Agenda of Finance and Performance Committee

Finance and Performance Committee

17 October 2018

Auckland Council and group financial performance for the year ended 30 June 2018

File No.: CP2018/19034

Te take mō te pūrongo / Purpose of the report

1. To provide the Finance and Performance Committee with a high-level recap of the financial performance of the Auckland Council group for the year ended 30 June 2018, based on the recently released Auckland Council 2017/2018 Annual Report and Summary Annual Report.

Whakarāpopototanga matua / Executive summary

2. The Audit and Risk Committee reviewed the draft 2017/2018 Annual Report and Summary Annual Report, the preparation process and the audit with Audit New Zealand on 13 September 2018.

3. The financial performance, financial position and cash flows of the Auckland Council group for the year ended 30 June 2018 were reported to this committee at its meeting on 18 September 2018.

4. The Governing Body, at the meeting held on 27 September 2018, adopted the 2017/2018 Annual Report and Summary Annual Report for the Auckland Council group.

5. The 2017/2018 Annual Report and Summary Annual Report were released to the New Zealand Stock Exchange and the public on 28 September 2018.

6. The operating surplus before gains and losses favourable variance of $122 million better than budget and $320 million better than last year.

7. The favourable variance to budget was primarily driven by:

· vested assets (assets passed to the group at no cost) up by $370 million

· depreciation costs down by $60 million (primarily through Auckland Transport)

· increase in weathertightness provisioning of $83 million to prudently cover future expectations

· change in accounting treatment for Crown contributions for City Rail Link of $229 million (budgeted for as revenue, but went through balance sheet after signing of agreements).

8. During the year, the group has invested $1,670 million, to expand and renew the community and infrastructure assets. These were funded by operating cash flows of $1,101 million, increased borrowings of $253 million and the balance being net proceeds from sales of financial and non-strategic assets.

9. The total net assets increased by $3,026 million, to $38,802 million, as at 30 June 2018 as a result of the level of investment, revaluations and lower debt than expected.

10. The Auckland Council parent and council-controlled organisations will be reporting their individual performance for the year ended 30 June 2018 to this meeting.

11. The key performance results that committee members may wish to discuss with the Auckland Council parent and council-controlled organisations during their presentations at this committee meeting are outlined below.

· Capital expenditure of the group for the 12-month period was $269 million behind budget (based on the annual plan before the 2017/2018 capex carry forwards of $136 million). The actual and budgeted amounts exclude the funding to City Rail Link Limited.

Possible line of questioning: The committee may want to direct their line of questioning to Regional Facilities Auckland (delivered 79 per cent) and Panuku Development Auckland (delivered 19 per cent) to determine the reasons for significant ongoing under delivery of capital expenditure. What plans are in place to improve delivery, particularly in the light of the significantly larger budget for the 2018/2019 year?

· Regional Facilities Auckland’s performance continued to be behind budget. Revenue includes capital grants and vested assets. As capital expenditure was below budget, we have excluded capital grants and vested assets revenues from their result to determine the revenue without the impact of capital underspend. Revenue excluding capital grants and vested assets was generally in line with budget, however, costs exceeded budget resulting in a $5 million unfavourable variance against the statement of intent.

Possible line of questioning: The committee may want to ask why expenses continue to exceed revenue, and plans that Regional Facilities Auckland have to meet budget in 2018/2019.

· There are acknowledged weaknesses in the measures that capture the council group’s engagement with Māori. This weakness is being addressed through the development of a cohesive performance management framework for Māori outcomes and is due for completion by June 2019. Another report on today’s committee agenda outlines the activity and engagement with Māori that was undertaken by the Auckland Council group in 2017/2018.

Ngā tūtohunga / Recommendation/s

That the Finance and Performance Committee:

a) note the Auckland Council group, for the year ended 30 June 2018, generated an operating surplus before gains and losses of $659 million against the annual plan, a favourable variance of $122 million, and an increase in net assets of $3,026 million to $38,802 million

b) note that the financial performance, net of the City Rail Link budget accounting treatment difference of $229 million, against the annual plan, shows a favourable non-cash vested asset revenue of $370 million, lower than expected depreciation of $60 million, partly offset by an additional weathertightness provision of $82 million.

Horopaki / Context

12. This report discloses the financial performance, financial position and cash flows of the group, for the year ended 30 June 2018. This paper has been prepared to inform the committee members and to enable them to ask questions of staff at the committee meeting.

Tātaritanga me ngā tohutohu / Analysis and advice

Overall financial performance is in line with annual plan

13. The group generated an operating surplus before gains and losses of $659 million for the year ended 30 June 2018, compared to the annual budget of $537 million.

Year financial performance ($ million)	Actual	Annual plan	Variance
Revenue	4,543	4,344	199
Expenses	3,884	3,807	(77)
Operating surplus before gains and losses	659	537	122
Net other (losses) gains	35	62	(27)
Surplus before income tax	694	599	95

14. The favourable variance of $122 million is largely due to:

· the additional vested asset revenue of $370 million

· lower depreciation of $60 million (Auckland Transport longer than budgeted useful lives of road assets)

partly offset by:

· a change in accounting treatment resulting in lower grant revenue from the Crown ($229 million), subsequent to the finalisation of City Rail Link (CRL) agreements (there was a reclassification of funding for CRL from grant income in the budget, to a reduction in the value of the assets to which it related)

· an additional provision for weathertightness claims of $82 million.

15. Total revenue excluding gains was $199 million higher than annual plan, mainly driven by the following:

(in $ million)	Variance to budget	Favourable/ Unfavourable	Explanation
Grants and subsidies	(180)		When the Annual Budget 2017/2018 was approved, the accounting treatment for City Rail Link had not been finalised. Subsequently, with the execution of the contracts, the grants received were $229 million lower as the accounting treatment has differed from that included in the Annual Budget 2017/2018. The budgeted grant is recognised as a reduction against “Property, plant and equipment” in the statement of financial position and the finance charge from the Crown recognised in the statement of financial performance. This is offset by a favourable variance of $49 million which related to higher grants and subsidies from New Zealand Transport Agency as a result of some capital works being completed earlier than anticipated.
Vested assets	370		Higher due to timing and volume of vesting of assets in the group.
Finance revenue	29		Higher than expected. Mainly driven by the Crown’s reimbursement of finance charges on City Rail Link stage 1 works and first quarter initial funding to City Rail Link Limited, totaling $14.5 million and higher level of cash and short-term deposits.
Development contributions	(32)		Lower than expected due to timing of developments.
Fees and user charges	5		Higher than expected resource and building consents revenue and port operations revenue due to the acquisition of new subsidiaries, Nexus and Conlinxx.
Others	7		Higher than expected dividend income and other revenue.

16. Total expenditure excluding losses was $77 million higher than annual plan, mainly driven by the following:

(in $ million)	Variance to budget	Favourable/ Unfavourable	Explanation
Weathertightness expense	(82)		Weathertightness provision increase due to provision assumption changes and increase in repair costs for multi-unit dwelling claims.
America’s Cup 36	(13)		Provision for remediation of waterfront land and early lease termination, which were expected to be incurred in future years.
Depreciation and amortisation	60		Lower than budget mainly driven by delays in the completion of projects and revised useful lives of roading assets as a result of the latest revaluations.
Consultancy and professional fees	11		Lower than expected due to a general reduction in professional services, particularly in the Auckland Council parent.
Outsource of resource consents and maintenance functions	(15)		In order to meet the demand on services, the council outsourced resources due to unfilled internal vacancies.
Additional unbudgeted expenditure	(20)		From acquisition of two Ports of Auckland subsidiaries.
Other operating expenses	(19)		Mainly due to higher than expected repairs and maintenance costs and other operating expenses.

17. Employee benefits of the group was within $2 million of the budget, driven by the following variances:

	(un)favourable
Auckland Council – reducing back office staff and recruiting difficulties in recruiting resource and building consent staff	26
Auckland Council Investments Limited Group (Ports of Auckland) – two new subsidiaries	(10)
Auckland Transport – New transport officers and supervisors for trains	(4)
Regional Facilities Auckland – Maritime Museum acquisition	(5)
Budget reclassification	(5)

Group net assets increased by $3,026 million

18. The group net assets increased by $3,026 million, to $38,802 million, during the year ended 30 June 2018.

	Actual 30-Jun-18	Actual 30-Jun-17	Movement
Assets	51,462	47,359	4,103
Liabilities	12,660	11,583	1,077
Net assets	38,802	35,776	3,026
Borrowings, net of cash and cash equivalents	8,222	7,969	253

The principal contributors being the:

· increase in assets mainly attributed to:

o revaluation increases of $2,497 million

o investment in new infrastructure of $1,670 million

o vested assets of $572 million

o increase in cash and receivables of $315 million

partly offset by:

o depreciation of $865 million

· increase in liabilities mainly attributed to:

o increases in deferred tax liabilities of $311 million following the non-cash deferred tax impact of revaluations in Ports of Auckland and Watercare

o increase in gross borrowings of $532 million

o increase in provisions, payables and accruals of $131 million.

Cash flows applied to fund infrastructure asset expansion and renewals

19. During the year, the group has invested $1,670 million to expand and renew community and infrastructure assets. These were funded by operating cash flows of $1,101 million, borrowings of $253 million and the balance from the net sale proceeds of financial and non-core assets.

Credit rating financial ratio continues to be managed within threshold, but limited headroom

20. This credit rating finance ratio measures the proportion of direct debt* to operating revenue.

21. The credit rating ratio has increased closer to the threshold of 270% from 251% at 30 June 2017 to 263.6% at 30 June 2018.

22. The higher level of borrowings reflects the higher level of pre-funding this financial year with the issue of green bonds and European notes.

23. Increase in direct debt is also driven by increase in the net present value of the operating lease commitments, mainly driven by the finalisation of further agreements since 30 June 2017, under the Public Transport Operating Model of Auckland Transport. These agreements were determined to contain a lease.

*direct debt includes principally gross debt plus the present value of all operating lease commitments excluding derivatives.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe /
Local impacts and local board views

24. 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.

Tauākī whakaaweawe Māori / Māori impact statement

25. 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. The council’s contributions to Māori outcomes are reported in the annual report.

Ngā ritenga ā-pūtea / Financial implications

26. This paper is only pertaining to the reporting on the financial performance of the Auckland Council group. As such, there are no financial decisions required, and consequently there are no financial implications as a result of this paper.

Ngā koringa ā-muri / Next steps

27. The Auckland Council parent and the substantive council-controlled organisations will present their individual performance results at this meeting. The committee will have the opportunity to ask questions of each entity.

Ngā tāpirihanga / Attachments

There are no attachments for this report.

Ngā kaihaina / Signatories

Authors

Tracy Gers - Group Accounting & Reporting Manager

Francis Caetano - Group Financial Controller

Authorisers

Kevin Ramsay - General Manager Corporate Finance and Property

Matthew Walker - Group Chief Financial Officer

Finance and Performance Committee

17 October 2018

Update on the independent assessment of expenditure incurred by Auckland Council to deliver Māori Outcomes

File No.: CP2018/19117

Te take mō te pūrongo / Purpose of the report

1. To provide an update to an earlier report on the council’s response to the PricewaterhouseCoopers (PwC) ‘Assessment of expenditure incurred by Auckland Council on projects to deliver Māori outcomes – 13 November 2017’ (the assessment).

Whakarāpopototanga matua / executive summary

2. This report responds to a subset of findings from an earlier PwC assessment, these being the “strategic alignment group of findings”. It also summarises actions undertaken to date.

3. Nine strategic priorities for achieving Māori outcomes have been established to replace the whai model. These were informed by the Auckland Plan refresh, the mayor’s priorities as outlined in his budget proposal, Independent Māori Statutory Board, Long-Term Plan 2018-2028 (LTP) business cases and the Mana Whenua Kaitiaki Forum Strategic pou.

4. Opportunities for council collaboration across four Māori outcomes strategic priorities has resulted in a three-year workplan which the Executive Leadership Group plans to confirm at their 13 November 2018 meeting.

5. The Māori Responsiveness Plan for Watercare Services Limited has been completed and was approved at their March 2018 board meeting.

A draft performance measurement framework has been developed, guided by the Māori Responsiveness Framework and the Strategic Priorities endorsed by Executive Leadership Group.

Ngā tūtohunga / Recommendation/s

That the Finance and Performance Committee:

a) note progress of the council’s response

b) note the next progress report will be provided at the 21 May 2019 Finance and Performance Committee meeting.

Horopaki / Context guidance

6. On 12 December 2017, the Independent Māori Statutory Board presented the findings and recommendations of PwC’s independent assessment of expenditure incurred by Auckland Council to the Finance and Performance Committee meeting.

7. The committee resolved to:

agree that a response to the “Assessment of expenditure incurred by Auckland Council on projects to deliver Māori outcomes” be reported to the Finance and Performance Committee agenda at its 27^th February 2018 meeting with an Implementation and Reporting Plan that addresses the recommendations in the report. [FIN/2017/201]

8. A response to the report was tabled on 26 March 2018 at the Governing Body and Independent Māori Statutory Board Joint meeting.

9. It was noted that the reporting timeline would include a second report to the September 2018 Finance and Performance Committee meeting on the strategic alignment group of actions. This report is now tabled alongside the Programmes and Projects that have delivered Māori Outcomes in 2017/2018 report.

Tātaritanga me ngā tohutohu / Analysis and advice

10. The findings of the 2017 PwC ‘assessment’ have been grouped into three response areas (shown in the diagram below). Together they cover 12 of the 13 priority areas contained in the ‘assessment’.

11. This report responds to the strategic alignment group of findings and the subsequent actions undertaken to date.

Finding 5: The strategic vision and priorities for Māori need to be better aligned through plans, activities and reports

12. The Long-term plan 2018-2028 brought together a cross-council family process to:

· determine the existing strategic Māori outcomes for the council and CCOs

· ascertain alignment and gaps

· provide advice to decision-makers on how these outcomes translate to LTP funding programmes and activities for 2018–2028.

13. At least 15 different Hui were held between December 2017 – March 2018 to discuss the development of Māori outcomes.

14. From this approach a total of nine strategic priorities have been established for achieving Māori outcomes. These were also informed by the Auckland Plan refresh, the mayor’s priorities as outlined in his budget proposal, IMSB LTP 2018-2028 business cases and the Mana Whenua Kaitiaki Forum Strategic pou.

There are seven external focussed priorities:

· Marae

· Te Reo, Māori Culture and Identity

· Māori Housing and Papakainga

· Māori Business

· Tourism and Employment

· Rangatahi Potential

· Kaitiakitanga outcomes with a focus on water.

There are also two internal focussed priorities

· an empowered organisation

· an effective participation

15. Membership of the Executive Leadership Group is made up of chief executives of Auckland Council, CCO’s and Independent Māori Statutory Board with their representatives appointed to the Māori Outcomes Steering Group to give effect to Executive Leadership Group decisions. The Independent Māori Statutory Board also contributed to the workshops, Terms of Reference for the Executive Leadership Group and the Māori Outcomes Steering Group.

16. The Māori Outcomes Steering Group are developing a CCO template that will form the basis for future reporting of all Māori outcomes across council group. This will result in recording council group delivery of the strategic outcomes being sought.

Finding 6: Further guidance should be developed to provide clarity on the four whai strategy and Māori responsiveness framework outcomes

17. The ‘assessment’ noted that Te Toa Takitini was undergoing a ‘period of transition’ at the time the reported was tabled in November 2017.

18. That transition has resulted in the Executive Leadership Group replacing the whai model with nine strategic priorities that have Māori outcome statements to which all projects delivering Māori outcomes will be required to demonstrate alignment to. Refer Attachment A.

19. The Executive Leadership Group also determined that of the nine strategic priorities, four will be developed into a three-year work-plan for FY2018/2021 to demonstrate and report on cross council collaboration.

20. This workplan will be presented to the 13 November 2018 Executive Leadership Group meeting identifying programmes of work that deliver and report on the Māori Outcomes for Te Reo, Marae, Māori Business, Tourism and Employment, and Kaitiakitanga (water) already underway or are in development and/or need further investment.

21. The Independent Māori Statutory Board continue to be involved in the development of the three-year workplan and are contributing to the development of outcomes statements and measures as well as project identification.

Finding 8: Watercare Services Limited’s Māori Responsiveness Plans need to be finalised

22. The Māori Responsiveness Plan for Watercare Services Limited has been completed and was approved at their March 2018 board meeting.

23. It is presently being revised to align more directly with the nine strategic Māori outcome priorities.

Finding 9: A performance management framework for Māori outcomes is required

24. Projects that are to be included in any programmes within Te Toa Takitini Māori Outcomes portfolio will be assessed alongside the council’s programme management tool Sentient and the Investment Group methodology. This requires structured business cases that can identify and quantify expected benefits for any given investment.

25. A draft performance measurement framework has been developed, guided by the Māori Responsiveness Framework and the Strategic Priorities endorsed by Executive Leadership Group. Further work will be undertaken throughout FY2019 to develop key indicators, measures and targets for priority programmes.

26. Draft high-level outcomes have been developed. These will also be further refined through FY2019, with the performance measurement framework seeking to measure delivery of these outcomes.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe / Local impacts and local board views

27. As this report responds to matters which are directed at management activity, the views of local boards have not been sought.

28. Externally focused work that impacts or involves local boards or impacts their local areas will be subject to separate engagement processes.

Tauākī whakaaweawe Māori / Māori impact statement

29. This report is solely related to matters that will impact on Māori.

30. Te Toa Takitini is a cross-council portfolio of activities to lead and influence better outcomes with and for Māori. This includes driving a shift in culture, by modelling high performance leadership behaviors and transforming the way the council plans, prioritises and delivers for Māori.

31. Te Toa Takitini portfolio enables the identification and tracking of progress on activities and budgets that contribute to significantly lifting Māori economic, social and cultural wellbeing, strengthens council’s effectiveness for Māori and optimises post Treaty settlement opportunities for the benefit of mana whenua and the wider public of Auckland.

Ngā ritenga ā-pūtea / Financial implications

32. No additional resource has been utilised to implement the assessment findings.

33. Instead staff have taken up recommendations from the report whilst utilising existing reporting mechanisms to indicate progress. This enables maximum expenditure to be directed towards activity that directly benefits Māori.

Ngā raru tūpono / Risks

34. Four risks were identified in the initial response report which are still of note:

Risk	Mitigation	Actions
Loss of buy-in from key people across the council group through complex collaboration processes	Early improvements to Te Toa Takitini Executive Leadership Group oversight and support key messages outlining the proposed response and actions will be communicated to the appropriate council group staff. These key messages will be agreed through the Executive Leadership Group	Terms of Reference established for Executive Leadership Group Māori Outcomes Steering Group established
Loss of alignment and visibility of existing and future budget allocations for Māori outcomes during the Long-term Plan 2018-2028 process	Continue cross-council working group that are developing advice for budget priorities for the Long-term Plan 2018-2028.	Māori Outcomes Steering Group Terms of Reference to give clarity to level of decision-making around investment decisions
Duplication of target outcomes across council group of same/similar initiatives, identification of these is not always undertaken prior to project commencement	Application of Investment Group process	Māori Outcomes Steering Group Terms of Reference to give clarity to level of decision-making around investment decisions
Potentially the rigour of Investment Group process is causing decline in projects entering Te Toa Takitini programme	Better communications of portfolio purpose.	Establishment of forward work programme for Governing Body and Independent Māori Statutory Board joint meetings to establish communication priorities

Ngā koringa ā-muri / Next steps

35. The Executive Leadership Group of Te Toa Takitini will:

· work through the Māori Outcomes Steering Group to provide updated reports on the ‘three response areas”

· continue to work with CCO boards in relation to the findings

· unless otherwise directed - resource the proposed response within existing budgets. This will likely mean that improvements will occur over a two to three-year timeframe.

Ngā tāpirihanga / Attachments

No.	Title	Page
a ⇩	Te Toa Takitini Māori Outcomes Portfolio Strategic Priorities	23

Ngā kaihaina / Signatories

Author

Amokura Panoho - Head of Te Toa Takitini

Authorisers

Graham Pryor - GM Maori Responsiveness & Relationships

Phil Wilson - Governance Director

Matthew Walker - Group Chief Financial Officer

Finance and Performance Committee

17 October 2018

Auckland Council group - Programmes and projects that have delivered Māori outcomes in 2017/2018

File No.: CP2018/19343

Te take mō te pūrongo / Purpose of the report

1. To provide an overview of the delivery of outcomes for and with Māori by the Auckland Council group in the 2017/2018 financial year.

Whakarāpopototanga matua / Executive summary

2. The 2017/2018 year saw both a considerable lift in activity as well as better strategic alignment across the Auckland Council group towards the achievement of outcomes for Māori. The report shows that in particular, there is significant activity which is outward facing and will directly impact on the lives of mana whenua and mataawaka living in Tamaki Makaurau today and in the future.

3. It was also a year where a more streamlined strategic foundation was laid for the future integration of activity across the group. The refreshed Auckland Plan sets the 30-year strategic direction, which has been followed by the more fine-grained strategic priorities for the group for the next three and ten years.

4. These foundations will mean the council group is clearer about outcomes it is seeking, can better align expenditure and will be able to articulate performance in a more coherent manner. This shift was outlined in the PwC report ‘Assessment of expenditure incurred by Auckland Council on projects to deliver Māori outcomes’.

5. Key programmes and projects that were delivered in the 2017/2018 year are outlined in this report, grouped by the council-controlled organisations and council divisions that lead them.

Ngā tūtohunga / Recommendation/s

That the Finance and Performance Committee:

a) note the key programmes and projects delivered across the Auckland Council group that have contributed towards Māori outcomes in 2017/2018.

Horopaki / Context

6. The Auckland Council group delivers services for all Aucklanders, but also some activities that are aimed specifically at Māori communities and businesses.

7. In November 2017, the Independent Māori Statutory Board (IMSB) advised through a report called ‘Assessment of expenditure incurred by Auckland Council on projects to deliver on Māori outcomes’, that council’s reporting needed to more focus on project and activity outcomes, rather than the amount of money spent. This 2017/2018 report is the first respond to that challenge, and makes a shift towards providing an overview of activity across the whole council and the impact it has on Māori.

8. During the 2017/2018 year, many Māori outcomes have been achieved; some at a strategic region-wide level, some at a sub-regional level and others very locally.

9. Not all projects have been included in this report, but rather examples are given of the outcomes that are being pursued across the council group.

Tātaritanga me ngā tohutohu / Analysis and advice

10. The following discussion provides an overview of activity, broken down by council-controlled organisation or council division. The activity reflects the nature of the organisation or division, and the scope of their roles and responsibilities within the group.

Auckland Council – Governance, and People and Performance Divisions

11. In the 2017/2018 year Te Waka Anga Mua focused on the development of a solid strategic platform for prioritising Māori outcomes for the Auckland Council group. The department did this by:

· partnering with the Chief Policy Office and Operations Division to develop the ‘Māori Identity and Wellbeing’ outcomes in the Auckland Plan, which has a thirty-year focus or all of Auckland

· developing Auckland Council group’s priority outcomes for Māori for the next ten years.

12. These Auckland Council group priorities are cascaded from the Whiria Te Muka Tangata: Māori Responsiveness Framework as outlined in the following paragraphs.

a. Strong Māori Communities: Social outcomes

· papakāinga and Māori housing: papakāinga and Māori housing: enabling the development of Māori housing and papakāinga through funding assistance and improvement of processes and planning

· whānau and tamariki wellbeing: supporting whānau and tamariki wellbeing through services deliver in council facilities (e.g. libraries) as well as supporting whānau safety through licensing activities

b. Strong Māori Communities: Cultural outcomes

· Marae development: supporting Marae to be sustainable culture hubs for Māori and wider community

· Te Reo Māori: Te Reo Māori is seen, heard and spoken through council activity

· Māori identity and culture: Māori identity and culture is advanced through cultural experiences, such as events, and placemaking activities such as urban design and the application of Te Aranga design principles in our spaces and places, sites of significance work and Māori public art

c. Strong Māori Communities: Economic outcomes

· Māori business tourism and employment: council actively provides economic opportunities for Māori and supports Māori growth in business, tourism and enterprise

· Realising rangatahi potential: council enables rangatahi participation in council activities to support rangatahi in leadership, training and employment

d. Strong Māori Communities: Environmental outcomes

· Kaitiakitanga (particularly water): council actively provides for the Māori participation in the management of taonga resources and works with mana whenua in the management, restoration and protection of our water resources.

e. Effective Māori participation

· Council will work with mana whenua and mataawaka to identify areas that are of value to them and enable opportunities for leadership and influence

f. Organisational effectiveness:

· Adoption and implementation of the Mahi Employment Strategy. The strategy has recognised that the council needed a plan to build internal capability and recruit/retain staff with the necessary skillset to help it deliver on Māori responsiveness and other obligations. In particular, the strategy aims to:

o develop a workforce capable of responding to the needs and aspirations of Māori

o support career development and progression of Māori staff

o provide a culturally responsive and respectful work environment.

There is an associated three-year roadmap and implementation has begun.

· Ngā kete akoranga learning and development programme – An internal capability building programme which delivers five foundational courses on Te Tiriti, local government and Māori, cultural competency, tikanga and te reo. This was delivered to approximately 900 staff.

· Te Whaihanga – a project to help built environment professionals and students, who learn why and how to engage effectively with Māori. This was a collaborative project with national research consortia. Council piloted the programme in the Regulatory Services department and the Chief Planning Office. This project received international acclaim.

· Whanau Manawa, a Māori staff network was relaunched. Sub-groups of the network are being leveraged to provide cross-council input into other activities where necessary.

· Our Charter was launched, which consolidates over 200 policies into a single set of principles for our staff and seeks to empower them to make good decisions. One of the six principles is that we honour Te Tiriti o Waitangi – we are committed to honouring te Tiriti and to improving our Māori responsiveness. Council is currently embedding this work as part of business as usual.

Auckland Council – Operations Division

13. The Operations Division has a strong focus on using its size to leverage positive outcomes for Māori in the 17/18 year. A key driver for a collaborative approach across the Division is the Kāhui Kō roopu who have developed a strategic framework for Māori responsiveness across the Operations Division.

Māori Responsiveness in the Operations Division

14. The Infrastructure and Environmental Services department completed their Māori Responsiveness Plan ‘Kei hea te kōmako? Where will the bellbird sing?’ The action plan is being implemented, with internal capacity building a priority focus.

15. The Community Services and Community Facilities departments introduced a collaborative approach to developing their Māori Responsiveness framework ‘Karanga Atu! Karanga Mai!’ The framework places Māori at the centre with ‘ngā kūrae’ setting the direction for responsiveness. Hui at marae, and ongoing hui with mana whenua continues to inform the framework.

16. The Regulatory Services department provided significant lead support and advice to Ngāti Whatua ō Ōrākei for their new iwi management plan. This has ensured the plan has specific relevance to regulatory services. Regulatory services through their Animal Management team, introduced a marae based dog registration and microchipping programme, and uptake of this service continues to grow.

17. Several of the departments within Operations have implemented capacity building initiatives and events. This has included people enrolled in the He Papa Tikanga programme setting up support/study groups, and cultural activities during matariki.

Cultural Identity projects within the Operations Division

18. Nearly $2 million was provided by council as grants to 15 marae and two organisations for papakāinga development. The funding provided for:

· kitchen upgrades

· water and waste water upgrades

· fire protection sprinkler system

· roof maintenance

· painting

· fencing

· laundry equipment

· heat pumps

· carpeting

· general maintenance.

It also provided for:

· feasibility reports

· concept designs

· consent related costs.

19. Te Kete Rukuruku focuses on two key streams for identity opportunities, the collation of cultural narratives and stories and the renaming of parks. The outcomes from the programme are to capture our unique Māori stories in such a way that sustains Māori cultural identity, knowledge and practice and to increase visible Māori names and stories as part of our unique identity in Tāmaki Makaurau. Significant progress on the programme has been made in 2017/2018 with a business case prepared to support further funding for the programme.

20. Te Kakano programme was implemented in 2017/2018 and brings together a collaborative approach to how Operations can deliver programmes to rangatahi. The drive for the programme is to provide better council services for tamariki and whānau. The programme is being piloted in Howick with the support of Te Whare Wananga o Owairoa, libraries and Uxbridge Arts. The number of participants in the programme continues to grow and there is interest from other centres to trial the programme.

21. A number of Māori kaupapa events continue to be supported by the Operations Division, including Waitangi Day celebrations and Matariki events.

22. Demand for Te Whare Wananga o Owairoa tamariki/rangatahi programme continues to grow with 2,500 tamariki visiting the whare and participating in the cultural programmes.

Auckland Council – Chief Planning Office

23. Plans and Places with Regulatory Services worked closely with Ngāti Whātua Ōrākei to assist them to develop their iwi management plan, the first to be developed by iwi with council. Mana Whenua input and feedback on the Unitary Plan continues through the Plans and Place Cultural Values Assessment Hui. The Auckland Plan team engaged with mana whenua, the Independent Māori Statutory Board, and key Māori organisations throught the development of the Auckland Plan. While there is a Māori section, Māori outcomes are woven throughout the plan, and together provide an integrated approach. The design elements of the Auckland Plan build on Auckland’s unique Māori identity through the use of te reo Māori and Māori design. There are four Māori Responsiveness Plans across the Chief Planning Office that departments are making progress towards.

24. The following are the key initiatives delivered by the Chief Planning office:

a. Māori Sites of Significance: A significant amount of work has been completed by mana whenua during 2017/2018 to complete their technical inputs. Planning is underway to develop the methodology for site visits and land owner engagement.

b. He Waka Eke Noa: builds on The Southern Initiative’s work on sustainable procurement. It is New Zealand’s first ‘social procurement supplier diversity facilitator’, connecting the public sector and other major corporations and institutions with Māori and Pacific owned businesses. There are more than 40 registered businesses in construction and infrastructure related industries. He Waka Eke Noa has been focused initially on connecting with construction and infrastructure businesses, though are now ready to take on Māori and Pacific owned businesses from other sectors.

c. Māori and Pasifika Trades Training: The Southern Initiative leads a consortium of private training establishments to deliver a trades training programme for Māori and Pasifika peoples in South Auckland. The pre-apprenticeship courses cover carpentry, construction, infrastructure, welding, fabrication and automotive engineering, all of which directly relate to the council family.

Māori and Pacific Trades Training has enrolled more than 300 Māori (48 per cent) and Pasifika youth. The Southern Initiative piloted a career brokerage and coaching service to improve employment outcomes with a small cohort of graduates. By leveraging the council group’s procurement, they brokered graduates into quality jobs, each with individualised career pathways such as apprenticeships, at a time of poor up-take and completion rates nationally. On the Manukau Bus Station, for example, all nine placements had tailored career development plans and ongoing support.

d. Transform Manukau: The Māori Responsiveness team are working with Panuku and Healthy Families MMP on the Transform Manukau project. The team are using the maramataka to guide the work across the project, advocating to ensure a cultural narrative (connecting place and space) and Māori aspirations and priorities are considered.

e. Sciences in schools: Rereata Makiha of the Māori Responsiveness team is working with some local schools providing a matauranga Māori perspective in relation to their Science curriculum. The work helps reflect a perspective for Māori students that shows how traditional Māori knowledge can co-exist alongside curriculum subjects. This may help more Māori students in the sciences and across the wider Science, Technology, Engineering and Maths subjects, with practical application of their lessons in their local environment. It may also support Māori students to pursue Science, Technology, Engineering and Maths as a viable tertiary study option and potential career option.

Auckland Transport (AT)

25. Auckland Transport’s contribution to Māori outcomes includes:

a. Te Ara Haepapa - Road safety programmes: The following are examples of the activity for 2017/2018:

o Kaihautū – Driver Licensing: Raihana Ākonga workshops (Learner Licensing) for Rangatahi Māori have been delivered at eleven marae (Mana whenua and Mataawaka) or other sites, with some of these receiving more than one workshop. Raihana Whītiki (Restricted Driver) workshops were delivered at two marae

o Tamaki Herenga Waka Festival, Polyfest and South Tech Week had Taraiwa inu Waipiro kore promotions (Drive Drink Free) with fatal vision goggles and alternative mocktails to alcohol for the driver

o sober driver presentations to Kaiako and Rangatahi at events, Kura and Unitec

o creation and promotion on social media of six Te Ara Haepapa Road Safety videos five bilingual and one in Te Reo Māori. Video scripts were written, and video produced by Māori for Māori through a Māori agency.

b. Te Reo Māori: The following is the most significant example of the activity for 2017/2018:

o On board train station announcements (stage 1) in Te Reo began at the end of the financial year.

c. The application of Te Aranga Urban Design Principles: The following are examples of the activity for 2017/2018:

o All public transport, road and shared pathway/footpath projects include Te Aranga design principles in the project management methodology

o the Manukau Station won an Architecture award due to the Mana whenua Te Aranga response because “culture and function were integrated so that the architecture is meaningful”

o the Half Moon Bay Ferry Terminal, Pukekohe Interchange, Newmarket Crossing incorporated mana whenua stories into engineering and urban design and form

o the repair of the Sandspit Seawall – Mahi Taiao

o various shared pathway (walking and cycling projects) – Ian McKinnon Drive, Tamaki Drive and Te Ara ki Uta ki Tai (Glen Innes to Tamaki) have all had robust engagement with mana whenua and featured expression of interest for mana whenua urban design leads.

d. Māori engagement with Auckland Transport: The following are examples of the activity for 2017/2018:

o Engagement with mana whenua at a leadership level (Tamaki Transport Table with NZTA and Kiwi Rail) and an operational level (kaitiaki table/s)

o All of RLTP programme Māori engagement implemented via the AT engagement framework

o All mana whenua Values Assessments, mana whenua reports and engagement documents submitted to AT from 2010 to 2018 collated, stored and accessible by an AT Māori information storage portal (Te Waharoa)

o Supporting Growth Alliance (Tupu Ngātahi) established and mana whenua Values scoped and agreed by Te Ākitai Waiohua, Ngāti Te Ata Waiohua, Ngāti Tamaoho and Te Kawerau a Maki. Ngai Tai ki Tāmaki indicated intention to submit a scope

o engagement on the Regional Land Transport Project and Regional Fuel tax was undertaken by Auckland Council and Auckland Transport. 17 of the 19 mana whenua tribes formally submitted on both issues.

e. Organisation responsiveness to Māori - During 2017/2018, the Auckland Transport Māori Responsiveness Plan was rolled out to all parts of the organisation.

· AT Māori staff Network started

· AT Māori staff training package created and implemented (Nga Kete Kiwai – Te Reo, Te Tiriti, Māori Engagement, Māori Responsiveness).

f. Marae, Papakainga (Maori Freehold Land road safety programme

o five marae have reached the stage of preliminary to final investment. Auckland Council (Marae Initiative Fund) and the new council-group Māori Outcomes Steering Group will be informed prior to final sign off to ensure co-investment opportunities by the council family have been fully canvassed

o marae road safety (turnout programme): Seven out of 19 Mana whenua marae reserve trusts and two Mataawaka marae organisations have been approached and investment in road and safety/access issues discussed.

Panuku Development Auckland Limited

26. The following projects or programmes are examples of Panuku’s commitment to Māori outcomes.

a. Enabling Māori commercial development opportunities: The Panuku Statement of Intent includes a commitment towards enabling Māori commercial opportunities. Panuku provided a three-year work programme to enable mana whenua to align these with their own commercial direction and target priority development opportunities. The following is an example of this activity in 2017/2018:

o Panuku entered into an agreement with Te Ākitai Waiohua to build a new residential neighbourhood on part of an empty site at 20 Barrowcliffe Place in Manukau. The new neighbourhood – Kōtuitui Place will be developed into a residential hub during the next five years.

o 22 properties went out for mana whenua consultation in 2017/2018. Across the 22 properties, mana whenua flagged several commercial and cultural interests.

o 30 properties were cleared for sale by the Governing Body in 2017/2018. Across the 30 properties, mana whenua flagged commercial cultural interests. Two of the 30 properties are development opportunities.

o mana whenua were given advance notice of the sale of 15 properties.

b. Celebrating the Māori cultural footprint in design, the natural and urban environment: The following are examples of this activity for 2017/2018:

o the Te Aranga Design principles are included as essential requirements in several of our Request for Proposals / Development Agreements (and always in the public realm).

o the Reinventing Cities low carbon project in Henderson worked with mana whenua to establish criteria and involved them in evaluating ‘Expressions of Interest’. This will continue to play a strong part in shaping ‘Requests for Proposals’ and selecting preferred development partners.

o Wynyard Quarter developments have incorporated naming and design outcomes such as Tiramarama Way.

o Opanuku playground in Henderson commissioned a mana whenua artist to develop the concept for the space.

Auckland Tourism, Events and Economic Development Limited (ATEED)

27. ATEED has supported the development of a revised council-wide approach to monitoring and delivering Māori outcomes across the council group as outlined in paragraph 12 (a-f) above. This programme will bring clarity to ATEED’s obligations and the range of stakeholders ATEED is expected to work with on economic development outcomes. The following areas of work outline ATEED’s commitment to Māori outcomes.

a. Māori signature festival-Te Herenga Waka Festival: this event was delivered over Auckland Anniversary weekend 2018.

b. Whāriki Māori Business Network: Focus has continued of the Whāriki Māori Business Network led by ATEED to increase the proportion of business owners and young people in the network and increase capability support to businesses.

Work is also underway to broaden the location of members which is currently heavily biased towards the central city with greater focus on south and west Auckland events. About 45 Whāriki Māori Business Network members attended the first 2018 South Auckland network event on 7 June, in partnership with Poutama Trust.

At the end of June there were 363 business owners in the network out of a total membership of 845.

c. DIGMYIDEA Māori Innovation Challenge 2018: The DIGMYIDEA Māori Innovation Challenge 2018 ran between 17 April 2018 and 27 May 2018 with more than 200 entries across the two categories. There were ten finalists from around the country and the winning ideas, each received a business start-up and support package worth $10,000.

A new bilingual website was launched as part of the challenge, targeting rangatahi and supporting competition entries. The challenge delivered and contributed to two Techweek’18 events: DIGMYIDEA Ideation Weekend (19-20 May, in partnership with Centrality and Māori Women Development Inc) and the XLR8 Techweek event delivered by The Southern Initiative.

d. Māori Tourism Development Programme: The ‘Māori Culture site’ on aucklandnz.com has been completed to more effectively highlight the diverse cultural offering in Tāmaki Makaurau. Meetings were also held with Papatuanuku Marae, Makaurau Marae, and Manurewa Marae to understand and support their tourism aspirations.

Watercare Services Limited

28. Watercare Services Limited (Watercare) has continued to embed Auckland Council’s Whiria te muka tangata (Māori Responsiveness Framework), including the goals of Auckland Council within the organisation and finalised its Māori Responsiveness Plan.

Watercare projects and relationships

29. Mana whenua are engaged at the initial early stages of all Watercare projects throughout Tāmaki Makaurau. Overlapping interests mean that often more than one mana whenua rōpū will be engaged in any project and these project relationships often continue past the resource consent process.

30. Mana whenua cultural values and aspirations are incorporated into projects wherever possible. Cultural Values Assessments, Archaeological Reports, Cultural kaitiaki Monitors, Restoration strategies and Cultural Impact Assessments are priorities for projects. Kawa and tikanga are reverberated at all Watercare site blessings. Mana whenua dictate and lead the cultural procedures.

31. Two examples of Watercare project engagement with mana whenua are:

o the Glendowie pump station site was blessed. Ngai Tai ki Tāmaki, Ngāti Paoa and Ngāti Whātua ki Ōrākei were heavily involved in the planning

o continuing to work with Ngai Tai ki Tāmaki Leadership regarding the possible Pine Harbour water proposal.

32. Watercare met with Ngai Tai ki Tāmaki, Ngāti Tamaoho, Te Taniwha o Waikato, Ngāti Whanaunga and Te Kawerau a Maki leaders to foster a higher-level relationship with these Iwi. On 11 April 2018, Watercare signed a relationship agreement with Ngāti Paoa.

33. Watercare also continued its Mana Whenua Kaitiaki forum to ensure that Māori knowledge and world views are respected, and its validity and value are acknowledged by Watercare. The Forum received advice on the Central Interceptor project, including timelines and details of Mana whenua engagement as the project progresses.

Watercare - Te Reo Māori initiatives

a. Te Whāinga o Te Ao, Te Reo Māori me ōnā Tikanga - Watercare and Te Wānanga o Aotearoa - 25 staff registered

b. marae visits for staff – Wānanga held at Umupuia Marae, (Ngai Tai ki Tāmaki) staff delivered a kaupapa on Te Pārenoreno Māori (Māori Philosophy). Poutiaki Tikanga Māori working with other mana whenua iwi and marae representatives to host the kaupapa and incorporate local mana whenua kaupapa.

c. Watercare has visual displays of Te Reo Māori, significant sites in Tāmaki Mākaurau and interviews on digital screens throughout the office

d. Watercare has a waiata rōpū called Ngā korimako, whose tikanga is to tautoko all site blessings engaged with mana whenua to carry out waiata – me kī, hei kinaki ki ngā kaikōrero mai Watercare. Ā ka whakatinanahia hoki tēnei rōpū ki ngā pōwhiri kei roto I te whare ō Watercare.

e. lunch-time Te Reo Māori sessions for staff

f. a high number of Watercare project leads that present kaupapa at the mana whenua managers kaitiaki forum introduce themselves in Te Reo Māori, Pēpēhā delivered. Capability and confidence is building for staff at all levels to use and engage in Te Reo Māori outside of the Watercare offices.

Watercare - Economic development initiatives

34. Watercare is in regular discussions with mana whenua to investigate potential water and other commercial relationship and investment opportunities. There is Iwi interest in several housing development schemes across Auckland. Watercare works closely with their development managers to address water and wastewater infrastructure requirements.

Marae and papākainga development

35. Watercare is committed to work collaboratively with other council controlled organisations, providing ‘in-kind’ support giving effect to council’s marae development programme. Watercare’s role is water and wastewater.

Kaitiakitanga (water)

36. Watercare has a holistic approach to the planning and consenting of infrastructure projects. Careful consideration is given to the water bodies from water extraction to treated wastewater discharge. Project details are shared with mana whenua through the Watercare Kaitiaki Forum to ensure early engagement and collaboration in developing solutions that improve the quality of waterways.

Identity and Culture

37. Mana whenua are being engaged to incorporate Iwi interpretations through signage, artworks (tukutuku panels) whakairo (carvings) at Watercare sites. Restoration strategies with a holistic view point maximising mana whenua values, beliefs and mātauranga māori are being created and implemented

Rangatahi

38. One rangatahi is currently receiving the Mark Ford Scholarship

Organisational Effectiveness

39. The Poutiaki Tikanga Māori delivers, supports and builds the confidence and cultural competency of the Watercare Board Chair and staff and provides cultural support in all Watercare engagement with iwi.

Regional Facilities Auckland (RFA)

40. RFA’s Māori Engagement Strategy aims to enhance existing relationships with iwi and enter into business relationships in order to create meaningful engagement. This may create employment, and be either cost neutral or generate a profit, while positively increasing the visibility of iwi and enhancing the RFA brands.

41. RFA is committed to continuing to develop programmes and initiatives to support Māori visibility at regional facilities, support Māori businesses to engage with RFA, and support tikanga Māori cultural expression. These include Auckland Zoo’s Māori science programme, Auckland Art Gallery’s Māori Advisory Group, Auckland Art Gallery’s Lindauer exhibition, and Auckland Conventions’ support for the Tamaki Herenga Waka Festival on Anniversary Day.

42. As part of RFA’s overall renewals and capital works programme, bi-lingual signage and incorporation of Māori identity and Te Aranga design principals are being incorporated where appropriate in accordance with Auckland Council Group’s Te Reo Māori Framework.

43. RFA continues to build on our existing organisational capability in Te Reo and tikanga and to ensure that biculturalism is reflected in our everyday work practices.

44. These and other initiatives form part of RFA’s operations rather than specific and discrete projects, and align with the goals of RFA’s approved Māori Engagement Framework.

45. In 2017/18, RFA reviewed its Māori Engagement Strategy to ensure it is continuing to support RFA’s contributions to Māori outcomes. RFA is working with Auckland Council’s Te Waka Anga Mua ki Uta through their work in supporting development of Māori responsiveness plans across the group.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe /
Local impacts and local board views

46. The views of local boards have not been sought in writing this report.

Tauākī whakaaweawe Māori / Māori impact statement

47. This report relates to matters that will impact on Māori.

Ngā ritenga ā-pūtea / Financial implications

48. The combined Te Toa Takitini portfolio budget for the 2017/2018 financial year was $9,092,000. The total year-end spend is $7,729,000.

49. The projects and programmes outlined in this report cover more activity than is captured under Te Toa Takitini portfolio.

Ngā raru tūpono / Risks

50. There are no risks associated with this report.

48. Ngā koringa ā-muri / Next steps

51. In line with advice provided by the IMSB, staff from across the council group are continuing to refine the way that activity demonstrates clearer aligned to council’s new strategic objectives for Māori. This work also seeks to make reporting more streamlined and therefore cost effective.

Ngā tāpirihanga / Attachments

There are no attachments for this report.

Ngā kaihaina / Signatories

Author

Rose Leonard - Executive Officer

Authorisers

Phil Wilson - Governance Director

Matthew Walker - Group Chief Financial Officer

No.	Title	Page
a ⇩	Draft 2018 Treaty Audit Response Work Programme (condensed)	37

No.	Title	Page
a ⇩	Summary of CCO fourth quarter report ending 30 June 2018	43
b ⇩	Auckland Transport fourth quarter report ending 30 June 2018	49
c ⇩	Panuku Development Auckland Panuku Development fourth quarter report ending 30 June 2018	79
d ⇩	Watercare Services Limited fourth quarter report ending 30 June 2018	109
e ⇩	Auckland Tourism Events and Economic Development fourth quarter report ending 30 June 2018	143
f ⇩	Regional Facilities Auckland fourth quarter report ending 30 June 2018	171

Finance and Performance Committee

17 October 2018

Auckland Council parent performance report for the period 1 July 2017 to 30 June 2018

File No.: CP2018/14093

Te take mō te pūrongo / Purpose of the report

1. To provide an overview of the Auckland Council organisation (parent) performance results for the period 1 July 2017 to 30 June 2018.

Whakarāpopototanga matua / Executive summary

Annual Report

2. The contents of this report form part of the annual report and annual report summary adopted by the Governing Body on 27 September 2018 and then released publicly.

3. Prior to this, the annual report had been reviewed and recommended for adoption by the Audit and Risk Committee on 13 September 2018 and the Finance and Performance Committee on 18 September 2018.

Summary of performance

4. The council parent delivered $464 million of capital investment and performed well operationally with a net operating result that was $32 million better than expected.

5. From a service performance perspective, half of the adopted regional Long-term Plan performance measures were fully achieved, with work continuing on the remainder.

Financial performance

6. This report shows how the organisation is performing against the revised budget and outlines any associated financial risks. Comparing to the revised budget rather than the originally adopted annual plan means any approved budget changes during the year are also incorporated.

7. The 2017/2018 net operating result was $32 million better than the revised budget. This was mainly due to higher than expected dividend income ($15 million), higher than expected commercial property rental income ($6 million), and lower than expected staff costs ($16 million below). The overall favourable result was offset by Regulatory Services revenue being $7 million lower than expected.

8. The 2017/2018 capital expenditure was $464 million (76 per cent of the full year $608 million budget).

Service performance

9. This report includes results against regional LTP performance measures. For the 2017/2018 financial year, 68 measures are reported. 34 measures reached their target and 34 did not.

10. Within the themes subsections, the status of each performance measure is indicated with the following icons:

· Ο indicates performance measures that have achieved, or are better, than target

· Ο indicates performance measures that have not achieved the target

11. For performance measures showing a red status, an explanation of the performance is provided.

12. Attachments to this report include information on professional services expenditure, LGOIMAs and customer services. Group financial results and CCO performance results are in separate agenda papers.

Ngā tūtohunga / Recommendation/s

That the Finance and Performance Committee:

a) receive the performance report for the Auckland Council parent for the period of 1 July 2017 to 30 June 2018.

Horopaki / Context

13. The following subsections outline performance by each theme used in the Annual Report. For each theme, highlights, financial performance and service performance are summarised. The themes are:

· Auckland Development

· Environmental Management and Regulation

· Parks Community and Lifestyle

· Governance and support.

14. Following the subsections on themes an additional subsection provides a consolidated commentary on financial performance.

Tātaritanga me ngā tohutohu / Analysis and advice

Auckland Development theme

Auckland Development highlights

15. Highlights for the Auckland Development theme include:

· The Auckland Unitary Plan is fully operative, now that the last of the appeals to the High Court and Environment Court on the residential rules of the Auckland Unitary Plan have been resolved.

· The Southern Initiative’s digital engagement platform Upsouth, won the highest accolade at council’s annual Engagement Awards, taking both the Transparency and Accessibility and Supreme awards for work addressing the challenges facing South Auckland communities.

· In June, the City Centre Design Unit-led Business Case for Walking won the Understanding Walking Prize at the 2018 Living Streets Aotearoa awards in Wellington. This was a collaborative effort, with work undertaken by the council, Boffa Miskell and MRCagney. This work provides a clear mandate for understanding walking as a mode of transport which shapes the design of the city centre and has implications for urban planning across all of New Zealand.

Auckland Development financial performance

$million	YTD Actual	YTD Revised Budget	YTD Variance		FY Annual Plan
Net operating expenditure	123	137	14	10%	138
Capital expenditure	74	129	55	43%	141

· Net operating expenditure for the Auckland Development theme was $14 million below the 2017/2018 revised budget. The favourable result was mainly due to higher rental property revenue, lower staff costs due to vacancies, and lower repairs and maintenance costs due to the timing of work programmes.

16. Capital expenditure was $55 million below the 2017/2018 revised budget. This was mainly due to the strategic property development programme purchase of Onehunga Wharf being delayed (it is now expected to settle next year), and the Hobsonville residential project which is delayed due to delays in contractors’ work schedules. This was offset by the capital expenditure on Americas Cup infrastructure projects, budgeted for in subsequent years.

Auckland Development service performance

17. The following table summarises the performance against the LTP measures relating to Auckland Development:

Auckland Development	FY18			FY17
Performance measures	Full year result	Full year target	Status	Actual Result
Number of historic heritage places and areas formally protected in the Unitary Plan	2,249	2,180	Ο	2,249
Percentage of unitary and area plan changes and Notices of Requirement processed within statutory timeframes	100%	100%	Ο	100%
Percentage of adopted core strategies, policies and plans incorporating Māori outcomes or developed with Māori participation	100%	85%	Ο	100%
Number of economic, business, and city building opportunities facilitated through the Auckland Council global engagement programme	152	50	Ο	140
Proportion of actions from strategies and action plans that are being implemented according to timeframes	90%	80%	Ο	90%
Percentage of Aucklanders satisfied with historic heritage management in Tāmaki Makaurau / Auckland	52%	75%	Ο	52%
The results may reflect that not all Aucklanders are aware of, or impacted, by a heritage issue.
Number of sites and places of significance to mana whenua formally protected in the Unitary Plan	75	100	Ο	75
In addition to the 75 sites currently scheduled in the Unitary Plan, another 36 sites also potentially meet the criteria for scheduling. Iwi agreement and council approval is required to initiate a plan change.

Environmental Management and Regulation theme

Environmental Management and Regulation highlights

18. Highlights for the Environmental Management and Regulation theme include:

· Action plans to protect the regional parks from Kauri dieback have been implemented in the Waitākere and Hunua Ranges. Visitors will see new signs and barriers on the tracks and compliance officers monitoring the closed tracks.

· The Auckland Council Zero Waste Zone has recently hosted delegates from C40 Cities. This organisation promotes prevention, reuse and recycling to keep valuable materials from the residual waste stream.

· Chickens are being used to control plague skinks on Great Barrier Island. This innovative joint Auckland Council and Department of Conservation project is helping to protect the island’s precious biodiversity and is significantly cheaper than alternative control methods. The eggs being produced by the chickens are being shipped by SeaLink (for free) to the Auckland City Mission.

Environmental Management and Regulation financial performance

$million	YTD Actual	YTD Revised Budget	YTD Variance		FY Annual Plan
Net operating expenditure	294	288	(6)	(2%)	290
Capital Expenditure	124	121	(3)	(3%)	117

19. Net operating expenditure for the Environmental Management and Regulation theme was higher than the 2017/2018 revised budget by $6 million. This was primarily driven from lower than budgeted building consents revenue, higher repair and maintenance costs for community facilities, and higher than expected professional services expenses in Regulatory Services.

20. Capital expenditure was $3 million higher than budget, impacted by Healthy Waters progressing stormwater projects ahead of schedule.

Environmental Management and Regulation service performance

21. The following table summarises the performance against the LTP measures relating to Building and Resource Consents:

Building and Resource Consents	FY18			FY17
Performance measures	Full year result	Full year target	Status	Actual Result
Percentage of customers satisfied with the overall quality of building control service delivery	49%	65%	Ο	55%
This result reflects the pressure on consenting timeframes due to the growth in new construction, the difficulties in recruiting experienced technical staff, and the adjustment to new consenting systems. The qualified partner programme with high volume customers is helping to improve processing time, which will have a positive impact on customer satisfaction.
Percentage of Building Consent applications processed within 20 working days	52%	100%	Ο	80%
The decline in performance reflects the high volume and increasing complexity of building consents being processed, challenges recruiting staff, and the time taken to embed new process on the NewCore platform. Improvement actions saw a lift in performance, from 48% compliance over the first 9 months, to 66% compliance from 1 April to 30 June 2018. These improvements include more training, quality assurance checks and independent checks.
Percentage of customers satisfied with the overall quality of resource consents service delivery	49%	55%	Ο	58%
This result reflects resourcing pressures and the transition to the Unitary Plan rules for those providing input into consenting.
Percentage of non-notified Resource Consent applications processed within 20 working days	67%	100%	Ο	77%
This result was discounted after a weakness was identified where dates recorded in the consenting system do not agree with the underlying consenting information, affecting when the “clock” starts and stops when we required information to process a resource consent. A number of improvements have been made, including additional training, validation reporting and quality assurance checks.
Percentage of notified Resource Consent applications processed within 70 working days.	51%	100%	Ο	45%
Notified consents are complex and due to the small number processed per month the number over time have a large impact on the performance.

22. The following table summarises the performance against the LTP measures relating to Licensing and Compliance Services:

Licensing and Compliance Services	FY18			FY17
Performance measures	Full year result	Full year target	Status	Actual Result
Percentage of urgent animal management complaints such as dog attacks responded to within one hour	99%	99%	Ο	99.5%
Percentage of known dogs that are registered	94%	100%	Ο	88%
We have increased the percentage of known dogs that are registered, from 88% in 2016/2017 to 94% in 2017/2018.
Percentage of noise complaints responded to within 30 minutes for urban areas or 60 minutes for rural areas	56 %	80%	Ο	77%
Contractors failed to meet targets for noise response and their payments were subsequently reduced. These results were considered when renewing the contracts for the new financial year and beyond.
Percentage of complainants satisfied with noise control services	54%	52%	Ο	59%
Percentage of registered food premises graded annually	62%	95%	Ο	95%
Changes to the Food Act mean that businesses are not inspected annually. They are now inspected according to their risk which may range from every three months to three years.
Percentage of customers satisfied with the food and hygiene licensing service	80%	70%	Ο	81%
Percentage of D/E graded food premises re-inspected within one month	97%	95%	Ο	98%
Percentage of high-risk alcohol premises inspected annually	100%	100%	Ο	100%
Percentage of customers satisfied with the alcohol licensing service	85%	68%	Ο	83%
Percentage of bylaw-related requests for service (e.g. illegal signs, public nuisance, street trading) responded to within three days	74%	83%	Ο	80%
In October 2017 the Regulatory Committee endorsed a shift to a strengthened compliance approach, including a risk based approach for attending requests for service. This risk based approach is reflected in the result.

23. The following table summarises the performance against the LTP measures relating to Solid Waste and Environmental Services:

Solid Waste and Environmental Services	FY18			FY17
Performance measures	Full year result	Full year target	Status	Actual Result
Percentage of customers satisfied with the overall reliability of waste collection services	69%	76%	Ο	74%
Significant service changes were introduced, which impacted a high number of Aucklanders. With teething issues largely resolved, satisfaction should increase.
Domestic kerbside refuse per capita per annum	144kg	110kg	Ο	144kg
Auckland Council's target to achieve a significant reduction in the volume of kerbside waste sent to landfill is dependent on the introduction of a food scraps collection. Because this collection has not yet been introduced it was not possible for council to achieve the 110 kilogram per capita refuse target. However, a successful pilot food scraps trial was introduced in March 2018 in Papakura which is serving 15,000 households. Future refuse targets have been amended to reflect the new timetable for the food scraps service rollout - this is now proposed to be introduced across Auckland in 2020/2021.
Total number of Resource Recovery Facilities	5	4	Ο	4
Percentage of the council-controlled closed landfill discharge consents achieving Category 1 or 2 compliance rating	100%	98%	Ο	100%
Percentage of threatened species under active management	34%	34%	Ο	34%
Percentage of indigenous ecosystems under active management	70%	68%	Ο	68%
Number of hectares under community pest control	124,000	90,000	Ο	124,000
Percentage of land area with less than 5% residual trap catch for possums	28%	52%	Ο	52%
Due to budget and operational challenges, some large community-run possum control operations were unable to achieve desired levels of control in 2017/2018. The natural environment targeted rate will enable the council to better support these groups and to increase the extent of professional possum control undertaken in 2018/2019.
Proportion of kauri areas on Auckland Council land that have active management or exclusion measures in place for kauri dieback disease	89%	70%	Ο	68%
Proportion of schools participating in sustainability education programmes	63%	58%	Ο	73%
Number of hectares of new forest or wetland habitat established on regional parks	7.55	8	Ο	8
The proposed Unitary Plan required resource consents for revegetation planting in dune habitats, and this delayed planting. This requirement has been removed in the operative Unitary Plan.
Length (kms) of waterways protected annually with riparian planting and/or fencing	11.7	37	Ο	Not measured
The annual result is below the target because this target is primarily reached through grants to community groups and landowners through the Healthy Waters' Waterway Funds. In 2017/2018 the timeline for delivering on these grants was increased from 12 months to 18 months, to allow for better operational delivery of fencing and planting by grant recipients. Because of this many of the projects that Waterway Funds grants were committed to in 2017/2018 are yet to be completed, and the results of these projects will be reported in 2018/2019. The 2018/2019 results are expected to be on target and will better reflect the effects of the positive changes made to the programme during 2017/2018.
Percentage of Aucklanders prepared at home for an emergency	66%	36%	Ο	Not measured

24. The following table summarises the performance against the LTP measures relating to Stormwater Management:

Stormwater Management	FY18			FY17
Performance measures	Full year result	Full year target	Status	Actual Result
Stormwater manholes that pop open in flood events are made safe within two hours	98%	100%	Ο	66%
92 popping manholes were reported with two events not made safe within two hours. Steps are being taken to mitigate this in the future, especially during storm events, with a focus on call centre staff assigning maintenance tasks correctly.
Auckland Council stormwater compliance with resource consents for discharge from the stormwater system, measured by the number of: a) abatement notices, and b) infringement notices, and c) enforcement notices, and d) successful prosecutions received in relation to those resource consents	0	0	Ο	0
The number of complaints received about the performance of the stormwater system per 1000 properties connected to Auckland Council’s system	1.76	3.0	Ο	1.01
Proportion of mana whenua satisfied with Auckland Council’s engagement with iwi in relation to stormwater projects	1/19	10/19	Ο	1/19
Of the nine respondents that completed the survey of mana whenua's satisfaction with council on this issue, one awarded a score of satisfied and eight awarded a score of neutral. No respondents were dissatisfied with the council's effectiveness in engagement with iwi in relation to stormwater projects. This represents an improvement on results in 2016/2017. Various initiatives are underway to improve the council's engagement with mana whenua on stormwater issues, including a regular monthly hui with mana whenua kaitiaki representatives, appointment of dedicated staff to work on this issue and training for staff to improve their understanding of te reo, Te Ao Māori and tikanga.
The ratio of length of watercourse consented to be physically improved versus physically degraded in the current year	2.88:1	3:1	Ο	2.6:1

Parks, Community and Lifestyle theme

Parks, Community and Lifestyle highlights

· There were successful planting sessions for the Million Trees initiative, with 20,000 plants hand dug by volunteers including Mayor Phil Goff and MP Meka Whaitiri supporting the Puhinui planting programme.

· Big Belly Bins are being used in Mangere Bridge Town Centre, Massey Park Pool and Papakura Central Park. These are large capacity bins with sensors that can safely self-compact their contents. When they are full, the bins alert the contractor so they can be emptied in a timely manner to ensure a clean environment for Aucklanders.

· Auckland Council supported 79 Anzac Day services across Auckland. The Auckland Domain dawn service was attended by over 18,000 people, Mayor Phil Goff, and Prime Minister Jacinda Ardern.

· A year on from the Auckland Council support Housing First programme 396 adults and families with children have been supported into 215 permanent homes.

· Ōtara Music Arts Centre (OMAC) turned 30 this month and amongst the anniversary programming an open day was held to celebrate the key milestone. Music featured on the day showcased OMAC’s past and future talents headlined by Ōtara locals Ardijah, Three Houses Down and Smash Proof. OMAC is one of only two local government-funded community centres to boast a recording studio. The centre provides a creative environment that allows aspiring artists to focus on their musical dreams.

· After the recent storm in April many residents living in the Henderson Massey local board area lost their power and hot water for over a week and were not prepared. A new programme started in June partnership with Wāitakere Neighbourhood Support. The purpose of these monthly sessions is to develop resilience in the event of an emergency (and also discuss crime prevention strategies) by holding open community conversations where staff connect, empower and encourage neighbours to look out for one another.

· Over 2,700 young people attended JobFest in May. The event connects young people furthest from the job market directly with employers who have entry level job vacancies. JobFest 2018 was run in collaboration with The New Zealand Careers Expo.

Parks, Community and Lifestyle financial performance

$million	YTD Actual	YTD Revised Budget	YTD Variance		FY Annual Plan
Net operating expenditure	539	525	(14)	(3%)	497
Capital expenditure	199	271	71	26%	279

25. Net operational expenditure for the Parks, Community and Lifestyle theme was $14 million over the 2017/2018 budget. This is a combination of lower outsourced services expenses, and lower repairs and maintenance expenses due to delays, offset by recreation revenue being lower than budget mainly due to delays in fees standardisation and changes to membership models.

26. Capital expenditure is $71 million behind, mainly due to timing of parks land acquisitions, together with slower renewals for parks coastal assets, leisure facilities and major sports fields, and some locally driven initiatives projects.

Parks, Community and Lifestyle service performance

27. The following table summarises the performance against the LTP measures relating to the Parks, Community and Lifestyle theme:

Parks, community and lifestyle	FY18			FY17
Performance measures	Full year result	Full year target	Status	Actual Result
Total permitted events taking place across the city	1354	2500	Ο	1610
Since targets were set, opportunities have been identified for relaxing permitting requirements to ensure that permits are only required where there is a clear reason and benefit for doing so, to reduce cost and make it easier for event organisers.
Number of visits to Auckland Libraries website	8.15m	7.3m	Ο	6.71m
Number of library items borrowed	15.34m	15m	Ο	15.34m
Percentage of items borrowed that are e-collections (e.g. eBooks, Audiobooks)	14.1%	15%	Ο	11.5%
The target was not achieved but the increase in e-circulations has been extremely significant. A number of new approaches and initiatives were undertaken: curation, simultaneous access, increased collection size, reduced wait times, improved user experience with the Libby app and promotional efforts. Importantly, the combined circulation of both e- and physical collections shifted from a declining pattern in 2016/2017 to one of growth by the end of 2017/2018. The slower decline for physical collection usage has meant it’s been harder to achieve the target for e-usage.
Percentage of customers satisfied with the range of collection items available at libraries	76%	72%	Ο	74%
Percentage of Māori satisfied with the range of collection items available at libraries	76%	72%	Ο	71%
Percentage of customers satisfied with the Auckland Libraries website	84%	75%	Ο	78%
Percentage of city park service requests completed on time	75%	90%	Ο	89%
Work orders not being passed through meant that the target was missed. This has now been resolved, and a new weekly report is being monitored to ensure that each department has their work orders investigated and completed.
Number of New Zealand native plants grown for revegetation programmes in the Botanic Gardens	63,750	60,000	Ο	60,955
Percentage of the public who have used a regional park in the last 12 months	69%	76%	Ο	72%
Visitor counts showed an increased use of regional parks. The difference between survey and visitor counts may be the result of repeat use by visitors or use by visitors from outside of the region. A range of initiatives continue to be developed and delivered to activate public enjoyment of the Regional Parks, including increasing use of less visited parks.
Percentage of regional park visitors satisfied with the overall quality of their visit	95%	96%	Ο	96%
Number of volunteer hours worked in regional parks each year	81,342	80,000	Ο	84,860
Number of formalised arrangements with Māori (per annum) that provide for the management of specific cultural sites within regional parks	4	3	Ο	4
Proportion of mana whenua satisfied with their engagement in the kaitiakitanga and stewardship of parks and reserves	1/19	10/19	Ο	1/19
There were 12 responses to the survey – one was favourable, five were neutral and six were unfavourable. Training staff in effective engagement is identified as an improvement opportunity
Percentage of residents participating at least once per week in sport and recreation	66%	72%	Ο	68%
Investment in sports fields has been guided by the Sports Field Capacity Development Programme to accommodate population growth. The focus in now on building capacity in high demand areas such as Henderson, Albany, Albert Eden, Waitematā, Manurewa, Howick, Franklin, Mangere and Otahuhu.
Percentage of tenants satisfied with provision and management of 'housing for older people'	63%	75%	Ο	62%
Haumaru Housing has struggled to deliver on some tenants’ expectation of the time needed to complete repairs and maintenance. Communication about timeframes and improved grounds maintenance should increase satisfaction.
Percentage of successful funding applications (where the main beneficiary is Māori organisations, individuals or Kaupapa Māori) as a percentage of all successful applications	8.9%	13%	Ο	4.5%
This year’s result is higher than last years as we've received more self-declared applications from individuals and organisations identifying themselves as Māori. The total number of successful applications including non-Māori was 1277 (1292 last year). This year we received 159 applications from individuals and organisations identifying themselves as Māori (82 last year), of which 114 obtained funding (58 last year). This year these applicants have a success rate of 72% comparable to the overall success rate of 69%. The reporting of this measure is based on applicants’ status, not the main beneficiary. While we ask relevant applicants to provide information on how the funding will be used, we rely heavily on each applicant’s representation.
Percentage of Aucklanders that feel Auckland is an eventful, fun and exciting city	57%	72%	Ο	59%
This measure was negatively affected by transport option, parking and traffic in terms of accessing events and activities.
Percentage of Aucklanders that feel art and culture is part of their everyday life	42%	70%	Ο	42%
When people are asked about arts and culture, there is confusion about its definition. Many people experience arts and culture daily in their surrounding but may not make a conscious effort to engagement in a specific arts and culture experience.
Percentage of the people of Auckland with a greater awareness of spiritual, ancestral, cultural, customary and historic significance of the Tūpuna Maunga	22%	80%	Ο	21%
While we are seeing incremental increases of awareness of the significance of the maunga we are yet to achieve our goal. The target was set before baselines existed and was overly-optimistic.
Number of key sites of significance on Tūpuna Maunga with mitigation measures to improve or maintain their condition	25	25	Ο	33
Number of activities that mana whenua is engaged in on Tūpuna Maunga	24	7	Ο	17
Percentage of all assets that are graffiti free across the city	94%	94%	Ο	94%
Percentage of visitors satisfied with the presentation of cemeteries	75%	82%	Ο	75%
New maintenance contracts have been implemented in the past 12 months resulting in new contractors on site and some teething issues have been experienced. Additional audits have been implemented by the contract manager and engagement with the Cemetery team is resulting in improvements.

Governance and Support theme

Governance and Support highlights

28. Highlights for the Governance and Support theme include:

· All 21 local boards approved their local board agreements in June 2018.

· The Robotics Process Automation (RPA) technology was used to analyse more than 27,000 submissions on the 2018-2028 Long Term Plan and the Auckland Plan refresh.

Governance and Support financial performance

$million	YTD Actual	YTD Revised Budget	YTD Variance		FY Annual Plan
Net operational expenditure	121	168	47	28%	181
Capital expenditure	65	87	21	24%	65

29. Net operational expenditure was $47 million lower than the 2017/2018 revised budget due to higher dividend income from the Auckland Council Investment Limited investment portfolio, and lower net interest costs, together with an adjustment for lower ACC levy provisions.

30. Capital expenditure was $21 million behind the 2017/2018 budget. This is due to timing of the ICT, business enablement and corporate property projects.

Governance and Support service performance

31. The following table summarises the performance against the LTP measures relating to Governance and Support theme:

Governance and Support	FY18			FY17
Performance measures	Full year result	Full year target	Status	Actual Result
Number of complaints regarding council demographic processes upheld by the Auditor General or Ombudsman	0	0	Ο	0
Number of formalised relationship arrangements between the council and mana whenua	7	19	Ο	11
Shared areas of mana whenua interests across Tamaki Makaurau require local boards to engage with multiple iwi entities. The measures assumes 19 mana whenua will each sign only one agreement with the council when in fact their tribal rohe extends across multiple local boards which requires mana whenua to formalise relationships with multiple local boards.
Percentage of residents who feel they can participate in Auckland Council decision making	38%	50%	Ο	34%
Despite enhancements to the 2018-2028 Long-term Plan consultation process, Aucklanders’ perceptions have proven slower and more difficult to shift than anticipated. We did make some gains, for example, enhance engagement with Asian communities who more than tripled their submissions compared to the previous Long-term Plan.
Percentage of Māori residents who feel they can participate in Auckland council decision making	36%	50%	Ο	32%
As with the general population, enhancements such as the Long-term Plan consultation process have not impacted perceptions as quickly as we anticipated.

Financial performance

32. This section summarises the 2017/2018 financial results for the Parent.

33. Operating revenue is $576 million, $7 million higher than the revised budget; mainly due to dividend income and commercial properties rental revenue being higher, offset by lower building consents revenue.

34. Operating expenditure was $2,173 million, $29 million lower than the revised budget. Major items which were under revised budget include:

· Staff costs at$16.1 million below, reflecting tighter controls on recruitment during the year;

· Finance expenses being $17.8 million below, due to lower than budgeted interest rates;

· Professional services/Outsourced services are $1.9 million under, due to work programmes delays;

· Repairs and maintenance costs being $3.5 million under due to the timing of work programmes.

35. The net operating surplus was $120 million, $32 million higher than the 2017/2018 revised budget.

36. The net non-operating deficit was $354 million. This is $526 million less than the 2017/2018 budget, mainly due to variances arising from City Rail Link transactions proposed in the Annual Plan 2017/2018. With the execution of the contracts, these City Rail Link investments were recognised in the balance sheet, and so this is simply an accounting difference.

37. The 2017/2018 capital expenditure was $464 million, which is 76 per cent of the full programme of $608 million approved for the year. The variance is mainly due to land acquisition for projects not being achieved at year end.

$000	FY 18 Actual	FY 18 Revised Budget	Variance	Prior Year Actuals
Capital expenditure	463,525	607,753	144,228	483,314

38. Capital projects that were completed over the fourth quarter include:

· Tamakae Wharf improvements including a new timber boardwalk, fish hook seat, and footpath renewals;

· Takanini stormwater works achieving two stages of implementation, which provides the necessary facilities for the Takanini area new growth;

· New Lynn Clark Street culvert upgrade beomg completed, which installed a new larger culvert ten times the original capacity;

· Brains Park development to improve sand slits drainage, irrigation and to install lighting;

· Te Puke o Tara Community Centre refurbishment;

· Mt Wellington War Memorial Reserve – upgrading the playground to a destination playground.

Balance sheet

$million	Actual as at June 2018	Projected per Annual Plan 2018	Actual audited June 2017
Assets
Property, plant and equipment	14,908	14,237	13,660
Other assets and investments	24,663	24,806	24,494
Less liabilities
Borrowings	8,313	7,827	7,705
Other liabilities	1,937	1,874	1,854
Net assets (ratepayers’ equity)	29,321	29,342	28,597

39. The increase in property, plant and equipment since June 2017 was mainly due to gains on revaluations of restricted park land and operational land and buildings, together with gains from the revaluation of public arts, alongside completed capital projects.

40. The total borrowing has increased mainly due to prefunding bonds issued in Euro and Green Bond, which has also increased cash holding, with no refinancing requirements until late-2018.

Treasury management

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

42. Total borrowing at June 2018 was $8.3 billion. After adjusting for cash holdings of $0.6 billion, net debt was $7.7 billion.

43. The June 2018 cost of funds was 5.21 per cent which is below the budgeted cost of funds of 5.30 per cent but above the 7-year benchmark. The average duration of our debt portfolio at June 2018 was 5.89 years.

Employee numbers

44. Employee numbers are expressed in full-time equivalent (FTE) terms.

45. The table below shows the trend of both FTE and FTE per 1,000 residents in Auckland for the council parent organisation. Overall the FTE number has increased by 29 compared to end of June 2017 as vacancies in Community Facilities and Community Services are filled.

	30 June 2018	30 June 2017	30 June 2016
Number of full-time equivalents (FTE)	6,120	6,091	6,102
FTE per 1,000 residents	3.60	3.70	3.78

46. There has been ongoing difficulty recruiting skilled staff in a number of front line areas, such as Regulatory Services.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe /
Local impacts and local board views

47. Local boards receive their own reporting for their respective areas. The local board quarterly performance reports have been enhanced to improve the quality of information to track LTP measures. These changes will give local boards more visibility, earlier, about how performance is tracking against targets.

Tauākī whakaaweawe Māori / Māori impact statement

48. Performance in each theme affects Māori, and specific measures relating to Māori are outlined in the report.

Ngā ritenga ā-pūtea / Financial implications

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

Ngā raru tūpono / Risks

50. There are no risks arising from the receipt of this report.

Ngā koringa ā-muri / Next steps

51. There are no next steps from this report.

Ngā tāpirihanga / Attachments

No.	Title	Page
a ⇩	Attachments to Auckland Council parent performance report for the period 1 July 2017 to 30 June 2018	207
b ⇩	CAPEX projects over $5 million	225

Ngā kaihaina / Signatories

Authors

David Gurney - Manager Corporate Performance & Reporting

Paul Sadasivam - Project and Innovation Leader

Karuna Dahya - Strategy Analyst

Authorisers

Kevin Ramsay - General Manager Corporate Finance and Property

Matthew Walker - Group Chief Financial Officer

Finance and Performance Committee

17 October 2018

2017/2018 Budget Carry Forwards

File No.: CP2018/16035

Te take mō te pūrongo / Purpose of the report

1. To approve budget changes relating to the 2017/2018 year-end budget carry-forward process.

Whakarāpopototanga matua / Executive summary

2. As part of Auckland Council’s year-end process, staff and management have reviewed the 2017/2018 group result, and assessed the carry-forward of unspent 2017/2018 budget into 2018/2019 and beyond where appropriate.

3. The review of carry-forwards considers unspent project budgets due to timing changes and projects linked to targeted rates or special funding. This includes both operational expenditure (opex) and capital expenditure (capex) budgets.

4. This report also includes requests from Panuku Limited for an additional capex budget that is self-funding, as well as a bring-forward of future year capex budgets.

Capital expenditure budget

5. The group delivered $1.67 billion capital expenditure in 2017/2018, which represents an underspend of $397 million compared to the 2017/18 revised capital programme of $2.07 billion (Annual plan 2017/2018 plus 2016/2017 carry-forwards of $136 million, excluding CRL).

6. Of the $397 million underspend, approximately $140 million has already been incorporated into the 10-year budget 2019-2028 (LTP) capital programme. In this report a further $165 million of the remaining underspend is proposed to be carried forward.

7. Of the $165 million proposed, council departments requested $94 million and council-controlled organisations (CCOs) $71 million of underspends to be carried forward from 2017/2018.

8. $44 million of the unspent capex budget is proposed to be carried forward to 2018/2019, and $121 million in outer years. The flow-on effect to the outer years is due to capacity constraints in delivering the capital programmes.

9. $15 million is requested to be brought forward from 2019/2020 and added to the council capex budget in 2018/2019. This is to support business transformation and improvement initiatives through the Investment Group programme.

10. The impact of the carry-forwards is only on the timing of borrowings between years.

Operational expenditure budget

11. Carry-forward of operational expenditure (opex) budget is permitted under specific circumstances, such as unexpected project timing changes, specific purpose funding (e.g. reserves or targeted rates), contractual/compliance arrangements (e.g. grants), Locally Driven Initiatives (LDI), and high public interest spend.

12. It is proposed for $15 million of opex underspend in 2017/2018 to be carried forward to 2018/2019. Of the $15 million, approximately $3 million relates to LDIs, which were requested by Local Boards as part of the LTP process and approximately $4 million relates to the City Centre Targeted Rate Programme.

13. As part of the $15 million, Panuku is requesting a conversion of a $2 million underspend in capex in 2017/2018 into opex for 2018/2019 for investigatory works required for the commercial property portfolio. These works can be of an operating or capital nature and the conversion takes Panuku’s latest forecast into consideration.

Panuku requested budget changes

14. In addition to the carry-forwards, $20 million is requested to be brought forward from the last 3 years of the LTP for Wynyard Quarter auxiliary works relating to America’s Cup 2021, and $12 million to be added to Panuku’s capex budget in 2018/2019 for the construction of super yacht berthing.

Ngā tūtohunga / Recommendation/s

That the Finance and Performance Committee:

a) agree to amend the Auckland Council group capital expenditure budget for the carry-forwards from 2017/2018.

b) agree to carry-forward unspent 2017/2018 operational expenditure of $15 million.

c) agree to bring-forward $15 million of capital expenditure from 2019/20 to support business transformation and improvement initiatives through the Investment Group programme.

d) agree to bring-forward $20 million of capital expenditure for Panuku from the last 3 years of the LTP for Wynyard Quarter auxiliary works relating to the 36^th America’s Cup.

e) agree an additional $12 million of capital expenditure for Panuku in 2018/2019 for super yacht berthing, subject to the Group Chief Financial Officer’s agreement that favourable returns on investment are achievable for the council group.

Horopaki / Context

Capital expenditure budget

15. The group delivered $1.67 billion capital expenditure in 2017/2018, which represents an underspend of $397 million compared to the 2017/18 revised capital programme of $2.07 billion (Annual plan 2017/2018, plus 2016/2017 carry-forwards of $136 million, excluding CRL).

16. Of the $397 million underspend, around $140 million has already been incorporated into the 10-year budget 2019-2028 (LTP) capital programme. In this report a further $165 million of the remaining underspend is proposed to be carried forward.

17. As part of the year-end process, staff have reviewed the 2017/2018 result against the budget, and assessed the need for carrying forward unspent budgets into the subsequent financial years. The assessment is based on the following criteria:

a) The unspent project budget being added to the following year’s capital budget must relate to a specific project and not a generic programme of works.

b) The specific project must be fully scoped, planned and has the Planning Gateway approval to enter the Execution and Delivery Phase.

c) One-off renewal projects that are physically underway at year-end with the aim to be completed shortly after year-end can be added to the following year’s capital budget.

d) Ongoing development and renewal programme budgets cannot be carried forward unless they meet the requirement of point 13 b) above.

e) Savings and unused contingencies of completed projects cannot be carried forward and cannot be used to offset other projects.

f) The total whole-of-life project cost cannot be changed unless there is an approved variation. The revised capital budget represents a timing change only.

18. Staff have requested a total of $94 million of unspent capital budget for council departments that need to be carried forward into the current and future financial years. Capex carry-forward requests from council departments are summarised in the table below.

Council parent area	Amount ($m)	Note
Community Facilities Department	60	Primarily local asset renewals, park acquisitions and local board projects
Development Programmes Office (DPO)	12	Primarily downtown development including city center targeted rate funded projects
Investment Group	11	Transformation projects such as SAP OpenText, Building Control Inspection Scheduling and Robotic Process Automation
Healthy Waters	(9)	Bring-forward of approved 2017/2018 project overspends
Planning division	8	Mainly St. James Theatre
Corporate property	4	Primarily renewals of administration and service buildings
Waste	2
Engineering and Technical Services	2
Co-Governance	2
Arts, community and events (ACE)	1
Information Communication and Technology	1
Libraries and information	1
Other	<1
Grand Total	94

19. CCOs request to carry-forward $71 million of unspent capital budgets from 2017/2018 into future years. The proposed carry-forwards are broken down as follows:

CCOs	Amount ($m)	Note
Panuku	17	Waterfront development projects including development of Westhaven, Vos Yard and Wynyard Quarter
Panuku - Commercial Property Portfolio	33	Re-phasing of commercial property programme including transform/unlocks, strategic development and commercial renewals.
RFA	20	Major projects include: Aotea Centre: $7m and Mayoral drive: $6m.
ATEED	<1
Grand Total	71

20. Overall, $44 million of the unspent capex budget is proposed to be carried forward to 2018/2019, and $121 million in outer years. The flow-on effect to the outer years is due to capacity constraints in delivering the capital programmes.

21. $15 million is requested to be brought forward from 2019/2020 and added to the council capex budget in 2018/2019. This is to support business transformation and improvement initiatives through the Investment Group programme.

22. The impact of the carry-forwards is only on the timing of borrowings between years.

23. Refer to Appendix A for the proposed capex programme. This programme is based on the agreed LTP programme and adjusted for the changes requested in this report.

Panuku capital expenditure acceleration

24. On 29 March 2018, the Governing body endorsed the Wynyard-Hobson option as the location of the 36th America’s Cup bases.

25. Following this decision, Panuku has been working with existing tenants to enable relocation to suitable sites before construction works of the America’s Cup bases can begin.

26. Sealink has a lease to operate their ferry fleet at Wynyard wharf until 2024 and provides essential services to Great Barrier Island. This tenant needs to be relocated before September 2019 to accommodate critical works needed on Wynyard land and waterspace.

27. 38 Hamer Street has been identified as the most suitable site as a permanent home for Sealink by both parties in that it is appropriate for marine related activity. Negotiations are underway on lease arrangements on the land and waterspace. Final approval of the lease term will be requested from the Governing body after appropriate consultation (if required).

28. The site requires substantial work (building demolition, ground works, utilities, seawall, decontamination and installation of berthing infrastructure) to prepare for its long-term use. The costs associated with the termination of the lease, relocation and capital works are estimated to be between $16 million and $20 million. To enable this, Panuku is requesting a bring-forward of existing capex budget of $20m.

29. The request is an acceleration of works that would be required in future years.

30. The expected timing change is as follows:

	FY19	FY20	FY21	FY22	FY23	FY24	FY25	FY26	FY27
Bring-forward	$5m	$15m	-	-	-	-	($6m)	($7m)	($7m)

31. The timely consideration of this request is essential to meet the consent conditions for the Wynyard Hobson proposal and deadlines for the construction of the America’s Cup bases and breakwaters.

Panuku additional capital expenditure budget request

32. The agreed plans on 29 March 2018 included additional superyacht berthing in the Wynyard basin.

33. During the America’s Cup event, the Wynyard Basin will be able to accommodate an additional 12 superyachts immediately adjacent to the team bases, making a total of 101 superyacht berths, and this will provide legacy benefits after the event.

34. Panuku requires an additional $12 million of capex budget in 2018/2019 for the construction of the super yacht berthing. This cost is expected to be fully recovered from additional berthage revenue. Neither the capex nor the revenue associated with the additional berthing were included in the Long-term plan 2018-2028 due to timing of cost and revenue estimates.

35. The expected timing of the capital expenditure and revenue are as follows:

	FY19	FY20	FY21	FY22	FY23	FY24	FY25	FY26	FY27	FY28
Capital expenditure	$12m	-	-	-	-	-	-	-	-	-
Council’s share of lease surplus	$0m	$1.2m	$1.2m	$2m	$2m	$2m	$2m	$2m	$2m	$2m

36. The final business case is being developed and terms of the arrangement are being agreed with ETNZ. The funding is subject to the Group Chief Financial Officer being satisfied that there is a high degree of confidence that favourable returns on investment will be achievable for the council group.

Operational expenditure budget

37. Carry-forward of operational expenditure (opex) budget is permitted under specific circumstances, such as unexpected project timing changes, specific purpose funding (e.g. reserves or targeted rates), contractual/compliance arrangements (e.g. grants), Locally Driven Initiatives (LDI), and high public interest spend. Staff have assessed the requests and recommend approval of the items that meet the criteria.

38. It is proposed for $15 million of opex underspend in 2017/2018 to be carried forward to 2018/2019. Of the $15 million, approximately $3 million relates to LDIs, which were requested by Local Boards as part of the Long-term Plan 2018-2028 process and approximately $4 million relates to the City Centre Targeted Rate Programme. All the requests are summarised in the table below:

Proposed opex carry-forward	Amount($m)	Note
AC parent
Seismic Programme	2.5
LDIs	2.8
Special funding/Targeted rates funded	3.8	City Centre targeted rate
Capital Grant to third parties	0.5	Rescue Helicopter grant
Initiatives relating to Maori	0.7
CCOs
ATEED	1.0
Panuku	3.7	Commercial Property Portfolio, mainly repairs and maintenance
Grand Total	15.0

39. As part of the $15 million, Panuku is requesting a conversion of a $2 million underspend in capex in 2017/2018 into opex for 2018/2019 for investigatory works required for the commercial property portfolio. These works can be of an operating or capital nature and the conversion takes Panuku’s latest forecast into consideration.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe /
Local impacts and local board views

40. Approximately $36 million of the capex carry-forwards relates to local board projects. In general, there is a high degree of community interest in these.

41. $3 million of the proposed opex carry-forwards relates to LDI projects and was requested by local boards. The requests were approved by this committee in June 2018.

Tauākī whakaaweawe Māori / Māori impact statement

42. Staff recognise carry-forward requests which are of specific relevance to Māori in the recommended budget adjustments. The revised 10-year capital project list includes proposed carry-forwards for Tūpuna Maunga o Tāmaki Makaurau Authority, Ngāti Whātua Ōrākei Reserves Board and Te Poari o Kaipātiki ki Kaipara (formerly the Parakai Recreation Reserve Board) totalling $2 million. The proposed opex carry-forwards include approximately $0.7 million for commitments in relation to Māori, such as the Cultural Initiative Fund.

Ngā ritenga ā-pūtea / Financial implications

43. Council staff have assessed the financial implications of the carry-forwards and bring-forwards. As these are only timing changes they have no direct funding impacts other than on the timing of borrowings and interest expense. Due to the under-spend in 2017/18 the borrowings levels are forecast not to exceed those set in the LTP in any year because of these changes.

44. The additional budget request for the superyacht berthing is expected to be self-funding and have a favourable financial impact compared to the LTP.

Ngā raru tūpono / Risks

45. There is a possibility that the carry-forward of unspent capital expenditure budgets may reduce council’s ability to deliver its overall capex budget due to capacity constraints. This risk is mitigated by the apportioning of the carry-forward over multiple years. Many of the projects included in the carry-forward are already underway and will be completed in the current year.

Ngā tāpirihanga / Attachments

No.	Title	Page
a ⇩	2018-2019 Group Capex List	239

Ngā kaihaina / Signatories

Author

Albert Rootman, Manager Financial Modelling and Data

Authorisers

Ross Tucker - Acting General Manager, Financial Strategy and Planning

Matthew Walker - Group Chief Financial Officer

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