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Finance and
Performance Committee
13 December
2016
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Letters of
Expectation for Council-controlled Organisations, 2017-2018
File No.: CP2016/23596
Purpose
1. To
recommend content for inclusion in the 2017-2018 Letters of Expectation (LOEs)
for substantive Council-controlled Organisations (CCOs). These CCOs
are: Auckland Council Investments Limited (ACIL), Auckland Tourism Events
and Economic Development (ATEED), Auckland Transport (AT), Regional Facilities
Auckland Limited (RFA), Watercare Services Limited and Panuku Development
Auckland.
Executive
summary
2. The
annual LOEs are an important accountability tool that informs the substantive
CCOs of council’s expectations.
3. The
LOEs provide direction on:
a. issues of importance
for council to help inform refinement of CCO behaviour, operations and service
delivery
b. the development of the
CCOs’ Statements of Intent (SOI) for 2017-2020.
4. This
year the messages in the LOEs should reflect Council’s determination to
ensure the substantive CCOs:
· take
active steps to reinforce accountability to council, and operate with more
transparency, especially around budgeting and financial reporting
· align
their activities with Council strategies including the refreshed Auckland Plan
· collaborate
effectively with other members of the council group, and participate in
group-wide policies
· operate
with a strong customer focus, and are responsive to Local Boards as well as the
Governing Body.
5. The
Finance and Performance Committee’s role is to recommend the content of
the LOEs to the Mayor, for him to finalise the Letters. Six draft LOEs
are attached for the consideration of the committee. Each LOE contains
general messages common to all substantive CCOs, and particular messages of
relevance to the particular CCO.
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Recommendation/s`
That the Finance and
Performance Committee:
a) recommend
to the Mayor the 2017/2018 Letters of Expectation for Auckland Council
Investments Limited, Auckland Tourism Events and Economic Development,
Auckland Transport, Regional Facilities Auckland Limited, Watercare Services
Limited and Panuku Development Auckland, incorporating any changes to the
drafts agreed by this committee, and minor editorial changes as
required.
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Comments
6. The
LOEs are an important document that commences the annual accountability process
for the substantive CCOs.
7. The
purpose of the LOEs is to outline council’s direction on:
a. issues of importance to
help inform refinement of respective CCO behaviours, operations and service
delivery
b. the development of the
CCOs’ SOIs for 2017-2020.
8. Significant
strategic direction is already provided to the CCOs through the various
planning documents approved by council, such as the Auckland Plan, Local Board
Plans, the Economic Development Strategy, and City Centre Master Plan. It is
not considered necessary to repeat the relevant priorities from these planning
documents in the LOE.
9. Council
operational and governance imperatives on the CCOs that are enduring in nature
are included in the CCO Governance Manual, and therefore not considered
necessary to include in the LOEs and SOIs.
10. The Finance
and Performance Committee has the delegated authority to advise the Mayor on
the Letters of Expectation. Draft LOEs have been prepared for the
committee’s consideration.
11. The
resolutions from this committee will be provided for the Mayor’s
consideration, to inform the final LOEs.
General
messages for 2017-2018
12. As council
moves into the third term since amalgamation, there is a need to re-set some of
the expectations on the CCOs about their participation and commitment to a
whole-of-group approach. This year’s draft LOEs therefore outline a
number of general expectations, and send a strong signal that Council will be
giving significantly more attention to the degree to which CCOs are delivering
outcomes for Aucklanders.
13. These
expectations are set out below.
· CCOs
need to take active steps to reinforce accountability to council. This
will require strong leadership from Boards and chief executives, to build
cultures and behaviours which recognise their organisations’
responsibilities to residents and ratepayers. Greater transparency in
financial reporting is an important element of this. Additionally, CCOs
need to work with council to develop new performance metrics which genuinely
measure our success in achieving outcomes.
· CCOs
need to align their operations with council strategies. A key plank of
this is participation in development of the refreshed Auckland Plan.
· A
stronger sense of collaboration in the council group is needed. This
means collaborating across the other CCOs, and with council itself, to achieve
group outcomes, and to maximise investment opportunities. As part of
this, the shared services model and participation in group-wide policies
remains important.
· CCOs
should develop a stronger focus on customer service. One aspect of this
is engaging more actively with Local Boards.
Specific
messages
14. Each
LOE also contains references to specific expectations and priorities for the
individual organisation. Some of the most important messages are outlined
below.
15. Auckland
Transport is to be reminded of its role as a placemaker, and that its
operations need to align at all times with the strategic direction set down by
council, including in the Auckland Transport Alignment Project (network
optimisation; demand management and new technology; delivering strategic new
investments). This strategic direction influences the requirements for
greater transparency over spending, more aggressive public transport and active
modes targets, and a particular message around engagement with local
boards.
16. Watercare
is asked to continue its shift to participating as a full member of the council
group. One key plank of this is its participation in the central
interceptor optimisation work, and ensuring that its approach to supporting
Auckland’s growth areas is in line with council plans.
17. Panuku’s
focus is about continuing its organisational development to ensure it
successfully delivers on its work programme. It is also important that
Panuku’s plans are integrated and aligned with the development plans of
the other CCOs, especially Auckland Transport and Watercare.
18. ATEED
is asked to bring a tighter focus on prioritising its work to deliver on the
economic development strategy. This includes working with Council on how
we can make more progress in facilitating economic development in less
prosperous areas of Auckland.
19. RFA’s
priorities for the year include driving better value and transparency in the
council-funded cultural heritage sector, and ensuring council has good
visibility over its plans for major assets such as stadia and the Aotea
precinct.
20. ACIL’s
role in delivering dividends from the Port and Airport is recognised, but the
Letter should deliver expectations about further reclamation of land and wharf
extensions into the harbour, and expresses a desire to investigate options for
reducing the adverse effects of motor vehicle storage on the wharves.
Consideration
Local
board views and implications
21. CCO
governance and direction is the responsibility of the Governing Body.
22. A key element
of this year’s LOEs is for CCOs to ensure they engage with the
development of Local Board plans during the process, and not just once the
Local Board plans, and their own plans, are set.
Māori
impact statement
23. CCO
governance documents require the CCOs to take into account the Independent
Maori Statutory Board’s schedule of issues of significance and statutory
Treaty of Waitangi provisions, and where appropriate engage with the board on
these matters.
24. The CCO Governance Manual (2015) also requires CCOs to develop
Māori responsiveness plans consistent with Whiria Te Muka Tangata, the
Māori Responsiveness Framework, and to contribute to Te Toa Takitini
– a council group approach that seeks to embed Māori responsiveness
into the council group’s culture to achieve progress on significantly
lifting Māori well-being and better outcomes with Māori. For
this year, the LOEs should specifically request that CCOs identify when a
comprehensive Māori responsiveness plan will be completed, for those CCOs
that have not yet done this: RFA, AT, and Watercare.
Attachments
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No.
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Title
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Page
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a⇩ 
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Draft Auckland Transport Letter of Expectations
2017-2018
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9
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b⇩
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Draft Watercare Letter of Expectations 2017-2018
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13
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c⇩ 
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Draft Panuku Letter of Expectation 2017-2018
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17
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d⇩ 
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Draft ATEED Letter of Expectations 2017-2018
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21
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e⇩
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Draft RFA Letter of Expectations 2017-2018
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25
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f⇩
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Draft ACIL Letter of Expectations 2017-2018
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29
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Signatories
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Author
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David Wood – Director Finance and Policy -
Mayoral Office
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Finance and
Performance Committee
13 December
2016
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Annual Budget 2017/18 – Mayoral Proposal on
items for Public Consultation
File No.: CP2016/24837
Purpose
1. To propose items for public consultation on the Annual Budget
2017/18[1].
Executive
summary
2. The
Annual Budget 2017/18 is the last under the Long Term Plan 2015-2025.
3. Next
year the council will commence deliberations on the Long Term Plan
2018-2028. This will be the primary vehicle for making significant
budgetary changes over the triennium, including the replacement of the Interim
Transport Levy with a more durable instrument such as a regional fuel
tax.
4. The
mayoral proposal for the Annual Budget 2017/18 places high priority on rating
stability in the 2017/18 year to restore public confidence in the
council’s financial management and prudence. Previous years have
been characterised by volatile movements in rates, which has been unnerving for
ratepayers.
5. The
2016/17 financial year was the first time since amalgamation all residential
and farm lifestyle ratepayers had the same general rates increase.
Businesses also received the same, slightly lower rates increase (consistent
with the long term differential strategy). We need to reinforce the
stability that arisen from the standardisation of rating policy across the
region. A core objective of the mayoral proposal is that all ratepayers
will receive a general rates increase of 2.5% in 2017/18. Achieving this
will require the Uniform Annual General Charge to increase by 2.5% (to preserve
its percentage share of general rates), and the business-residential rating
differential to be held at its 2016/2017 level.
6. The
second priority is to commence implementation of a revenue strategy that
creates the financial headroom for the council to bring forward capital
investments in transport and housing infrastructure without recourse to
unacceptably high increases in general rates. A significant
infrastructure deficit has arisen from years of underinvestment, coupled with
rapid population growth. Addressing this challenge requires the council
to draw on new revenue sources to ensure the financial burden is borne by those
who will benefit from the infrastructure investment. The Annual Budget
2017/18 consultation represents the first step towards executing this revenue
strategy, and includes proposals relating to:
· the council’s participation in the
government’s Housing Infrastructure Fund,
· introducing growth infrastructure targeted rates
for significant housing developments,
· introducing a visitor levy via a targeted rate
to fund visitor related expenditure of Auckland
Tourism, Events and Economic Development (ATEED).
7. The
mayoral proposal also recommends we consult the public on the introduction of a
living wage for employees of the council group over the triennium.
Implementing the living wage in a staged manner over three years will provide
opportunities to accelerate the progress of the social equity payments
already built into the council’s remuneration policy, and lock-in
opportunities to lift productivity through complementary initiatives to upskill
the workforce. It will also ensure the living wage is funded through
council efficiencies, such as better fleet management and group
procurement.
8. Another spending priority will be a $0.5 million investment in
2017/18 to promote collaboration across council, government agencies, charities
and philanthropists to address chronic homelessness. The scale of
spending does not trigger the materiality or significance
thresholds for community consultation.
9. Council will be required to examine the cost
effectiveness and necessity for all aspects of its operational and capital
expenditures. This will be promoted through a continuing programme of
value for money reviews, better procurement, and the adoption of group shared
services. Efficiency targets for council business units
and council controlled organisations will be identified as part of the budget
refresh scheduled for February 2017.
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Recommendation/s
That the Finance and
Performance Committee:
a) note
that the mayoral proposal places high priority on:
i) achieving
rating stability in the 2017/18 year to restore public confidence in the
council’s financial management and prudence;
ii) commencing
the implementation of a revenue strategy that creates the financial headroom
for the council to accelerate capital investments in transport and housing
infrastructure without recourse to unacceptably high increases in general
rates;
b) note that rating stability can be
achieved by:
i) capping
general rates increases at 2.5% in 2017/18;
ii) increasing
the Uniform Annual General Charge in line with the general rates increase;
iii) pausing
implementation of the Long-term Differential Strategy, which relates to business
and residential rates, for one year;
iv) not making changes to the share of the Interim Transport Levy
(ITL) paid by residential and business ratepayers;
c) agree
to recommend to the Governing Body that the Annual Plan 2017/18 public
consultation document include the following items:
Rating policy
changes
i) the
Uniform Annual General Charge (UAGC), including the mayor’s proposal
that the UAGC only increase in line with the general rates increase;
ii) pausing
implementation of the Long-term differential strategy – which relates
to business and residential rates – for one year;
iii) introduction
of a visitor levy (via a targeted rate) to fund visitor related expenditure
of Auckland Tourism, Events and Economic Development (ATEED);
iv) changes
to the council’s Revenue and Financing Policy which, in turn, will
facilitate future proposals to the Governing Body on the application of
growth infrastructure targeted rates on specific housing developments;
v) the
expansion and establishment of business improvement districts;
vi) waste
management targeted rates;
Other budget
changes
vii) mass
transit network;
viii) introduction
of a Living wage over three years;
ix) homelessness;
Budget changes
for information
x) the
rural fire service, reflecting the anticipated enactment of the Fire and
Emergency New Zealand (FENZ) Bill;
xi) changes
to the implementation of the Waste Management and Minimisation Plan;
xii) Housing
Infrastructure Fund;
xiii) Skypath
implementation;
d) note that efficiency targets for
council business units and council controlled organisations will be
identified as part of the Annual Budget process.
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Background
Consultation
requirements
10. The Local Government Act 2002 requires each local
authority to consult on and adopt a LTP every three years. In each
intervening year local authorities are required to consult the Auckland
community on any significant or material changes to the relevant year of the
LTP through the Annual Budget consultation document.
11. Significance
is determined by the local authority’s Significance and Engagement
policy. The council’s finance and legal staff have developed internal
guidance to test potential budget changes against significance and materiality
thresholds.
12. Most changes to rating policy require consultation.
13. Legislation
also requires that the council’s consultation document include a summary
of key matters from Local Board Agreements and the Draft Tūpuna Maunga
Authority operational plan for the annual plan year.
14. The consultation document may include other issues that
the council considers to be of high public interest but which are not
legislatively required.
Financial position
15. The
initial starting point for the 2017/2018 Annual Plan is year 3 of the Long-term
Plan 2015-2025 (LTP). This included capital investment of $1.6 billion,
and average general rates increases of 3.5%.
16. Council
staff have updated budget projections to reflect decisions made subsequent to
the adoption of the LTP, actual performance in 2014/15 and 2015/16, the timing
of capital projects, and latest forecasts of external variables such as
interest costs and inflation.
17. Key
decisions made since adoption of the LTP in June 2015 have included:
● changes to
the capital programme made as part of decision-making for the 2016/2017 budget,
● changes to
operational expenditure and efficiency savings made in the Annual Budget 2016/2017,
● reduced revenue as a result of the lower general rates increases
adopted in 2016/17.
18. Reviews
of current market conditions and council projections indicate that in 2017/18
average council interest rates and inflation rates will be lower than projected
in the LTP. Updated forecasting assumptions will be generated prior to
final decision-making on the Annual Budget in 2017.
19. The
updated financial position for 2017/18 includes:
● capital
expenditure of $1,961 million
● operating
expenditure of $3,822 million
● Rates increases of between 2.5% and 3.5%, which result in total
revenue of $4,131 - $4,145 million, closing borrowing of $9,146 - $9,161
million, and an S&P debt to revenue ratio of 256% - 257%.
20. The
council group capital programme for the remainder of the 2015-2025 LTP period
has also been updated to reflect decisions made subsequent to LTP adoption.
Figure 1 below shows this updated capital programme and how this relates to the
projected debt to revenue ratios (based on LTP revenue settings of 3.5% annual
general rate rises).
Financial Strategy
21. A
core tenet of the council’s financial management approach is maintaining
our AA credit rating. This credit rating underpins the council’s access
to international credit markets and competitive interest rates. This is
the focus of the council’s prudential limits, which are expressed as debt
and interest as a percentage of revenue. When the prudential limits are
paired with the revenue settings we calculate the maximum borrowing the council
can undertake, and therefore the size of its capital investment programme.
22. A
credit downgrade would reduce investor confidence in Auckland Council, drive up
our cost of borrowing, and reduce our capacity to secure longer duration
debt.
Annual Budget
2017/18 - Consultation Items
Rating
policy levers
23. Consulting the community on a lower average general rates
increase via the Annual Budget consultation
document is not necessary unless material changes to service levels are
required to achieve it. A reduction in service levels is not on the
agenda, as current forecasts indicate general rates increases can be contained
without compromising the council’s prudential limits. For the sake
of transparency, however, there is merit in clearly signalling to the public in
the document our intention to reduce the rates increase below the currently
planned 3.5 per cent.
24. Only
the Governing Body can set a rate (general or targeted). The council has three
levers to manage the distribution of the rates requirement across ratepayers:
● the level of
the UAGC
● the
business-residential differential
● targeted
rates.
25. To
provide ratepayers with rating stability in the 2017/2018 year[2] the council would
need to:
● increase the
UAGC in line with the general rates increase
● keep the
rating differentials at the 2016/2017 level.
Uniform Annual General Charge (UAGC)
26. The
current rating policy provides for the UAGC ($394 for 2016/2017) to be
increased annually by the general rates increase. This maintains the
proportion of rates raised from the UAGC at approximately 13.4 per cent.
Increasing the UAGC by the increase in general rates for 2017/2018 will provide
rating stability.
27. My
strong preference is to increase the UAGC in line with the general rates
increase. Any proposal to materially change the UAGC would need to be
canvassed with the Auckland community through the consultation document.
Long-term differential strategy
28. The
Long-term Differential Strategy (LTDS) lowers general rates (UAGC and
value-based general rate) for businesses in equal steps from 32.7 per cent of
the total requirement in 2016/2017 to 25.8 per cent by 2036/2037. The
rate of reduction is set so that the increase in rates for residential and
farm/lifestyle properties above the underlying general rates increase is around
0.5 per cent each year.
29. The
differentials relative to the urban residential rate for 2016/2017 are set out
in the table below.
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Property category
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Business
differential split
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Relative
differentials within usage categories for 2016/2017
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Rate
in the dollar for 2016/2017 (including GST) ($)
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Differential
relative to urban residential rate for general rate for 2016/2017
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Business grouping
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Urban business
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32.7 per cent
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1.00
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0.00693795
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2.74
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Rural business
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0.9
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0.00624415
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2.46
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Non-business grouping
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Urban residential
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67.3 per cent
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1.0
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0.00253439
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1.00
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Rural residential
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0.9
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0.00228095
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0.90
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Farm and lifestyle
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0.8
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0.00202751
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0.80
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No road access
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0.25
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0.00063360
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0.25
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Uninhabitable island(1)
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0
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0
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0
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30. To
allow for all ratepayers to have the same rates increase in 2017/2018 requires
pausing the LTDS for a year. A one year pause will extend the timeframe
to achieve the goal of the LTDS by one year to 2037/2038. The intention
is that the LTDS will be resumed when the replacement for the Interim Transport
Levy is implemented, as any replacement is expected to shift more of the burden
of incremental transport investment on to businesses. While I consider
the current parameters of the ITL to be inequitable with respect to its impact
on residential ratepayers, I am prepared to not reopen the design of the ITL
given it has only a year to run.
Targeted
rates
31. The
use of targeted rates provides the council with an opportunity to better align
the sources of revenue with the beneficiaries of specific expenditures. A
range of targeted rates are set out in the rating policy. Possible
additional targeted rate initiatives are discussed below.
Visitor levy
32. The
number of commercial guest nights in Auckland rose from 6 million in the year
ending July 2011 to 7.3 million in the year ending July 2016. This growth
is partly attributable to the visitor attraction and major events activities of
Auckland Tourism, Events and Economic Development (ATEED), and has placed
additional demands on the city’s infrastructure and services. In
light of the benefits visitors derive from the council activities, ATEED has
been exploring with the commercial accommodation sector the available options
for indirectly funding some or all of ATEED’s visitor-related expenditure
from visitors rather than Auckland ratepayers.
33. The
council cannot set a bed tax, but may be able to achieve a similar outcome
through a targeted rate on accommodation providers. We wouldexpect, but
not require, the financial impact of the targeted rate to be passed on to
guests through an additional charge on their bills. The revenue captured
through a levy is expected to be $20 - $30 million per annum. Indicative
council analysis suggests the levy would translate into a 3-4% surcharge on a
typical tariff for a 4-5 star hotel – in the order of $6-10 per
night. Municipal charges of this nature are common practice in OECD
countries.
34. The
Chair of the Finance & Performance Committee has invited his deputy,
Councillor Desley Simpson, to convene a Steering Group that will advise on the
content of the public consultation document with respect to the visitor levy.
Following public consultation, if there is support to proceed with a levy the
Steering Group will advise on the design of a preferred targeted rate
instrument. Representatives of the accommodation sector will be invited
to participate on the Steering Group. In the event the levy is implemented the
wider tourism and accommodation sector will be invited to participate on an
body tasked to advise ATEED on the allocation of levy revenues.
35. Any
visitor levy revenue will replace the equivalent amount of ratepayer funding
which ATEED currently receives. It will not be a source of additional
revenue for ATEED. The ratepayer funding that is freed up will be
available for new infrastructure investments, including transport
infrastructure projects that will relieve congestion pressures across
Auckland. This will be of benefit to both visitors and Auckland
residents.
Growth infrastructure targeted
rates
36. To
support Auckland’s rapid population growth, the recently adopted Auckland
Unitary Plan has enabled significant intensification of the existing urban
areas and identified 11,000 hectares in new areas – that's one and a half
times the size of Hamilton and will provide enough land for 110,000 new
homes. Because these new areas are currently rural and lack the
infrastructure needed to support new neighbourhoods and town centres,
substantial investment will be needed in new roads, sewers, water pipes, parks
and community facilities.
37. After
adjusting for external funding sources (such as transport subsidies from the
New Zealand Transport Agency) Auckland Council currently funds growth
infrastructure primarily through development contributions and infrastructure
growth charges. These are lump sum charges that are payable when a new
dwelling is consented or when a dwelling connects to the water and wastewater
networks. Together, these charges currently average about $30,000 per dwelling.
38. Landowners
pay nothing while they hold their land in an undeveloped state.
39. Where
these charges are not adequate to cover the cost of providing infrastructure to
service a particular development, that creates a funding challenge for the
council. Typically the council resolves this by either delaying the
infrastructure investment until there are sufficient houses being built in a
particular area to make the investment viable, or uses general rates to make
existing ratepayers across Auckland subsidise the cost of the infrastructure.
40. The
full cost of providing all of the infrastructure needed to support large scale housing
developments is substantial. Meeting these costs will require ongoing
discussions with central government on solutions such as the Housing
Infrastructure Fund, new transport funding mechanisms, and alternative
approaches to infrastructure funding used overseas that will require
legislative change (for example Municipal Utility Districts and Tax Increment
Financing).
41. In
the meantime, there are some instances where new housing developments are ready
to proceed immediately apart from the need to resolve a relatively modest
infrastructure funding challenge. In some cases this relates to different
landowners within a Special Housing Area being unable to agree amongst
themselves who should pay for a local connector road or stormwater pond.
In other cases, it relates to providing the final piece of bulk or trunk
infrastructure (for example an arterial road, a wastewater pumping station or
an extension of the water main) that will open up a new housing area.
Proposal
42. To
help address Auckland’s housing and infrastructure challenges, the
council has been investigating a range of alternatives for funding the
significant bulk infrastructure costs associated with new developments.
One approach is to use targeted rates alongside the existing development
contribution and infrastructure charges. This approach would effectively
spread a lump sum charge out over time as an annual payment, and can be
triggered ahead of development occurring.
43. This
approach has a number of advantages including:
· increasing land holding costs, thereby
weakening the incentives for landbanking
· reducing the reliance on existing
ratepayers across Auckland to subsidise new housing developments
· creating a closer link between the rates
paid by landowners in a specific area and the uplift in the value of their land
as a result of it being available for development
· establishing a more predictable and secure
revenue stream for council
44. If
growth infrastructure targeted rates are applied to large scale developments of
thousands of houses this should assist with our efforts to place downward
pressure on land price increases across the Auckland region.
Implementation
45. The
first step is a discussion with Aucklanders generally about the merits of using
growth infrastructure targeted rates as a tool to fund infrastructure for new
housing developments.
46. The
council’s Revenue and Financing Policy would need to be amended to
provide for the use of targeted rates to fund growth infrastructure including
water and wastewater. The council must identify all its sources of
funding in its Revenue and Financing Policy, and is required to consult on any
material changes to it.
47. If
the council agrees to consult on this policy change, staff will discuss the use
of this new tool with key developers in those areas most ready to provide new
houses. From these discussions, staff may develop specific funding
proposals involving targeted rates that can address a critical infrastructure
funding challenge for a defined parcel of land and unlock more houses sooner.
That proposal will then be presented to the mayor and councilors with full
details on matters such as:
· the amount of the targeted rate
· when it would commence
· how long it will apply for
· what infrastructure it will fund, and
· how the cost would be
applied to particular properties, and the impacts on land owners.
48. If
any specific targeted rate proposal is approved for consultation, staff would
formally consult with the relevant landowners and any other affected
parties. After considering the feedback from this consultation, the
Governing Body would make a decision about implementing the charge as part of
setting rates for the relevant financial year. The Governing Body would
then also make a decision on setting the rate each subsequent year, as part of
each year’s rate setting process.
Business improvement district -
establishment and expansion
49. The
Business Improvement District (BID) programme enables the Auckland business
sector to fund local business investment, promotion and joint initiatives with
council and central government. Funding is secured through a targeted
rate set by Auckland Council on all businesses properties in a defined business
association area. Business associations are incorporated societies
independent from Auckland Council, and the targeted rate revenue is passed to
the business association as a grant.
50. Activities
funded through the BID programme include:
· promotions, events and marketing campaigns
· business support and enterprise
· local economic development activities
· skill and expertise development
· crime prevention initiatives
· networking and shared services
· local improvement projects
· advocacy to local and central government.
51. Currently
$15.7 million is collected from targeted rates to fund activities across 48
participating business associations, representing over 25,000 Auckland
businesses.
52. Establishing
or expanding a BID area requires the business association to undertake a ballot
of members (business ratepayers and occupiers of business properties in the BID
area). Ballots are coordinated by an independent polling agent separate from
Auckland Council and the business association.
53. The
following BID establishments and expansions are proposed for 2017/18.
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BID
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Proposed
change
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Uptown
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Expansion
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Wiri
|
Expansion
|
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Manukau
|
Expansion
|
|
Henderson-Lincoln
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New
establishment
|
54. To
be successful a ballot:
· must achieve a threshold of at least 25% of the
total voting forms being returned, and
· of the returned voting forms, a minimum of 51%
of the votes must be in favour.
55. The
results of the ballots will be reported back to the Local Boards and to the
Governing Body to support final decisions.
Waste Management targeted rates
56. The intent of the Waste Management and Minimisation Plan
(WMMP) is to move to a charging regime that promotes waste minimisation.
Waste management services have been transitioning to a region-wide delivery
approach. The associated charges have been incrementally adjusted from the
legacy council regimes.
57. Full implementation of that approach is still some way
off. In the interim, some material changes are required to standardise
recycling charges across the region as the services are now standardised.
In addition, some adjustments are proposed to charges where extra services are
requested. The detail of the proposed changes are set out in Attachment
A.
Local Board targeted rates
58. Local
targeted rates provide a funding mechanism for local boards to make investments
in their communities beyond the resourcing available to them from general rates
funding. At present there are two local targeted rates promoted by local
boards. These fund free swimming pool access for adults in the respective
local board areas:
● Otara
Papatoetoe swimming pool targeted rate
● Mangere Otahuhu swimming pool targeted rate.
59. At
this stage no additional local targeted rates have been proposed by local
boards for 2017/18. If a Local Board wishes to propose a local targeted
rate we encourage that they make a submission no later than 28 February 2017.
Any proposals received in the New Year will need to be subject to a separate
consultation process.
Other
budget changes
60. Three other potential budget changes that do not meet the
significance and materiality thresholds
but are nevertheless of high public interest could be included in the Annual
Budget consultation document:
a. Mass
transit network
An expanded and well-connected mass transit network is at
the heart of Auckland Transport’s plans for supporting growth in existing
urban and future urban areas. Auckland Transport has indicated the intention to
accelerate planning and design works on routes and the most optimal mode,
whether it be bus or light rail. It has also indicated the opportunity for
early acquisition of strategically important properties. The debt impact is
projected to be approximately $40 million in 2017/18.
b. Living wage
I am committed to achieving a living wage for Council and
CCO employees, with this being implemented in a staged manner over the triennium. This will effect departments such as
Libraries, Customer Services and Arts, Communities and Events. A staged
implementation will allow us to accelerate on the progress made through social
equity payments, and to align implementation with workforce reorganisations so
productivity gains can be locked-in through staff training and career
development. These proposed changes also have the additional benefit of
having a positive impact on gender pay equity, as two thirds of staff in these
teams are women.
A living wage is estimated to cost around $9 million if it
was fully implemented on 1 July 2017 (based on a forecast living wage of $20.40
per hour). This applies to around 2,200 staff earning
under $20.40 per hour (including casual and part-time employees) and another
1,200 staff just above the living wage who are likely to require wage
adjustments to preserve relativities. A three year timeframe allows for
the fiscal impact of the policy to be funded by efficiencies, such as better
fleet management and group procurement.
There are a number of matters concerning
the design of a living wage we should solicit feedback from the public,
including how the living wage is calculated and adjusted through time, and the
categories of council and CCO employees it should apply to.
An advisory group will be established to
advise council on the detail of the public consultation and implementation
issues. It will be convened by the Chair of Finance & Performance
Committee, Councillor Ross Clow, and will include representatives from the
Living Wage Movement Aotearoa NZ.
c. Homelessness
We face a significant challenge in
relation to homelessness in Auckland. The Government has acknowledged this
problem by putting $3 million over three years towards supporting experienced community agencies
already working with the homeless. I am proposing that Council plays a
coordinating role bringing together central government agencies like Housing
NZ, MSD, DHBs and Police with NGOs and private businesses supporting the
homeless. Council has put money into the James Liston hostel and
supporting NGOs, and will contribute $500,000 a year to ensuring the efforts of
all of these groups are coordinated.
Budget
changes for public information
61. Staff have identified some potential budget changes that
do not require decisions as part of the Annual Budget process. However,
we are legally required to consult on them, and their inclusion in the
consultation document will ensure the Auckland community is aware of the
changes. The budget changes in this category are:
a. Rural
Fire Service
Auckland Council is
currently a key player in delivering and funding rural fire services. The Fire
and Emergency New Zealand (FENZ) Bill is currently before Parliament and is expected
to pass in April 2017. If passed, this will amalgamate New Zealand's urban and
rural fire services into an integrated fire and emergency service.
Consequently, the council would no longer deliver rural fire services as of 1
July 2017. The cessation of a service previously provided by council would
trigger the need to inform the public via the council’s annual plan
process. The net financial impact of the change is likely to be
minimal.
b. Waste Management and
Minimisation Plan (WMMP) implementation reset
As part of the WMMP Auckland Council has
successfully introduced region-wide inorganic and recycling collections and is
establishing a network of Community Recycling Centres. The programme team is
reviewing the planned implementation of food waste and organic refuse
collections. This is to ensure services for all waste streams are planned
holistically, implemented in a manner bringing best value for money, and
support the aspirational goal of zero waste to landfill by 2040. The review
will delay rolling out the food waste and user pays refuse collection services.
As a delay to a currently planned service, there is a need to inform the public
via the annual plan process.
c. Housing Infrastructure
Fund
Central government established a $1 billion
Housing Infrastructure Fund (HIF) to assist high-growth local authorities with
providing infrastructure to support housing development. The council is
preparing an application for funding from the HIF. Should the council’s
bid be successful, there would be a substantial increase in the capital
expenditure in transport, stormwater, water supply and wastewater in
high-growth areas of Auckland. While this is a central government
investment decision, a potential change of this nature would need to be clearly
signalled in the annual plan consultation document.
d. Skypath financial implications
SkyPath is a cycling and walking project that
will be attached to the Auckland Harbour Bridge. It seeks to complete a
key missing gap in Auckland’s cycling and walking networks. It is
planned as a Public Private Partnership (PPP) and as part of this Council would
permit the collection of fares by the private sector from users (cyclists and
pedestrians) of the pathway.
On 28 July 2016, the Governing Body agreed to proceed
with the SkyPath project and make a budget provision for SkyPath in the
2017/2018 Annual Plan and the LTP 2018-2028. This includes:
· $7.2 million additional capex in 2017/2018 for
ancillary projects at the landings at each end of the SkyPath, and
· the provision of a revenue underwrite from
2019/2020, if required, as part of the 2018-2028 LTP.
Efficiency
Targets and value for money reviews
62. Reducing the average general rates increase for 2017/2018
from 3.5 per cent to 2.5 per cent depends, in part, on sustaining and
refreshing the programme of efficiency savings. The specific efficiency
savings proposals do not trigger materiality or significance thresholds,
provided there is no adverse impact on service levels.
63. Efficiency targets for council business units are
likely to be set as part of the Budget refresh scheduled for February.
Council controlled organisations (CCOs) will also be set targets as part of the
Annual Budget process.
64. The Finance and Performance Committee will also be
overseeing an ongoing programme of value for money reviews, as required under
section 17A of the Local Government Act. The forward programme of reviews
is expected to be considered by the Committee at its February 2017 meeting,
with a view to the reviews informing deliberations on the LTP 2018-2028.
Consideration
Local
board views and implications
65. The
views of local boards have not been sought in relation to this advice.
66. Legislation requires that the council’s consultation document
include a summary of key matters arising from proposed Local Board Agreements.
Māori
impact statement
67. A
summary of the draft Tūpuna Maunga Operational Plan 2017/18 will be
included in the consultation document.
68. Any specific impact of the proposed consultation items on Māori
is expected to be identified and addressed through the consultation
process. The Local Government Act establishes requirements with respect
to engaging Māori in decision making, and taking
into account Māori perspectives and
traditions, and council will be advised about those requirements throughout the
Annual Budget process.
Implementation
69. The
key milestones for the preparation and approval of the Annual Budget 2017/18
are set out below:
13
December 2016: Finance and Performance Committee
makes recommendations to the Governing Body on consultation items
15
December 2016: Governing Body agrees consultation
items for the Annual Budget
9
February 2017: Governing
Body adopts consultation document and supporting material
February-March
2017 Public consultation on the Annual Budget
1
June 2017: Governing
Body confirms decisions for incorporation into the Annual Budget
29 June 2017: Governing
Body adopts Annual Budget 2017/2018
Attachments
|
No.
|
Title
|
Page
|
|
a⇩ 
|
Waste management targeted rates changes
|
45
|
Signatories
|
Author
|
David Wood – Director Finance and Policy -
Mayoral Office
|
