Agenda of Council Controlled Organisation Oversight Committee

Terms of Reference

Responsibilities

The purpose of the committee is to:

· have a general overview and insight into the strategy, direction and priorities of all Council Controlled Organisations (CCO)

· set policy relating to CCO governance

· approve CCO Statements of Intent

· monitor performance of CCOs and other entities in which the council has an equity interest (such as CRLL, Tāmaki Regeneration Company and Haumaru Housing).

Key responsibilities include:

· monitoring the financial and non-financial performance targets, key performance indicators, and other measures of each CCO and the performance of each organisation

· advising the mayor on the content of the annual Letters of Expectations (LoE) to CCOs and Ports of Auckland Limited

· exercising relevant powers under Schedule 8 of the Local Government Act 2002, which relate to the Statements of Intent of CCOs

· exercising relevant powers under Part 1 of the Port Companies Act 1988, which relate to the Statements of Corporate Intent for port companies

· exercising Auckland Council’s powers as a shareholder or given under a trust deed, including but not limited to modification of constitutions and/or trust deeds, granting shareholder approval of major transactions where required, exempting CCOs, and approving policies relating to CCO and CO governance

· approval of a work programme which includes a schedule of quarterly reporting of each CCO to balance reporting across the meetings.

Powers

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

Except:

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

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

(ii) Power to establish subcommittees.

Auckland Plan Values

The Auckland Plan 2050 outlines a future that all Aucklanders can aspire to. The values of the Auckland Plan 2050 help us to understand what is important in that future:

Exclusion of the public – who needs to leave the meeting

Members of the public

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

Those who are not members of the public

General principles

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

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

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

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

Members of the meeting

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

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

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

Independent Māori Statutory Board

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

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

Staff

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

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

Local Board members

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

Council Controlled Organisations

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

1 Apologies

At the close of the agenda no apologies had been received.

2 Declaration of Interest

Members are reminded of the need to be vigilant to stand aside from decision making when a conflict arises between their role as a member and any private or other external interest they might have.

3 Confirmation of Minutes

There is no confirmation of minutes.

4 Petitions

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

5 Public Input

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

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

6 Local Board Input

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

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

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

7 Extraordinary Business

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

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

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

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

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

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

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

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

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

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

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

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

Council Controlled Organisation Oversight Committee

12 December 2019

Council-controlled organisation quarterly reports ending 30 September 2019

File No.: CP2019/20402

Te take mō te pūrongo

Purpose of the report

1. To receive a high-level summary of and comments on the council-controlled organisations’ first quarter reports for 2019/2020.

Whakarāpopototanga matua

Executive summary

2. Under Auckland Council’s accountability framework, each substantive council-controlled organisation (CCO) must provide a quarterly report to the Council-Controlled Organisation Oversight committee. The reports for the first quarter of 2019/2020 are contained in Attachment A to E and are measured against the updated 10-year Budget.

3. For this term of council, staff will provide a report alongside the CCOs’ quarterly reports which summarises the results and identifies any key issues on the financial and non-financial results in the quarterly reports. The report is not exhaustive, particularly in terms of noting the positive achievements of the CCOs in the period being reported on.

4. Overall, the Auckland Council group has performed steadily in the first quarter. Capital delivery is improved when compared to first quarter of last year, while revenues and operational expenditure are both favourable to budget.

5. Representatives of the substantive CCOs boards, Chief Executives and Chief Financial Officers will be presenting at the meeting. The programme for the day is outlined in the table below:

Council Controlled Organisation	Time
Auckland Transport	9.30am
Watercare Services Limited	10.00am
Panuku Development Auckland	10.30am
Auckland Tourism, Events and Economic Development	11.00am
Regional Facilities Auckland	11.30am

6. Key aspects of the individual CCO first quarter reports are presented in the table below.

Auckland Transport

· A favourable net operating result for first quarter, with capital delivery slightly behind.

· Performance indicators, where measured, tracking to achieve targets.

· Questions to be asked about fast-tracking the e-bus roadmap, and Britomart risk issues.

ATEED

· A favourable net direct expenditure results due to increased revenue and some delayed expenditure.

· Performance indicators not yet measured, except one case which is tracking to target.

Panuku

· A favourable net direct expenditure results due to deferred expenditure (particularly on staff).

· Capital programme is tracking somewhat behind, for reasons explained in the quarterly report.

· Performance indicators are tracking to targets, where they have been measured.

RFA

· Two targets have not been met: visitation at venues, and (partly in consequence) percentage of non-rates revenue. Explanations relate to weather and the impacts of the RFA capital programme.

· RFA faces longer term issues given the condition of its assets. This is likely to mean ongoing unfavourable results through 2019/2020. A discussion about RFA’s overall position is required at an appropriate time during 2020.

Watercare

· A favourable net direct revenue results due to increased revenue from infrastructure growth charges and higher usage.

· The capital programme is slightly underspent due to changed phasing of central interceptor since budgets were set.

· Performance measures, where measured, are meeting or tracking to targets.

· The report notes progress with Watercare’s plans for providing water services in the Waikato.

Ngā tūtohunga

Recommendation/s

That the Council Controlled Organisation Oversight Committee:

a) receive the first quarter reports of the substantive council-controlled organisations.

Horopaki

Context

7. Under Auckland Council’s accountability framework, each substantive council-controlled organisation must provide a quarterly report to the Council Controlled Organisation Oversight committee.

8. Quarterly performance reports are required to:

· summarise the CCO’s performance against the approved budget and agreed targets in the long-term plan and statement of intent

· provide a forecast of the CCO’s performance for the end of the year

· identify the cause of major variances

· highlight major achievements for the quarter

· signal any potential or developing issues.

9. For this term of council, staff will provide a report alongside the CCOs’ quarterly reports which summarises the results and identifies any key issues on the financial and non-financial results in the quarterly reports. The report will not provide an exhaustive list of issues about the CCOs’ performance, and it does not address future issues. It focusses more on issues of concern, rather than the achievements and activity highlights of the CCOs, which are well documented in the quarterly reports themselves and we expect the CCOs will cover verbally when they attend the CCO Oversight Committee.

10. The reports for the first quarter of 2019/2020 are contained in Attachment A to E and are measured against the updated 10-year Budget.

Tātaritanga me ngā tohutohu

Analysis and advice

11. The Auckland Council group has delivered a steady performance over the three-month period to 30 September 2019.

12. There has been good progress with the capital programme delivery, with $502 million delivered over the three-month period. This is a $130 million increase compared to the same period last year and is tracking well against the current year budget.

13. There has also been strong operating performance for the three-month period. Direct revenue (revenue excluding rates, capital revenue, finance and regional fuel tax revenue) was $32 million ahead of budget, while direct expenditure (expenditure excluding depreciation and interest) was $4 million favourable. Overall, this was a $36 million favourable result against the net direct operating budget.

14. Further comments for each CCO are presented below, covering financial and non-financial performance.

15. As it is only the first quarter of the financial year, many of the performance indicators have not been measured or it may be too early for a clear picture of the year-end result.

Auckland Transport

Financial results

16. Auckland Transport had a favourable net operating result of $2 million for the quarter. This is mainly due to increased revenue from public transport services and infringements, partially offset by higher than budgeted staff costs due to lower capitalisation to capital projects.

17. Capital delivery was $153 million against a budget of $162 million. The unfavourable variance is mainly due to timing of the Downtown Infrastructure Development Programme and delays in corridor improvement projects.

18. New Zealand Transport Agency (NZTA) capital funding remains a risk, with an unfavourable year to date variance to budget of $25 million. This is due to the assumption that NZTA would fund 50 per cent of Auckland Transport’s annual capital programme, rather than 50 per cent over the 10-year period of the Auckland Transport Alignment Project (ATAP).

Performance indicators and other issues

19. Those performance indicators which have an available result are generally tracking to be met or to exceed targets.

20. While the quarterly report contains a useful section about the low emissions bus programme, there is no reference to the consideration by the AT Board of the potential fast tracking of the E-bus roadmap. As this is quite critical to [the council group’s] C40 commitments, it would be useful for any updates to be provided verbally at council committee and included in a future report.

21. There is a reference on page eight of the quarterly report to “saline water ingress” at Britomart. The report does not provide information about the level of risk associated with the seepage of seawater into Britomart. It would be useful to understand more about this, both in terms of the extent of potential physical and financial consequences, and their likelihood.

Auckland Tourism, Events and Economic Development

Financial results

22. Auckland Tourism, Events and Economic Development’s (ATEED) had a favourable net direct expenditure result of $1.4 million against budget. This is a result of higher than budgeted rental income and some delayed expenditure due to event timing and project resourcing.

Performance indicators and other issues

23. Three of ATEED’s seven key performance indicators are measured six-monthly, so there is no quarterly result available at this point.

24. Of note, KPI2 (the number of businesses that have been through an ATEED programme or benefitted from an ATEED intervention) has achieved 27 per cent of the annual target so far. The contributory measure (number of Māori businesses that have been through an ATEED programme or benefitted from an ATEED intervention) has achieved 60 per cent of the annual target, which means it is on track to meet or exceed its annual target.

Panuku Development Auckland

Financial results

25. Panuku Development Auckland (Panuku), including the commercial property portfolio, reported a $2.5 million favourable net direct expenditure result. This is mainly due to lower staff costs as a result of delivery staff vacancies and the timing of payments to consultants.

26. Capital expenditure delivered was $25 million against a budget of $36 million. The underspend mainly relates to delays at the Vos shed redevelopment due to asbestos contamination issues, timing delays for the Westhaven Promenade and 36^th America’s Cup infrastructure, and a delayed start to the Pile Mooring redevelopment project.

Performance indicators and other issues

27. Panuku’s Support and Unlock locations are on track. It has achieved the measures where a result is available this quarter. Panuku is also making good progress with the Crown on three development areas, however, the ongoing market challenges are being monitored.

Regional Facilities Auckland (RFA)

Summary

28. RFA’s first quarter report shows that it has failed to meet two key targets – visitation at the Auckland Zoo and arts venues (with cultural venues all below target), and the percentage of operating costs funding through non-rates revenue. The quarterly report, and conversations with senior staff, provide reasonable explanations for why these targets have not been met, but they reflect a consistent pattern over recent years where there has been a gap between planned/budgeted targets, and actually-achieved results.

Detailed discussion

29. Historically, RFA has endeavored to offset any lower returns from its commercial activities by reducing or deferring expenditures in order to mitigate against the need for additional Auckland Council funding. This practice, together with constrained funding available from Auckland Council, has led to a cycle of budgeting inadequate costs to deliver operational efficiencies, effective forward planning or business development. Further, the organisation manages venues with a legacy of long-term under-investment, with respect to visitor amenity and security, and health and safety, adding unnecessary operational cost.

30. In this context, 2019-2020 again looks likely to be a challenging year for revenues with adverse weather and significant onsite construction negatively impacting on zoo attendance, the Downtown construction programme impacting on Queen’s Wharf and Maritime Museum revenues, and the cancellation of a high-profile concert at Mt Smart. Usual avenues for cost savings to mitigate this are unavailable at this stage of implementation of a new “Connected RFA” operating model, which is aimed at better positioning the organisation for future development and further sustainable growth in commercial revenue.

31. Historic and significant under-investment in RFA’s ICT infrastructure has left the organisation vulnerable to systems failure. This is reflected in increased likelihood of service interruption and data loss, increased data manual handling costs, reduced data accuracy and accessibility and cyber-security vulnerabilities. The net result is the need for above budget funding in FY20 and future years.

32. Furthermore, additional pressures and risks are apparent in FY21, with Council’s currently planned level of operational funding for RFA in that year assuming:

· significant revenue growth (10 per cent)

· a real-term reduction in operating costs (zero increase on budgeted FY20 levels).

33. The resulting planned level of Council funding represents a 15 per cent reduction in FY21 compared with FY20.

34. At an appropriate time, it may be useful to consider whether RFA’s current financial constraints allow them to deliver the services and asset management which are desired by council over the long-term.

Watercare Services Limited

Financial results

35. Watercare’s net direct revenue was $18 million favourable against budget. This is as a result higher than budgeted revenue of $10 million from infrastructure growth charges and $3 million from higher actual usage volumes. Watercare also received $8 million in assets from the Department of Corrections. The favourable revenue was partially offset by $3 million in unplanned maintenance expenditure.

36. Capital delivery was $139 million against a budget of $157 million. The underspend mainly relates to phasing of the Central Interceptor that was finalised after the budgets were set.

Performance indicators

37. Watercare has met or is meeting all the targets that it has reported on. For three of its measures, Watercare has signaled that it will not report these until the end of the financial year. These are: the average number of wet weather overflows, average consumption of drinking water, and the real percentage water loss from the network. The annual consumption and real percentage water loss targets were not met in 2018/2019.

38. As part of its move to explore external revenue sources, Watercare has begun providing services in the Waikato district under the provisional arrangement endorsed by the Finance and Performance Committee in April 2019 (which Watercare must publicly consult on before it moves into the second phase of the contract).

39. Watercare may set up a separate, limited liability company to provide services in Waikato (which would be a subsidiary CCO). Staff consider that this would be a positive move, as it would contribute to transparency of financial reporting and cost allocation of external revenue-generating activities.

40. Watercare is also continuing to explore other external revenue sources. Through the upcoming statement of intent process, the council should consider the reporting and risk parameters that are appropriate to enable this activity while ensuring accountability.

Tauākī whakaaweawe āhuarangi

Climate impact statement

41. The quarterly performance reports are a key tool to monitor the progress of each CCO in action on climate change, particularly following the council’s declaration of a climate emergency earlier in 2019.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

42. The quarterly performance reports are a tool to monitor the performance of each CCO. Each CCO will be present at the meeting of the CCO Oversight Committee and available to answer questions from committee members.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

43. The governance of CCOs is a responsibility for the Governing Body, which has delegated it to the CCO Oversight Committee. We have not sought the views of local boards on quarterly performance reporting, but the reports provide a summary of the engagement that CCOs have carried out with local boards during the first quarter.

44. More generally, an overall sense of local board impact and engagement is given by the elected members survey which is completed every 18 months. This was last undertaken earlier in 2019. In addition, the CCO review to take place in 2020 will seek the views of local boards.

45. Finally, specific CCOs (most notably Auckland Transport) have specific programmes in place to improve their engagement with local boards, so that outcomes from their work with local boards are enhanced and aligned with local board plans. This is reported on separately as part of the Governance Framework Review (GFR). A report on the GFR is next due in early-mid 2020.

Tauākī whakaaweawe Māori

Māori impact statement

46. The substantive CCOs have an important part to play in contributing to Māori outcomes. This represents a shift from the previous focus on output measures (such as whether a CCO had a Māori responsiveness plan) and is still being embedded as we move into the new political term. We expect to have more to report on later in the financial year, as upcoming quarterly reports are provided to council.

Ngā ritenga ā-pūtea

Financial implications

47. The overall results for the first quarter are favourable against budget. Current forecasts are for 2019/2020 results to be largely on budget, with exceptions as discussed above.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

48. The quarterly reports provide a summary of the top risks and mitigations. At the committee meeting on 12 December, councillors have the opportunity to question the CCOs about how they are mitigating stated risks to reduce their likelihood and consequences.

49. This supports the work of the Audit and Risk Committee, which has an express mandate to monitor risks in the Auckland Council group. Each CCO reports quarterly to this committee on its risks, but the CCOs appear in person once a year only (on a rotating basis, one CCO per meeting) to discuss their overall risk profile with the Audit and Risk Committee.

Ngā koringa ā-muri

Next steps

50. This report is for information purposes and no decisions are required.

Ngā tāpirihanga

Attachments

No.	Title	Page
a ⇩	Auckland Transport - Quarter 1 Report 2019 - 2020	19
b ⇩	Watercare - Quarter 1 Report 2019 - 2020	33
c ⇩	Panuku Development Auckland - Quarter 1 Report 2019 - 2020	45
d ⇩	Auckland Tourism, Events and Economic Development - Quarter 1 Report 2019 - 2020	59
e ⇩	Regional Facilities Auckland - Quarter 1 Report 2019 - 2020	67

Ngā kaihaina

Signatories

Authors

Sarah Holdem - Principal Advisor

Edward Siddle - Principal Advisor

Claire Gomas - Principal Advisor

Sarah Johnstone-Smith - Principal Advisor

Albert Rootman - Financial Planning Manager

Authoriser

Alastair Cameron - Manager - CCO Governance & External Partnerships

Council Controlled Organisation Oversight Committee

12 December 2019

Draft 2020-2023 Letters of Expectation to substantive council-controlled organisations

File No.: CP2019/19569

Te take mō te pūrongo

Purpose of the report

1. To propose content for inclusion in the 2020/21 letters of expectation to substantive council-controlled organisations (CCOs).

Whakarāpopototanga matua

Executive summary

2. The letters of expectation are important documents that provide direction on:

· the development of the substantive CCOs’ Statements of Intent for 2020-2023

· other priorities and issues of importance for the council to inform CCO operations, behaviours and service delivery.

3. The expectations are set out in two parts:

· Part I: Common organisational expectations and priorities for all CCOs. These include; the context for the 2020/21 Annual Budget and preparation for the 10-year Budget 2021-31, climate change, Māori outcomes, group approach, CCO review, the CCO Oversight Committee work programme and water quality.

· Part II: The specific expectations for each CCO.

4. The expectations have been drafted based on the priorities in the 10-year Budget 2018-2028 and the current annual budget, with input from subject matter experts from across the council. Feedback on the proposed draft letters of expectation content was sought from councillors at a workshop of the CCO Oversight Committee on 27 November 2019.

5. The letters will be drafted on the basis of the committee’s resolutions and sent by Mayor Goff to the board chair of each substantive CCO prior to Christmas 2019.

Ngā tūtohunga

Recommendation/s

That the Council Controlled Organisation Oversight Committee:

a) approve the proposed content for inclusion in the 2020/21 letters of expectation to substantive council-controlled organisations.

b) delegate authority to the Mayor to finalise and issue the 2020/21 letters of expectation to substantive council-controlled organisations based on the resolutions of this committee.

Horopaki

Context

Introduction

6. The 2020/21 letters of expectation are important documents that provide direction on:

· the development of the substantive council-controlled organisations SOIs for 2020-2023

· other priorities and issues of importance for the council to inform CCO operations, behaviours and service delivery.

7. The local body election period has meant a shorter than normal window for letter of expectation preparation. A streamlined approach has been taken to keep the content as tightly focussed as possible and generally not repeat content/expectations contained in other documents or policies.

8. This paper sets out a scheme for the council’s proposed expectations in two parts:

· Part I: Common expectations and priorities for multiple or all CCOs

· Part II: The specific expectations for each CCO.

9. Ports of Auckland Limited is not a CCO. Council will have the opportunity to set expectations for its 2020-2023 Statement of Corporate Intent next year.

Relation to other accountability mechanisms

10. The letters of expectation are one part of an overall accountability framework for substantive CCOs. Some other important parts of this framework are the:

· Statement of Intent: the Statement of Intent (SOI) sets out the activities and intentions of a CCO for the next year, and the objectives it will contribute to (the letters of expectation provide direction to them). CCOs report quarterly on progress towards achieving the objectives set out in the SOI.

· CCO accountability policy: the CCO accountability policy sets more enduring expectations about CCO priorities and behaviours, is part of the 10-year Budget 2018-2028 and is complementary to the letters of expectation.

· CCO governance manual: the CCO governance manual provides more detailed guidance on governance and operational matters to CCO boards and staff and brings together key policies and other requirements.

Tātaritanga me ngā tohutohu

Analysis and advice

Proposed content for the letters of expectations

11. The proposed expectations which are common to all CCOs are set out below (Part 1), followed by specific expectations for each CCO (Part 2).

Part I: Common expectations

12. The proposed common expectations are focused on; the context for the 2020/21 Annual Budget, and preparation for the 10-year Budget 2021-31, climate change, Māori outcomes, group approach, CCO review, the CCO Oversight Committee work programme and water quality.

Context for 2020/21 Annual Budget

13. The adoption of the 10-year budget 2018-2028 sets a significant agenda for the council group to deliver. It includes a substantial programme of infrastructure investment, set in the backdrop of major population growth, while also focussing on sustaining and enhancing Auckland’s environment.

14. Council expects the CCOs to continue to deliver on the strategic priorities and key projects/activities as set out in the 10-year budget 2018-28 and reflected in the current annual budget. For the 2020/21 Annual Budget, CCOs should be cognisant of the following:

· The council group should stay focused on delivering capital projects and services for Auckland

· Renewing the drive for efficiency and value for money

· Start taking early actions within the current remit and fiscal constraint to act on the climate emergency declared in June 2019 and contribute towards our 1.5°c target for the region, with a view to making more substantive decisions through the next 10-year Budget

· There is limited capacity for any new cost pressures, new funding requests or unforeseen events.

15. Council expects draft 2020/21 SOIs to be consistent with the relevant aspects of the Mayor’s proposal for the 2020/21 Annual Budget.

Preparation for the 10-year Budget 2021-31

16. In addition to delivering key projects and activities in the 2020/2021 financial year, it is expected that each CCO will undertake sufficient work to prepare for political decision-making as part of the 10-year Budget 2021-2031. This includes both:

· Responding to political direction on key changes proposed by the Mayor of Auckland and the Governing Body

· Undertaking comprehensive reviews of asset management plans, performance trends, budgets and fee setting.

17. As part of the work on asset management plans, CCOs are expected to not only follow best practice asset planning process, but to also do so in a highly transparent manner.

18. Specifically, it is expected that in the first half of calendar 2020, each CCO will share key information with the Governing Body on asset condition, renewals planning, maintenance and renewals procurement, asset-related cost trends and asset planning for growth.

Climate change

19. Addressing the challenges that climate change presents for Auckland continues to be a priority for the council group. This was highlighted in the council’s declaration of a climate emergency, commitment to a 1.5°c target for the region and the ongoing work on Te Tāruke-ā-Tāwhiri: Auckland’s Climate Action Framework (ACAF).

20. Council expect CCOs’ statements of intent to outline how they will continue to support the achievement of these regional climate commitments and support the ongoing development and delivery of Te Tāruke-ā-Tāwhiri. Whilst CCOs are at various stages of development in their climate action planning and implementation, council expects that CCOs will also participate in efforts across the council group to coordinate initiatives and responses to climate change.

21. Auckland Council reports to committees now require inclusion of a mandatory climate change impact statement. CCO SOIs should address how climate change impacts are being considered in the decision-making processes of their CCO.

Māori outcomes

22. Māori responsiveness has been an important journey for the council group. While there has been progress in building internal capability, it is harder to see where there has been progress against a coordinated work programme that delivers for Māori. For this reason, the focus is now changing from a Māori Responsiveness lens to a Māori Outcomes lens.

23. During the 10-year Budget 2018-28, long-term outcomes were set by the Governing Body and the strategic direction set by the council group Chief Executives and the Chief Executive of the Independent Māori Statutory Board. The council expects CCOs to contribute to the Māori outcomes portfolio (Te Toa Takitini) and the council group Tiriti o Waitangi Audit response as an integral part of their work programme. The council also expects draft 2020/21 SOIs to reflect any new Māori outcomes portfolio programmes that have been allocated funding for implementation from 1 July 2020.

Group approach

24. It is council’s expectation that CCOs will always act consistently with group policies, and while operationally independent, will be aware at all times the decisions they take reflect back on the reputation of council. In this regard council expects strong and clear communication, no surprises and a group approach at all times.

25. Contained in the CCO Governance Manual, the no surprises policy states that CCOs must ensure that elected members (via the Mayoral Office, Auckland Council Chief Executive and/or CCO Governance, as appropriate) are kept informed well in advance of anything that could be potentially contentious or reported in the media, whether or not the issue is covered by the SOI or legislation. The policy highlights the issues that should be raised with council, including such matters as potential/actual litigation by or against a CCO, its directors or employees.

CCO review

26. Council has initiated a process to review the CCO model’s effectiveness in delivering services for Aucklanders. The terms of reference for the review were endorsed by the Governing Body on 26 November 2019. The review will be led by an independent panel. Council expects CCOs will prioritise input and appropriately support this process and respond to any requests for information in a timely manner.

27. It is acknowledged that a review of this nature can create uncertainty for CCOs. It is intended that the review is completed without undue delay. During this period council expects CCOs to continue to ensure a stable level of service delivery to Aucklanders.

28. It is proposed the panel will deliver a final report with recommendations to the Governing Body by July 2020. The Governing Body will consider and make decisions on the report’s recommendations. If required, the Governing Body will carry out public consultation on any proposals as part of the Auckland Council 10-year budget process.

CCO Oversight Committee work programme

29. CCOs will be aware that in the committee structure for this term, council has established a CCO Oversight Committee, which is chaired by Deputy Mayor Bill Cashmore. This committee has, amongst other matters, responsibility for approving CCO SOIs, and monitoring the performance of CCOs and other entities in which the council has an equity interest.

30. The committee is still finalising its work programme for 2020 but the intent is for a rolling programme of workshops in addition to committee meetings. CCOs will be invited to these workshops, with the focus on discussing priority issues identified by the committee. Staff will engage with CCOs on these topics in the New Year.

Water quality – for Auckland Transport and Watercare

31. Addressing water quality issues continues to be a top priority for the council. The government has also prioritized this, announcing an ambitious programme of reform with a focus on improved water quality outcomes, including a revised National Policy Statement on Freshwater Management and a National Environment Statement on Freshwater Management, both of which are likely to be finalised by mid-2020. This will have implications for members of the council group, and the council expects CCOs to be fully involved in the group’s planning and subsequent implementation, in order to contribute to improved water quality outcomes.

Part II: Specific expectations for each council-controlled organisation

32. The specific expectations for each CCO are provided below.

Auckland Transport

33. Auckland Transport has a comprehensive programme, which is identified in the various planning and statutory documents that inform its work. These include the Auckland Transport Alignment Project, Regional Land Transport Plan, Regional Public Transport Plan, and the Regional Fuel Tax programme. As a result, Council expects the main strategic priorities, and broad parameters of Auckland Transport’s activities to be continued from previous years.

34. Nonetheless, council expects Auckland Transport to:

· Continue improving its responsiveness to the community, both through the agreed programme for engaging with local boards and ward councillors, but also directly with residents (such as through improvements to customers response management systems).

· Ensure that strategic priorities of Council are delivered not just through major projects, but also for minor improvements. Examples would include ensuring safety of all users when intersections are redesigned, safe connections on the public transport network and prioritising the inclusion of street trees and/or planting in small and large projects.

· Continue to work closely with council on how to deliver tangible results and action on climate change. It is clear that the transport system is a major contributor to Auckland’s emissions, so it will be important to ensure Auckland Transport is contributing meaningfully in the areas for which it has clear responsibility and an ability to effect change.

· Continue to engage and work collaboratively with city centre stakeholders and City Rail Link Limited, as part of the wider programme of works underway in the city centre. In doing so Auckland Transport should seek to deliver the benefits of this programme and consider how the more disruptive elements of the construction process can be managed most effectively and even turned into opportunities to deliver mode shift in the city centre.

· Enable the outcomes of the Auckland Plan, with a greater focus on climate action, in the development of the Regional Land Transport Plan. This plan should be developed in collaboration with Auckland Council.

Auckland Tourism, Events and Economic Development (ATEED)

35. The council expects ATEED to continue implementing its strategy which focusses on quality jobs for all Aucklanders, through its economic development and destination activities. This includes the following priority projects:

· planning and preparation, in partnership with the council group and others, for the successful delivery of Auckland’s 2021 events year, including the leverage and legacy components

· delivery of a coordinated Auckland Investment Story (InvestAKL)

· south and west regeneration, in partnership with the council group and others.

36. ATEED should ensure that where not already captured, the SOI three-year work programme includes at a high level the planned priority initiatives, deliverables or projects for each major programme area, to facilitate enhanced alignment with the performance reporting process.

37. ATEED should continue to embed its SOI key performance indicator framework within the organisation, with a view to establishing numeric targets for, KPI1, KPI3 and KPI5 through the development of the 10-year Budget 2021-31.

38. ATEED should complete a board performance review in the next 12 months. Such a review was postponed for 2019. This review should be undertaken in line with the board performance review process adopted by the council.

Panuku Development Auckland (Panuku)

39. The council continues to expect Panuku to deliver on its transform and unlock programme. Council has limited capacity to respond to emerging cost pressures and with complex construction and development market conditions, meeting future urban redevelopment challenges will require alternative thinking and approaches. Council expects Panuku to undertake this thinking as it works to deliver its capital programme and develop its business plans and help us to understand where the greatest gains can be made.

40. The council expects Panuku to continue to work with Kāinga Ora Homes and Communities and the council group to deliver an agreed and prioritised approach to urban development in Auckland.

41. Panuku’s SOI should include specific deliverables for each of the Transform and Unlock locations, to better assist council in assessing performance in these areas.

42. Panuku should continue to work collaboratively with local boards regarding place making and provide advice on property sales and property optimisation.

43. Request Panuku to continue to work in partnership with Haumaru Housing to redevelop the social housing portfolio and work towards a net increase in homes for older people.

Regional Facilities Auckland (RFA)

44. Regional Facilities Auckland should continue to engage with the cultural heritage review in the constructive manner in which it has done so thus far. It will be important to keep an open mind about the outcomes of the review, which need to be focussed on achieving better and more coordinated cultural provision for Auckland, and a clear path for potential future investment.

45. Council expects RFA to work closely with council on developing the long-term strategic approach to stadiums within the RFA portfolio.

46. Finally, RFA should complete a board performance review in the next 12 months. Such a review was postponed for 2019. RFA can work with the Council’s CCO team to establish this review.

Watercare Services Limited

47. Watercare should continue to implement, with Healthy Waters, the Western Isthmus Water Quality Improvement Programme to reduce wastewater overflows into the Waitematā Harbour and reduce stormwater entering the wastewater network.

48. Watercare should continue to keep a tight focus on ensuring that its heavy programme of capital development, including the Central Interceptor, run on time and to budget.

49. Watercare should also continue the implementation of its climate change strategy and should include an appropriate performance measure as discussed in last year’s statement of intent process.

50. Watercare is continuing to explore other external revenue sources; through the development of the statement of intent, Watercare should work with the council to establish the reporting and any risk parameters that are appropriate to enable this activity whilst ensuring adequate accountability.

Tauākī whakaaweawe āhuarangi

Climate impact statement

51. Addressing the challenges that climate change presents for Auckland continues to be a priority for the council group and this is reflected in the common expectations proposed in the letters of expectation.

52. The decision to approve proposed content for substantive CCO letters of expectation does not have a direct impact on greenhouse gas emissions.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

53. The letters of expectation are one part of an overall accountability framework for substantive CCOs. The expectations have been drafted based on the priorities in the 10-year Budget 2018-2028 and the current annual budget, with input from subject matter experts from across the council.

54. It is suggested that the letters include a closing paragraph which invites CCOs to contact the Manager CCO Governance and External Partnerships should they wish to discuss or clarify any aspects of the letter.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

55. The governance relationship between the substantive CCOs and the council sits with the Governing Body, and therefore local boards have not been consulted on issues for inclusion in the letters of expectation.

Tauākī whakaaweawe Māori

Māori impact statement

56. Māori outcomes are a priority for the substantive CCOs and this is reflected in the common expectations proposed in the letters of expectation.

57. The Independent Māori Statutory Board has expressed a desire for enhanced performance measurement as it relates to engagement with Māori and Te Toa Takitini projects. There are two key programmes of work progressing in this area, through Te Hōanga and the development of the Māori outcomes portfolio performance measurement framework, however the final outcomes of these programmes will not be available by 1 March 2020.

Ngā ritenga ā-pūtea

Financial implications

58. There are no financial implications arising from this report. The CCOs are being asked to focus on delivering activities agreed through the 10-year Budget 2018-2028 (and updated through Annual Budget processes).

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

59. There is a risk that CCOs may misunderstand the expectations provided in the letters of expectation. It is suggested that the letters include a closing paragraph which invites CCOs to contact the Manager CCO Governance and External Partnerships should they wish to discuss or clarify any aspects of the letter.

Ngā koringa ā-muri

Next steps

60. Council staff will draft the letters of expectations based on the resolutions of this committee and including only the issues that are approved by this committee. The mayor will send the letters to substantive CCO board chairs not later than 20 December 2019.

61. Each CCO must provide a draft SOI to the council no later than 1 March 2020. Council expects the draft SOI will reflect, where relevant, the changes to SOI sections and Schedule 8, as set out in the Local Government Act 2002 Amendment Act 2019.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Author	Sarah Johnstone-Smith - Principal Advisor
Authoriser	Alastair Cameron - Manager - CCO Governance & External Partnerships

Council Controlled Organisation Oversight Committee

12 December 2019

Council-controlled organisations and joint ventures: written resolutions instead of annual meetings of shareholders 2018/2019

File No.: CP2019/19405

Te take mō te pūrongo

Purpose of the report

1. To authorise the chief executive to pass written resolutions instead of holding annual meetings of shareholders for: Auckland Tourism, Events and Economic Development; Regional Facilities Auckland Limited; Watercare Services Limited; Panuku Development Auckland Limited; Ports of Auckland Limited; Tāmaki Regeneration Company; and City Rail Link Limited.

Whakarāpopototanga matua

Executive summary

2. The Companies Act 1993 (the Act) requires all companies to hold annual meetings of shareholders no later than six months after their balance date. The balance date for all relevant council-controlled organisations (CCOs) and joint ventures was 30 June 2019.

3. The Act also provides provision for shareholders to pass written resolutions instead of holding annual meetings. For this to pass, a written resolution must be signed by no less than 75 per cent of the shareholders who would be entitled to vote on that resolution at a meeting in person.

4. Due to the administrative nature of annual meetings of shareholders, we recommend the committee authorises the chief executive to pass written resolutions instead of holding annual meetings of shareholders for the relevant CCOs and joint ventures.

5. Auckland Council is the sole shareholder for: Auckland Tourism, Events and Economic Development; Regional Facilities Auckland Limited; Watercare Services Limited; Panuku Development Auckland Limited; and Ports of Auckland Limited.

6. Auckland Council is joint shareholder with the Crown in Tāmaki Regeneration Company and City Rail Link Limited. The Crown has confirmed they would prefer to sign written resolutions rather than holding a meeting of shareholders.

Ngā tūtohunga

Recommendation/s

That the Council Controlled Organisation Oversight Committee:

a) authorise the chief executive to act as the sole shareholder representative to sign a written resolution instead of holding an annual meeting for:

i) Auckland Tourism, Events and Economic Development Limited

ii) Regional Facilities Auckland Limited

iii) Watercare Services Limited

iv) Panuku Development Auckland Limited

v) Ports of Auckland Limited

b) authorise the chief executive to act as the council shareholder representative of the two jointly owned companies Tāmaki Regeneration Company and City Rail Link Limited, and to sign a written resolution instead of holding an annual meeting of shareholders.

Horopaki

Context

7. Section 120 of the Act requires all companies to hold an annual meeting of shareholders no later than six months after their balance date. The constitutions of the companies subject to this report also contain this requirement. The balance date for these companies was 30 June 2019.

8. The content of the annual shareholders’ meetings 2018/2019 for the CCOs and joint ventures is purely administrative in nature. Each meeting will:

(i) note that who was appointed as each company’s auditor;

(ii) note that a copy of each company’s respective 2018/2019 annual report, including audited financials and auditor’s report, has been provided to the shareholders; and

(iii) confirm the appointment of any new directors and/or the reappointment of directors to each company’s respective board.

9. Section 122(1) of the Act permits the shareholder to pass written resolutions on these administrative matters instead of holding an annual meeting of shareholders. Such a resolution must be signed by no less than 75 per cent of shareholders entitled to vote at a shareholders meeting.

10. Auckland Council is the sole shareholder of Auckland Tourism, Events and Economic Development; Regional Facilities Auckland Limited; Watercare Services Limited; Panuku Development Auckland Limited; and Ports of Auckland Limited.

11. Auckland Council is a joint shareholder with the Crown in Tāmaki Regeneration Company Limited and City Rail Link Limited. Correspondence with the Crown confirms that they also plan to sign written resolutions instead of holding annual meetings of shareholders for both companies.

12. On 12 December 2017, the Finance and Performance Committee passed a resolution authorising the Auckland Council chief executive to act as Auckland Council’s shareholder representative and execute written resolutions instead of holding annual meetings of shareholders for the CCOs and joint ventures subject to this report.

13. For the year 2017/2018, written resolutions were signed by the chief executive instead of holding annual meetings of shareholders for each of the relevant CCOs and joint ventures.

Tātaritanga me ngā tohutohu

Analysis and advice

14. There is precedent to authorise the chief executive to act as Auckland Council’s shareholder and sign written resolutions instead of holding annual meetings of shareholders.

15. It is administratively easier to continue to pass written resolutions for these matters. There are no related or emerging issues that cannot be dealt with through other council accountability mechanisms.

Tauākī whakaaweawe āhuarangi

Climate impact statement

16. Due to the administrative nature of annual meetings of shareholders, there is no impact on greenhouse emissions as a result of the recommendations. Signed written resolutions remove the potential emissions associated with the organisation and facilitation of holding annual meetings of shareholders.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

17. The recommendations do directly concern the council group by removing an administrative requirement for the CCOs and joint ventures. However, there are no significant council group impacts.

Ngā whakaaweawe ā-rohe me ngā tirohanga a te poari ā-rohe

Local impacts and local board views

18. Local board views were not sought because decisions regarding the governance of CCOs are made by the Governing Body.

19. There are no local impacts because of the administrative nature of annual meetings of shareholders and the recommendations and this report.

Tauākī whakaaweawe Māori

Māori impact statement

20. Due to the administrative nature of annual meetings of shareholders, there are no significant impacts on Māori as a result of the recommendations.

Ngā ritenga ā-pūtea

Financial implications

21. The recommendations do not give rise to any financial risk. Signed written resolutions remove the costs associated with the organisation and facilitation of holding annual meetings of shareholders.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

22. Due to the administrative nature of annual meetings of shareholders, there are no significant risks associated with the recommendations.

Ngā koringa ā-muri

Next steps

23. The CCO Governance and External Partnerships department will prepare the resolutions for signing by the chief executive, ensuring compliance with the statutory timeframes.

Ngā tāpirihanga

Attachments

There are no attachments for this report.

Ngā kaihaina

Signatories

Author	Simon Stewart - Graduate Executive Officer
Authoriser	Alastair Cameron - Manager - CCO Governance & External Partnerships

No.	Title	Page
a ⇩	CCO Oversight Committee - Forward Work Programme	91

Council Controlled Organisation Oversight Committee

12 December 2019

Kōmiti Aromātai Whakahaere Kaupapa Kei Raro I Te Maru O te Kaunihera / CCO Oversight Committee
Forward Work Programme 2020

This committee deals with the performance monitoring of CCOs and other entities in which the council has an equity interest. The committee are to have a general overview and insight into the strategy, direction and priorities of all CCOs, set policy relating to CCO governance and approve the CCO statements of intent.

The full terms of reference can be found here: Terms of Reference - Agreed 12 November 2019

Area of work and Lead Department	Reason for work	Committee role (decision and/or direction)	Expected timeframes Highlight the month(s) this is expected to come to committee in 2019/2020
Area of work and Lead Department	Reason for work	Committee role (decision and/or direction)	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
Letters of Expectation CCO Governance and External Partnerships.	Council issues annually a letter of expectations to each of its substantive CCOs to inform the development of the CCOs’ Statements of Intent.	Seeking committee approval of the content of draft 2020/21 letters of expectation. Progress to date:												2020
Draft SOIs CCO Governance and External Partnerships.	Under legislation CCOs must prepare an annual statement of intent and provide a draft to its shareholders by 1 March. As shareholder council can provide comments on the drafts to CCOs.	Seeking committee approval of proposed shareholder comments on substantive and non-substantive CCO draft 2020/21 Statements of Intent. Progress to date:			2020	2020								2019
Final SOIs CCO Governance and External Partnerships.	Under legislation CCOs must deliver annually a final statement of intent to its shareholders by 30 June.	Seeking committee approval of final 2020/21 Statements of Intent from its substantive and non-substantive CCOs. Progress to date:								2020
Quarterly, Half-Year and Annual Reports CCO Governance and External Partnerships.	Under the LGA and LGACA the council must regularly undertake performance monitoring of the CCO to evaluate its contribution to meeting its objectives, and the desired results identified in the SOI.	Receive quarterly reports, receive and adopt half yearly and annual reports. The CCO will present to the CCO Oversight committee twice a year on their performance. Progress to date:			2020		2020				2020		2020	2019
Legacy CCO Review CCO Governance and External Partnerships.	Auckland Council’s nine legacy CCOs have been operating in the same model since amalgamation, and it is timely to review their status as CCOs.	To agree a set of criteria that will guide a review of Auckland Council’s legacy CCOs and the sequence of their review. Progress to date:			2020
CRLL CCO Governance and External Partnerships.	CRLL is a crown entity, jointly owned by the Crown and Council. CRLL has full governance, operation and financial responsibility for the city rail link. Under the Project Delivery Agreement CRLL provides Sponsors a monthly report. Sponsors can reasonably request additional reports or information.	CRLL reports quarterly as part of the group report to the Finance and Performance committee. CRLL will present to the CCO Oversight committee twice a year to discuss performance. Progress to date: [			2020		2020				2020		2020
CCO AGM Resolutions CCO Governance and External Partnerships	Under the Companies Act 1993, the CCOs and other relevant entities must hold an annual meeting of their shareholders. Section 122(1) of the Companies Act and the constitutions also allow the company to forgo holding such a meeting if all the business required to be conducted at the meeting is done by written resolution.	To delegate the authority to Auckland Council’s chief executive to act as Auckland Council’s shareholder representative to execute a written resolution in lieu of an annual meeting. Progress to date:												2019
CCO ‘Scan the Horizon’ Workshops CCO Governance and External Partnerships	The Te Pae Tāwhiti: Scanning the Horizon workshops have been designed to ensure that the Governing Body and CCO Board members have the opportunity to meet to better understand each other's roles, priorities and ways of working. The focus is on discussing the medium to long term opportunities and challenges. At the CCO Oversight Committee workshop on 27 November 2019, a list of issues that the elected members would like to discuss with the CCOs was created. Staff will work through this list and develop a workshop schedule, which will be presented to the committee for approval in the February meeting.	The topics and sequencing of these workshops is being developed and will be agreed early in 2020. Progress to date:		2020
Liaison Councillor Updates CCO Governance and External Partnerships	Mayor Phil Goff has appointed a list of six CCO liaison councillors to attend the board meetings of the CCOs allocated to them, and report back to this committee.	To receive updates from the CCO Liaison Councillors. Progress to date:		2020	2020	2020	2020	2020		2020	2020	2020	2020	2020
CCO Review –Progress Updates	As per the CCO Review: Terms of Reference (Agreed on by GB on 26/11/2019 – Res: GB/2019/127), an independent review panel will lead a review of Auckland Council’s Substantive Council-Controlled Organisations. Updates on the progress of this independent review panel will be presented to the CCO Oversight Committee as required.	To receive updates regarding the CCO Review. Progress to date:		2020	2020	2020	2020	2020

Chairperson	Deputy Mayor Cr Bill Cashmore
Deputy Chairperson	Cr Angela Dalton
Members	Cr Josephine Bartley	Cr Richard Hills
	Cr Dr Cathy Casey	Cr Tracy Mulholland
	Cr Fa’anana Efeso Collins	Cr Daniel Newman, JP
	Cr Pippa Coom	Cr Greg Sayers
	Cr Linda Cooper, JP	Cr Desley Simpson, JP
	Cr Chris Darby	Cr Sharon Stewart, QSM
	Cr Alf Filipaina	IMSB Chair David Taipari
	Cr Hon Christine Fletcher, QSO	Cr Wayne Walker
	Mayor Hon Phil Goff, CNZM, JP	Cr John Watson
	IMSB Member Hon Tau Henare	Cr Paul Young
	Cr Shane Henderson

Date	Workshop
27/11/19	Issues discussed were the 2020 work plan and issues the committee wants to address through the current political term, and the draft letters of expectation to be sent to the CCOs.

Author	Duncan Glasgow - Kaitohutohu Mana Whakahaere / Governance Advisor
Authoriser	Alastair Cameron - Manager - CCO Governance & External Partnerships