
24. The governing body has decision making authority for setting contributions policy.
25. Local boards provided feedback through the Long-term Plan 2015-2025 consultation process and the proposed funding area changes further align with that feedback. A number of local boards suggested that funding areas should be more locally focused. The proposal to increase the number of funding areas is consistent with this view.
26. If the Finance and Performance Committee adopts the proposal, local board chairs will be briefed in April 2016. If the local boards wish to comment and/or seek further advice from staff they will have an opportunity to do so following that briefing. Staff will report any local board commentary to the Finance and Performance Committee to consider when seeking a final decision on the proposal.
Māori impact statement
27. Council does not hold information on the ethnicity of developers. The impact on Māori will be similar to the impact on other residents and ratepayers.
28. The council offers a grants scheme that provides funds equivalent to the cost of development contributions for qualifying papakāinga housing.
Implementation
29. There are no implementation issues.
Financial and Resourcing Implications
30. There are no financial or resourcing implications.
Legal and Legislative Implications
31. The options presented in this report comply with the requirements of the Local Government Act 2002.
No. |
Title |
Page |
aView |
Contributions Policy 2015 Variation A |
165 |
bView |
Consultation document for proposed changes to Contributions policy |
175 |
Signatories
Author |
Andrew Duncan - Manager Financial Policy |
Authorisers |
Matthew Walker - GM Financial Strategy and Planning Sue Tindal - Group Chief Financial Officer |
Finance and Performance Committee 17 March 2016 |
|
Auckland Council Group half year financial results to 31 December 2015
File No.: CP2016/00947
Purpose
1. This report presents the financial results of the Auckland Council Group for the six months to 31 December 2015.
Executive Summary
2. This report is part of the regular quarterly reporting to the Finance and Performance Committee on the Council’s Group financial performance for the year to date.
3. The Council Controlled Organisations report their individual performance to the Council Controlled Organisations Governance and Monitoring Committee.
That the Finance and Performance Committee: a) receive the Auckland Council Group half year financial results to 31 December 2015 report. |
Discussion
4. This report discloses the financial performance, financial position and cash flows of the Auckland Council Group for the six months ended 31 December 2015.
5. The chair and deputy chair were delegated by this committee to authorise the release of the Group Interim Report to the New Zealand Stock Exchange (NZX) on 29 February 2016, as required by the NZX listing rules.
6. Auckland Council Group generated an operating surplus before gains and losses of $948 million for the six months to 31 December 2015, compared to the phased budget of $864 million.
7. Total revenue excluding gains is ahead of budget by $41 million primarily due to higher volume of vested assets received than expected.
8. Total expenditure excluding losses is lower than budget by $43 million primarily due to timing of when expenditure is incurred.
9. Overall financial performance is in line with the phased long-term plan.
Consideration
Local Board Views and Implications
10. This report is for the Council Group. Each Local Board receives a report specific to their area.
Māori Impact Statement
11. The report is limited to financial performance. Council’s contribution to Māori outcomes will be reported in the annual report.
General
12. There are no financial or resourcing implications arising from the adoption of this report.
Implementation Issues
13. There are no implementation issues.
No. |
Title |
Page |
aView |
Auckland Council Group Quarterly Financial Report 31 December 2015 |
183 |
Signatories
Author |
Francis Caetano - Group Financial Controller |
Authorisers |
Kevin Ramsay - General Manager Finance Sue Tindal - Group Chief Financial Officer |
Finance and Performance Committee 17 March 2016 |
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File No.: CP2016/02855
Purpose
1. The purpose of this paper is to seek approval for minor changes to the current Auckland Council Treasury Management Policy (TMP). The changes reflect:
a) amendments to the Local Government Act and updates to council’s funding sources to include the Local Government Funding Agency (LGFA), Crown Loan and foreign currency borrowings; and
b) for the avoidance of doubt, that Treasury staff carry out the council’s treasury activities in accordance with the TMP.
Executive Summary
2. The council’s TMP sets out the council‘s policies on liability management and investment. The council is legally required to have these policies. This report proposes minor changes to the TMP to make sure that the council’s policies are up to date.
3. The council’s Treasury Management Steering Group (TMSG) consists of :
Auckland Council
· Chief Executive
· Group Chief Financial Officer
· General Manager Corporate Finance and Property
· Chief Economist
· General Manager Financial Strategy and Planning
· Treasurer and General Manager Transaction Services
· Executive Director, Auckland Investment Office
Auckland Transport
· Chief Financial Officer
Independent
· Partner Financial Risk, PricewaterhouseCoopers
4. The TMSG considered some changes in September 2014 to the TMP. These were mainly relating to legislation changes and to update details on council’s funding sources to include LGFA, the Crown and offshore markets. In addition, some sections were reworded to make the policy easier to understand. These changes were originally intended to be combined with the Long-term Plan process (LTP), but were separated out, and still need to be adopted by the Finance and Performance Committee.
5. In 2016, the TMSG also considered that it was useful to re-confirm through the TMP that TMSG’s responsibilities (and powers) arise from the TMP, and that Treasury staff acting under the TMP will be giving effect to council decisions and the TMP, while still dealing with day to day financial transactions.
6. The January 2016 TMSG meeting approved the proposed changes to the TMP and recommend adoption by the Finance and Performance Committee.
That the Finance and Performance Committee: a) approve minor amendments to the Treasury Management Policy for the Local Government Act, Local Government Funding Agency, Crown Loan and foreign currency borrowings. b) approve an amendment to the Treasury Management Policy to clarify that Treasury staff carry out the council’s treasury activities in accordance with the Treasury Management Policy. |
Comments
7. Under the Local Government Act 2002, the council is required to adopt a liability management policy and an investment policy. The council’s TMP meets this legal requirement.
8. Over recent years, the legislation has been amended to confirm that the policies could be amended without a formal consultation process. The council’s Significance and Engagement Policy still applies in this situation, and any proposed significant change would still require public consultation.
9. The TMP establishes the TMSG to review and approve strategic risk limits, and to report quality. In September 2014, the TMSG considered and recommended changes to the TMP mainly relating to legislation changes and to update details on council’s funding sources to include LGFA, the Crown and offshore markets. In addition, some sections were reworded to make the policy easier to understand.
10. The TMSG also recommended including the revised TMP with the proposed adoption of policies for the 2015 LTP.
11. However, during the LTP process the TMP policy work was separated out, as there were no significant changes to the TMP. That means that the 2014 TMSG minor recommendations were not presented to the Finance and Performance Committee for approval at that time. It is now appropriate that these changes are considered by this committee.
12. In addition to the earlier recommendation, in 2016 the TMSG considered that it was useful to confirm in the TMP that the TMSG authority arises from the TMP. This states that the TMSG will have responsibility for reviewing and approving strategic risk limits for council’s treasury activities; and monitoring compliance to these limits and the performance of treasury activities against agreed benchmarks.
13. When carrying out these responsibilities, TMSG (and all Treasury staff) are required to act in accordance with the LTP, and other council decisions and policies including the financial strategy. This strategy sets out council’s objectives for holding and managing financial investments and equity securities, and quantifies limits for borrowing (among other matters). The strategy acknowledges that “council’s financial risks (market risk, credit risk and liquidity risk) are managed under the TMP which focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the financial performance of the council group[1].”
Consideration
Local Board views and implications
14. The governing body (and committees) are responsible for decision-making on the council’s financial strategy. Local Boards were provided with the opportunity to provide views on the council’s financial strategy through the LTP. Local Board views have not been sought in relation to the minor amendments to the TMP.
Māori impact statement
15. There are no identifiable Māori impacts relating to the decision required.
Implementation
16. There are no implementation issues.
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Draft Treasury Management Policy |
193 |
Signatories
Author |
Joy Buckingham - Treasury Reporting Manager |
Authorisers |
John Bishop - Treasurer & GM Transaction Services Sue Tindal - Group Chief Financial Officer |
Finance and Performance Committee 17 March 2016 |
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Alternative Sources of Financing work programme
File No.: CP2016/03866
Purpose
1. To provide an update on the council’s programme of work related to the two independent reports on alternative sources of financing available to Auckland Council.
Executive Summary
2. Last year Cameron Partners and Ernst Young were appointed to independently provide input and thought expertise into the range of alternative financing options available to the council and the criteria by which the council should evaluate these options. The full reports are publicly available as attachments to the agenda to the 19 November 2015 meeting of this committee.
3. Certain options identified by the report authors would require council to amend its Long-term Plan prior to any final decision-making. An amendment process would require a full audit as well as comprehensive community consultation.
4. Other opportunities identified in the reports are more operational in nature and relate to corporate support functions. The forward programme of work for these opportunities is set out in this report.
That the Finance and Performance Committee: a) note that a proposal on recommended financing options for the council’s corporate office property portfolio will be presented to the 13 May 2016 Finance and Performance Committee meeting.
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Comments
Background
5. The Long-term Plan 2015-2025 included projected rates and debt increases that aimed to strike the right balance between investing in Auckland and ensuring that general rates increases remain affordable over time. These projections were based on the assumption that large and growing efficiency targets will be met. These targets were as follows:
Financial year ending 30 June ($ million) |
2016 |
2017 |
2018 |
Savings from prior years |
183 |
224 |
243 |
Increase |
41 |
19 |
17 |
Annual efficiency savings |
224 |
243 |
260 |
6. Last year Cameron Partners and Ernst Young were appointed to independently provide input and thought expertise into the range of alternative financing options available to the council and the criteria by which the council should evaluate these options. The full reports are publicly available as attachments to the agenda to the 19 November 2015 meeting of this committee.
7. Certain options identified by the report authors would require council to amend its Long-term Plan prior to any final decision-making. An amendment process would require a full audit as well as comprehensive community consultation.
8. Other opportunities identified in the reports are more operational in nature and relate to corporate support functions. The forward programme of work for these opportunities is set out in this report.
Strategic Procurement
9. In October 2015 Auckland Council, Auckland Transport and Watercare combined their spend data with a consistent categorisation and performed a review of high level opportunities to deliver procurement savings. This desktop review looked at on and off contract spend, identified what was addressable and found a potential total opportunity across the council group of $72.76 million annualised savings including both operating and capital expenditure.
10. During November and December of 2015 this desktop exercise was validated through a number of workshops with relevant council group staff. Real initiatives were identified and scoped that could deliver these savings. Each initiative was then weighted based on ease of implementation and value. A total of 1,866 initiatives were identified worth $122 million. Initiatives have now been prioritised with a focus on contributing to Long-term Plan efficiency targets in the current and next financial years.
Corporate Accommodation Usage
11. The council group currently occupies over 110,000m2 of office space across 28 sites for corporate accommodation. This is after a reduction since amalgamation of 5 sites and around 3,000m2. This has been achieved through vacating previously leased sites such as Pitt Street and Hereford Street, as well as implementing our workplace strategy, resulting in much more efficient use of our space.
12. There is currently some co-location within the group, as well as some co-location of service delivery functions with corporate accommodation, where this is deemed appropriate due to location, the activities undertaken and the size of the site.
13. The organisation is continuing to move towards a more mobile workforce, whereby the nature of the activities undertaken will dictate how and where people work. This is all made possible by improvements in technology and utilising features within our systems.
14. Future and/or continued focus is on:
· A more portfolio approach to corporate property across the group, including more co-location, and sharing of workplaces.
· Roll out of a more mobile workforce, enabled by Wi-Fi access throughout our portfolio, and system enhancements.
· Further optimising the number of workplaces we utilise and the workspace performance within them.
Corporate Accommodation Financing
15. Auckland Council owns a range of corporate offices with an estimated market value of $275 million. The largest, both in terms of office space and value, is 135 Albert Street.
16. The extent of ownership of the office buildings in part reflects legacy council ownership structures, and the 2012 decision to buy 135 Albert Street.
17. Both Ernst Young and Cameron Partners identified re-structuring the corporate office portfolio as a financing opportunity. Council staff are now developing a formal proposal on this opportunity for presentation to the 13 May meeting of this committee.
18. In developing the options and recommendation, an assessment criteria will be used that includes:
· Control - is the property strategic or specialised, and whether having control supports organisational goals.
· Financial – the impact on balance sheet, the income statement, rates and ratios.
· Operational risk – level of risk for ongoing maintenance, renewal and capacity requirements.
· Capital scarcity – the level of scarcity of capital and whether this capital may be best used for other capital projects.
19. The financing options will include council ownership, sale/leaseback, a joint ownership structure and an equity ownership structure. There may be variants to these options which will be considered through the process.
Fleet
20. The Council currently has around 800 vehicles, utilising around 1 million fleet hours per year. This includes specialist vehicles (such as for Civil Defence & Emergency Management, and Animal Control), as well as pool vehicles for more general use, with around 75% being used by field staff in the operations division.
21. At around 50% the utilisation rate is below industry benchmarks of 77%, and Council currently has a very wide range of types of vehicles and suppliers for vehicles services.
22. In examining fleet, there are many aspects to be covered including the use of alternate modes (e.g. Hop cards, taxis, electric bikes, video conferencing), whole of life costs (purchase, operating, resale), sustainability and ownership/management models.
23. Future and/or continued focus is on:
· Consolidation of the fleet to optimise the utilisation rate and maximise availability, enabling an overall reduction in the fleet size.
· Transformation of current practices, to further improve safety, reduce running costs and ensure vehicles are being used as efficiently as possible.
· Further “greening” of the fleet from a sustainability perspective, thereby reducing both our costs and our carbon footprint.
Shared Back Office Services
24. As stated in the Ernst Young alternative financing report, the cost of delivering back office functions is a significant component of expenditure. The centralisation of common back office functions provides the opportunity to deliver a lower cost-to-serve.
25. Currently council parent provides centralised shared services across a number of functions including accounts payable, accounts receivable, reconciliations and travel. This support is provided to council parent and the smaller CCO’s including ACIL, ATEED, RFA and PDA.
26. Since council’s inception, approximately $12 million of savings has been generated through this centralisation and improvement in business processes.
27. Future initiatives are focused on the following areas:
· Unification of all payable, receivables, payroll and reconciliation functions within council parent and the smaller CCO’s. This will help achieve the operational efficiency targets in the Long-term Plan.
· Analysis of other back office and support functions within council parent and smaller CCO’s to see where efficiencies or outsourcing opportunities exist.
· Examine the feasibility of group wide (including AT and Watercare) multi-functional shared services and centres of excellence.
28. The last two initiatives will be integrated with the group corporate accommodation strategy and incorporated in the group IS roadmap (File No.: CP2016/03862).
Investment Decision Making and Better Business Cases
29. In recent years, there has been a significant push to lift investment decision making standards across the state sector. This has included the publishing of high quality guidance materials and minimum standards for the development of business cases and asset management plans. It has introduced a requirement for asset-intensive agencies to set out their capital investment intentions over a 10 year horizon, and also mandated regular project reporting across the sector.
30. Cabinet’s expectations on these matters are set out Cabinet Office Circular CO (15) 5 – Investment Management and Asset Performance in the State Services.
http://www.dpmc.govt.nz/sites/all/files/circulars/coc_15_05_0.pdf
31. The council’s investment decision making processes are well advanced in a number of areas including the development of the Auckland Plan as an over-arching strategy document and the use of asset management planning to develop robust 10-year financial plans. However, staff see room for further improvement, particularly in the development of effective business case and investment reporting processes that are fit for purpose and well aligned to political decision making processes. Staff are working with The Treasury to understand how their key learnings could be applied to Auckland Council, beginning with investment decision making for the next annual and long-term plans.
Consideration
Local Board views and implications
32. The work programmes discussed in this report are of corporate support in nature. Local board views were not sought.
Māori impact statement
33. As the work programmes discussed in this report are of corporate support in nature, Iwi views have not been sought. Nor is it considered there is a specific impact.
Implementation
34. There are no implementation issues
There are no attachments for this report.
Signatories
Author |
Ross Tucker - Manager Financial Planning and Strategy |
Authorisers |
Matthew Walker - GM Financial Strategy and Planning Sue Tindal - Group Chief Financial Officer |
Finance and Performance Committee 17 March 2016 |
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Diversified Financial Asset Portfolio and Insurance
File No.: CP2016/03856
Purpose
1. To inform the Finance and Performance Committee of:
· The intention to examine utilising part of the Diversified Financial Asset Portfolio (DFAP) to fund current uninsured underground asset risks.
· The intention to liquidate the remaining DFAP balance to fund infrastructure investment.
· Proposed changes to Auckland Council’s insurance policies.
· Future high level strategic plans to optimise Auckland Council group’s insurance arrangements.
Executive Summary
Underground Assets and the Diversified Financial Asset Portfolio
2. Auckland Council currently self-insures its exposure to underground assets risks. However, Council is not exposed to the full cost of repairs and replacement of these assets in the event of a natural hazard event or loss.
3. Under current Civil Defence and Emergency Management arrangements, in general terms, the Crown is responsible for 60 per cent of damage and local government 40 per cent.
4. The Crown has signaled a review of the current uninsured/self-insured risk arrangements. Future cost sharing arrangements may result in council being responsible for the first layer of loss (up to a defined point based on maximum probable loss modelling) and then for a cost sharing arrangement (with the Crown) to apply for losses above this level.
5. Staff are undertaking analysis on the most appropriate way to mitigate and manage council’s exposure to losses on underground assets, given the likely future arrangements. Considerations involve: (1) protecting the council’s balance sheet and credit rating; (2) inter-generational equity of funding such losses; (3) the availability or otherwise of insurance solutions; and (4) the council’s self-insurance capability.
6. Other than the status quo of self-insuring Council’s potential exposure to loss for its underground assets, staff are examining the possibility of forming a captive insurance company[2] or something similar, to be funded each year from rates to build up a fund to cover (an eventual) underground event. The fund would be initially capitalised from a partial sell-down of DFAP.
7. The captive (or similar) would be excluded from credit rating and balance sheet ratio’s to minimise the risk that a future underground asset loss event would adversely impact the council’s balance sheet and credit rating.
8. The next steps involved are:
· Completing risk modelling to assess council’s exposure to losses on underground assets.
· Undertaking actuarial analysis to determine options for the appropriate initial level of any fund.
· Completing legal analysis on the formation of a captive insurance company including its domicile and CCO status.
· Undertaking an assessment of any other relevant options, and the benefits and risks of each option.
9. It is very likely that the funds required to capitalise a captive insurance company or similar will be less than the current balance of the DFAP. It is recommended that any excess DFAP funds are then liquidated over time in an orderly manner, to fund general infrastructure requirements.
10. It is proposed to submit a formal recommendation to the Finance and Performance Committee in May or June 2016.
2016/17 Insurance Renewal
11. There are no significant changes planned to the group’s property insurance under our material damage/business interruption policy.
12. Specifically, staff will:
· Continue to expand the use of group policies where appropriate.
· Examine the option of integrating CCO Professional Indemnity and Professional Liability policies. Into the council parent policy.
· Look at extending the required coverage for Statutory Liability.
13. Staff will report back on the outcome of the renewal at a future Committee/Governing Body meeting.
14. We do not expect significant premium changes given steady insurance market pricing.
Insurance Broker
15. Auckland Council and CCO’s (excluding Watercare) use JLT for insurance broking services, while Watercare use AON.
16. Council intends to undertake a tender for insurance broking services before 31 December 2016, and on a group basis, subject to Watercare’s agreement.
That the Finance and Performance Committee: a) note the report on the 2016/17 insurance renewal and the proposed future direction for insurance and the Diversified Financial Asset Portfolio. b) note that staff will submit a formal recommendation regarding the matters referred to in this report to the Finance and Performance Committee in May or June 2016.
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Comments
Funding Uninsured Underground Assets and the Diversified Financial Asset Portfolio
17. The Crown has signaled a review of current Civil Defence Emergency Management funding arrangements for local government three waters and flood protection assets. Under current arrangements, in general terms, Crown is responsible for 60 per cent of damage and local government 40 per cent.
18. Auckland Council currently self-insures its 40 per cent exposure. The rationale for this is:
· the low risk of an event; and
· the likelihood that external insurance would be excessively expensive relative to the risk.
19. Future cost sharing arrangements may result in council being responsible for the first layer of loss (up to a defined point based on maximum probable loss modelling) and then for a cost sharing arrangement (with the Crown) to apply for losses above this level.
20. The Crown has, in collaboration with Local Government New Zealand, established a board to investigate the option of a Local Government Risk Agency. Any such agency if established would assist councils with risk management advisory services (including natural hazard risks). Council is part of the advisory group for this project.
21. Staff are undertaking analysis of the most appropriate way to mitigate and manage its exposure to underground assets, given the likely future arrangements. Considerations will involve: (1) protecting the council’s balance sheet and credit rating; (2) inter-generational equity of funding such losses; (3) the availability or otherwise of insurance solutions; and (4) the council’s self-insurance capability.
22. Other than the status quo of self-insuring Council’s potential exposure to loss for its underground assets, staff are examining the possibility of forming a captive insurance company or something similar, to be funded each year from rates or retained insurance premiums to build up a fund to cover (an eventual) underground event. This would result in inter-generational equity with regard to the funding of such losses. Payments into the captive fund would be based on market premiums for the risk. If this option is preferred, the fund could be initially capitalised from a partial sell-down of DFAP.
23. A captive insurer is a wholly owned subsidiary entity of an insured party that insures the risks of its owner(s). The owners of a captive would benefit, amongst other things, from retaining any underwriting profits for insuring the owner’s risks. It would require appropriate level of capitalisation from its owners.
24. The captive (or similar) would be excluded from credit rating and balance sheet ratio’s to minimise the risk that a future underground asset loss event would adversely impact the council’s balance sheet and credit rating. If the fund was not excluded from these ratios a large adverse event is likely to result in a negative ratings consequence due to the resulting unplanned increase in debt levels.
25. The next steps involved are:
· Completing risk modelling to assess council’s exposure to losses on underground assets. This will inform staff as to the likely magnitude of a loss based on scenarios such as a 1 in 500 year natural catastrophe event.
· Undertaking actuarial analysis to determine options for the appropriate initial level of any fund. This will be dependent on :
o the maximum level of the fund required
o likely premiums paid into the fund
o assumed investment returns
o the number of years necessary before the fund reaches maximum level requirements
· Completing legal analysis on the formation of a captive insurance company including its domicile and CCO status.
· Undertaking an assessment of any other relevant options, and the benefits and risks of each option.
26. It is very likely that the funds required to capitalise a captive insurance company or similar will be less than the current balance of the DFAP. This will be confirmed by actuarial analysis.
27. It is recommended that any excess DFAP funds are then liquidated over time in an orderly manner, to fund general infrastructure requirements.
28. Both EY and Cameron Partners identified the DFAP as a commercial rather than a strategic asset meaning ownership of the asset is not required to ensure delivery of key services or outcomes.
29. The DFAP is currently valued at around NZ$ 329 million and is diversified across investments in equities, bonds and cash in NZ and global markets. The performance of the fund since inception has broadly been in line with benchmark and ‘market’ returns. The portfolio is managed by 12 separate fund managers with oversight from an external independent investment advisor.
30. The creation of a captive insurance vehicle would create a fund with a specific purpose relating to the strategic long-term financing goals of council.
31. The funds composition would also be different from the current composition of the DFAP. The emphasis would be on non-New Zealand assets to ensure risk is geographically diversified. This contrasts with the current DFAP where the fund has no strategic purpose and therefore the amount of the portfolio and the investment approach bear no relationship to the strategic direction of council.
32. It is proposed to submit a formal recommendation to the Finance and Performance Committee in May or June 2016.
2016/17 Renewal
33. Council arranges insurance on a group basis, with the exception of Watercare who undertake insurance independently.
34. Most of council’s insurance policies renew on 30 June each year.
35. There are no significant changes planned to the group’s property insurance under our material damage/business interruption policy. Staff recommend the current limit of $500 million remains appropriate. We will continue to look to diversify our insurers across different insurance markets and avoid excessive reliance on the New Zealand market.
36. Staff will continue to expand the use of group policies where appropriate, so that economies of scale can achieve lower premiums and/or higher limits through joint policies for council parent and CCO’s.
37. Specifically, staff will examine the option of having group Professional Indemnity and Professional Liability policies. Currently, there are separate policies for council parent and the CCO’s (excluding Watercare). We believe there maybe premium and coverage benefits to the group in expanding council parent’s current Professional Indemnity and Professional Liability policies to include the CCO’s (excluding Watercare) rather than having a separate policies for council parent and CCO’s.
38. We will look at extending the required coverage for Statutory Liability.
39. Staff will report back on the outcome of the renewal at a future Committee/Governing Body meeting. Overall we do not expect significant premium changes given the steady insurance market pricing. Staff will look to balance the preference for low premiums with the importance of maintaining long term diversified insurance relationships.
Insurance Broker
40. Auckland Council and the CCO’s (excluding Watercare) use JLT for insurance broking services, while Watercare use AON.
41. Council intends to undertake a tender for insurance broking services before 31 December 2016 and on a group basis, subject to the Watercare’s agreement.
42. Council parent believes there are strong merits in having insurance and risk matters dealt with on a group basis to take advantage of economies of scale and ensure consistency in approach.
Consideration
Local Board views and implications
43. Local boards were not consulted on this report as this is a region-wide issue and not specific to a particular local board.
Māori impact statement
44. The decision to review insurance options is not a significant decision for Māori.
Implementation
45. Implementation will require collaborative working relationship with council’s CCOs.
There are no attachments for this report.
Signatories
Authors |
John Bishop - Treasurer & GM Transaction Services |
Authorisers |
Jazz Singh - Head of Risk Katherine Anderson - Director Legal and Risk Sue Tindal - Group Chief Financial Officer |
Finance and Performance Committee 17 March 2016 |
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Reports Pending Status Update - 17 March 2016
File No.: CP2016/03885
Purpose
1. To update the committee on the status of Finance and Performance Committee resolutions from July 2015 requiring follow-up reports.
Executive Summary
2. This report is a regular information only report that provides committee members with greater visibility of committee resolutions requiring follow-up reports (Attachment A). It updates the committee on the status of such resolutions. It covers committee resolutions from July 2015 and will be updated for every regular meeting.
3. This report covers open resolutions only. A separate report will be prepared in future covering any confidential resolutions requiring follow-up reports.
4. The committee’s Forward Work Programme 2015/2016 is also attached for information (Attachment B).
That the Finance and Performance Committee: a) receive the Reports Pending Status Update report.
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No. |
Title |
Page |
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Reports Pending Status Update |
211 |
bView |
Forward Work Programme 2015/2016 |
213 |
Signatories
Author |
Mike Giddey - Democracy Advisor |
Authoriser |
Sue Tindal - Group Chief Financial Officer |
Finance and Performance Committee 17 March 2016 |
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Exclusion of the Public: Local Government Official Information and Meetings Act 1987
That the Finance and Performance Committee:
a) exclude the public from the following part(s) of the proceedings of this meeting.
The general subject of each matter to be considered while the public is excluded, the reason for passing this resolution in relation to each matter, and the specific grounds under section 48(1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution follows.
This resolution is made in reliance on section 48(1)(a) of the Local Government Official Information and Meetings Act 1987 and the particular interest or interests protected by section 6 or section 7 of that Act which would be prejudiced by the holding of the whole or relevant part of the proceedings of the meeting in public, as follows:
Reason for passing this resolution in relation to each matter |
Particular interest(s) protected (where applicable) |
Ground(s) under section 48(1) for the passing of this resolution |
The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 7. |
s7(2)(g) - The withholding of the information is necessary to maintain legal professional privilege. In particular, the report contains legal advice and information about the council's listed securities. s7(2)(h) - The withholding of the information is necessary to enable the local authority to carry out, without prejudice or disadvantage, commercial activities. In particular, the report contains legal advice and information about the council's listed securities. |
s48(1)(a) The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 7. |
C2 Civic Administration Building
Reason for passing this resolution in relation to each matter |
Particular interest(s) protected (where applicable) |
Ground(s) under section 48(1) for the passing of this resolution |
The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 7. |
s7(2)(h) - The withholding of the information is necessary to enable the local authority to carry out, without prejudice or disadvantage, commercial activities. In particular, the report contains commercially sensitive information regarding commercial negotiations. |
s48(1)(a) The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 7. |