Agenda of Finance and Performance Committee

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

Date:

Time:

Meeting Room:

Venue:

Thursday, 16 June 2016

9.30am

Reception Lounge
Auckland Town Hall
301-305 Queen Street
Auckland

Finance and Performance Committee

OPEN AGENDA

MEMBERSHIP

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

(Quorum 11 members)

Mike Giddey

Democracy Advisor

10 June 2016

Contact Telephone: (09) 890 8143

Email: mike.giddey@aucklandcouncil.govt.nz

Website: www.aucklandcouncil.govt.nz

TERMS OF REFERENCE

Responsibilities

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

· Financial management

· Approval of non-budgeted expenditure

· Write-offs

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

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

· Recommending the Annual Report to the Governing Body

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

- Local Board agreements

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

- Setting of rates (recommendation to the Governing Body)

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

· Financial policy outside the LTP and AP

Powers

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

Except:

(a) powers that the Governing Body cannot delegate or has retained to itself (section 2)

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

(ii) Approval of a submission to an external body

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

(iv) Power to establish subcommittees.

EXCLUSION OF THE PUBLIC – WHO NEEDS TO LEAVE THE MEETING

Members of the public

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

Those who are not members of the public

General principles

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

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

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

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

Members of the meeting

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

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

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

Independent Māori Statutory Board

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

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

Staff

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

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

Local Board members

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

Council Controlled Organisations

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

1 Apologies

An apology from Cr C Darby has 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, 19 May 2016, including the confidential section, as a true and correct record.

4 Petitions

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

5 Public Input

Standing Order 7.7 provides for Public Input. Applications to speak must be made to the Democracy Advisor, in writing, no later than one (1) clear working day prior to the meeting and must include the subject matter. The meeting Chairperson has the discretion to decline any application that does not meet the requirements of Standing Orders. A maximum of thirty (30) minutes is allocated to the period for public input with five (5) minutes speaking time for each speaker.

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

6 Local Board Input

Standing Order 6.2 provides for Local Board Input. The Chairperson (or nominee of that Chairperson) is entitled to speak for up to five (5) minutes during this time. The Chairperson of the Local Board (or nominee of that Chairperson) shall wherever practical, give one (1) day’s notice of their wish to speak. The meeting Chairperson has the discretion to decline any application that does not meet the requirements of Standing Orders.

This right is in addition to the right under Standing Order 6.1 to speak to matters on the agenda.

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

7 Extraordinary Business

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

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

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

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

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

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

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

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

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

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

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

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

8 Notices of Motion

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

Finance and Performance Committee

16 June 2016

66 Flat Bush School Road, Flat Bush

File No.: CP2016/11149

Purpose

1. The purpose of this report is to seek confirmation of approval from the Finance and Performance Committee for Panuku Development Auckland (Panuku) to dispose of 66 Flat Bush School Road, Flat Bush. This is a legacy project inherited from the Manukau City Council, and a resolution for disposal is sought from Auckland Council as a matter of procedure.

Executive Summary

2. 66 Flat Bush School Road, Flat Bush comprises approximately 9.26 hectares of vacant, undeveloped land which is part of a larger lot of approximately 20 hectares.

3. 66 Flat Bush School Road is a legacy development site inherited from Manukau City Council by Panuku Development Auckland. It was originally acquired by Manukau City Council specifically for residential development purposes, with the balance to be used for park.

4. The Howick Local Board has been kept informed on the progress of the development of housing plans for 66 Flat Bush School Road and the overall development of the Special Housing Area and adjacent Ormiston Town Centre.

5. Iwi consultation regarding 66 Flat Bush School Road will be ongoing as part of the development of the Special Housing Area and adjacent Ormiston Town Centre.

6. Panuku seeks approval from the Finance and Performance Committee to dispose of 66 Flat Bush School Road to enable a development agreement to be entered into with Todd Property Group regarding this development of this property as a Special Housing Area.

Recommendation/s

That the Finance and Performance Committee approve:

a) the disposal of 66 Flat Bush School Road, Flat Bush described as Section 2 Survey Office Plan 471952 and contained in part certificate of title 662148 subject to the satisfactory conclusion of any required statutory processes;

b) that the final terms and conditions be approved under appropriate delegated authority.

Attachments

No.	Title	Page
a View	Image of 66 Flat Bush School Road, Flat Bush	11

Signatories

Author	Allan Young - Director Development - Panuku Development Auckland
Authoriser	Sue Tindal - Group Chief Financial Officer

Finance and Performance Committee

16 June 2016

Disposals Recommendation Report

File No.: CP2016/10098

Purpose

1. This report seeks approval to sell two 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 contributes to the Auckland Plan outcomes and the Long-term Plan 2015-2025 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, 61-117 Clark Road, Hobsonville is a large, vacant, triangular shaped site. It is proposed that approximately 3,400m² of this site remains in council ownership as a future reserve. The balance of the site forms two parcels of land comprising approximately 4,300m². It is proposed that these two parcels of land be utilised for urban renewal (housing) purposes. A portion of Clark Road comprising approximately 5,200m² which is contiguous to 61-117 Clark Road is to be stopped. Following the completion of the road stopping process, it is recommended that the stopped road also be utilised for urban renewal (housing) purposes. The rationalisation process commenced in December 2015. Consultation with Council, Council Controlled Organisations (CCO’s), iwi authorities and the Upper Harbour Local Board has now taken place. No alternative service uses have been identified for the relevant parcels of land, and the feedback received has been supportive of the proposal set out in this report. Due to this, we recommend that approximately 4,300m² of 61-117 Clark Road and a portion of approximately 5,200m² of Clark Road that is to be stopped be utilised for urban renewal (housing) purposes. The Hobsonville Land Company (HLC) seeks to undertake this urban renewal work. However no agreements have been entered into at this stage. Should the governing body approve the proposal set out in this report, Panuku will enter into negotiations with the HLC and any other interested parties to ensure a housing outcome is achieve at this location.

4. The second property presented in this report, 2 Wiremu Street, Balmoral is a residential property that is currently operated as a commercial childcare centre. It was acquired by the Mt Eden Borough Council in 1986. The rationalisation process for this property commenced in 2013. Consultation with council and its CCOs, iwi authorities and the Albert-Eden Local Board has now taken place. No planned or funded service uses have been identified for this property through the rationalisation process. Accordingly, Panuku recommends that it be divested. The Albert-Eden Local Board oppose the proposed disposal of 2 Wiremu Street and seek to have it retained for community leasing purposes. An additional community facility in the Albert-Eden Local Board area is not planned and funded in the Long-term Plan, and the Community Facilities team does not support the retention of this property for community leasing purposes. Should this property be retained for community leasing purposes, the governing body would need to allocate unbudgeted funding towards the ongoing costs associated with retaining this property for community leasing purposes, and the costs associated with repurposing the residential dwelling for community leasing purposes.

Recommendation/s

That the Finance and Performance Committee:

a) approve, subject to the satisfactory conclusion of any required statutory processes, utilising for urban renewal purposes the land at:

i) 61-117 Clark Road, Hobsonville, comprised of an estate in fee simple comprising approximately 4,300m² of a total area of 7,641m² described as Lot 1 Deposited Plan 308781 contained in computer freehold register 34081;

ii) approximately 5,127m² of Clark Road (which is currently formed and sealed as road) be used for urban renewal purposes following the completion of the road stopping process;

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

i) 2 Wiremu Street, Balmoral being an estate in fee simple comprising approximately 726m² more or less being part Lot 39-40 Deposited Plan 4347 contained in certificate of title NA207/106; and

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

Comments

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. All sale recommendations must be approved by the Panuku board before a final recommendation is made to the governing body.

Consideration

Local board views and implications

11. 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.

12. 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.

13. The views of the relevant local boards about the subject sites are contained in Attachments A and B of this report.

Māori impact statement

14. 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.

15. 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.

16. 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.

17. 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

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

Attachments

No.	Title	Page
a View	61-117 Clark Road, Hobsonville property information	17
b View	2 Wiremu Street, Balmoral 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

16 June 2016

Regional Historic Heritage Grants Programme 2015/2016 allocation

File No.: CP2016/09905

Purpose

1. To present recommendations for the Regional Historic Heritage Grants Programme (RHHGP) 2015/2016 funding round.

Executive summary

2. Following the adoption of the Community Grants Policy (CGP) in December 2014, Auckland Council established a RHHGP to support historic heritage outcomes outlined in the Auckland Plan, Long-term Plan, Proposed Auckland Unitary Plan and the Heritage Incentives Framework.

3. In March 2016, the committee adopted the RHHGP framework (consisting of regional significance criteria, funding exclusions, an investment approach and timing of funding) for the 2015/2016 financial year. The adopted framework for this fund is in Attachment A to this report.

4. In 2015/16 the RHHGP has a total of $80,743 available for allocation. In total 28 applications were received requesting $356,914. Two applications did not meet grant programme eligibility criteria. Following application assessment, it is recommended that seven applications be supported with grants totalling $80,743. Recommended grants ranging from $3,375 to $20,000, with an average grant of around $12,000 are outlined in Attachment B to this report. It is also recommended that 19 applications totalling $202,186 be declined.

5. The RHHGP leverages private investment and resources to achieve historic heritage outcomes.

6. Most applicants are making some contribution towards total project costs. Three applications were received requesting 100 percent funding support. Eighteen applications were received where the applicant’s contribution was 50 percent or greater.

Recommendation/s

That the Finance and Performance Committee:

a) approve grant allocations, totalling $80,742 as listed below, for applications to the Regional Historic Heritage Grants Programme for a term of one year:

Organisation/Individual	Amount requested	Amount recommended
New Lynn Protection Society Inc	$17,250	$12,000
Warren Durling & Jessica Britten	$27,359	$19,417
Narshi Gosha Family Trust	$20,000	$10,000
Michael Booth	$20,000	$20,000
Stephen Thomas	$3,375	$3,375
Storm Trust (Piers Kay & Alisha Ward)	$14,512	$6,750
Howick & Districts Historical Society Inc	$22,990	$9,200

b) decline applications to the Regional Historic Heritage Grants Programme as listed below:

Organisation/Individual	Amount requested
Warren Durling and Jessica Britten	$17,250
Warren Durling and Jessica Britten	$11,500
St. Patrick’s Cathedral Heritage Foundation	$20,000
St. David’s in the Fields	$11,430
Kay Wooff	$6,210
Kay Wooff	$20,000
St. Matthew-in-the-City	$5,000
Ian D. Sutcliffe	$20,000
The Northern Club	$20,000
Ruth Holden and Damian Cunniffe	$10,000
Cirrus Trading Limited	$18,000
Joseph Baranyai	$4,224
Motu Kaikoura Trust	$1,256
New Zealand Fencible Society Inc.	$1,816
Kingsland Business Society Inc.	$5,037
Birkenhead Town Centre Association	$3,780
Mt. Eden Village Inc.	$6,290
The Tug William C. Daldy Preservation Society Inc.	$19,421
Protect Piha Heritage Society Inc.	$1,792

Comments

Background

7. The CGP, adopted by council in December 2014, recognises regional grant funding programmes as a key tool by which Auckland Council can support communities to implement the historic heritage vision and aspirations for the region as a whole, as set out in the Auckland Plan and other regional strategic documents.

8. The CGP established the RHHGP which is targeted towards supporting the following outcomes:

a. Regulations in the Unitary Plan are supported by incentives to protect and conserve significant historic heritage places.

b. Auckland Council, Mana Whenua, community organisations, and property owners work together to support kaitiakitanga and stewardship of historic heritage.

c. Aucklanders see council investment in historic heritage.

d. Historic heritage grants unlock private and community investment in heritage conservation.

9. In March 2016 the Auckland Development Committee adopted the RHHGP framework setting out criteria, funding exclusions, investment approach and timing of funding (resolution AUC/2016/21); this framework is attached as Attachment A to this report.

10. The RHHGP has one annual funding round; the 2015/2016 funding round was open for applications between 15 March 2016 and 15 April 2016. The fund was promoted through the Auckland Council website and social media, council publications, email notification through the heritage team network, local board networks and email notification to stakeholders. A community funding workshop was run for applicants to come in and talk to the council heritage and funding staff.

Eligibility

11. To be eligible for funding through the RHHGP, projects need to meet at least one of the grants programmes’ criteria for regional significance. These are:

a. Historic heritage places that are included in one of the schedules of the Proposed Auckland Unitary Plan, including the Historic Heritage Schedule, Sites of Significance to Mana Whenua, Sites of Value to Mana Whenua, and contributing buildings within a Historic Heritage Area or Historic Character Area.

b. Historic heritage places that are unscheduled but demonstrated to be of regional significance, subject to evidence that the site has interim protection through heritage covenants as well as a letter from the applicants confirming support for scheduling the site under the relevant heritage overlay.

c. Movable heritage items subject to evidence that the object would be stored and exhibited within the Auckland region in a manner that will ensure its long-term protection.

12. For the 2015/2016 funding round the RHHGP had the following priorities:

a. Conservation of regionally significant historic heritage places.

b. At-risk historic heritage places.

c. Supporting Kaitiakitanga of Māori cultural heritage.

d. Heritage and character in town centres.

Assessment of Applications

13. Applications were assessed by staff with subject matter expertise using the weighted assessment criteria as set out in Table 1 below.

Table 1 – Regional Historic Heritage Grant Assessment Criteria

Criteria	Weighting
Alignment with strategic priorities for 2016	40%
Project significance	30%
Funding necessity	15%
Public access & education	15%

14. Each application had an assessment score out of 100 which was used to rank applications from highest to lowest. Grant recommendations were developed and moderated by staff considering the application assessment score, project budget, items funding was requested for, the level of funding that would maximise outcomes and value for money and local board feedback.

15. The RHHGP provides for grants of up to $20,000 per annum and there is provision to award smaller grants for projects that meet the criteria for regional significance but only require moderate support.

16. As a funding principle, grants through the RHHGP are provided to leverage the community’s ‘match’ of an equal value in volunteer labour, cash or donated goods and services. While there is no set match requirement for this fund, council will generally consider a 50% match desirable.

17. The value of in-kind contributions that are part of a match should be quantified to the extent that it is possible. For example, estimate the hours to be donated, with an indicative hourly rate based on a fair market value for the work that is undertaken.

Consideration

18. It is recommended that seven applications be supported with grants totalling $80,743. Recommended grants range from $3,375 to $20,000 with an average grant of around $12,000. It is also recommended that a further 19 applications be declined. A brief summary of each application, fund outcomes, assessment score, funding recommendation and comment is provided in Attachment B to this report.

Local board views and implications

19. The Community Grants Policy provides for local boards to operate their own local grants programmes. They may choose to fund local heritage projects and activities, some of which may complement the grants provided at regional level, or vice versa.

20. Local boards were involved with promotion of the RHHGP funding round.

21. Local boards were provided with a summary of applications in their local board area and their feedback regarding applicants and project alignment with local board priorities was considered when setting final funding recommendations.

Māori impact statement

22. All grant programmes aim to respond to Auckland Council’s commitment to improving Māori wellbeing by providing grants to organisations delivering positive outcomes for Māori. Te Waka Angamua provided input and practical support towards the promotion of the RHHGP assisting with distribution of information to Mana Whenua and wider Māori community groups.

23. Whilst interest was received from potential applicants and Council staff provided advice on the application process, these groups decided they were not ready to submit an application. Council staff will continue to work with these groups as they develop their heritage projects.

24. Following the 2015/2016 funding round, the RHHGP will be reviewed. As part of this review staff will seek input and guidance from the Independent Māori Statutory Board and Te Waka Angamua. This review will inform the development of a communications plan for the 2016/2017 funding round of the RHHGP and the revision of the RHHGP Programme framework.

Implementation

25. There are no implementation issues arising from this report though the funding round was oversubscribed, the funding recommendations presented in this report recommend full allocation of the 2015/2016 fund.

Attachments

No.	Title	Page
a View	Regional Historic Heritage Grant Programme Framework	33
b View	Regional Historic Heritage Grant Programme application summary	37

Signatories

Authors

Fran Hayton - Environmental Grants and Incentives Manager

Mary Kienholz - Senior Specialist: Community Heritage

Maisha Bukhari - Environmental Grants Advisor

Authorisers

Jacques Victor - GM Auckland Plan Strategy and Research

Sue Tindal - Group Chief Financial Officer

Finance and Performance Committee

16 June 2016

Auckland Council Group third quarter financial results to 31 March 2016

File No.: CP2016/04520

Purpose

1. The report provides an overview of the financial performance of the Auckland Council Group for the nine months to 31 March 2016.

Executive Summary

2. This report is part of the regular quarterly reporting to the Finance and Performance Committee on the Auckland Council Group financial performance.

3. The Council Controlled Organisations report their individual performance to the Council Controlled Organisations Governance and Monitoring Committee.

Recommendation/s

That the Finance and Performance Committee:

a) receive the report.

Comments

4. This report discloses the financial performance, financial position and cash flows of the Auckland Council Group for the nine months ended 31 March 2016.

5. Auckland Council Group generated an operating surplus before gains and losses of $634 million for the nine months to 31 March 2016, compared to the phased budget of $541 million.

6. Total revenue excluding gains is ahead of budget by $25 million primarily due to higher volume of vested assets received than expected.

7. Total expenditure excluding losses is lower than budget by $68 million primarily due to lower finance costs as a result of lower than budgeted borrowings ($17 million); reduction in public transport contracts ($10 million); lower consultancy due to project delays ($13 million); lower operating costs from Ports due to reduced revenue ($4 million); with the remaining variance predominately due to expenditure being incurred later than originally planned.

8. Net other losses of $377 million are primarily non-cash book entries, driven by the reduction in fair value of financial instruments, resulting from falling interest rates.

9. Property, plant and equipment has increased by $402 million from 30 June 2015, as a result of net additions of $956 million less year to date depreciation of $554 million.

10. The capital expenditure is funded by net operating cash inflow of $603 million and the balance from borrowings and working capital movements.

11. Overall financial performance is in line with the phased long-term plan.

Consideration

Local Board views and implications

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

Māori impact statement

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

Implementation

14. There are no implementation issues.

Attachments

No.	Title	Page
a View	Auckland Council Group Financial Report March 2016	101

Signatories

Author

Francis Caetano - Group Financial Controller

Authorisers

Kevin Ramsay - General Manager Corporate Finance and Property

Sue Tindal - Group Chief Financial Officer

Finance and Performance Committee

16 June 2016

Insurance

File No.: CP2016/11373

Purpose

1. To seek agreement of the Finance and Performance Committee to the insurance renewal programme for the 2016/17 year and to ask the committee to delegate final placement of insurance policies to the Group Chief Financial Officer and Director Legal and Risk.

Executive summary

2. Council’s insurance policies are renewed annually on 30 June. This includes all the policies that the council group (excluding Watercare) purchases in order to transfer insurable risks into the insurance markets.

3. Negotiations are largely complete for the 2016/17 insurance renewal (for Auckland Council parent and the CCO’s excluding Watercare).

4. Insurance market conditions remain benign – all renewals are most likely to be at premiums at or below current premium rates and within budgeted cost.

5. The most significant proposed changes are:

· The inclusion of below ground assets in the property insurance policy (refer below for more detail).

· The formation of a group policy (excluding Watercare) for public liability and professional indemnity insurance.

6. Staff will also explore the potential benefits of insurance for cyber risks and statutory liability relative to the costs in the current insurance market.

Recommendation/s

That the Finance and Performance Committee:

a) agree the insurance renewal programme for the 2016/17 year.

b) delegate final placement of insurance policies to the Group Chief Financial Officer and Director Legal and Risk.

Comments

Insurance Renewal Update 2016/17

7. Negotiations are largely complete for the 2016/17 insurance renewal (for Auckland Council parent and the CCO’s excluding Watercare).

8. Insurance market conditions remain benign – all renewals are most likely to be at premiums at or below current premium rates and within budgeted cost.

9. The most significant proposed changes are:

· The inclusion of below ground assets in the property insurance policy (refer below for more detail).

· The formation of a group policy (excluding Watercare) for public liability and professional indemnity insurance.

Background

10. Council’s insurance policies are renewed annually on 30 June. This includes all the policies that the council group (excluding Watercare) purchases in order to transfer insurable risks into the insurance markets. The Governing Body approved changes to some key aspects of property and liability insurance policies for council at its meeting on 25 June 2015, which applied to the 2015/16 renewal year. This included, amongst other things:

· A reduction in the limit of sum insured for property from $1 billion to $500 million based on up to date loss model estimates

· Placement of council’s liability insurance for public liability and professional indemnity directly in the London market rather than Riskpool. (Resolution number GB/2015/67).

11. Council group currently insures a range of risks including property damage, professional indemnity and public liability, crime, fine arts, motor vehicle, rolling stock and others. Full details are provided in Attachment A. For matters not expressly covered by insurance policies, council effectively ‘self insures’ the risk of all financial loss not covered by those policies.

12. Staff work with council’s insurance brokers Jardine Lloyd Thompson (JLT) to identify changes happening in the risk landscape for council as well as the insurance markets. Staff are currently investigating insurance for the following types of cover that we don’t currently have:

· Cyber risks

· Statutory liability

13. Council has previously not purchased these two types of cover due to costs of insurance relative to the benefits provided. However, staff will evaluate the prices and options again for both types of cover once we have received this from the insurance markets.

Property Insurance - Above and Below Ground

14. Historically Auckland Council has only insured its buildings and above ground infrastructure (and has not insured below ground assets).

15. Above ground assets have been insured in a group policy, excluding Watercare. Watercare operates separate insurance arrangements through a different broker. It does not currently insure its below ground assets.

16. Based on natural hazards and fire modelling, and allowing a buffer, council currently purchases a limit of $500 million for above ground assets based on a total insurable asset value of $6.6 billion.

17. With respect to below ground assets, in general terms, the Crown is currently responsible for 60 per cent of damage and local government 40 per cent.

18. The Crown has signalled a review of this arrangement. Future cost sharing arrangements may result in council being responsible for the first layer of loss (up to a defined point based on Probable Maximum Losses (PML)) and then for a cost sharing arrangement (with the Crown) to apply for losses above this level. However there is a high degree of uncertainty about the timing and the level at which the defined point of loss will be set. Staff are working with Local Government New Zealand on this review.

19. In preparation of this anticipated change, council has had our broker complete natural catastrophe modelling of losses on below ground council group assets (excluding Watercare). These consist mainly of pipelines and manhole assets with a total value (optimised replacement cost) estimated at approximately $3 billion. The catastrophe modelling estimates the following PMLs:

· Return period 1 in 10,000 years : $18 million

· Return period 1 in 1000 years : $1.29 million

· Return period 1 in 500 years : $0.14 million

20. This has reaffirmed council’s view that the natural hazard risk is low in the Auckland region. It should be noted, however, that while the modelling is based on scientific assumptions the results should only be taken as a guide.

21. Based on the modelling, staff have proposed (for the 2016/17 year) an overall property insurance limit of $600 million covering both below and above ground assets, with a sub-limit of $100 million for below ground assets.

22. Staff believe it is now appropriate for council to purchase a policy to cover both above and below ground assets. This is because:

· There are now sufficient insurance markets world-wide which are prepared to underwrite below ground risks at reasonable cost. The combination of policies (above and below ground) also results in less combined insurer capital being utilised and therefore will be less expensive than two separate policies.

· The likely change in government policy which will potentially expose local government to greater risk.

· The below ground insurance coverage further protects council’s balance sheet and therefore credit rating.

23. For the 2017/18 year and beyond, staff will continue to investigate a range of risk funding options which may enable the council group to retain more risk while ensuring price stability in the long term.

Consideration

Local board views and implications

24. 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

25. The decision to review the insurance options is not a significant decision for Māori.

Implementation

26. Group Chief Financial Officer and Director Legal and Risk to approve placement of policies and for council’s brokers JLT to make the placements in the insurance markets for 30 June 2016.

Attachments