Agenda of Finance and Performance Committee

TERMS OF REFERENCE

Responsibilities

The purpose of the Committee is to:

(a) control and review expenditure across the Auckland Council Group to improve value for money

(b) monitor the overall financial management and performance of the council parent organisation and Auckland Council Group

Key responsibilities include:

Advising and supporting the mayor on the development of the Long Term Plan (LTP) and Annual Plan (AP) for consideration by the Governing Body including:

- Local Board agreements

- Financial policy related to the LTP and AP

- Setting of rates

- Preparation of the consultation documentation and supporting information, and the consultation process, for the LTP and AP

Monitoring the operational and capital expenditure of the council parent organisation and Auckland Council Group, and inquiring into any material discrepancies from planned expenditure
Monitoring the financial and non-financial performance targets, key performance indicators, and other measures of the council parent organisation and each Council Controlled Organisation (CCO) to inform the Committee’s judgement about the performance of each organisation
Advising the mayor on the content of the annual Letters of Expectations (LoE) to CCOs
Exercising relevant powers under Schedule 8 of the Local Government Act 2002, which relate to the Statements of Intent of CCOs
Approving the financial policy of the Council parent organisation
Overseeing and making decisions relating to an ongoing programme of service delivery reviews, as required under section17A of the Local Government Act 2002
Establishing and managing a structured approach to the approval of non-budgeted expenditure (including grants, loans or guarantees) that reinforces value for money and an expectation of tight expenditure control
Write-offs
Acquisition and disposal of property, in accordance with the long term plan
Recommending the Annual Report to the Governing Body
Te Toa Takatini

Powers

(a) All powers necessary to perform the committee’s responsibilities, including:

a. approval of a submission to an external body

b. establishment of working parties or steering groups.

(b) The committee has the powers to perform the responsibilities of another committee, where it is necessary to make a decision prior to the next meeting of that other committee.

a. the power to establish subcommittees

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

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 Casey 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 Tuesday, 21 February 2017, 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.

6.1 Local Board Input - Manurewa Local Board - Part of 770R Great South Road, Manukau

Purpose

1. Angela Dalton, Chair of the Manurewa Local Board wishes to address the Committee in relation to part 770R Great South Road, Manukau which is contained in the Disposals Recommendation Report.

Recommendation/s

That the Finance and Performance Committee:

a) receive the presentation and thank Angela Dalton for her attendance.

6.2 Local Board Input - Rodney Local Board - Disposal of 14 Baxter Street, Warkworth

Purpose

1. Beth Houlbrooke, Chair and Phelan Pirrie, Deputy Chair of the Rodney Local Board wish to address the Committee in relation to the proposed disposal of 14 Baxter Street, Warkworth which is contained in the Disposals Recommendation Report.

Recommendation/s

That the Finance and Performance Committee:

a) receive the presentation and thank Beth Houlbrooke and Phelan Pirrie for their attendance.

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

21 March 2017

Approval of Auckland Regional Amenities Funding Act levy 2017/2018

File No.: CP2017/01767

Purpose

1. To consider the Auckland Regional Amenities Funding Act (ARAFA) levy for 2017/2018.

Executive summary

2. The Auckland Regional Amenities Funding Act 2008 (the Act) provides for ten Auckland regional organisations to submit annual funding applications to the Auckland Regional Amenities Funding Board (Funding Board). The Funding Board must analyse these applications and prepare a draft funding plan, before finalising and levying Auckland Council for the total amount.

3. Council’s ability to influence the Funding Board is limited to setting funding principles and making a submission on the draft funding plan. It cannot influence the individual amounts received by the amenities.

4. This year the Funding Board seeks a total levy from council of $16,165,500, which is an increase of $23,000 from last year (0.14 per cent). Only small or no increases are proposed for all the amenities.

5. We recommend that council approves the levy. Disputing the levy and entering arbitration is the alternative, but staff consider that the request is consistent with the funding principles set out in the Act and therefore there is no valid reason to dispute it.

6. A summary of the amenities’ work on defining sustainability is included. Sustainability has been defined as including elements of effective governance, assurance of ongoing support, community demand, adaptation and innovation, and financial sustainability. The Funding Board will incorporate relevant information on these matters into its processes over time.

Recommendation/s

That the Finance and Performance Committee:

a) approve the Auckland Regional Amenities Funding Board levy request of $16,165,500 for 2017/2018.

Comments

7. The Act was put in place to establish a mechanism to provide adequate, sustainable and secure funding for specified amenities that provide arts, educational and rescue services throughout the Auckland region. It was passed in the pre-amalgamation context to ensure that all councils in the region contributed equitably to the funding of the amenities. At amalgamation, the levying regime passed over to Auckland Council.

8. Ten amenities were included in the regime at inception:

· Stardome Observatory and Planetarium

· New Zealand Maritime Museum

· Auckland Philharmonia

· Auckland Festival

· Auckland Theatre Company

· New Zealand Opera

· Auckland Regional Rescue Helicopter

· Coast Guard Northern Region

· Surf Life Saving Northern Region

· Watersafe Auckland.

9. The Act established a Funding Board which is an independent body responsible for allocation of the annual funding provided by Auckland Council for the amenities. The role of the Funding Board is to assess the annual funding applications received from the amenities against the funding principles within the Act and adopted by Auckland Council:

· funding is primarily for provision of facilities or services by the amenities (i.e. operational)

· funding is not available for capital expenses

· funding is not for any part of facilities or services provided outside the Auckland region

· funding is available only if the amenity has made all reasonable endeavours to maximise their funding from other available sources (council is the funder of last resort)

· the Funding Board must have regard to council’s proposed rates increase for the forthcoming year

· the amenities should align their activities to the Auckland Plan and adopt relevant performance measures.

10. Once the Funding Board has conducted the analysis of the amenities funding applications, it is required under the Act to prepare a funding plan, circulate it for public consultation and call for public submissions.

11. As part of the public submissions process, the Funding Board considered council’s submission as approved on 21 February 2017. The Funding Board has now submitted its levy request to Auckland Council for approval (Attachment A). The Funding Board needs to adopt its final funding plan for 2017/2018 by 30 April 2017.

12. The total levy sought for 2017/2018 is $16,165,500, representing an increase of $23,000 (or 0.14 per cent) over 2016/2017. We recommend that council approves the levy request as it is consistent with the funding principles in the Act and those established by council. Disputing the levy and entering arbitration is the alternative, but staff consider that the levy request is consistent with the funding principles set out in the Act and therefore there is no reason to dispute the levy.

Indicative Funding Requests for next two financial years

13. The projected indicative grant requests for 2018/2019 represent a 12 per cent increase on this year’s grants (a six per cent increase on what the amenities sought from the Funding Board) and another four per cent for 2019/2020. It is staff’s view that the amenities should not expect large annual increase in ARAFA funding, other than in exceptional circumstances.

14. Furthermore, the amenities have a statutory obligation to maximise revenue from other sources. Council is meant to be the funder of last resort for these organisations, a point which the Funding Board noted when it received council’s submission on the funding plan.

Sustainability of the Amenities

15. The purpose of the Act is to establish a mechanism to provide adequate, sustainable and secure funding for specified amenities providing arts, education, rescue, or community facilities for or services to the Auckland region.

16. During the 2015 review of the ARAFA funding model, council requested the Funding Board to work with council on establishing a framework which defined what sustainability meant for the amenities. The Funding Board led this work and has developed a broad framework within which to consider annual funding applications, in conjunction with the requirements of the Act. This framework will enhance and complement the annual decision-making process. Council is not currently being asked to endorse the framework or put in place an additional funding principle (which is has the power to do under the Act).

17. The framework recognises that sustainability is derived from more than just reliable, secure funding and that there is never a mix of programmes and revenue that will deliver permanent sustainability. Instead, continuous assessment and adjustment to each amenity’s context in its operating environment is required.

18. The Funding Board determined that financial sustainability (effective financial and strategic planning, diverse income streams and sound financial administration) underpins all other components. However, for an amenity to be sustainable other elements or building blocks are required:

· stable, effective leadership, governance and management

· assurance of on-going support for services

· community demand for valued services that are relevant

· impact: an amenity’s services align strongly with its core mission; demonstrate excellence in delivery; have a broad reach or deeply impact a smaller number of individuals; fill an important gap in the community; illustrate strong community building; or increase the impact of other programmes in the organisation or community

· dynamic response: to avoid crises or failure, an amenity needs to adapt to changes in its operating environment by adapting and innovating.

19. The Funding Board has advised that in addition to the minimum information requirements laid down in the Act, it has been seeking, and will continue to seek, a significant amount of additional information to ensure the components of the sustainability framework are adequately considered with each annual funding application. The Funding Board considers it undertakes a comprehensive analysis of the funding applications to ensure the requirements of the Act are met as well as ensuring the question of sustainability is adequately and properly assessed.

Consideration

Local board views and implications

20. Local board views have not been canvassed. Decision-making and oversight for regional activities is the responsibility of the Governing Body. This report relates to the funding relationship between council, the Funding Board and the amenities.

Māori impact statement

21. Council’s ability to influence or guide the Funding Board is limited to setting funding principles. In 2012 council added the funding principle that the Funding Board should require the amenities to align their activities to the Auckland Plan. The amenities have the ability to make positive contributions to Māori wellbeing, to deliver on Auckland Plan outcomes relating to effective communication and engagement with Māori and contribute to effective Māori capacity.

22. We note also that the Funding Board includes at least one member who represents the interests of Māori in the Auckland region, as required by the Act.

Implementation

23. If the committee approves the levy request payment will be made on 1 July 2017 to the Funding Board.

Attachments

No.	Title	Page
a ⇩	Letter to Auckland Council from ARAFA Funding Board re levy request for 2017/2018	17

Signatories

Author

Edward Siddle - Principal Advisor

Authorisers

Alastair Cameron - Manager - CCO Governance & External Partnerships

Phil Wilson - Governance Director

Sue Tindal - Group Chief Financial Officer

Finance and Performance Committee

21 March 2017

Auckland War Memorial Museum: Approval of the 2017/2018 levy

File No.: CP2017/00749

Purpose

1. To consider the 2017/2018 levy for the Auckland War Memorial Museum (the Museum).

Executive summary

2. Auckland Museum is one of Auckland’s world-class cultural institutions. It is currently in the process of significant capital and operating investment to ensure it meets the needs of Auckland as a fast-growing and diversifying city.

3. The Museum’s legislation allows it to levy Auckland Council for funding on an annual basis. Auckland Council through Regional Facilities Auckland (RFA) can provide feedback on the Museum’s draft annual plan for 2017/2018 (Attachment A), but does not have a direct role in monitoring the Museum’s outcomes or financial performance.

4. This year the Museum’s levy request is $30.735 million, an increase of three per cent. This includes around $9 million for depreciation.

5. The annual plan provides some detail about how the levy and the accumulated depreciation funding (the Asset Replacement Reserve, $60 million) will be spent over time. However, council staff remain concerned about whether council’s annual investment in the institution is being maximised given the current lack of strategic direction for Auckland’s museums.

6. We recommend that the Museum’s levy is approved to ensure secure funding for the Museum to meet its minimum obligations under the Act. Disputing the levy quantum and entering arbitration is the alternative, but this is not recommended. Enhancements to the wider governance and funding arrangements for Auckland’s museums is a longer-term goal and this will be best achieved through consensus with the institutions. Creating a dispute in the short-term will not assist with achieving this goal.

Recommendation/s

That the Finance and Performance Committee:

a) approve the total levy applied for by the Auckland War Memorial Museum of $30,735,000 for 2017/2018.

Comments

Legislative framework

7. Auckland Museum is, along with Auckland Art Gallery, one of Auckland’s world-class cultural heritage institutions. Its collections are of regional and national significance and it is resourced at a level surpassed in New Zealand only by Te Papa. It operates under the Auckland War Memorial Museum Act 1996 (the Act). The Act requires the Museum Board to adequately maintain, manage and develop the Museum (Section 12(2)(d)).

8. Council is obliged to fund the Museum under the levy provisions of the Act, which gives the Museum security of public funding, including for its depreciation and capital projects. These provisions were originally developed in the pre-amalgamation context to ensure that all councils in the Auckland region contributed equitably to the Museum.

9. The purpose of the levy is to fund the Museum’s activities, including maintenance, operations and development. Agreement on the levy must be reached so that the Museum can finalise its annual plan by 30 April 2017 and send a resolution to council notifying it of the annual levy required.

Role of Regional Facilities Auckland

10. RFA and Auckland Council have an Advisory and Management Agreement under which RFA has been appointed council’s advisor for the Museum’s annual funding process.

11. The legislation requires the Museum to publish its draft annual plan and publically consult on the levy request being made to Auckland Council. RFA worked with council staff on a submission and the Museum has considered this along with other submissions received.

12. RFA has assessed the levy proposed by the Museum and recommends (Attachment B) the continued funding of the Museum because of the regional and national significance of the Museum’s collections. RFA notes the funding request is within the levy cap.

2017/2018 Auckland War Memorial Museum Annual Plan

13. The Museum’s draft annual plan for 2017/2018 proposes a total levy of $30.735 million representing an increase of $895,000 or a three per cent increase over the 2016/2017 levy. The total levy request includes $9.226 million for depreciation.

14. If the levy request is approved, Auckland Council’s funding will be approximately 79 per cent of the museum’s total revenue. Non-council revenue is projected at $8.356 million.

	2015/2016 Annual Report	2016/2017 Budget	2017/2018 Annual Plan	2018/2019 Indicative	2019/2020 Indicative
Council levy ($m)	28.971	29.840	30.735	31.903	33.115
Other revenue ($m)	7.628	7.923	8.356	8.397	8.438
Levy as proportion of total revenue (%)	79.2	79.0	78.6	79.2	79.7
Annual increase in levy (%)		3.0	3.0	3.8	3.8
Non-council revenue as proportion of total revenue (%)	20.8	21.0	21.4	20.8	20.3

15. The draft 2017/2018 annual plan projects the Museum’s operational costs and revenues to rise to close to $50 million in 2026 (see graph below). This would require a doubling of current non-council income to achieve. However, given the proportion of revenue from non-council sources is projected to decline in the next two years (see bottom line of table above), it would appear likely that the council levy will continue to rise. At 80 per cent of revenue, the levy will likely be around $40 million by the mid-2020s.

16. The Museum’s annual plan sets out (pages 12-16) how it intends to deliver value for Aucklanders. This is in six key areas:

· heritage assets: better fire detection system; heritage maintenance to prevent leaks

· our communities: gallery changes including to tell the Auckland story more effectively; increased public space; better navigation and ‘laneways’; better classroom facilities; ongoing development of Collections Online; information and communications technology capital replacement

· collections and expertise: interim offsite collections facility delivered; digitisation programme continued; new conservation lab developed; Pacific Access Collection Project

· environment: increased accessibility by participating in Domain Master Plan

· sustainability: Southern Atrium changes to enhance commercial hub to support revenue generation

· people: high performing workforce will deliver exceptional public experiences.

17. With respect to these priorities, we note that the Museum appears to have invested significantly in staff in the last four years (figures from Museum Annual Reports):

	2012/2013	2013/2014	2014/2015	2015/2016
Total staff costs ($m)	12.668	14.735	16.549	18.038
Annual change (%)		16.3	12.3	9.0

18. The Museum operates an Asset Replacement Reserve (ARR). When it calculates its costs for the upcoming year for the purposes of determining its levy, a proportion of these are driven by asset replacement costs, including depreciation. The difference between the amount funded and the sum spent on capital projects each year remains in the ARR. The Museum has built the ARR over time and it currently has a balance of $60.931 million (end of 2015/2016 year).

19. The Museum intends to reduce the ARR balance over the next ten years as it pursues its long-term capital programme (see chart below). This is based on significant capital spending on the Future Museum programme. It is not clear if the Museum has the capacity to deliver such a capital works programme, given that the level of planned capital works in previous annual plans has not eventuated (e.g. 2015/2016: $19.1 million planned; $11.9 million actual). The Museum is therefore now on a steep capital spending path to reduce the largely council-funded ARR.

20. Future Museum is the Museum’s high level capital and strategic investment master plan. The plans in the Future Museum document (adopted in 2012/2013 by the Museum – year 1 of the programme) are mapped out to Year 5 of the programme (2016/2017). Council has not been provided with further information about the $56.8 million planned to be spent on Future Museum in the years 2017/2018, 2018/2019 and 2019/2020 (see graph below from the 2017/2018 draft annual plan, the combined total of the last three years of the Future Museum row).

Comment

21. Auckland Museum contributes significantly to cultural life in Tamaki Makaurau. It is currently engaged in a major effort to meet the future needs of a growing and diversifying region, at the same time as looking after globally important collections. It is seeking new ways of connecting Aucklanders and visitors with those collections, especially in its role as kaitiaki of Māori taonga (see also the Māori impact statement below). Sustained investment by council over many years has played an important role in strengthening the Museum.

22. We recommend that the Finance and Performance Committee approves the Museum’s levy request for 2017/2018. While officials have some concerns about the level of clarity provided to council about how ratepayer money is being spent, this will provide certainty for the Museum’s plans for the upcoming year. It will also demonstrate council’s continued commitment to the Museum, rather than withholding or disputing the levy.

23. Disputing the levy quantum and entering arbitration is the alternative, but this is not recommended. Improvements to the fundamental governance and funding arrangements for Auckland’s museums is the longer-term goal. This will be best achieved through consensus with the institutions. Creating a dispute in the short-term will not assist with achieving this goal.

24. However, the annual levy process for the Museum has become a significant source of tension between council and the institution.

25. In recent years the Museum has used its legislation to levy council for significant increases in funding, without necessarily being clear in its accountability documents as to how this money is being spent and what value it is delivering for Auckland. The Museum’s annual Performance Measures (Annual Plan, pages 18-22) are set by the Museum’s Board. They have only a weak connection to council’s strategic vision and provide few meaningful measures.

26. Council is in the position of being unable to influence the levy and balance it against other priorities within both the sector and its overall budget. Council has no way to determine the value of proposed future investments (such as a joint storage facility for Auckland’s institutions) or encourage greater collaborative behaviour among the museums. For example, Auckland Museum is currently investing over $8 million in a temporary offsite collection facility. In a more collaborative model, the Museum could have been leading development of a permanent facility which would cater for the needs of all Auckland’s institutions.

27. Efforts have been made in previous years to investigate with central government the possibility of funding, or governance change, but central government is reluctant to support change until Auckland is clear on strategic direction in the cultural heritage sector with agreed governance and funding structures to support that.

28. Overall, staff consider there are significant risks and missed opportunities in the current system and separate to this levy process, council may wish to consider how improved arrangements among Auckland’s museums could be pursued.

Local board views and implications

29. Decision making and oversight in respect of regional activities is the responsibility of the Governing Body.

Māori impact statement

30. The Museum aims to be a bicultural organisation and makes positive contributions to Māori aspirations in Auckland and around New Zealand. The Museum’s He Korahi Māori document sets out the nature of the Museum’s Māori dimension, which builds on the structural place of Māori built into the Museum through its Taumata-a-Iwi (Māori advisory committee).

31. Auckland Museum plays an important role in Auckland’s ability to contribute to meeting Treaty of Waitangi obligations, both through the principle of kaitiakitanga for taonga and by being an example of how genuine partnership can work in the future. In the past few years the Museum has undertaken a number of highly significant projects where its bicultural approach has been given expression. These include:

· the Te Awe project (improving access to and care of the taonga Māori collection)

· loan agreements and relationships developed between the Museum, Te Rarawa and far north museums to uphold and enhance the mana of Tangonge (a highly significant carved lintel), and increase access to it

· purchase of the Te Pahi medal to secure its return to New Zealand from Australia

· return of the Maungapōhatu Flag to Tūhoe

· development of the Treaty of Waitangi exhibit in the Māori Court at the Museum, the first time the Museum has had such an exhibit.

32. Approving the levy will support the continuing process within the Museum to develop as a bicultural institution. It will also help the Museum enhance its role as a leader in meeting the aspirations of Auckland’s Māori, including those expressed in the Auckland Plan.

Implementation

33. If this committee approves the proposed levy, payment will be made through the usual channels prior to or on 1 July 2017.

Attachments

No.	Title	Page
a ⇩	Auckland Museum draft Annual Plan 2017-2018	25
b ⇩	Regional Facilities Auckland letter to Auckland Council re Auckland Museum draft Annual Plan 2017-2018	45

Signatories

Author

Edward Siddle - Principal Advisor

Authoriser

Alastair Cameron - Manager - CCO Governance & External Partnerships

Phil Wilson - Governance Director

Sue Tindal - Group Chief Financial Officer

Finance and Performance Committee

21 March 2017

Museum of Transport and Technology: Approval of the 2017/2018 Levy

File No.: CP2017/00747

Purpose

1. To consider the 2017/2018 levy for the Museum of Transport and Technology (MOTAT).

Executive summary

2. MOTAT’s legislation allows it to levy Auckland Council for funding on an annual basis. Council through Regional Facilities Auckland (RFA) can provide feedback on MOTAT’s draft annual plans, but does not have a direct role in monitoring MOTAT’s outcomes or financial performance. Council can withhold or dispute the levy amount if it is in excess of what is required for MOTAT to meet its minimum obligations under its Act.

3. This year MOTAT’s levy request is for $15,222,110, an increase of 16 per cent. MOTAT is approximately 82 per cent council-funded.

4. The increase reflects a request for funding to cover an unforeseen offsite storage facility issue which MOTAT has been dealing with during the current financial year. This issue has meant that projects intended for the current financial year did not proceed as planned, as there was insufficient funding available. Increased funding is therefore sought for the deferred projects.

5. Staff recommend that MOTAT’s levy is approved, to ensure secure funding for the institution. Disputing the levy quantum and entering arbitration is the alternative, but this is not recommended. Improvements to the fundamental governance and funding arrangements for Auckland’s museums is a longer-term goal, and this will be best achieved through consensus with the institutions. Creating a dispute in the short-term will not assist with achieving this goal.

6. Staff note that MOTAT’s long-term priority is securing funding for the MOTAT Athfield Masterplan. Decisions about the masterplan would benefit from council being clear on its strategic priorities for cultural heritage in Auckland. This may have long-term implications for MOTAT’s governing environment and legislation, which the MOTAT Board (the Board) has already been considering in the context of masterplan development.

Recommendation/s

That the Finance and Performance Committee:

a) approve the total levy applied for by the Museum of Transport and Technology of $15,222,110 for 2017/2018

b) note that the levy increase for the 2017/2018 is not considered as an increase to the Museum of Transport and Technology’s baseline funding for the future.

Comments

Legislative framework

7. MOTAT operates under the Museum of Transport and Technology Act 2000. The Act requires the Board to maintain, manage, and develop MOTAT and its collections and provide for the recording and presentation of the history of transport and technology in Auckland and New Zealand. The Board must also provide maximum community benefit, including providing for education which engages and entertains, promoting historical and scientific research and achieving customer satisfaction through continuous improvement.

8. Council is obliged to fund MOTAT under the levy provisions of the Act, which gives MOTAT security of public funding for its activities, including maintenance and development. These provisions were originally developed in the pre-amalgamation context to ensure that all councils in the Auckland region contributed equitably to MOTAT.

9. Agreement on the levy must be reached so that MOTAT can finalise its Annual Plan by 30 April 2017 and send a resolution to council notifying it of the annual levy required.

2017/2018 MOTAT draft Annual Plan

10. The levy indicated within the final draft annual plan 2017/2018 (Attachment A) is $15.222 million, an increase of 16 per cent or $2.1 million on the 2016/2017 year. MOTAT is approximately 82 per cent council funded. This proportion is expected to decline slightly over the next few years, reflecting some increased non-council revenue earning.

11. MOTAT’s key priorities for the increased levy include (but are not limited to):

· additional offsite storage costs

· design work for MOTAT Athfield Masterplan

· subsidence issues

· tram tracks upgrade

· Customer Relationship Management system

· collection review (including staff to accelerate this)

· repainting of exhibition buildings.

Role of Regional Facilities Auckland

12. RFA and council have an Advisory and Management Agreement under which RFA has been appointed council’s advisor for MOTAT’s annual funding process.

13. The Act requires MOTAT to publish its draft annual plan and publicly consult on the levy request being made to council. RFA worked with council in developing a submission and MOTAT has considered this along with other submissions received.

14. RFA has assessed the levy proposed by MOTAT and recommends (Attachment B) that council approves the levy request. This is because MOTAT’s collections are of regional and national significance. The levy request is below the cap provided for in the Act, though it does represent an increase of 16 per cent. This reflects the fact MOTAT has been dealing in the current period with an issue in relation to their offsite storage facilities, which has resulted in the need for MOTAT to remove, clean and relocate all affected collection items and postpone projects in the 2016/2017 year.

15. RFA’s support for the funding is on the basis that:

· the levy increase for the 2017/2018 year is not considered as an increase to MOTAT’s baseline funding going forward

· MOTAT provides to RFA confirmation of the start and end dates for the collection rationalisation programme which is linked to the offsite storage issue

· funding is to be focused on completing the projects deferred from 2016/2017 because of the offsite storage issue, including improvements to MOTAT’s Customer Relationship Management System (CRM) to enable MOTAT to better track and report on visitor demographics.

Comment

16. MOTAT is beginning to approach its levy cap and indeed its projected levy requests for the next two years ($16.322 million) are at this cap. This signals a financial risk for council, as property revaluation is expected to raise the cap, which will allow higher levy requests from the institution.

17. Staff recommend that council approves MOTAT’s levy request for 2017/2018. MOTAT holds collections and objects of both regional and national importance, and pending longer-term decisions, these need to be looked after.

18. Another option is to dispute the levy quantum and enter arbitration, but this is not recommended. Improvements to the fundamental governance and funding arrangements for Auckland’s museums are the long-term goal, and this will be best achieved through consensus with the institutions. Creating a dispute in the short-term will not assist with achieving this goal.

19. Long-term, MOTAT’s key priority is to secure funding for the MOTAT Athfield Masterplan. This funding is expected to come from multiple sources, including council. A business case has been prepared and drafts have been shared with council staff. While MOTAT’s challenges have been well documented in the past, both in terms of its site and its governance environment, perhaps the most important matter is around MOTAT’s long-term strategic role in the Auckland cultural heritage sector. Without a clear view of this, it will be difficult for council to assess the value of investing in the proposed redevelopment.

20. In the context of the Auckland Museum levy report, (also on this committee agenda) staff have suggested that council may wish to consider how changes to governance of the Auckland cultural heritage sector could be pursued. Such changes would be designed to build a consensus around key priorities and directions in the sector at the same time as achieving greater coherence and collaboration, to maximise council’s investments.

21. This may well affect MOTAT and its legislation. It is positive that the MOTAT Board has already considered some options for governance change as part of its thinking about the masterplan and this is referred to in the Chair and Director’s overview (draft Annual Plan 2017/2018 page seven of Attachment A).

Consideration

Local board views and implications

22. Decision making and oversight in respect of regional activities is the responsibility of the Governing Body.

Māori impact statement

23. MOTAT is in the process of developing its relationships with Māori. As noted in the draft Annual Plan (page 17), MOTAT has been engaging with the Independent Māori Statutory Board and developing partnerships with Māori educators. Approving the levy will support MOTAT’s development in this area, especially in terms of working with mana whenua to authentically share Māori stories of technology and innovation.

Implementation

24. If the Finance and Performance Committee approves the levy, payment will be made through the usual channels prior to or on 1 July 2017.

Attachments

No.	Title	Page
a ⇩	MOTAT draft Annual Plan 2017/2018	51
b ⇩	RFA Letter to Auckland Council re MOTAT draft Annual Plan 2017-2018	99

Signatories

Author

Edward Siddle - Principal Advisor

Authorisers

Alastair Cameron - Manager - CCO Governance & External Partnerships

Phil Wilson - Governance Director

Sue Tindal - Group Chief Financial Officer

Finance and Performance Committee

21 March 2017

Disposals Recommendation Report

File No.: CP2017/02778

Purpose

1. To obtain approval to dispose of three council-owned properties that Panuku Development Auckland (Panuku) considers suitable for sale.

Executive summary

2. Capital receipts from the sale of surplus properties contribute to Auckland Plan outcomes and the Long-term Plan 2015-2025 (LTP) by providing the Council with an efficient use of capital and prioritisation of funds to achieve its activities and projects. In the 2016/2017 financial year, the LTP has forecast the disposal of non-strategic council assets to the combined value of of $69 million.

3. In accordance with the Local Government Act 2002, the annual Statement of Intent (SOI) states the activities and intentions of Panuku, the objectives that those activities will contribute to and performance measures and targets as the basis of organisational accountability. For the 2016/2017 financial year Panuku is required to identify properties from within council’s portfolio that may be suitable for potential sale to a combined value of $75 million and to sell $50 million of property by 30 June 2017.

4. The first property presented in this report comprises part of 770R Great South Road, Manukau. It is subject to a 99 year lease to the Second Nature Charitable Trust (Second Nature) and is a reserve subject to the Reserves Act 1977. Second Nature operates the Vodafone Events Centre which is located onsite. Second Nature’s master plan for the Vodafone Events Centre identified having a hotel onsite as an integral element to its ongoing success.

5. To enable such a development to occur, Second Nature approached Auckland Council seeking to revoke the reserve status and purchase approximately 4,594m² of 770R Great South Road, Manukau. As 770R Great South Road, Manukau is subject to a 99 year lease to Second Nature, Auckland Council as lessor can only dispose of the subject parcel of land to Second Nature as lessee until the expiration of the lease term. Given this, the proposed hotel and apartment complex can only be realised if Auckland Council agrees to sell its lessor’s interest over the subject parcel of land to Second Nature as lessee.

6. To ensure full transparency is provided to the Finance and Performance Committee about Second Nature’s proposal, Second Nature has advised that it intends to on-sell the subject parcel of land to the Safari Group (NZ) Limited (Safari Group) to undertake the development of a 120 bed, three to four star hotel and apartment complex. Second Nature undertook its own procurement process when selecting the Safari Group as its preferred developer. Auckland Council and Panuku were not involved in the procurement process. Second Nature has entered into a conditional agreement with the Safari Group to sell the subject parcel of land to construct the proposed hotel and apartment complex.

7. The rationalisation process for the 4,594m² portion of 770R Great South Road, Manukau commenced in October 2016. Consultation with Council and its CCOs, the Manurewa Local Board and iwi authorities has now taken place. No alternative service uses have been identified for the subject portion of land through the rationalisation process. The feedback received during the internal consultation and iwi engagement was supportive of the proposal. The Manurewa Local Board endorsed the reserve revocation of the subject parcel of land in December 2016. The Manurewa Local Board will consider the proposed disposal at its March 2017 business meeting and its resolution will be tabled at the Finance and Performance Committee meeting.

8. As no alternative service uses have been identified for the subject portion of land, we recommend the revocation of the reserve status and disposal of approximately 4,594m² of 770R Great South Road, Manukau. Final revocation of the reserve status will be subject to completing the statutory requirements of the Reserves Act 1977 and Local Government Act 2002, including public advertising.

9. The second property presented in this report, 14 Baxter Street, Warkworth is comprised of a public car parking platform, the airspace above it, and ancillary foyer, stairs and support pillars originally acquired for a proposed community centre development. Consultation about this property has been undertaken with council and its CCOs, iwi authorities and the Rodney Local Board. No alternative service uses have been identified. The Rodney Local Board does not endorse the proposed disposal of this site on the basis that it may be required for town centre car parking purposes in the future. Retention of this property will require significant expenditure to undertake necessary remedial work and deferred maintenance. Panuku’s assessment is that through a disposal, the sale of the future development unit (being the airspace) could include provision to retain public car parking and the development opportunities at the site could be addressed by the market. As such, it is recommended that the property be divested.

10. The third property presented in this report, 2R Carolyn Street, Papatoetoe, is vacant land held in two lots that was acquired on subdivision for the purpose of a spite strip for disposal to cover roading costs. One lot will be legalised as part of Auckland Transport’s road network. The balance of the site was the subject of the rationalisation process. Consultation with council and its CCOs, iwi authorities and the Ōtara-Papatoetoe Local Board about this site has been undertaken. No alternative service uses were identified for site through the rationalisation process and the feedback received was supportive of the proposed disposal. As such, it is recommended that the balance of the site be divested.

Recommendation/s

That the Finance and Performance Committee:

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

i) the revocation of the reserve status of approximately 4,594m² of 770R Great South Road, Manukau comprised of an estate in fee simple more or less being Section 1 SO 361058 contained in computer freehold register 440697 as it is no longer required by Auckland Council for reserve purposes;

ii) the disposal of approximately 4,594m² of 770R Great South Road, Manukau comprised of an estate in fee simple more or less being Section 1 SO 361058 contained in computer freehold register 440697 as it is no longer required for reserve purposes to the Second Nature Charitable Trust;

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

c) note, in the interest of full transparency, that the Second Nature Charitable Trust has entered into a conditional agreement to sell approximately 4,594m² of 770R Great South Road, Manukau to the Safari Group (NZ) Limited;

d) note that in the event of Panuku Development Auckland and the Second Nature Charitable Trust concluding a sale and purchase agreement at full and fair market value for Auckland Council’s interest in approximately 4,594m² of 770R Great South Road, Manukau, the Second Nature Charitable Trust will in turn make unconditional its current conditional sale and purchase agreement with the Safari Group (NZ) Limited to enable the construction of a hotel and apartment complex on the site;

e) note that the Second Nature Charitable Trust has undertaken its own procurement process in selecting the Safari Group (NZ) Limited for the development of a hotel and apartment complex at 770R Great South Road, Manukau and that the Second Nature Charitable Trust has entered into these commercial arrangements as an independent, standalone entity in accordance with its own objectives;

f) approve, subject to the satisfactory conclusion of any required statutory processes, the disposal of the land at 14 Baxter Street, Warkworth, comprised of three stratum fee simple estates described as Lot 2 DP 208963 and being below Reduced Level 7.90 in terms of Lands and Survey Datum 1946 (includes 40 parcels) comprising approximately 466m²; Lot 2 DP 208963 between Reduced Level 7.90 and 9.10 in terms of Lands and Survey Datum 1946 comprising approximately 3,763m² and Lot 2 DP 208963 and being above Reduced Level 9.10 in terms of Lands and Survey Datum 1946 comprising approximately 3,709m² and contained in computer freehold register NA137A/463 and agree that final terms and conditions be approved under the appropriate delegations;

g) approve, subject to the satisfactory conclusion of any required statutory processes, the disposal of the land at 2R Carolyn Street, Papatoetoe, comprised of an estate in fee simple more or less being Lot 18 DP 60730 contained in computer freehold register NA15C/759 and agree that final terms and conditions be approved under the appropriate delegations.

Comments

General

11. Panuku and the Auckland Council’s Land Advisory team in the Community Facilities department 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.

12. 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. Once a property has been internally cleared of any service requirements, Panuku then consults with local boards, mana whenua and ward councillors. 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

13. 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.

14. 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.

15. Property specific feedback received is included in the Local Board Engagement section of the property attachments to this report.

Māori impact statement

16. 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.

17. 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.

18. 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.

19. 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.

20. Property specific feedback received is included in the Mana Whenua Engagement section of the property attachments to this report.

Implementation

21. The results of the rationalisation process for the three subject properties are that they are not required for current or future service requirements. Due to this, we recommend that they be divested.

22. Property specific implementation issues are included in the property attachments to this report.

Attachments

No.	Title	Page
a ⇩	770R Great South Road, Manukau property information	107
b ⇩	14 Baxter Street, Warkworth property information	115
c ⇩	2R Carolyn Street, Papatoetoe property information	119

Signatories

Authors

Anthony Lewis - Senior Advisor Portfolio Review, Panuku Development Auckland

Letitia McColl - Team Leader Portfolio Review, Panuku Development Auckland

Authorisers

Marian Webb – Manager Portfolio Strategy, Panuku Development Auckland

David Rankin – Chief Operating Officer, Panuku Development Auckland

Sue Tindal – Group Chief Financial Officer

Finance and Performance Committee

21 March 2017

Auckland Council Group quarterly financial report and financial results to 31 December 2016

File No.: CP2016/25374

Purpose

1. This report provides, for noting, the quarterly financial report and an overview of the financial performance of the Auckland Council Group for the six months to 31 December 2016.

Executive summary

2. This report is part of the regular quarterly financial reporting to the Finance and Performance Committee on the Auckland Council Group’s financial performance, financial position and cashflow for the six months to 31 December 2016.

3. The Finance and Performance Committee on 13 December 2016 delegated the chair and deputy chair to authorise the release of the Auckland Council Group Interim Report for the six months to 31 December 2016 to the New Zealand Stock Exchange (NZX). The release occurred on 27February 2017, as required by the NZX listing rules.

Financial highlights

4. Auckland Council Group generated an operating surplus before gains and losses of $966 million for the six months to 31 December 2016, compared to the phased budget of $929 million.

5. The net other gains of $373 million are primarily non-cash book entries, driven by the improvements in the fair value of net derivative financial liabilities, resulting from rising long-term interest rates. This reverses recent trends of the last two years of increasing net other losses as long term interest rates fell.

6. The Group net assets increased by $1.347 billion, to $34.99 billion, during the six months to 31 December 2016. The principal contributors being the increase in receivables of $776 million as a result of recognising the 2016/2017 rates at the time of the issuance of the rating notices on 1 July 2016 and the net increase in property, plant and equipment of $336 million.

7. The capital expenditure of $713 million was funded by net operating cash inflow of $494 million and the balance from borrowings and working capital movements.

8. Overall the financial performance is in line with the phased annual plan.

Auckland Council and CCO reporting to this committee

9. The Council Controlled Organisations (CCOs) individual performance reports will be provided to Finance and Performance Committee members via memo and will be available on council’s website.

10. Auckland Council financial performance for six months to 31 December 2016 was provided to the Finance and Performance Committee on 21 February 2017.

Recommendation/s

That the Finance and Performance Committee:

a) receive the Auckland Council Group quarterly financial report to 31 December 2016.

b) note the Auckland Council Group for the six months to 31 December 2016 generated an operating surplus before gains and losses of $966 million and the increase in net assets of $1.347 billion to $34.99 billion.

Comments

11. This report discloses the financial performance and financial position of the Auckland Council Group for the six months ended 31 December 2016.

Financial performance

12. Auckland Council Group generated an operating surplus before gains and losses of $966 million for the six months to 31 December 2016, compared to the phased budget of $929 million.

13. Total revenue excluding gains was $6 million higher than phased budget primarily due to higher:

· volume of vested assets received than expected ($18 million);

· other revenue ($8 million) including rental revenue increases arising from a larger portfolio than budgeted and higher than anticipated dividend revenue;

· grants and subsidies ($4 million) due to timing and one off grants received;

14. This is partly offset by:

· reductions in fees and user charges ($16 million) due in part to lower than expected revenue from Ports of Auckland (POAL) driven by a reduction in volumes and lower than expected fare revenue from Auckland Transport;

· lower rates revenue mainly due to the discounting applied to the uncollected portion of the rates revenue ($5 million); and

· the remaining variance predominantly due to revenue expected to be collected later in the year than originally planned.

15. Total expenditure excluding other gains and losses is lower than budget by $31 million primarily due to lower:

· depreciation and amortisation expenses due to the timing of the capitalisation of property, plant and equipment ($13 million);

· cost of goods and services mainly due to POAL as a result of the reduced volumes ($13 million);

· than budgeted finance costs ($9 million);

· consultancy costs ($3 million);

16. This is partly offset by:

· increase in the weathertightness provision ($11 million); and

· the remaining variance predominately due to expenditure expected to be incurred later in the year than originally planned.

17. The net other gains of $373 million are primarily non-cash book entries, driven by the decrease in the fair value of net derivative financial liabilities, resulting from rising long-term interest rates. This reverses the trend of the last two years of increasing net other losses as long term interest rates fell.

Financial position

18. The total Group net assets increased by $1.3 billion from 30 June 2016, the principal contributors being:

· increase in receivables ($776 million) due to timing of rates receipts from ratepayers;

· net investment in property, plant and equipment ($336 million);

· decrease in fair value of net derivative financial liabilities ($349 million);

19. This was offset by an increase in borrowings ($149 million).

20. The capital expenditure of $713 million was funded by net operating cash inflow of $494 million and the balance from borrowings and working capital movements.

21. Overall the financial performance is in line with the phased annual plan.

Consideration

Local board views and implications

22. This report relates to the financial performance of the Auckland Council Group, which does not include reporting at a local board level. Each local board receives reports specific to their area. Accordingly the views of local boards have not been sought.

Māori impact statement

23. The report is limited to financial performance of the Auckland Council Group and does not affect the achievement or reporting of council’s contribution to Māori outcomes. Council’s contributions to Māori outcomes are reported in the annual report.

Implementation

24. There are no implementation issues.

Attachments

No.	Title	Page
a ⇩	Auckland Council Group quarterly financial report to 31 December 2016	127

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

21 March 2017

Budget update March 2017

File No.: CP2017/03003

Purpose

1. To approve additional budgets in the 2016/2017 financial year for three projects in the City Centre Programme of Work, funded from the City Centre Targeted Rate (CCTR).

Executive summary

2. In February, the Auckland City Centre Advisory Board (ACCAB) endorsed the updated City Centre Programme of Work, as part of the half yearly review cycle (attachment A and B). The programme is predominately funded from the CCTR.

3. There is a range of changes proposed with respect to the scope and/or timing of existing projects and introduction of new initiatives. This report only seeks the approval from this committee for budget changes in the current financial year, as outlined below:

· Freyberg Place upgrade: additional capital expenditure (capex) budget of $960,000

· K Road destination marketing: new operational expenditure (opex) budget of $80,000

· City feature lighting: new operational expenditure (opex) budget of $300,000.

4. Budget adjustments proposed in outer years will be considered by this committee through the 2017/2018 Annual Plan or Long-term Plan 2018-2028 process.

5. The new opex budget would result in a bottom line impact of $380,000 for the current financial year, which would be met from the CCTR reserve. The additional capex budget would also be funded from the CCTR reserve. These proposals would have no material impact on general rates or debt for 2017/2018.

Recommendations

That the Finance and Performance Committee:

a) approve an additional capital expenditure budget of $960,000 in the 2016/2017 financial year to complete Freyberg Place upgrade.

b) approve a new operational expenditure budget of $80,000 in the 2016/2017 financial year for Karangahape Road destination marketing.

c) approve a contribution of $300,000 in the 2016/2017 financial year to the city feature lighting project led by Heart of the City.

d) agree that the above budget increases are to be funded from the City Centre Targeted Rate reserve.

Comments

Freyberg Place Upgrade

6. Freyberg Place upgrade has an existing capex budget of $5.8 million, funded by the CCTR. The construction work started in August 2016 and is scheduled to be completed in June 2017.

7. The project team is seeking an additional capex budget of $960,000, consisting of

a) $450,000 for unforeseen site issues (itemised in attachment B), mainly:

· new stormwater manholes and requests to recycle-reuse existing assets

· clashes with underground concrete and utilities

· Vector transformer and Adshel shelter assets relocation

b) $510,000 for kerb build out works

· post tender design change

· contingency

8. These estimates have been verified by the project quantity surveyor and peer reviewed by an independent quantity surveyor. The amount relating to kerb build out works will only be used as required.

K Road destination marketing

9. There are two Business Improvement Districts (BIDs) in the city centre. They are Heart of the City and the K Road Business Association. Heart of the City receives $400,000 per annum from CCTR funding for destination marketing and to date the K Road Business Association has not received any CCTR funding for destination marketing.

10. Staff propose to allocate $80,000 in 2016/2017 to the K Road Business Association to undertake destination marketing. This would bring some parity between the two BIDs and highlight the significant role that both BIDs play in marketing Auckland’s city centre as a destination for events, dining, shopping and leisure, in addition to a place to live and do business.

City feature lighting

11. Heart of the City is leading a proposal to install a network of lights on Queen Street’s 118 trees and 70 street poles from the Customs Street East intersection through to Mayoral Drive. The lighting has the potential to transform the city centre in the evening and provide a point of difference for Auckland. Heart of the City will report back to ACCAB with further information.

12. The total cost for the project is estimated at $800,000, $300,000 of which is sought from the CCTR funding in the 2016/2017 financial year. A funding agreement will be in place to ensure the council’s contribution will be contingent on the Heart of the City obtaining the remaining $500,000 from other sources.

Overall financial impact

13. The new opex budget would result in a bottom line impact of $380,000 for the current financial year, which would be met from the CCTR reserve. The additional capex budget would also be funded from the CCTR reserve. These proposals would have no material impact on general rates or debt for 2017/2018.

Consideration

Local board views and implications

14. The budget changes proposed have not been discussed independently with the Waitematā Local Board. However, the chair of the local board is a member of the ACCAB.

Māori impact statement

15. The City Centre Programme of Work will be part of the consultation and engagement at ongoing Development Programme Office Hui which are held with mana whenua.

Implementation

16. Should the budget changes be approved, budgets would be amended in core financial systems and would be used for internal management reporting, regular reporting to council committees and annual financial reporting for the 2016/2017 financial year.

17. Budget changes proposed for outer years will be dealt with as part of the 2017/2018 Annual Plan or Long-term Plan 2018-2028 process as appropriate.

Attachments

No.	Title	Page
a ⇩	Auckland City Centre Advisory Board OPEN MINUTES 6 March 2017	137
b ⇩	Review of the 2015-25 City Centre Programme of Work (TR6)	141

Signatories

Authors

Neil Huang - Principal Advisor

Tracy Xu – Finance Graduate

Authorisers

Robert Irvine - Head of Group Financial Planning

Matthew Walker - GM Financial Strategy and Planning

Sue Tindal - Group Chief Financial Officer

Finance and Performance Committee

21 March 2017

Section 17A Group Cost Effectiveness Review Programme

File No.: CP2017/03050

Purpose

1. To consider and approve a programme of s17A value for money reviews across the group (the value for money programme ) including the:

· Objectives and scope of the programme and proposed governance arrangements.

· Approach to prioritisation and the proposed first four reviews.

· Initiation of the work programme.

Executive summary

2. Council is responsible for meeting the needs of a growing city while delivering value for money for Aucklanders. Over the next ten years the Auckland Council group is seeking to spend over $60 billion and to increase efficiency savings from $183 million for the 2014/2015 year to more than $300 million per annum by 2025. This plan is to be achieved against a backdrop in Auckland of rapid population growth, increased demand in public services including associated infrastructure investment and a requirement to maintain service levels.

3. Given this background, the Governing Body mandated through the terms of reference that the Finance and Performance Committee oversee an ongoing programme of value for money reviews, as required under section 17A of the Local Government Act 2002 (LGA02) which are integral to the delivery of our own plans. We have a statutory obligation to undertake such reviews.

4. The reviews are intended to introduce a framework to evaluate expenditure and to provide greater accountability to the governing body and the ratepayer on what is being achieved with public expenditure. The objective of the programme is to analyse cost effectiveness in a systematic manner across the Auckland Council group and to provide a basis on which more informed decisions can be made on long term planning priorities.

5. This report provides a proposal for a three year value for money programme including:

· The scope and objectives for the review programme.

· Criteria for prioritising and sequencing the reviews.

· Recommendations for the first four reviews, including objectives.

· The broad methodology and approach to evaluating value for money

· Proposed programme governance and structure

Recommendation/s

That the Finance and Performance Committee:

a) endorse the proposed value for money programme including the approach, priorities, objectives, and the recommended first four reviews.

b) delegate the Chair and Deputy Chair of the Finance and Performance Committee to approve the terms of reference of the three waters, domestic waste, organisational support and the investment attraction and global partnership reviews in consultation with the Chairs of the Environment and Community Committee, the Planning Committee and the Chairs of the affected CCOs and the Mayoral Office.

c) endorse the establishment of a steering group to give political oversight, consisting of the Chair and Deputy Chair of the Finance and Performance Committee and the Chairs of the Environment and Community Committee and the Planning Committee to monitor progress of the value for money programme at key milestone points.

Comments

Background

6. Section 17A requires that Auckland Council must review the cost effectiveness of current arrangements for meeting the needs of communities within its district or region for good-quality local infrastructure, local public services, and performance of regulatory functions^{^[1]}”.

7. The legislation states that a review should consider three elements: how a service is governed, how it is funded and how it is delivered.

8. The transition provisions (Schedule 1AA of the LGA02) in relation to s17A require that the first reviews need to be completed by August 2017^{^[2]}. After that, s17A requires that reviews are conducted every six years, or when:

· Council is considering a significant change to relevant service levels.

· A Council contract or binding agreement in relation to delivery of infrastructure, service or regulatory function is expiring within the next two years^{^[3]}.

Proposed Approach

9. The value for money programme is intended to introduce a framework to evaluate the effectiveness of spending in securing the outcomes sought for Aucklanders, consider the merits of alternative arrangements for delivery of those services and to provide greater accountability to the governing body and the ratepayer on what is being achieved with public expenditure. The objectives of the reviews are to evaluate cost-effectiveness in a systematic manner and to provide a basis on which more informed decisions can be made on long term planning priorities.

10. The scope of the reviews will be framed with reference to the activities and services categories in the long term plan and the organisational scope will extend across the Auckland Council parent and the CCOs. The assessment will require an evaluation of past, present and future performance across strategic activities including investments and services mirrored in the Long-term Plan and annual report performance reporting framework set out in the appendix to this report (Attachment A).

11. The recommended approach to the value for money programme is to follow public sector practice and sequence the reviews to focus in the first instance on activities that are most significant to meeting the Council’s strategic objectives and the city’s growth needs. Specifically the proposed reviews should:

· Represent significant levels of expenditure.

· Have potential to achieve material efficiencies consistent with long term planning outcomes.

· Significantly contribute to council’s effective and efficient management of urban development and the provision of urban infrastructure.

· Address major public policy issues including the integration of governance, funding and service delivery options.

· Can be completed in time to inform the next two Long-term Plans.

12. Each review should test whether resource allocation is well aligned to strategy and whether council is operating efficiently and effectively. Developing an understanding of these matters will form the general objective of each review. The evaluation framework for each review would consider the following value for money including Section 17A criteria illustrated below.

Opening Assumptions

13. The opening assumptions for the value for money programme are:

· The scope of each review is activity and service-based mirroring the group budget and service areas in the Annual Plan and the Long-term Plan set out in Attachment B.

· The reviews are concerned with value for money in a broad sense –i.e. how well the existing policy and institutional arrangement deliver on Council’s strategic objectives and desired outcomes for Aucklanders. This extends beyond the legislative requirement in s17A to look at cost efficiency, effectiveness and appropriateness of services.

· A fact based approach will be used in undertaking the review utilising quantitative data where available.

· A three year programme of s17A reviews for the Auckland Council Group is proposed^{^[4]} planned in two phases for completion by February 2021. The first 18 month phase (March 2017 – May 2018) will focus on in-depth service reviews for activities and services that are considered high priority to assist in the development of the 2018 Long-term Plan. Lower priority service reviews which will be commissioned in a subsequent 18 month phase (June 2018 – November 2019) to assist the annual budget refresh and the development of the 2021 Long-term Plan.

· For indicative planning purposes, it is assumed each review will take between two to four months depending on size and complexity. It is assumed up to four reviews can be run in parallel.

· An initial schedule of reviews and high level preliminary review timeline has been prepared. It is set out in the appendix to this report (Attachment C).

· The recommended prioritisation and sequencing is based on the prioritisation criteria noted in paragraph 11 above, and set out in the table (Attachment A) of this report.

Priorities and Timings

14. Given the urgency to get the reviews underway to ensure information is available to the Finance and Performance Committee in time to evaluate the 2018 Long-term Plan draft in November, four reviews (one large, one medium-sized review and two smaller reviews) are proposed to start in April 2017. The timing and nature of subsequent reviews will require further evaluation and approval.

15. A minimum of eight reviews are proposed for the twelve months from April 2017. Subsequent reviews will inform the 2019 Annual Budget and the LTP 2021-2031.

16. The first four reviews have been prioritised using the criteria set out in Attachment A of this report. These are:

· Three Waters Review (comprising water, wastewater and stormwater budget categories).

· Domestic Waste Review (comprising a review of domestic waste services including refuse, recycling, inorganics and organic services).

· Organisational Support Review (comprising a review communications & engagement services across the group followed by a rolling series of reviews including transactional services, payroll, finance, information systems, procurement, human resources, customer services and legal functions).

· Investment Attractions & Global Partnerships Review (comprising a review of how investment attraction and global partnership services are delivered across the group).

The Three Waters Review

17. It is proposed this review be given a high priority for early review given the:

· Scale and cost of maintaining and developing the public assets under management for water, wastewater and stormwater.

· The criteria in paragraph 11 above:

o Possible efficiencies of integration and/or combining in some areas

o The significance of contribution to future urban infrastructure development

· Public policy implications including addressing governance and funding issues such as regional strategic planning and charging mechanisms.

· Introduction in 2015 of council’s discretion on how it will provide water supply and wastewater services in Auckland.

18. The objectives and lines of inquiry for the review are set out in the appendix to this report (Attachment D).This review is focused on the Council parent, Watercare Services and Auckland Transport.

The Domestic Waste Review

19. Domestic waste (refuse, recycling, inorganic and organic matter). services has been selected for early review given the following considerations:

· Council is in the process of implementing its first waste management and minimisation plan aiming at an aspirational goal of zero waste. Council is required to refresh its Waste management and minimisation plan by June 2018.

· The recent changes in recycling and organic collection services.

· The financial significance of the service in the Long-term Plan.

20. The objectives and lines of inquiry for the review are set out in the appendix to this report (Attachment D).This review is focused on the Council parent.

The Organisational Support Review

21. This review has been segmented into seven sub-budget categories and a 12 month rolling review set out in the programme timetable in the appendix to this report (Attachment D). It has been selected for early review given the following considerations:

· The significant volume of feedback received from the public on the 2015 Long-term Plan spending called for reduced spending on governance and support (in particular council administration costs).

· The identification of a 10% annual operating cost savings opportunity from delivering shared group back office functions such as Communications, Finance, Human Resources, Information Communications and Technology, Legal and Procurement by Ernst & Young in its Alternative Source of Financing Report dated November 2015.

· The need to balance the review team’s workload with a mix of larger reviews supplemented by smaller reviews.

· The need to identify and implement group-wide solutions to meet the growing efficiency targets within the Long-term Plan.

22. The objectives of the review and lines of inquiry for this review are set out in the appendix to this report (Attachment D).This review is focused on the Council group including all CCOs.

23. Officers will report separately on the options for the configuration of group shared services at key milestone points, in alignment with other initiatives such as the development of Group Policies.

The Investment Attraction and Global Partnership Review

24. This review has been selected for early review given the following considerations:

· The public policy significance of the provision of these services in achieving investment outcomes arising from the Auckland Plan.

· The need to balance the review team’s workload with a mix of larger reviews supplemented by smaller reviews.

· The need to identify and implement group-wide solutions to meet the growing efficiency targets within the Long-term Plan.

25. The objectives and lines of inquiry for this review are set out in the appendix to this report (Attachment D).This review is focused on the Council parent and ATEED.

Consideration

Council Controlled Organisations

26. The Chairs of affected CCOs have been informed of the value for money programme and specific reviews related to their organization. They will be consulted in the development of the terms of reference for the relevant reviews.

Local board views and implications

27. The views of local boards have not been sought in relation to this advice. Feedback on the review programme will be sought from the Local Board Chairs throughout the review process.

Māori impact statement

28. If approved, engagement with Māori on the proposed programme of work will occur throughout the review process.

Implementation

29. The council’s financial planning cycle, particularly the long-term planning process and timelines will guide the timeline for the value for money programme. The first group of reviews are intended to be completed by May 2018. The second group of reviews are intended to be largely completed by November 2019.

Programme Oversight

30. Finance will oversee the programme with the Group Chief Financial Officer as Lead Officer reporting to the Finance and Performance Committee.

31. It is proposed to establish a small programme office within Corporate Finance to oversee project management, reporting, data collection and the detailed analytical elements of the review work. A panel of external experts will be established to provide ongoing independent strategic advice and assurance for each of the reviews through the life of the programme.

32. The Mayoral Office will provide co-ordination support across the group at the political level.

Next Steps

33. The key milestones for the first four months of the programme are shown in Table 1.

Table 1: Key Programme Milestones

Action	Due Date
S17A programme initiated	April 2017
Preliminary stakeholder consultation completed	May 2017
Terms of reference approved	April 2017
Programme timetable and review sequencing finalized	May 2017
Expert panel appointed	April/May 2017
First (four reviews) data collection and analysis	May-August 2017
Expert oversight, conclusions & recommendation	July/September 2017
First four reviews completed	September 2017

34. It is recommended that given the urgency required to initiate the reviews that the Chair and Deputy Chair of the Finance and Performance Committee be delegated to approve the terms of reference of the three waters, domestic waste, organisational support and the investment attraction and global partnership reviews in consultation with the Chairs of the Environment and Community Committee and the Planning Committee and the Chairs of the affected CCOs and the Mayoral Office.

35. It is recommended that a steering group be established to give political oversight, consisting of the Chair and Deputy Chair of the Finance and Performance Committee and the Chairs of the Environment and Community Committee and the Planning Committee to monitor progress of the value for money programme at key milestone points.

36. The final terms of reference will be circulated to the members of the Finance and Performance Committee and posted on the Auckland Council website.

37. Further proposed reviews and objectives will be reported back to the Finance and Performance Committee in July 2017.

38. Ongoing reporting on the review will be taken to the Finance and Performance Committee at the direction of the steering group. It is envisaged that these will be on a quarterly basis.

Attachments

No.	Title	Page
a ⇩	Long-term Plan Activity	181
b ⇩	Long-term Plan and Annual Plan Strategic Community Outcomes and Service Areas	183
c ⇩	Proposed Programme of s17A Review Work	185
d ⇩	Review Objectives	187

Signatories

Author

Sally Garrett – Programme Manager – Value for Money

Authorisers

Kevin Ramsay - General Manager Corporate Finance and Property

Sue Tindal - Group Chief Financial Officer

[1] “Good quality “is defined in s10 of the LGA02 in relation to local infrastructure, local public services, and performance of regulatory functions to mean infrastructure, public services, and performance that are efficient, effective and appropriate to present and anticipated future circumstances.

[2] The s17A review programme proposed in this report relates to the second six year review period from August 2017.

[3] There are exceptions to the s17A review requirements where:

· The delivery of that infrastructure, service or regulatory function is governed by legislation, contract or binding agreement such that it cannot reasonably be altered

· Auckland Council is satisfied that the potential benefits of undertaking a review in relation to that infrastructure, service or regulatory function do not justify the costs of a review.

[4] This work programme is separate from the s17A service review work completed to date by the council Parent and the Council Controlled Organisation.

Chairperson	Cr Ross Clow
Deputy Chairperson	Cr Desley Simpson, JP
Members	Cr Dr Cathy Casey	Cr Mike Lee
	Deputy Mayor Bill Cashmore	Cr Daniel Newman, JP
	Cr Fa’anana Efeso Collins	Cr Dick Quax
	Cr Linda Cooper, JP	Cr Greg Sayers
	Cr Chris Darby	Cr Sharon Stewart, QSM
	Cr Alf Filipaina	IMSB Chair David Taipari
	Cr Hon Christine Fletcher, QSO	Cr Sir John Walker, KNZM, CBE
	Mayor Hon Phil Goff, JP	Cr Wayne Walker
	Cr Richard Hills	Cr John Watson
	IMSB Member Terrence Hohneck
	Cr Penny Hulse
	Cr Denise Lee

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