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Emergency
Committee
23 April 2020
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Community
Loan Guarantees and Loans
File No.: CP2020/04348
Te take mō te
pūrongo
Purpose of the report
1. To
obtain delegated approval for the Group Chief Financial Officer and Group
Treasurer to approve alternative arrangements for community groups needing to
renegotiate loan and guarantee arrangements because of COVID-19 related issues.
Whakarāpopototanga matua
Executive summary
This report would usually be
considered by the Finance and Performance Committee; however, in light of
COVID-19 Alert Level 4, it must now be considered by the Emergency Committee.
2. Auckland
Council provides loan guarantees to the ASB Bank for five community groups
ranging in value from $150,000 to $2,500,000.
3. Several
of the groups have signalled the need to negotiate with the bank new repayment
arrangements (e.g. interest and/or principal repayment holidays, extending term
for repayment), all of which potentially impact on council’s liability.
4. Any
new arrangements between the bank and borrower require approval from council as
guarantor.
5. As
each group is at different stages in the negotiation process [with the bank],
it is necessary for council to be timely and responsive for requests to approve
loan term variations as they are received.
6. The
difference between the current balance of all guaranteed loans and the approved
maximum guarantee amount provides a degree of headroom for the loans to
accommodate the capitalisation of interest should the need arise.
7. Several
of the larger council community loans were due to (re)commence repayments
imminently. These groups have also signalled the need to delay the
commencement of loan repayments, primarily due to a dramatic reduction / loss
of revenue for the foreseeable future.
8. Delegations
for community loans and loan guarantees is held by the Finance and Performance
Committee only. During the current national State of Emergency, it is
impractical for the governing body of council to consider requests to approve
variations to loan guarantee arrangements for small community organisations.
9. Recommending
that authority to approve temporary loan repayment arrangements, including loan
guarantee arrangements with ASB Bank during the COVID-19 Alert Level 4 to Alert
Levels 1 phases, be delegated to the Acting Group Chief Financial Officer, who
shall consult with the Group Treasurer prior to authorising new
arrangements.
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Ngā tūtohunga
Recommendation/s
That the Emergency Committee:
a) delegate,
for all existing community loans and community loan guarantees (except those
relating to The Eden Park Trust), authority to approve temporary loan
repayment arrangements for council loans, and loan guarantee arrangements
with ASB Bank, during the COVID-19 Alert Level 4 to Alert Levels 1 phases, to
the Acting Group Chief Financial Officer, who shall consult with the Group
Treasurer prior to authorising new arrangements.
b) request
staff to report back to the Finance and Performance Committee on the status
of all loan and loan guarantee arrangements, in particular details of the
delegations exercised, at the conclusion of COVID-19 Alert Level 1.
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Horopaki
Context
Guarantees with ASB Bank
10. Council
provides loan guarantees to the ASB Bank in respect of five community groups
ranging in values from $150,000 to $2.5M.
11. All
guarantees are governed by contracts between the bank and council (the
guarantee) and in most other instances a guarantee side deed between council
and the community group (depends on the age of the guarantee).
12. Variations to
banking arrangements between the bank and community groups (except interest
rate changes) require approval by council as guarantor.
13. The current
national State of Emergency and its short to medium impacts on revenue streams
for community groups, means that the groups are approaching the bank seeking
assistance to help with both interest and/or principal repayment terms and
repayment holidays.
14. It is
necessary for council to consider (and approve) any requests received from the
community groups and bank in a timely manner. Due to the urgency of
matters (sudden reduction of income) the bank and community groups are seeking
to implement new arrangements as soon as possible.
15. Under normal
circumstances, staff would assess the application(s) and obtain approval of the
Finance and Performance Committee to the revised terms and conditions and
document accordingly.
Council Community Loans
16. Material
changes to the terms and conditions of council loans to community groups
require the prior approval of the Finance and Performance Committee.
17. Similar to
the rationale outlined above regarding loan guarantees, community groups are
seeking relief on repaying council loans for similar reasons.
18. As all
council loans are at zero percent interest, groups are seeking approval to
suspend / defer / reduce repayments until a degree of certainty and normalcy
returns.
19. Alternative
arrangements need to be implemented to ensure a timely response to requests to
alter existing loan repayment arrangements.
Tātaritanga me ngā
tohutohu
Analysis and advice
Guarantees with ASB Bank
20. There are
five community loan guarantees and ten council community loans. All loan
guarantees are with ASB Bank Ltd.
21. The maximum
liability of the loan guarantees is $3.681M. The balance currently (7
April 2020) owing by the organisations to the bank is $2.851M.
22. Any material
variations to the terms and conditions of the lending require the prior written
approval of council, as guarantor.
23. Due to the
immediate and dramatic impact of the COVID-19 crisis, all borrowers are, or
will be, discussing new arrangements and relief packages with the bank to
assist the organisations in the immediate to short-term.
24. These arrangements
include (but not limited to):
· Reductions
in interest rates
· Principal
repayment holidays or reductions
· Capitalisation
of interest
· Extending
the term for the debt to be repaid
25. When
originally considering the requests for loan guarantees, council set limits on
the maximum value of each guarantee. In all instances, principal
repayments have now reduced the balance of the loans owing to the bank.
The difference between the current balance and the approved maximum provides a
degree of headroom for the loans to accommodate the capitalisation of interest
should the need arise.
26. All
guaranteed organisations have been contacted and requested to ensure they have
explored all avenues to ensure the on-going operation of their business, e.g.:
· Apply
for the government wages subsidies
· Reduce
unnecessary costs
· Seek
any other government or bank assistance possible for community groups.
27. Implementing
temporary repayment arrangements is a practical means of assisting the groups.
Council Community Loans
28. The ten
community loans (excluding Eden Park Trust) have a combined outstanding balance
of $1.3M as at 7 April 2020.
29. The dramatic
reduction in revenue for these organisations may trigger requests for loan
repayment holidays. To ensure the survival of the organisations in the
first instance, a relaxed approach to loan repayments needs to be taken.
30. As banks
generally have been requested by central government to extend latitude to
borrowers, a similar approach needs to be taken by council as a first step
towards assisting the organisations.
Tauākī whakaaweawe
āhuarangi
Climate impact statement
31. There are no
known climate impacts resulting from amending community loan and loan guarantee
arrangements.
Ngā whakaaweawe me
ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
32. Parks, Sport
and Recreation, together with Treasury and Finance are working collaboratively
to ensure suitable solutions can be arrived at that are fair and reasonable to
all parties involved in these transactions.
33. It will not
be possible to guarantee the on-going operation and financial viability of any
community group and steps will be taken to reduce the harm to the group(s) and
council.
Ngā whakaaweawe
ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
34. Local Boards
have not been consulted on this matter due to time constraints and the nature
of the request.
Tauākī whakaaweawe
Māori
Māori impact statement
35. There are no
known impacts on Māori resulting from amending
community loan and loan guarantee arrangements.
Ngā ritenga
ā-pūtea
Financial implications
Guarantees with ASB Bank
36. There are no
immediate financial implications for council if new arrangements can be
implemented that assist the community group to ride-out the short-term
drop/loss of revenue, and then slowly resume business once alert levels start
to drop.
37. If alert
levels remain in place for longer than anticipated and/ or these restrict the
number of people gathering, further reductions in revenue will delay the date
that groups can commence making repayments.
38. Extended
periods of time capitalising interest will increase council’s contingent
liability under the guarantees.
39. Even a short-medium
term drop in revenue will impact the organisations in other aspects of their
operations – personnel, fixed costs. This will force all the groups
to reassess their business operating models for the foreseeable future.
40. Should one or
more of the groups fail financially, or default on their obligations to the
bank, council will be obliged to fulfil its obligations under the terms of
guarantees, including making payments directly to the bank as demanded.
41. If council
makes payment to the bank under the terms of a guarantee, it will be subrogated
into the position of the bank, assuming the role of lender.
42. In all but
one instance, council is already the landlord, and holds the lease with the
community group. For the remaining organisation, council already holds a
second mortgage over the property, and if required to repay the loan to the
bank, would assume the position of first mortgage holder.
Council Community Loans
43. The community
groups with loans from council will all experience the same issues as outlined
above for those with guarantees.
44. The most
immediate issue for council regards community loans is the loss of a relatively
small revenue stream from loan principal repayments.
45. All the
community groups with loans operate under leases from council. This is
the only security council holds in respect of community loans (including most
that may revert from loan guarantees to loans).
Ngā raru tūpono me
ngā whakamaurutanga
Risks and mitigations
Guarantees with ASB Bank
46. Given the
current and foreseeable state of business operations, there is a real
possibility that any arrangements entered into between all the parties to
mitigate the financial pressures on the community groups may not be the
last.
47. If the
community groups are unable to recover fast enough and revert to similar
revenue levels as previously, further discussions are likely between the
parties.
48. On-going and
regular reporting from the community groups regards their business operations
will be a requirement of any new arrangements implemented to ensure council is
able to monitor its potential exposure and to highlight pending issues.
49. A
catastrophic failure of an organisation will trigger the bank calling upon
council to make good under the guarantee.
Council Community Loans
50. Should a
group default on the loan repayments, council has a large degree of latitude
regards repayment terms, enabling repayments to be suspended and/or the term
extended.
51. There remains
the risk that any of the community groups with council loans and or guarantees
could fail for reasons unrelated to the loans. It is not possible for
council to plan for these, other than ensuring it has attempted to assist the
organisation(s).
52. As all groups
(except one) reside on council land, the terms and conditions of the lease will
provide further guidance on what course of action is possible should a
community group fail. Separate reports will be required to deal with
these should the situation arise.
53. For the one
group residing on private land, council currently holds a second mortgage,
which would move to a first mortgage if the bank loan is subrogated to
council. Should this situation arise, further reports will be submitted
for council to consider its options.
Ngā koringa ā-muri
Next steps
54. Delegations
for loan guarantees and community loans reside with the Finance and Performance
Committee.
55. Staff
recommend that for the duration of the national State of Emergency Alert Levels
4 to 1, delegations for matters relating to existing loan guarantees and
community loans be delegated to the (Acting) Group Chief Financial Officer and
Group Treasurer with authority to:
· Approve
the final terms and conditions of loan guarantee arrangements with ASB Bank;
· Approve
the final terms and conditions of loan guarantee arrangements with the
community group(s);
· Approve
the final terms and conditions of council loans to community groups;
Noting that the financial limits of loan guarantees are not
to exceed the existing approved maximum council liability in respect of each
guarantee agreement.
56. All new
arrangements will be documented with the assistance of Legal Services
department.
57. At the
conclusion of Alert Levels 4 to 1, staff will report back to the committee with
details of the new arrangements that have been implemented.
Ngā tāpirihanga
Attachments
There are no attachments for
this report.
Ngā kaihaina
Signatories
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Author
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Leigh Redshaw - Strategic investment Specialist
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Authorisers
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Kevin Ramsay - Acting Group Chief Financial Officer
John Bishop - Group Treasurer
Phil Wilson - Governance Director
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Emergency
Committee
23 April 2020
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Approval of the Auckland Regional
Amenities Funding Levy 2020-2021
File No.: CP2020/03824
Te take mō te
pūrongo
Purpose of the report
1. To
consider the Auckland Regional Amenities Funding Act (ARAFA) levy for
2020/2021.
Whakarāpopototanga matua
Executive summary
The report
was to be included on the Finance and Performance Committee 23 April 2020
meeting agenda (having been deferred from the Finance and Performance Committee
meeting held on 19 March 2020); however, in light of COVID-19, it must now be
considered by the Emergency Committee.
Background
2. The Auckland Regional Amenities Funding Act 2008 (ARAFA, or
the Act) provides for ten regional organisations to submit annual funding
applications to the Auckland Regional Amenities Funding Board (Funding
Board).
3. Nine amenities have made applications for funding under the
Act. The Maritime Museum is named as an amenity in the Act, but is now
part of Regional Facilities Auckland, so no longer applies for funding.
4. The Funding Board must analyse the funding
applications from the nine amenities, and prepare a draft funding plan. Following a period for submissions the final Funding Plan (attachment A) was approved by the Funding Board in early
March 2020.
Initial Funding request
5. The Funding Board has asked council for a total
levy of $16,714,500. A comparison with last years funding is set out in
the table below:
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2020-2021
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2019-2020
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Change %
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Allocated to nine
specified amenities
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$16,564,500
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$15,164,500
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9.23%
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Administration costs
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$350,000
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$340,000
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2.9%
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Total Auckland Council
levy
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$16,914,500
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$15,504,500
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9.1%
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Less funded from
Funding Board’s retained earnings
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($200,000)
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Net levy payable by
Council
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$16,714,500
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$15,504,500
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7.8%
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6. Following the submission of the draft funding
plan, two issues have impacted on the amount of funding sought by the Funding
Board. These are the financial impact of COVID-19, and the withdrawal of
Coastguard Northern Regions funding application.
Impact of COVID-19
7. Both the amenities funding applications, and the
Funding Board’s assessment of the amenities funding requirements was done
in a pre-COVID-19 context. Therefore, the initial funding request did not
take into account the financial implications of COVID-19 on the amenities or
Auckland Council.
8. The
purpose of the Act is to establish a mechanism to provide adequate,
sustainable, and secure funding for the amenities. However, the funding
must also be sustainable for Auckland Council.
9. The
projected impact by COVID-19 on council’s 2020-2021 revenue has made it
critical to control council’s expenditure where possible. As a
result, the Funding Board has been asked to hold its levy request at the same
level as was provided in 2019-2020.
10. The
Funding Board, in consultation with the Amenities, has agreed to amend the levy
request so that it is the same as 2019-2020.
11. However,
as the full implications of COVID-19 are still not known, the amenities may
need to reassess their financial positions. This may require further
discussions between council and the amenities regarding funding for 2020-2021.
12. Staff
acknowledge the contribution the Funding Board and the amenities have made to
help address the financial impact that COVID-19 has had on council,
particularly in the context of the impact it has had on their own financial
positions.
Coastguard
13. Coastguard
Northern Region (CNR) has elected to join with other regional coastguard
organisations by merging into the national body, Coastguard New Zealand.
This will come into effect from 1 July 2020.
14. Due
to this merger CNR will cease to exist as a legal entity. CNR is the
legal entity specified under the Act to receive funding. Coastguard New
Zealand is not entitled to funding under the Act. Coastguard New Zealand
is investigating what is required for it to be included within the Act’s
funding regime in the future, however, this process could take some time.
15. Staff
recommend providing Coastguard New Zealand with funding directly from council
equivalent to the amount CNR would have been allocated by the Funding Board
($824,000) by way of a funding agreement, for two years. Funding for future
years would need to be discussed through the Long-term Plan or by Coastguard
New Zealand seeking an amendment to the Act.
Total funding
16. The
total funding proposed is equivalent to the 2019-2020 levy ($15,504,500), with
$14,680,500 being provided to the Funding Board, and $824,000 being provided
directly to Coastguard New Zealand.
17. The
proposed levy is within the levy cap provided for by the Act.
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Ngā tūtohunga
Recommendation/s
That the Emergency Committee:
a) approve a levy of $14,680,500
b) approve staff developing a two-year funding agreement between
Auckland Council and Coastguard New Zealand for $824,000 per annum covering
the 2020/2021 and 2021/2022 financial years, subject to the following terms
and conditions noted below:
i) funding must only be used for
activities in the Auckland region
ii) performance
targets within the funding agreement to be at least equivalent to Coastguard
Northern Regions performance targets in 2019/2020
c) note
that as the full implications of COVID-19 are still not known, the amenities
may need to reassess their financial positions. This may require
further discussions between council and the amenities regarding funding for
2020-2021
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Horopaki
Context
18. The
Act was put in place to establish a mechanism to provide adequate, sustainable
and secure funding for the specified amenities that provide arts and culture,
educational and rescue services throughout the Auckland region.
19. The
funding provided under the Act must be sustainable for both the amenities and
Auckland Council.
20. The
Act states that the arts, educational, rescue, and community organisations that
receive funding under the Act “are vital to the Auckland region”
and “contribute to the well-being of the whole region by providing
facilities or services to the community. The organisations are an
essential part of the fabric of the Auckland region and are necessary to make
the region a vibrant and attractive place to live in and visit”.
21. The
Act established a Funding Board, which is an independent body whose role is to
receive annual funding applications from the specified amenities identified in
the Act, and to assess what would be a reasonable contribution towards the
amenities’ operational costs.
22. The
Funding Board assesses the annual funding applications received from the
amenities against the funding principles within the Act, and any additional
principles adopted by Auckland Council. The funding principles include
the following:
· funding is primarily for
provision of facilities or services by the amenities (i.e. operational)
· funding is not available
for capital expenses
· funding is not for any
part of facilities or services provided outside the Auckland region
· funding is available only
if the amenity has made all reasonable endeavours to maximise their funding
from other available sources
· the Funding Board must
have regard to council’s proposed rates increase for the forthcoming year
· the amenities should align
their activities to the Auckland Plan, and adopt relevant performance measures.
23. Once
the Funding Board has conducted the analysis of the amenities’ funding
applications it is required under the Act to prepare a funding plan. The Board
must then call for public submissions. Council may provide a submission on the
funding plan, as may the amenities themselves. The Funding Board must consider
the submissions received when preparing the final funding plan.
24. The
Funding Board, having considered any submissions, proposes a total levy to
Auckland Council for approval.
25. Council’s
decision-making role regarding the levy is confined to providing a submission
on the Funding Board’s draft funding plan, reviewing the total levy
proposed by the Funding Board, and either agreeing to or rejecting the proposed
levy. Allocations to individual amenities are the role of the Funding
Board, not the council. The Act requires that the funding plan must provide any
information that is necessary for council to make an informed assessment of the
annual levy (s25(2)(i)). Council is not able to comment on the amount of the
funding being provided to the individual amenities, as it is the role of the
Funding Board to analyse the funding requirements of each amenity.
Council’s submission on the
2020/2021 Funding Plan
26. The
committee at its 3 December 2019 meeting approved delegation of the
council’s submission on the Funding Board’s draft annual plan to
the chair and deputy chair of this committee (FIN/2019/122). This submission (Attachment C) noted the contribution provided by
the Funding Board and the nine regional amenities in making Auckland a better
place to live and visit.
27. The
submission noted that Auckland’s ratepayers have provided generous
financial support to these regional amenities since 2008 (in excess of $166
million over a ten-year period). The submission also highlighted to the
Funding Board that there are increasing funding demands on Auckland’s
ratepayer budget.
28. The
Funding Board’s role in analysing each individual amenities’
allocation is noted and the council appreciates that the conditions which have
been applied to the provisional allocation of some grants is highlighted in the
draft plan.
COVID-19
29. The
amenities made their funding applications in October 2019. These
applications were based on the amenities forecasts for the 2020/21 financial
year using the best information available at the time. These forecasts
did not take into account the financial impacts of the COVID-19 pandemic, nor
the activities that the amenities would be able to undertake posy COVID-19.
30. The
amenities have been severely impacted financially by the pandemic. The
performing arts amenities have not been able to put on live shows, and have
therefore not received box office and sponsorship revenue. Stardome has
been forced to close.
31. Other
amenities have had their fundraising activities severely impacted due to the
lockdown, and the current financial uncertainty.
32. COVID-19
has also had a massive impact on council’s financial situation. An
assessment of this impact was provided to the Emergency Committee on 16 April.
33. The
project massive impact by COVID-19 on council’s 2020-2021 revenue has
made it critical to control council expenditure where possible. As a
result, the Funding Board has been asked to hold its levy request at the same
level as was provided in 2019-2020.
34. The
Funding Board, in consultation with the Amenities, has agreed to amend the levy
request so that it is the same as 2019-2020, taking
into account the withdrawal of CNR from the funding process..
Tātaritanga me ngā
tohutohu
Analysis and advice
Coastguard Northern Region
35. Coastguard
Northern Region (CNR) provides search and rescue capability throughout the Auckland
region from its centre at Mechanics Bay, Auckland.
36. Auckland
Council through the ARAFA system has provided funding to this amenity since
2008. CNR has recently approved the merger into Coastguard New Zealand
from 1 July 2020, which means that CNR will cease to exist as a legal
entity. Coastguard New Zealand is not eligible to apply for funding under
the Act, or to receive any funding from the Funding Board.
37. Staff
recommend that funding for coastguard services in the Auckland region for the
2020/2021 and 2021/2022 financial years be provided through a direct Funding
Agreement between Auckland Council and Coastguard New Zealand to the same
amount which would have been provided through ARAFA ($824,000 per annum).
38. Council
will in effect be making the same financial contribution that the Funding Board
assessed as being appropriate. This is also the same amount as CNR
received via ARAFA in 2019-2020.
39. The
services that Coastguard New Zealand will provide to Auckland will be the same
as CNR have been providing to Auckland.
40. Entering
into a funding agreement will allow Coastguard New Zealand time to investigate
how it might become part of the ARAFA regime, or to discuss a longer-term
funding arrangement with council.
Return of retained
‘earnings’
41. The
initial Funding Plan proposed a $200,000 refund to Auckland Council from the
Funding Board’s retained earnings. Retained ‘earnings’
are the sums left over after the Board’s administration and director fees
have been paid. These are typically kept to provide the Board with some
money should there be legal challenges to its decisions. These funds have
been steadily increasing over time and the Board has made the decision that it
should return some of these monies to Council as they are in excess of what it
requires as a backstop.
42. This
refund is to be deducted from the total levy that would otherwise payable.
43. Staff
support the Funding Board’s decision in this regard. However, we
note that the Funding Board has at the same time increased its
administration budget request by a further $10,000 which seems unnecessary and
contradictory given the surplus return of funds to council.
44. Staff
note that the Funding Board is developing
a retained earnings policy to guide the Board’s future administration
funding requests.
Options
45. Under
s.34(1)(c) of the Act 2008 the total maximum levy that can be proposed by the
Funding Board is the amount equal to two percent of the revenue from rates of
the Auckland Council in the previous financial year. This equates to
$36,040,000. The final 2020/2021 Funding Plan proposes a total levy of $14,680,500.
46. The Act
provides a ‘needs based’ funding mechanism, where the amenities
receive the funding they require to keep them sustainable. That level of
funding will vary over time for each amenity, due to changes in their operating
environments. It is therefore difficult to make direct comparisons with
previous year’s levies.
47. As discussed above, COVID-19 has had a massive impact on the
activities and revenues of both the amenities and council.
48. In line with
council’s role in the Auckland Regional Amenities Funding Act levy
process the following options are outlined below.
49. The first
option is to approve the levy.
In a pre-Covid context, staff had no reason to believe that the proposed levy
is contrary to the funding principals contained in the Act, and therefore there
would be no reason for council to not approve the levy.
50. However, both the amenities funding
applications, and the Funding Board’s assessment of the amenities funding
requirements was done in a pre-COVID-19 context. Therefore, the initial
funding request did not take into account the financial implications of
COVID-19 on the amenities or Auckland Council.
51. We note that in response to a request from council, the Funding
Board, in consultation with the amenities, has agreed to reduce its levy
request to an amount equivalent to the 2019-2020 levy, taking into account the
withdrawal of CNR from the funding process.
52. Staff
acknowledge the contribution the Funding Board and the amenities have made to
help address the financial impact COVID-19 has had on council, particularly in
the context of the impact it has had on their own financial positions.
53. Approving the levy would reinforce council’s ongoing
commitment and long-term support for the work, services and programmes that
each amenity provides to Aucklanders across the region. Nonetheless, it
is important that each amenity remember that its funding comes from ratepayers,
and is ‘funding of last resort’.
54. The second option is to reject the proposed levy. The
Act only gives Council the ability to reject the entire levy, even if it only
disagrees with a part of it.
55. Staff have no reason to believe that the revised funding request is
inconsistent with the funding principles contained in the Act.
56. Staff therefore recommend approving the revised funding request.
Tauākī whakaaweawe
āhuarangi
Climate impact statement
57. There are no
direct impacts or emissions affecting the climate over the lifetime of the
decision to approve the Auckland Regional Amenities Funding Board levy for
2020/2021.
Ngā whakaaweawe me
ngā tirohanga a te rōpū Kaunihera
Council group impacts and views
58. There are no
direct impacts for the council group that result from approving the Auckland
Regional Amenities Funding Board levy for 2020/2021.
Ngā whakaaweawe
ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board views
59. Decision
making and oversight on regional activities is the responsibility of the
Governing Body. This report relates to the funding relationship between
the council, the Funding Board and the nine regional amenities.
Tauākī whakaaweawe
Māori
Māori impact statement
60. The
amenities have the ability to make positive contributions to Māori
wellbeing, and to deliver on Auckland Plan outcomes and contribute to effective
Māori capacity.
61. Some
amenities have outlined the various programmes delivered that contribute to
Māori wellbeing.
62. Additionally,
a Funding Board member (Precious Clark) has been appointed to represent the
interests of Māori in the Auckland region. Therefore, Māori
wellbeing and perspectives are criteria for consideration throughout the
Funding Board discussion at meetings.
Ngā ritenga
ā-pūtea
Financial implications
63. The
proposed levy is within the levy cap provided for by legislation but is more
than what is budgeted for in the 10-year Budget 2018-2028 because there was no
allowance made for increases.
64. COVID-19
is anticipated to have a significant impact on council’s revenue for
2020-2021. The anticipated impact was set out in a report to the
Emergency Committee on 16 April 2020.
Ngā raru tūpono me ngā
whakamaurutanga
Risks and mitigations
65. The
ongoing risk to council is that the Auckland Regional Amenities Funding system
provides little ability for council to ensure value for money from the
amenities. There is also no direct accountability to council for the
funding that the amenities receive.
66. The
Funding Board works directly with the individual amenities. As well as
analysing the funding applications of the amenities, the Funding Board also
reviews the amenities’ annual and half year reports. Council would
request that the risk be mitigated by the Funding Board continuing to exercise
rigorous scrutiny of the amenities’ activities.
67. There
is also the ongoing risk to council from the indicated funding requests from
the specified amenities for future years. The indication from the
amenities is that they will be seeking substantial increases in future
years. This risk is mitigated by the scrutiny that the Funding Board
applies to the annual funding applications submitted by the amenities.
Any increases to funding would need to be justified by the amenities in terms
of the Act’s funding principles.
68. The
COVID-19 pandemic poses a financial risk to both the amenities, and to Auckland
Council. The amenities financial viability will be impacted by the
national lockdown, and the expected economic downturn. This risk is
mitigated by the Act providing an annual mechanism to provide funding to the
amenities to help keep them sustainable. The amenities could also
approach council (and other funders) directly for additional funding if necessary.
69. There
is a risk to council’s financial position, as the amenities could seek
more funding in future years, when council’s revenue is still being
adversely impacted by the COVID-19 pandemic and the resulting economic
downturn. Council has no formal ability to require the amenities to
reduce their services (and therefore their expenses), so mitigation of this
risk will have to be discussed with the Funding Board.
70. Rejecting
the levy would mean the matter would be referred to arbitration. This
would result in additional costs to undertake the arbitration, and there is
uncertainty as to the result. The Act provides little in the way of
guidance as to what an arbitrator would have to consider, and whether an
arbitrator could set a levy at an amount greater than what was originally
requested.
Ngā koringa ā-muri
Next steps
71. If
the committee approves the proposed levy, payment will be made to the Funding
Board on 1 July 2020.
Ngā tāpirihanga
Attachments
|
No.
|
Title
|
Page
|
|
a⇩
|
2020-2021 Funding Plan
|
19
|
|
b⇩
|
Chairs letter to Auckland Council 9 March 2020 (CNR)
|
65
|
|
c⇩
|
Auckland Council Submission to 2020/2021 Draft Funding
Levy
|
67
|
Ngā kaihaina
Signatories
|
Authors
|
Josie Meuli - Senior Advisor
Edward Siddle - Principal Advisor
|
|
Authorisers
|
Alastair Cameron - Manager - CCO Governance &
External Partnerships
Kevin Ramsay - Acting Group Chief Financial Officer
Phil Wilson - Governance Director
|
