I hereby give notice that an extraordinary meeting of the Finance and Performance Committee will be held on:

 

Date:

Time:

Meeting Room:

Venue:

 

Thursday, 16 September 2021

10.00am

This meeting will be held remotely and can be viewed on the Auckland Council website
https://councillive.aucklandcouncil.govt.nz/

 

Kōmiti ā Pūtea, ā Mahi Hoki /
Finance and Performance Committee

 

OPEN AGENDA

 

 

MEMBERSHIP

 

Chairperson

Cr Desley Simpson, JP

 

Deputy Chairperson

Cr Shane Henderson

 

Members

Cr Josephine Bartley

Mayor Hon Phil Goff, CNZM, JP

 

Member Renata Blair

Cr Richard Hills

 

Cr Dr Cathy Casey

Cr Tracy Mulholland

 

Deputy Mayor Cr Bill Cashmore

Cr Daniel Newman, JP

 

Cr Fa’anana Efeso Collins

Cr Greg Sayers

 

Cr Pippa Coom

Cr Sharon Stewart, QSM

 

Cr Linda Cooper, JP

IMSB Chair David Taipari

 

Cr Angela Dalton

Cr Wayne Walker

 

Cr Chris Darby

Cr John Watson

 

Cr Alf Filipaina

Cr Paul Young

 

Cr Christine Fletcher, QSO

 

 

(Quorum 11 members)

 

 

 

Sandra Gordon

Kaitohutohu Mana Whakahaere Matua / Senior Governance Advisor

 

10 September 2021

 

Contact Telephone: (09) 890 8150

Email: sandra.gordon@aucklandcouncil.govt.nz

Website: www.aucklandcouncil.govt.nz

 

 


 


 

Terms of Reference

 

Responsibilities

 

The purpose of the committee is to:

 

a)    advise and support the mayor on the development of the Long-term Plan (LTP) and Annual Plan (AP)

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

c)     make financial decisions required outside of the annual budgeting processes.

 

The committee will establish an annual work programme outlining key focus areas in line with its key responsibilities, which include:

 

·       advising and supporting the mayor on the development of the LTP and AP for consideration by the Governing Body including:

o   local board agreements

o   financial policy related to the LTP and AP

o   setting of rates

o   preparation of the consultation documentation and supporting information, and the consultation process, for the LTP and AP

·       monitoring the operational and capital expenditure of the council parent organisation and Auckland Council Group, and inquiring into any material discrepancies from planned expenditure

·       approving the financial policy of the council parent organisation

·       establishing and managing a structured approach to the approval of non-budgeted expenditure (including grants, loans or guarantees) that reinforces value for money and an expectation of tight expenditure control

·       approve the council insurance strategy and annual insurance placement for Council

·       performance measures and monitoring

·       write-offs

·       acquisition of property in accordance with the LTP

·       disposals in accordance with the LTP

·       recommending the Annual Report to the Governing Body

·       funding for achieving improved outcomes for Māori.

 

Powers

 

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

(a)        approval of a submission to an external body

(b)        establishment of working parties or steering groups.

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

(iii)       If a decision is a budgetary or financial decision that relates primarily to the Finance and Performance Committee responsibilities, the Finance and Performance Committee has the powers to make associated decisions on matters that would otherwise be decided by other committees. For the avoidance of doubt, this means that matters do not need to be taken to multiple committees for decisions.


 

(iii)       The committee does not have:

(a)        the power to establish subcommittees

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

 

Code of conduct

 

For information relating to Auckland Council’s elected members code of conduct, please refer to this link on the Auckland Council website - https://www.aucklandcouncil.govt.nz/about-auckland-council/how-auckland-council-works/elected-members-remuneration-declarations-interest/Pages/elected-members-code-conduct.aspx

 


 

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.

 

 


Finance and Performance Committee

16 September 2021

 

ITEM   TABLE OF CONTENTS            PAGE

1          Apologies                                                                                 9

2          Declaration of Interest                                          9

3          Petitions                                                                 9  

4          Public Input                                                           9

5          Local Board Input                                                 9

6          Extraordinary Business                                       9

7          Development Contributions Policy 2021 Consultation                                                        11

8          Preparation of the Auckland Council Group and Auckland Council quarterly performance reports to 30 June 2021                                   203

9          Preparation of the draft Auckland Council Annual Report 2020/2021 and draft Auckland Council Summary Annual Report 2020/2021 207

10        Consideration of Extraordinary Items

PUBLIC EXCLUDED

11        Procedural Motion to Exclude the Public                         213

C1       CONFIDENTIAL: Auckland Council Group and Auckland Council quarterly performance reports to 30 June 2021                                   213

C2       CONFIDENTIAL: Recommendation of the draft Auckland Council Annual Report 2020/2021 and draft Auckland Council Summary Annual Report 2020/2021                                              213


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          Petitions

 

There is no petitions section.

 

4          Public Input

 

There is no public input section.

 

5          Local Board Input

 

There is no local board input section.

 

6          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.”


Finance and Performance Committee

16 September 2021

 

Development Contributions Policy 2021 Consultation

File No.: CP2021/13490

 

  

Te take mō te pūrongo

Purpose of the report

1.       To adopt the draft Contributions Policy 2021 for consultation.

Whakarāpopototanga matua

Executive summary

Contributions Policy 2021

2.       The Contributions Policy sets out how the council will recover from new development an appropriate and fair share of the cost of infrastructure investment attributable to growth. The Contributions Policy 2019 was adopted following a review in 2018 and reflects the investments planned in the ten years of the Long-term Plan 2018-2028 (LTP). The draft Contributions Policy 2021, see Attachment A: Draft Contributions Policy 2021[1], has been updated to reflect the:

·     capital expenditure and legislative changes since 2018

·     capital expenditure planned in the Recovery Budget (10-year Budget 2021-2031)

·     revised dwelling construction forecasts.

3.       These updates lower the weighted average development contributions price from $23,900 under the 2019 policy to $20,800 under the draft 2021 policy. This is because forecast construction[2] is 6 per cent higher than previous forecasts while the growth share of capital expenditure that can be recovered with development contributions hasn’t kept pace. These changes combined with the other proposed changes discussed below, addition of projects planned beyond 2031 to support growth in Drury and the adjustments to payment timing, bring revenue to $2.6 billion and a weighted average price of $21,500.

Funding long-term growth investment

4.       Auckland is growing rapidly. Significant investment in infrastructure is required to cope with the cumulative impacts of growth expected over the next 30 years. The 10-year budget has focused infrastructure investment in the investment priority areas. However, in the next decade the council will not be able to finance all the investment required to support growth, given constraints on revenue and borrowing. However, these investments are vital to ensure future development has the same level of infrastructure as the rest of the city and climate impacts of growth are managed.

5.       Officers recommend that the contributions policy be amended in stages to include capital expenditure planned beyond the ten years of the council’s long-term planning horizon for each of the investment priority areas. Previous contributions policies have only included investments within the horizon of council’s long-term plans.


 

6.       Current landowners and developers benefit from these future infrastructure investments as house buyers pay prices reflecting an expectation they will be delivered. Officers consider it is fair that developers, both those who may build early and those who will build in the next decade, pay an appropriate share of the costs of this infrastructure. Requiring early developers to meet their share of the costs will reduce the risk of future service level shortfalls and funding challenges being passed on to ratepayers.

7.       As a first step officers propose adding infrastructure investments planned from 2032 onwards in Drury. This will raise the weighted average development contributions price for the new Drury-Opaheke funding area[3] by up to $89,200 or $84,900 when combined with payment timing proposal below.

8.       Officers consider that these changes won’t impact on house prices. House prices are driven by supply and demand and are not determined via a cost plus methodology. The impact in Drury will eventually flow through to lower prices for raw land. However, the increases in Drury may have a short-term negative impact on the pace of development as developers respond to the change. Some developers may fail, and others may hold land awaiting future land price increases. Officers consider that these short-term trade-offs are outweighed by better cost signaling and associated longer-term benefits.

When developers have to pay development contributions

9.       The 2019 policy extended payment timing for residential development to better align with when cash was received from the sale of dwellings. Since then, the council’s finances have been impacted by COVID-19 impacting our ability to fund growth infrastructure. Officers recommend amending the contributions policy to require residential and non-residential development payment at the granting of a building consent.

10.     This would provide around $96 million in earlier revenue in total over the first three years of the 10-year budget, or $107 million when combined with the addition of investments beyond 2031 in Drury. Earlier receipt of revenue means less interest cost needs to be recovered lowering the weighted average development contributions price to $19,300. A change to payment timing is likely to present some developers with financial challenges which may disrupt the pace of development.

Facilitating the development of Māori land

11.     Recent legislative changes require the contributions policy to support the development of Māori land. Officers recommend using grants as this can assist with all the costs of development, not just development contributions. A grant scheme can direct support to developments most in need of assistance, is more transparent than a remission and allows better expenditure forecasting. The alternative is to remit development contributions for development on Māori land. Either option would be rates funded.

12.     The council presently provides similar support through the $1.2 million Cultural Initiatives Fund (CIF) which is oversubscribed by $500,000. A review of the CIF is underway and will consider the nature of development eligible and the appropriate level of funding.

13.     Officers also recommend that for Māori land, payment timing changes don’t apply to non-commercial developments and that not-for-profit developments be exempt from contributions for reserves because much of Auckland’s parkland was previously Māori land.


 

Other changes, consultation, and next steps

14.     Other changes include amendments to funding areas, definitions and confirming that developers will be liable for the costs of debt collection to recover late payments.

15.     Consultation is scheduled for September/October with three regional Have Your Say events, consultation with Māori and an opportunity for key stakeholders to present submissions directly to councillors. A draft Consultation Document has been prepared, see Attachment B: Contributions Policy 2021 Consultation Document. Decision making will take place in December with a new policy implemented in January 2022.

16.     Following implementation of the new policy, officers will continue work on adding longer term capital expenditure to the policy for the remaining investment priority areas. Work will also be restarted on the review of demand factors the council directed staff to undertake following the 2018 review. This work was halted as a result of COVID-19.

 

Ngā tūtohunga

Recommendation/s

That the Finance and Performance Committee:

a)      agree to consult on the attached draft Contributions Policy 2021 which has been updated for the capital expenditure in the 10-year budget and includes the following key proposed changes:

i)       addition of capital expenditure planned for 2032 onwards in Drury

ii)       requiring payment of development contributions for all development at grant of building consent except non-commercial development on Māori land

iii)      identifying that facilitation of the development of Māori land is made through grants under the Māori Cultural Initiatives Fund

iv)      exempting not-for-profit development on Māori land from contributions for reserve acquisitions.

b)      direct officers to report back to the Finance and Performance Committee on the infrastructure required to support growth over the next 30 years in the other investment priority areas identified in the 10-year Budget 2021-2031 (other than Drury), with a view to updating the contributions policy to add relevant capital expenditure in those areas planned for 2032 onwards once this work is completed.

c)       direct officers to include consideration of the appropriate increase in the budget for the Māori Cultural Initiatives Fund scheme

d)      approve the Consultation Document attached to this report as the basis for consultation

e)      delegate the authority and responsibility for agreeing any required changes to the draft Contributions Policy 2021 and consultation material to the Chair of the Finance and Performance Committee and the Group Chief Financial Officer.

f)       agree to the consultation process set out in the agenda report.

 


 

Horopaki

Context

Growth and infrastructure investment

17.     Auckland’s population is expected to grow by 260,000 in the next ten years on top of the rapid population growth we have experienced in the last decade, bringing the projected population to approximately 1.9 million by 2031. The latest housing capacity assessment for Auckland shows that across urban Auckland there is sufficient plan-enabled development capacity for up to 900,000 dwellings[4]. We are forecasting the construction of 145,800 new dwellings in the next ten years. To support the development enabled by the Auckland Unitary Plan, we are facing immediate demands for infrastructure in key growth areas and in response to construction on upzoned land, plan changes and the impact of the National Policy Statement on Urban Development.

18.     Development contributions allow for an equitable and proportionate share of the total cost of growth-related capital expenditure to be recovered from the development community. Different types of development place different demand on the need for the council to invest in various types of infrastructure. Higher or lower demand factors are applied to different types of development accordingly. A detailed explanation of the process for setting development contributions is set out in Attachment C: How we set Development Contributions.

Updating the Contributions Policy 2019

19.     The Contributions Policy 2019 came into effect on 1 January 2019 reflecting the capital expenditure within the ten-year investment horizon of the LTP 2018-2028. The projects included reflected the law at the time which precluded the use of development contributions for most community infrastructure.

20.     Our capital expenditure plans have changed since that time and changes to legislation now allow the use of development contributions to fund a broader class of community infrastructure. The key changes are:

·     $500 million increase in the City Rail Link (CRL) budget decided in 2019

·     revising the share of the cost of the CRL attributable to growth from 15 per cent to 23 per cent to reflect the additional capacity being provided

·     addition of $107 million of community infrastructure projects[5] (noting some investment is part of larger projects) including:

­       Community Hub – Panmure ($9 million)

­       Manurewa Community Centre Development ($2.7 million)

­       Papatoetoe Community Hub and Arts Development ($5.8 million)


 

 

 

21.     The 10-year budget includes $9.3 billion of projects with a growth component. To manage constraints on our revenue and ability to borrow, investment to support growth is focused on the joint investment priority areas with the government:

·     Auckland Housing Programme (Mangere, Mt Roskill, Oranga, Northcote, Tāmaki)

·     Drury and the North-West (Red Hills, Westgate and Whenuapai)

·     CRL stations at Karangahape Rd and Mt Eden.

22.     The 10-year budget also reflects an increase in our forecast of funding from Waka Kotahi for growth projects which reduces the costs we need to recover through development contributions.

23.     We recognise that even with this approach, we are well short of being able to deliver on all the investment needed in many of the investment priority areas and in the wider city in the next ten years. The council is working with central government on alternative sources of finance for the capital investment required, such as the use of mechanisms in the Infrastructure Funding and Financing Act 2020 (IFF Act). The council will have greater capacity to invest in growth infrastructure in the decade beyond the horizon of the 10-year budget. Adding investments planned from 2032 onwards to the Contributions Policy 2021 so they can be funded by development contributions will also help address the financing issue, albeit in the future.

Legislative compliance

24.     Officers have reviewed the current policy in accordance with the purpose and principles for setting development contributions in the Local Government Act 2002 and the council’s Revenue and Financing Policy. Schedule Five to the attached draft Contributions Policy 2021 considers the appropriateness of development contributions as a funding source in accordance with the requirements of section 101(3) of the Local Government Act 2002.

Tātaritanga me ngā tohutohu

Analysis and advice

25.     This section sets out the changes officers are proposing for the draft Contributions Policy 2021.

Capital expenditure updates and contributions pricing

26.     The draft Contributions Policy 2021 has updated the capital expenditure projects to reflect the decisions made since 2018 and the investment committed to in the 10-year budget. With these updates the draft policy provides for the recovery of $2.43 billion of development contributions revenue over the period from 2021 to 2031.

27.     The draft policy will include a list of over 1300 programmes and projects for which the council will seek to recover the growth share of costs through development contributions, see Attachment H: Schedule 8 Assets, for which development contributions will be used.

28.     Forecasts of dwelling construction which drive 94 per cent of development contributions revenue have been updated based on revised forecasting methodology. Over the next ten years, dwelling construction is predicted to increase 13 per cent from our current forecast of 102,000 household unit equivalents to 115,500. Previous forecasting was based on broader population growth predictions which don’t directly translate to new housing construction. The new methodology uses recent information on resource and building consents to forecast medium term dwelling construction. For the later years of the ten-year forecast period, this is combined with broader economic indicators.


 

29.     As a result of the capital expenditure changes and updated forecasts of Waka Kotahi funding and dwelling construction, the weighted average development contributions price for a standard residential unit will fall from $23,900 under the Contributions Policy 2019 to $20,800 under the draft Contributions Policy 2021. The price falls because while the share of

capital expenditure we expect to recover is rising, this is being spread over a larger number of dwellings. This is a weighted average and varies widely by location depending on the investments the council plans to make to support growth in each area.

30.     The proposal to add projects beyond the ten years of the 10-year budget in Drury (see below) will add $179 million to the expected revenue and will only affect the price of development contributions in the Drury area. Adoption of earlier payment for development contributions due at building consent (see below) would reduce the interest cost we need to recover and lower the weighted average development contributions price to $19,300. This would not impact revenue, just the timing of receipt of that revenue.

31.     The combined impact of the proposed changes is for contributions revenue of $2.6 billion over the period of the 10-year budget and a weighted average price of $21,500.

32.     Greater changes, increases or decreases, will occur in areas where additional investment has been planned or the historical investments have now been paid off. For the Drury area where we are signalling our intention to invest from 2032 onwards, the price change is significant as set out below.

Extending the time horizon for investment to support growth

33.     Auckland is growing rapidly and major infrastructure investment is required. The 10-year budget commits significant investment to support growth in the identified investment priority areas. However, the capital investment included in the 10-year budget does not reflect all the infrastructure the city will need to address the cumulative impact of growth over the next 30 years. Additional infrastructure will be required to cope. All development in the relevant areas over the next 30 years will benefit from this.

34.     The Contributions Policy 2019 set development contributions charges based on the capital expenditure planned over the ten-year period of the Long-term Plan 2018-2028. The current development contributions price for new developments therefore doesn’t reflect a full share of the costs of growth that Auckland will incur to service them.

35.     Continuing to limit development contributions to funding the capital investment included within the 10-year period covered by our long-term plans means those developing earlier, are not meeting a fair share of the cost of infrastructure that they both create the need for, and benefit from. Unless this shortfall is met by existing ratepayers (who do not create the need for this infrastructure and receive only limited benefits from it) this will lead to higher costs and/or service level problems for future generations of residents and ratepayers.

36.     Officers propose to gradually update the contributions policy to include the projects required to support growth in the investment priority areas. These projects cannot be financed within the council’s current capital constraints in the timeframe of the 10-year budget. The council is committed to delivering these investments and will reflect these longer-term intentions in the next 10-year budget covering the period 2024-2034 and in the following planning cycles. The first step will be to add a programme of expenditure to fund the infrastructure required to support growth in the Drury area. For further detail see Attachment D: Inclusion of capital projects beyond ten years in Drury.

37.     Extensive work has been undertaken in recent years on the infrastructure requirements to support growth in the investment priority areas. We now know in more detail the investment needed. However, further analysis is required to refine this work to allow inclusion of capital investments in investment priority areas other than Drury in the Contributions Policy. Officers are continuing work with central government, Waka Kotahi and developers on the infrastructure requirements and associated costs. Area specific amendments to the Contributions Policy will be proposed for consultation as the appropriate level of information becomes available.

38.     Officers note that as these investments are being planned over decades, they are subject to refinement as investment plans are developed further, development intentions change, and economic conditions fluctuate. Future contributions policies will require amendment as more refined information becomes available.

39.     A gradual phasing in of longer-term investments in all the investment priority areas means the relative development contribution price signals will favour some areas until we are able to complete this work. We plan to work through the rest of the investment priority areas and consult on changes as soon as practicable.

40.     In considering the long-term challenges of financing and funding capital investment to support growth, the council has considered and rejected the following alternatives of:

·     allowing development to proceed without plans in place to provide for the funding of all the infrastructure new and intensifying communities will require in the future

·     raising rates and increasing our borrowing now

·     waiting for additional government funding

·     waiting for the implementation of solutions using the tools in the IFF Act.

41.     Officers consider that the first two options are respectively not viable or at odds with the financial strategy in the 10-year budget. Officers expect the last two options to eventuate at some point. However, there is no certainty as to how long this will take. The longer we put off setting prices appropriately, the more development will proceed without making a contribution to the full costs of infrastructure.

42.     If additional government funding becomes available, the policy will be adjusted accordingly, and any charges levied previously will be refunded. If tools under the IFF Act are implemented, the Contributions Policy will be amended accordingly and an appropriate remission on the levy would be calculated for land where development contributions have already been recovered for infrastructure to be funded by an IFF levy.

Prices in Drury

43.     Developments in Drury will require investment in local and arterial roads, community facilities, parks, and stormwater. In Drury these investments will accommodate approximately 22,000 new dwellings and 12,000 new jobs.

44.     The Contributions Policy 2021 includes the $243 million of transport capital expenditure and $156 million for parks and parks development provided for in the 10-year budget. In addition, we have included $2.1 billion in local and arterial roads and parks and community infrastructure in the Drury area planned for beyond 2031. Under the draft Contributions Policy 2019, the development contributions charge per household unit equivalent ranges from $11,000 to $18,300. Under the draft Contributions Policy 2021, the price for Drury-Opaheke (see map in Attachment D), will increase to $89,200, or $84,900 including the impact of earlier payment timing. Once we have completed work on the stormwater investments required for Drury, we will consult on amendments to the policy to add this infrastructure.

Impact on development

45.     Officers do not consider that proposed development contributions price changes, nor those likely to come in the future as we address the other investment areas, will materially affect house prices over time. The price of housing is driven by supply and demand. The proposed development contributions prices reflect the level of infrastructure investment that council is making to support growth.

46.     Developers will seek to recover these increased costs by raising the price they are seeking for the dwellings they construct. However, competition amongst developers and from existing homes will over time temper their ability to pass on these costs.

 

 

 

47.     Current development contributions prices are on average 2 per cent of the average house value in Auckland and 3 per cent of the average section price. For the Drury area, the development contributions price changes being considered will be around 5 per cent of the average house value.

48.     The proposed development contributions price changes in Drury and the potential changes in the other investment priority areas as longer-term infrastructure programmes are added to the Contributions Policy 2021 will be material. A change in development contributions price of the scale required to fund the growth share of the investments required in these areas may impact on development in the short to medium term.

49.     The sudden development contributions price increase, the payment timing changes being considered (see below) and the likelihood of further changes in the future create substantial uncertainty for developers. Land acquired for development in Drury that was purchased some time ago has benefited from a rise in land values, particularly in the last year, and these developers may be cushioned from the impact of higher development contributions. Never-the-less many developers operate with small margins and those who purchased land recently or have more heavily leveraged their historic land purchases may be affected.

50.     The changes may lead to a pause in development in some areas and for some developers. Some developers may struggle, exacerbating the delay, however, if any fail their developments will eventually be taken over by replacements. Others may delay developments waiting for further price rises to return profitability to previous levels.

51.     Hamilton City Council introduced higher development contributions prices in 2018 with increases ranging from 30 to 100 per cent. While development slowed in the next two years in some areas, it progressed in others and all the development areas are now experiencing strong growth. The slowing of development in some areas was a result of timing issues in the delivery of infrastructure required to allow development to proceed. In addition, some developers accelerated development prior to introduction of the 2018 policy to avoid the higher charges with a consequent slow down immediately after the new policy was introduced.

52.     Ultimately the changes in contributions price will be reflected in the price paid for developable land. Research on the effect of changes in impact fees and development contributions overseas support this position. For a detailed discussion of the impact of the proposed changes see Attachment E: Impact of development contributions on house prices.

Transitioning price increases

53.     Given the scale of the increases, officers have considered the option of phasing in price increases. Officers do not consider that transition is necessary as the Drury area is some time away from being live zoned for development. This will give developers time to manage the changes. A transition would also defeat the purpose of recovering contributions from early developers for the infrastructure that will be provided later. A transition scheme is also likely to be very difficult to administer if it sought to target those developers most impacted.

Conclusion

54.     If the council allows development to proceed without financing and funding plans in place to deliver investments to address cumulative and regional impacts of growth, it will lead to infrastructure deficits. These will accumulate until the council has the resources to make the necessary capital investments. In the meantime, service levels will deteriorate in areas experiencing growth as the cumulative effects of growth impact and the cost of these investments will increase as time passes and land required for infrastructure rises in value.


 

 

55.     If development proceeds, the opportunity to secure a payment from early developers for the share of the benefits they receive and the extent to which they contribute to the need for the underlying capital expenditure, will be lost. This lost revenue will exacerbate the challenge council faces when seeking to address the service level issues arising from underinvestment. While already developed land can in theory be charged at a future point when infrastructure investments are closer to being delivered, this will be difficult to implement. This is because existing house owners will consider the price they paid already included the value of the expected benefit from investment in infrastructure.

56.     Officers recommend that the council includes projects outside the ten-year horizon of the 10-year budget in the Contributions Policy 2021 in stages as information becomes available. Officers recommend, as a first step, adding projects beyond 2031 in Drury to the policy. The primary beneficiaries of these investments are the current landowners whose land values will reflect the expectation of future infrastructure delivery to support development. Officers consider that it is fair that these developments contribute an appropriate share of the costs of these investments. Unless provision is made now for the funding of these investments, the council will face future service level and funding challenges in growth areas. While the price increases may impact adversely on the pace of development and individual developers, they will be absorbed over time in land prices and development will proceed.

Payment timing

57.     The requirement for the payment of development contributions may be triggered by the granting of resource consent, or by the granting of building consent. Under the Contributions Policy 2019, the time period for payment of development contributions for building consents depends on the nature of the development:

1.      

Development Type

Payment Period

Residential - less than five dwellings

6 months after granting of consent

Residential - five or more dwellings

24 months after granting of consent or at issue of code compliance certificate whichever is sooner

Non-residential development

58.     Prior to the Contributions Policy 2019, development contributions for residential building consent were payable at the time the building consent was granted. The council chose to extend the payment time for the 2019 policy to better align the requirement to pay development contributions with when developers would realise the cash from their investments. In making this decision, council weighed the trade-off between providing greater support for residential development and having to delay investments that it could otherwise make if it received the cash earlier. A detailed discussion of payment timing changes is set out in Attachment F: Payment timing changes.

59.     Since the adoption of the Contributions Policy 2019, the spread of COVID-19 has significantly impacted council’s ability to invest in the infrastructure required to support growth. Officers consider that it is appropriate to review the payment timing for development contributions.

60.     Reversing the previous policy change and requiring payment of development contributions when building consents are granted would increase revenue in the first three financial years of the 10-year budget by around $96 million in total, or $107 million when combined with the addition of investments beyond 2031 in Drury. This does not increase the total revenue but just brings forward the payment timing. Bringing forward the time at which payment is received reduces the interest cost that needs to be recovered. This lowers the weighted average development contributions price to $19,300.

 


 

 

61.     Earlier revenue will assist council in more timely funding of infrastructure to support growth.  However, it is likely to lead to development contributions debt, from developers paying late, rising back to the levels experienced prior to the recent policy changes. Debt had reduced under the more generous payment terms introduced in 2019.

62.     Developers supported the changes to payment timing when the council consulted on this issue in 2018. Reduced payment timing is likely to have some disruptive effect on the pace of development and present some developers with financial challenges. The council will need to carefully weigh the benefits of immediate improvements to its cashflow against the impacts on development when considering feedback. Officers recommend consulting on the option of requiring payment at grant of building consent.

63.     Officers also recommend that the alternative option of retaining the status quo be amended to make it clear that only residential developments of five or more attached dwellings are eligible for the longer payment period of 24 months or until code compliance certificate is issued. Since the adoption of the Contributions Policy 2019, some developers have been lodging consents for multiple stand-alone dwellings under a parent property consent to obtain an extended payment period. This has created administrative issues and issues in the management of building inspections.

64.     Officers considered, but do not recommend adjusting the payment timing for development contributions required when granting resource consent for subdivision (payment is required on the issue of the section 224(c) certificate). This would have a further positive impact on council cashflows. No other council requires payment of development contributions at grant of resource consent for subdivision. Introducing a requirement to pay development contributions at the grant of resource consent for subdivision would be a major change from current practice and have adverse financial impacts on developers in terms of their cashflow.

Māori freehold land

65.     Recent legislative changes require the council’s financial policies, including the contributions policy, to support the principles set out in the Preamble to the Te Ture Whenua Māori Act 1993. These principles include facilitating the occupation, development and utilisation of Māori land for the benefit of its owners, their whanau, and their hapu.

66.     The council is not required to provide a remission, or discount, to developers of Māori land through its contributions policy. However, the policy must be clear about what level of support is available and how it is provided. The council presently supports the development of marae and papakāinga through grants that include development contribution costs made through the Cultural Initiatives Fund. The Cultural Initiatives Fund budget for 2021/2022 is $1.2 million.

67.     Māori landowners have previously commented that there are many difficulties associated with developing Māori land, including gaining consent of owners and obtaining finance needed for development. They note that development contributions create an additional challenge that presents a further barrier to development, particularly for papakāinga and marae. They have raised these concerns in the historical context of Māori land confiscated by the Crown, or forcibly sold through rating sales, and the benefits that Aucklanders currently receive from this land and land gifted by Māori for parks.

68.     There are two elements that need to be considered when providing support for the development of Māori land. These are the mechanism used to provide support (eg: grants or remissions) and the extent to which support is provided (which types of land and which types of development to support).


 

 

69.     Officers recommend that the council continue to provide support through grants made through the Cultural Initiatives Fund. A grant can be used to fund any development costs and not just council fees. Grants also provide increased flexibility, transparency, and accountability and enable council to make decisions on the level of funding provided that reflects the relative merits of individual proposals rather than automatically supporting, or rejecting applications, on predetermined criteria. Development contributions remissions for development of Māori land would overlap with grants made under the Cultural Initiatives Fund, as such no remission is necessary.

70.     Officers also recommend increasing the budget for the Cultural Initiatives Fund as the fund is currently over-subscribed. The fund would need to be increased by at least $500,000 to fully fund all eligible applications. Increasing the fund will ensure the council is able to provide funding at the level necessary to support the current level of development of marae and papakāinga.

71.     Grants are currently only available for not-for-profit developers. Developments undertaken on a commercial basis, or by for-profit developers, are unable to access this support. If the council wished to provide support to commercial developments on Māori land, then consideration could be given to extending the Cultural Initiatives Fund to include for-profit developments or establishing a new fund to support this purpose. Commercial developments will likely proceed regardless of whether development contributions are charged or not. In these cases, any additional support will only have a marginal benefit. Officers recommend that support is not provided for these developments.

72.     Auckland Council values and recognises Te Tiriti o Waitangi as the founding document of our nation and is committed to meeting its statutory Treaty of Waitangi responsibilities.  However, council responsibilities are distinct from the Crown’s Treaty obligations. Treaty settlements are resolved directly between the Crown and iwi, and include formal responsibilities for council.

73.     Council could extend support to development of Māori land based on the underlying land status or the type of development being undertaken. This needs to be balanced against the council’s ability to fund the additional support and consideration of all the other demands on council spending such as investment in critical infrastructure and services and managing debt at a sustainable level. If the council wishes to provide additional support, then officers recommend further work be undertaken to establish a more comprehensive understanding on Māori land in Tāmaki Makaurau, its development potential, and the likely financial impact that additional options will have on council.

74.     The work on the level of funding for the grants recommended above and the nature of the land and type of developments to be covered should be addressed in broader review of council’s financial policies’ support for Māori development. The results of this review can then be incorporated into decision making on the Annual Budget 2022/2023.

75.     Changes to payment timing are also being considered as part of this review of the contributions policy. If payment timings do change, then officers recommend retaining deferred payment timings for non-commercial development on Māori land. Continuing with existing payment timings reduces the initial cashflow requirement of the developer until after the development is complete and provides additional time for marae, papakāinga and Māori housing developments to apply for a grant through the Cultural Initiatives Fund. The impact on council cashflow of continuing with payment deferrals on Māori land is likely to be immaterial.

76.     Officers also recommend that not for profit development on Māori land be exempt from contributions for reserves. This is proposed because most of Auckland Council parkland was formerly Maori land. Officers note that reserve contributions are not charged to commercial or industrial developments.

77.     Further detail on this issue is set out in Attachment G: Support for Māori land development.

Other proposed changes to the policy

Funding areas

78.     The draft Contributions Policy 2021 includes minor amendments to funding areas to align with Auckland Council’s new Macro Strategic Model growth zones used for growth forecasting. This is required to allow modelling of prices for funding areas.

79.     The draft Contributions Policy 2021 includes two additional funding areas for transport, and one new and four amended funding areas for stormwater.  These funding areas allocate the cost of transport infrastructure to the investment priority areas in Drury and the Auckland Housing Programme areas and provide close alignment with planned investment in stormwater within the Central and Takanini areas.

Definitions

80.     The draft Contributions Policy 2021 definitions have been amended to provide greater clarity and ensure alignment with changes to legislation.

Debt recovery costs

81.     The draft Contributions Policy 2021 has also been amended to confirm that the costs in collecting outstanding development contributions may be recovered. The current policy does not specify this requirement which may preclude the recovery of these costs from developers.

Consultation

82.     Officers have written to developers and had preliminary meetings with the Property Council, the Urban Development Institute of New Zealand and real estate agency personnel involved in property development. The purpose of this pre-engagement was to provide interested parties with

·     advice on the timeframe for decision making on the Contributions Policy 2021

·     information about the infrastructure financing and funding challenges and strategies for responding to these that officers proposed to present to elected members.

83.     Formal public consultation is planned for September and October 2021. A draft consultation document setting out the changes proposed in the draft Contributions Policy 2021 has been prepared to support consultation, see Attachment B, Contributions Policy 2021 Consultation Document.

84.     Three Have Your Say Events (HYSE) have been planned in North, South and Central locations. The location and timing of HYSE have been scheduled to provide opportunities for developers and the public to engage with the council at locations and timings to suit their needs and preferences, however, events are subject to change due to COVID-19 alert level restrictions. These HYSE events provide an opportunity for developers and other interested parties to learn more about the draft policy and provide feedback. All comments will be captured and reported through to the Finance and Performance Committee to inform decision-making on the final policy.

85.     Feedback received from developers during the last consultation process sought more opportunities to engage with the council on the policy. Some developers specifically requested the opportunity to present their feedback in person to elected members after they have finalised their submissions.

86.     In recent years, council has moved away from holding traditional hearings in favour of less formal and more interactive HYSE.  However, staff consider that for this consultation there is merit in providing stakeholders with an opportunity to present their feedback in a more traditional setting alongside the HYSE events. Time has been scheduled during the consultation period to provide an opportunity for this engagement with the Finance and Performance Committee.

Tauākī whakaaweawe āhuarangi

Climate impact statement

87.     Recommendations in this report have a neutral climate impact as they relate to the funding of capital investment rather than decisions on the activities to be undertaken.

88.     The changes to the draft policy only impact the funding for investments needed to support development for Auckland’s growth. The developments and identified projects have already been assessed in the context of the council’s climate goals through our planning and capital investment decision making processes.

89.     Extending the time horizon for growth related capital investment projects funded by development contributions beyond ten years will assist in meeting our climate goals. Addressing these challenges will allow us to invest earlier in growth areas mitigating the climate impacts. They will also reduce the future need to make funding and service level trade-offs which would otherwise limit our ability to manage climate impacts.

90.     For example, the infrastructure planned for Drury is focused on delivering a sustainable community, well-connected to public transport, with successful local centres and employment thus minimising climate impacts. Allowing development to proceed without the plans for funding in place for the delivery of the appropriate infrastructure will lead to suboptimal climate outcomes.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

91.     The information presented on the projects included in the draft Contributions Policy 2021 was developed in conjunction with the following council-controlled organisations and council units:

·    Auckland Transport

·    Eke Panuku Development Auckland

·    Healthy Waters

·    Community Facilities

·    Community and Social Policy

92.     The Chief Economist Unit and Research Investigations and Monitoring Unit worked with us on the:

·    impact of higher development contributions on the pace of development and on land and house prices

·    forecasting dwelling growth.

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

Local impacts and local board views

93.     The development contribution price varies by location depending on the cost of infrastructure required to support development in an area.

94.     Local boards have received a memorandum advising of the decision-making process and a workshop for local board chairs was held on 14 June 2021. Local board chairs have been invited to attend the Finance and Performance Committee workshops. A briefing session was held on 2 August 2021 to give local board members an opportunity to ask questions and discuss the policy. Following consultation, staff will report to the November local board business meetings seeking local board views. Local board views will be incorporated into the decision-making report to Governing Body for the 9 December 2021 meeting.

Tauākī whakaaweawe Māori

Māori impact statement

95.     An assessment of the impact of development contributions on Māori land is discussed in a separate section of this report. This is based on a more detailed assessment included in Attachment G: Support for Māori land development.

96.     Development contributions are assessed against the demand that different types of development generate on council infrastructure. Māori developments are assessed under broader development types based on the demand they generate. For example, kaumātua housing is treated the same as retirement villages, and marae are considered under community facilities. As more Māori developments occur, evidence of demand generation can be used to reclassify developments or create new development types.

97.     Auckland Council has a dataset of Māori freehold and customary title land in Tāmaki Makaurau. Limited information is currently held on Māori land in general title, such as land returned under settlement. Analysis of the impacts of development contributions on Māori land have been undertaken based on the best information available at the time this report was prepared. Importantly this analysis does not include all land returned for cultural or commercial redress. A summary of the impacts is below:

·     around 98.4 per cent of Māori land has no, or very low, development potential. Development contributions would be charged for developments on this land if any development takes place, however revenue from developments on this land is not expected to be material as most of this land is in rural areas or on islands.

·     around 1.1 per cent of Māori land currently has a zone, or use, that means the land owners would likely be eligible to apply for a Cultural Initiatives Fund grant.

·     land with an urban business or residential zone currently makes up around 0.5 per cent of Māori land and could easily be developed. This land has various levels of development which would be eligible for credits when development contributions are assessed.  This land could potentially be charged up to around $13 million in development contributions under the draft Contributions Policy 2021 if the land was developed. This is a very high-level estimate and actual charges would depend on the nature of development undertaken.

98.     Development contributions may act as a barrier to development and full utilisation of Māori land. Māori landowners have also previously commented that there are many other difficulties associated with developing Māori land, including gaining consent of owners and obtaining finance needed for development. They have raised their concerns in the historical context of Māori land confiscated by the Crown, or forcibly sold through rating sales, and the benefits that Aucklanders currently receive from this land and land gifted by Māori for parks.

99.     Feedback from iwi on the draft policy will be sought as part of consultation and via engagement with the Mana Whenua Kaitiaki Forum. A memo was submitted on 23 August 2021 to the Mana Whenua Kaitiaki Forum. All developers, including Mana Whenua, will be provided an opportunity to present their feedback in a more formal setting referred to in the consultation section above.

Ngā ritenga ā-pūtea

Financial implications

100.   The 10-year budget assumes development contributions revenue of $2.7 billion. After completing the analysis of the cost of investments in the 10-year budget that can be recovered with development contributions and the impact of the proposed policy changes, it is estimated that the revenue will be $2.6 billion. The achievement of this revised revenue forecast requires as a first step the implementation of a contributions policy updated for the capital expenditure decisions in the 10-year budget and the other changes proposed in this report.

101.   This report also recommends that the Cultural Initiatives Fund be increased by at least $500,000 which is currently unbudgeted and would need to be considered as part of the annual budget process.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

102.   Investment in development contributions funded growth-related infrastructure carries the risk that forecast development projections, and therefore development contributions revenue, are not met. These risks will be managed through monitoring consent applications and development contributions revenue.

103.   Legislation and legal precedent provide clear guidelines on what costs the council may recover through development contributions. Development contributions are a substantial issue for developers and as a result this has sometimes led to litigation. The Northern busway case (Neil Construction) successfully taken against North Shore City Council is a key precedent for the costs that can be recovered through development contributions. The recent decision on the judicial review of Hamilton City Council’s development contributions policy further clarifies the requirements for a policy and a council’s ability to exercise policy judgements.

104.   The council is careful to ensure its policy is compliant with legislation. However, the council has been subject to judicial review and a number of objections have been taken against the application of the council’s policy. The council has only lost one judicial review, although as a result legislation was changed to confirm our position. We have also had several objections all but one of which (Ryman Healthcare) was successfully defended. Council officers endeavour to work through concerns with objectors and resolve many in this way prior to a hearing.

105.   The recommendations in this report and the draft Contributions Policy 2021 and consultation document have been checked by Legal Services for legislative compliance.

Ngā koringa ā-muri

Next steps

106.   Public consultation on the draft Contributions Policy 2021 is proposed to be held in September and October 2021. Feedback will be reported to the Finance and Performance Committee workshop on 3 November 2021. Potential changes to the draft will be reported at the Finance and Performance Committee workshop on 1 December 2021. Staff will report to Finance and Performance Committee for the final policy adoption on 9 December 2021. The Contributions Policy 2021 is proposed to be implemented in January 2022.

Staged addition of investment beyond 10-years in the investment priority areas

107.   Officers will undertake further work on the infrastructure to support growth over the next 30 years in the other investment priority areas identified in the 10-year Budget 2021-2031 (other than Drury). Once this work is completed, further consultation will be proposed for the inclusion of these investment in the contributions policy. The commitment to deliver these investments, and those in Drury, will be reflected in longer-term intentions in the next 10-year budget covering the period 2024-2034 and in the following planning cycles.

Future demand factor review

108.   Our current policy uses demand factors based primarily on analysis undertaken to establish the 2012 and 2015 policies. Staff identified potential areas of change to demand factors in the work leading up to the 2019 policy review. When adopting the 2019 policy, the council directed staff to be undertake further work with the industry before considering making changes to demand factors. Progress was made on this work subsequently, but research and the required availability of human and financial resourcing was disrupted by the impacts of COVID-19.

 

109.   COVID-19 has changed the way in which Aucklanders, work, and play. Our research will have to establish if these are temporary or permanent phenomena, and how this may change the way in which the costs of infrastructure to support growth is shared between development types. Work on demand factors may suggest a redistribution of costs between development types and the implications of this will need to be factored into the work.

110.   Once we have implemented the Contributions Policy 2021, we will continue the work we have already begun on demand factors. We recognise this creates some uncertainty for developers in terms of potential price impacts. However, it ensures the council and developers will have the time and resource to ensure this is done well.

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Draft Contributions Policy 2021

27

b

Contributions Policy 2021 Consultation Document

77

c

How we set Development Contributions

99

d

Inclusion of capital projects beyond ten years in Drury

135

e

Impact of development contributions on house prices

141

f

Payment timing changes

145

g

Support for Māori land development

151

h

Schedule 8 Assets for which development contributions will be used

161

i

Funding area maps

189

      

Ngā kaihaina

Signatories

Authors

Andrew Duncan - Manager Financial Policy

Melva Yee - Programme Manager and Data Analyst

Authorisers

Ross Tucker - General Manager, Financial Strategy and Planning

Peter Gudsell - Group Chief Financial Officer

 


Finance and Performance Committee

16 September 2021

 

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Finance and Performance Committee

16 September 2021

 

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Finance and Performance Committee

16 September 2021

 

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Finance and Performance Committee

16 September 2021

 

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16 September 2021

 

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16 September 2021

 

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16 September 2021

 

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16 September 2021

 

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Finance and Performance Committee

16 September 2021

 

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Finance and Performance Committee

16 September 2021

 

Preparation of the Auckland Council Group and Auckland Council quarterly performance reports to 30 June 2021

File No.: CP2021/13189

 

  

Te take mō te pūrongo

Purpose of the report

1.       To provide an update on the preparation of the Auckland Council Group and Auckland Council performance reports and provide a summary of key highlights for the quarter ended 30 June 2021.

Whakarāpopototanga matua

Executive summary

2.       The committee is provided with results on a quarterly basis to review performance against budget and the prior year. Entities across the group are involved in the preparation of this information.

3.       Due diligence was performed by obtaining detailed explanations from all business units and group entities supplemented by representation letters provided by the substantive council-controlled organisations (CCOs) and Ports of Auckland Limited’s (POAL) Audit and Risk chairs and chief executives.

4.       Details of the council’s financial performance must remain confidential until they are first audited and published on the NZX. As such, the full performance reports are contained in a confidential report on this agenda. This report does summarise some of the key achievements and risks highlighted in the full reports.

5.       Representatives of the CCO boards, chief executives and chief financial officers will present their 30 June results at the 21 September 2021 CCO Oversight Committee.

Ngā tūtohunga

Recommendation/s

That the Finance and Performance Committee:

a)      note the update on the Auckland Council Group and Auckland Council quarter four performance reports.

b)      note the Auckland Council Group and Auckland Council quarter four performance reports will be further discussed in the confidential part of this meeting.

 

Horopaki

Context

6.       The Emergency Budget 2020/2021 was adopted in July 2020. Key aspects of the Emergency Budget include:

·    an average general rate increase of 3.5 per cent

·    over $2.5 billion group capital investment for the year

·    $200 million in group savings and temporary cost reductions

·    $244 million from asset recycling.

7.       The committee is provided with management and statutory results on a quarterly basis to review performance against the Emergency Budget and the prior year.

8.       The council group is subject to NZX disclosure requirements. Details of the council’s financial performance for the year must remain confidential until they are first audited and published on the NZX. As such, the full performance reports for both Auckland Council Group and Auckland Council are contained in a confidential report on this agenda.

9.       Representatives of the CCO boards, chief executives and chief financial officers will present their 30 June results at the 21 September 2021 CCO Oversight Committee.

Tātaritanga me ngā tohutohu

Analysis and advice

10.     Key achievements across the Auckland Council Group for the quarter ending 30 June 2021 include:

·    The Downtown Infrastructure Development programme was fully opened to the public on 2 July 2021. The programme includes six projects with a combined investment of $350 million. The programme has created a generous and welcoming destination along the water’s edge that is recognisably Tāmaki Makaurau. The space is designed to strengthen people’s connection with the Waitematā Harbour – a vibrant, transformed environment for all to enjoy.

·    The historic Chief Post Office building opened on 6 April 2021 as planned, three months after the completion of Te Komititanga, a new public square outside the building. Works still to be completed include the removal of the internal temporary facilities within the Chief Post Office building.

·    A total of 101 fossil-fuelled vehicles have been removed from council’s fleet this financial year, exceeding the emissions reduction target.

·    A successful tree planting season concluded with 735,000 trees planted.

11.     Key achievements for Auckland Council for the quarter ending June 2021 include:

·    Ōkahu Bay stormwater separation project completed separation of 200 private properties' private drainage and constructed around 3,380 metres of new public stormwater pipe network.

·    The June Papatoetoe tornado saw a cross-council response, co-ordinated by Auckland Emergency Management. The immediate response teams worked over 222 hours, they were then followed in by Regulatory Services conducting post-emergency assessments of the damaged housing.

·    With no sign or sightings of pigs on Waiheke (9,200 hectares), it is now considered to be feral pig free after six years of management.

·    The quarter was another record period for building consents, showing increases of 15 per cent and 16 per cent for lodged and issued consents, respectively, compared to the previous quarter.

·    Work is progressing for all six shovel ready Community Recycling Centre and Resource Recovery Park projects. Four sites have been granted resource consents and one further site consent has been lodged.

·    On 27 May 2021, Auckland Botanic Gardens received Toitū Envirocare Carbonzero Certification, demonstrating our commitment to Te Tāruke-ā-Tāwhiri: Auckland’s Climate Plan. This is the first certification of this type for an Auckland Council business unit.

Tauākī whakaaweawe āhuarangi

Climate impact statement

12.     This committee paper relates to performance reporting. No decision is sought in this paper that has a direct impact on the group’s greenhouse gas emissions nor the group’s approach to preparing for climate change.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

13.     The group quarterly performance report reflects the results of the group for the twelve months ended 30 June 2021. CCOs and POAL are involved in the preparation of this information.

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

Local impacts and local board views

14.     Community investment is one of Auckland Council’s strategic focus areas. The Auckland Council quarterly report provides highlights, issues and risks related to local and regional projects.

15.     In particular, for the quarter ended June 2021:

·    Matariki planting events took place in June 2021. Six events were held across the region with 1,270 volunteers planting 30,500 trees and plants.

·    Anzac Day services recommenced for April 2021 following cancellation last year due to COVID-19. These were delivered and supported by the Civic Events Team and were back to around the same level of activity as previously with over 80 events across Auckland.

·    This year the Music in Parks Internship Programme was introduced as a collaborative effort by the Community Innovation, Event Production and Youth Empowerment teams in partnership with Te Kāranga Charitable Trust and Youth Arts New Zealand. The programme was developed to support rangatahi in their curiosity to get onto a career pathway and contribute to the development of the event production industry in Aotearoa.

Tauākī whakaaweawe Māori

Māori impact statement

16.     Māori outcomes is one of our group and council’s strategic focus areas. The Auckland Council quarterly report provides key information and progress of delivery on the agreed programmes for the group and the council respectively.

17.     In particular, for the quarter ended June 2021:

·    Over 250 people attended the Amotai “Supplier Diversity Aotearoa Summit: Navigate 2021” in June 2021 held at the Ōrākei Marina.

·    Auckland Art Gallery’s Toi Tū Toi Ora closed with record visitation and outcomes delivered for Māori artists

·    Māori communities and outcomes were supported via the Manaaki Fund

·    The Ngāti-Ōtara Multi-sport Facility was completed and opened with a blessing by iwi.

18.     No decisions are being sought in this report that could have an impact on Māori.

Ngā ritenga ā-pūtea

Financial implications

19.     No financial decisions are sought and accordingly there are no financial implications directly arising from the information contained in the report.

20.     The council’s overall financial performance is discussed in the associated confidential report. One important milestone achieved this quarter, however, was Auckland Council reaching the $120 million savings target included in the Emergency Budget in May 2021.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

21.     The quarterly performance report also highlights key risks and issues identified during the quarter across the group. For this quarter, these identified risks include:

·    Further disruptions from new strains of COVID-19

·    Supply chain issues impacting capital delivery

·    Stakeholder concerns and construction disruption impacted by city centre development works. The recent completion of significant projects in Downtown, Waterfront and Karangahape Road has reduced the amount of disruption in the city centre.

22.     There is a minor risk that the information in this report and the attachments lacks accuracy or completeness due to it not being subject to an audit. Management has performed due diligence by obtaining detailed explanations from all Auckland Council business units as well as group entities supplemented by representation letters provided by CCOs and POAL’s Audit and Risk chairs and chief executives.

Ngā koringa ā-muri

Next steps

23.     The Auckland Council Group and Auckland Council quarterly performance reports to 30 June 2021 will be released to the public following the Governing Body adopting the Annual Report on 27 September 2021 and releasing this information to the NZX and the public on 28 September 2021.

 

Ngā tāpirihanga

Attachments

There are no attachments for this report.    

Ngā kaihaina

Signatories

Authors

Nick Bird – Lead Advisor Financial Planning

Tracy Gers - Group Accounting & Reporting Manager

Karuna Dahya – Manager Group Performance Reporting

Authorisers

Nicola Mills - General Manager Financial and Business Performance

Ross Tucker - General Manager, Financial Strategy and Planning

Peter Gudsell - Group Chief Financial Officer

 


Finance and Performance Committee

16 September 2021

 

Preparation of the draft Auckland Council Annual Report 2020/2021 and draft Auckland Council Summary Annual Report 2020/2021

File No.: CP2021/13104

 

  

Te take mō te pūrongo

Purpose of the report

1.       To provide assurance that due process was followed in the preparation of the draft Auckland Council Annual Report 2020/2021 and the draft Auckland Council Summary Annual Report 2020/2021 (together referred to as the annual reports).

Whakarāpopototanga matua

Executive summary

2.       The Governing Body will be asked to adopt the annual reports at its meeting on 27 September 2021. Preparing and publishing annual reports is a legislative requirement and ensures that we are transparent about our operations with investors and ratepayers.

3.       The annual reports cover the 12 months to 30 June 2021. They have been prepared by council staff and audited by Audit New Zealand on behalf of the Auditor-General. The annual reports compare and comment on the performance of the group and the council against the budgets and performance targets set in the Emergency Budget 2020/2021 and the amended 10-year Budget 2018-2028.

4.       The Deputy Auditor-General will attend the Audit and Risk Committee on 13 September 2021 to comment on the:

·   audit process

·   draft letter of representation

·   draft proposed audit opinion, including commentary on the key audit matters

·   status of the annual reports.

5.       There are no significant outstanding process issues relating to the annual reports, however, at the time of writing this report, there is one outstanding audit matter related to quantifying one resource consent measure.

6.       The council is working to resolve this matter and the general manager risk and assurance/group financial controller will update the committee on progress at this meeting.

7.       The Audit and Risk Committee will review the annual reports and the audit process prior to this Finance and Performance Committee meeting (13 September 2021). The Audit and Risk Committee’s recommendation to the Governing Body will be tabled at this meeting.

8.        Each substantive council-controlled organisation will present their fourth quarter 2020/2021 financial performance reports in the confidential part of the 21 September 2021 Council-Controlled Organisation Oversight Committee meeting.

Ngā tūtohunga

Recommendation/s

That the Finance and Performance Committee:

a)      note the confirmation by the Audit and Risk Committee that the audit process in respect of the draft Auckland Council Annual Report 2020/2021 and the draft Auckland Council Summary Annual Report 2020/2021 has been completed satisfactorily

b)      note the draft Auckland Council Annual Report 2020/2021 and the draft Auckland Council Summary Annual Report 2020/2021 will be discussed in the confidential part of this meeting.

 

Horopaki

Context

9.       The following diagram sets out the reporting milestones and provides an outline of the process underway to approve and adopt the annual reports.

Tātaritanga me ngā tohutohu

Analysis and advice

10.     The Local Government Act 2002 (LGA 2002) requires Auckland Council to prepare and adopt an annual report and summary annual report each year. The council is also required to publish an annual report under the NZX listing rules.

11.     The annual reports for the year to 30 June 2021 have been prepared by council staff and audited by Audit New Zealand on behalf of the Auditor-General.

12.     The Audit and Risk Committee reviews the quality of the annual reports, the processes used by management, and compliance with legislation and the financial reporting standards. They also review the audit process with the Office of the Auditor-General and Audit New Zealand. The Audit and Risk Committee will have completed their review of the annual reports and recommended the reports to the Governing Body for adoption prior to this Finance and Performance Committee meeting (resolution to be tabled).

13.     The terms of reference for the Finance and Performance Committee include recommending the annual reports to the Governing Body for adoption. This committee report, and the report to be presented in the confidential agenda (titled CONFIDENTIAL: Recommendation of the draft Auckland Council Annual Report 2020/2021 and draft Auckland Council Summary Annual Report 2020/2021) enable the committee to execute that responsibility.

14.     The annual reports are for the Auckland Council Group which is the result of consolidating the financial and performance results of Auckland Council, its council-controlled organisations and Ports of Auckland Limited. Financial statements of Auckland Council are included to comply with the Local Government Act 2002. All budgets and performance targets are those set out in the amended 10-year Budget 2018-2028 and the Emergency Budget 2020/2021.

15.     The annual report consists of four separate volumes (to be presented in confidential):

·    Volume 1: Overview and service performance

·    Volume 2: Local boards (comprising of 21 local board reports)

·    Volume 3: Financial statements

·    Volume 4: Climate change risk

16.     The summary annual report is a separate stand-alone document.

17.     The annual reports are currently undergoing a final review by Audit New Zealand and may be subject to some editorial changes prior to final submission to the Governing Body and subsequent publication.

Tauākī whakaaweawe āhuarangi

Climate impact statement

18.     This committee paper relates to financial and non-financial performance reporting and disclosures. Although Volume 4 of the annual report discusses climate change and includes performance measures relating to carbon emissions, no decision is sought in this paper that has an impact on greenhouse gas emissions or the council’s approach to reduce emissions.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

19.     The annual reports reflect the results of the Auckland Council Group for the year ended 30 June 2021. The council-controlled organisations are involved in the preparation of this information. No decision is sought that would directly impact the group.

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

Local impacts and local board views

20.     Volume 2 of the annual report includes a section featuring the achievements in each local board area. Local boards were engaged to collect and review this information and each chair has prepared a message which is included in their respective report. No decision is sought that would impact local boards.

Tauākī whakaaweawe Māori

Māori impact statement

21.     The annual reports cover all aspects of the group’s governance and public accountability. Although the annual reports include commentary on the Auckland Council Group’s contribution to outcomes for Māori, the role of the Independent Māori Statutory Board and the council’s Ngā Mātārae - Māori Strategy and Relations department, no decision is sought in this paper that has a direct impact on Māori.

Ngā ritenga ā-pūtea

Financial implications

22.     There are no financial implications directly arising from the information contained in the report as no financial decision is sought.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

23.     The following risks have been identified:

Risk of error, omission or non-compliance in preparation of annual report and summary annual report

24.     There is a risk that errors or non-compliance with legislation and accounting standards could occur in the preparation of the annual reports. To mitigate this risk, quality assurance reviews were performed on the consolidated results and commentary and the year-end reports. The reviews focused on accuracy, completeness and reasonableness of disclosures, legislative compliance and adherence to the council’s communications standards.

25.     There is also a risk that the annual reports present a biased view of the performance of the Auckland Council Group. Trust lens reviewers are used to review these reports to ensure that the annual reports tell a fair and balanced story, that good news stories are truthful and accurate and the poor performance stories are honest and transparent. They review the overall story for consistency through all volumes.

Compliance reviews

26.     Auckland Council’s Legal Services review the summary annual report and volumes 1-3 of the annual report for compliance with local government legislation.

27.     The Chief Sustainability Office reviews volume 4 of the annual report for compliance with the Taskforce on Climate-related Financial Disclosures (TCFD) framework.

28.     Mayne Wetherell reviews volumes 1,2 and 3 of the annual report as well as the summary annual report for compliance with NZX listing rules, and compliance with the Financial Reporting Act 2013 and the Financial Markets Conduct Act 2013.

Reviews of accuracy, completeness and fairness

29.     Several reviews of the annual reports take place by people with differing levels and areas of involvement in financial reporting. A summary of the reviews is as follows:

Reviewer

Volume 1

Volume 2

Volume 3

Volume 4

Summary Annual Report

Group chief financial officer

ü

ü

ü

ü

ü

Group treasurer

ü

ü

ü

ü

ü

General manager financial strategy and planning

ü

ü

ü

ü

ü

Group financial controller

ü

ü

ü

ü

ü

Manager group performance reporting

ü

ü

 

 

ü

Manager group accounting and reporting

 

 

ü

ü

ü

Senior group reporting technical accountant

 

 

ü

 

ü

Financial accounting manager

 

 

ü

ü

ü

Trust lens reviewers

ü

ü

ü

ü

ü

Legal services

ü

ü

ü

 

ü

Chief Sustainability Office

 

 

 

ü

 

Mayne Wetherell

ü

ü

ü

 

ü

30.     In addition to these reviews, the council’s Financial Control team completes a detailed reporting checklist to ensure all financial reporting and disclosure requirements have been met.

31.     The Chief Sustainability Office completed a checklist to determine the level of compliance with the TCFD framework.

32.     Two trust lens reviewers provided feedback on the financial statements. Both reviewers are not within the council’s finance division, and neither were involved in the preparation of the annual reports.

33.     All the technical quality assurance reviewers who perform reviews from a financial perspective are Chartered Accountant qualified or equivalent and have the appropriate technical accounting skills and knowledge.

Breach of confidentiality

34.     All Auckland Council, council-controlled organisations and Port of Auckland Limited employees who are involved in the preparation and review of the annual reports have been briefed on confidentiality requirements.

35.     Draft copies of the annual reports were provided to members prior to this meeting. Attached to the annual reports was a cover memo reminding councillors of NZX confidentiality obligations. The annual reports will be discussed in the confidential part of this meeting.

Ngā koringa ā-muri

Next steps

36.     The annual reports will be adopted by the Governing Body at its meeting on 27 September 2021 and released to the NZX and the public on 28 September 2021.

 

Ngā tāpirihanga

Attachments

There are no attachments for this report.     


 

Ngā kaihaina

Signatories

Authors

Tracy Gers - Group Accounting & Reporting Manager

Maria Marin Godoy - Financial Accounting Manager

Francis Caetano - Group Financial Controller

Authorisers

Ross Tucker - General Manager, Financial Strategy and Planning

John Bishop - Group Treasurer

Peter Gudsell - Group Chief Financial Officer

 


Finance and Performance Committee

16 September 2021

 

Exclusion of the Public: Local Government Official Information and Meetings Act 1987

That the Finance and Performance Committee

a)      exclude the public from the following part(s) of the proceedings of this meeting.

The general subject of each matter to be considered while the public is excluded, the reason for passing this resolution in relation to each matter, and the specific grounds under section 48(1) of the Local Government Official Information and Meetings Act 1987 for the passing of this resolution follows.

This resolution is made in reliance on section 48(1)(a) of the Local Government Official Information and Meetings Act 1987 and the particular interest or interests protected by section 6 or section 7 of that Act which would be prejudiced by the holding of the whole or relevant part of the proceedings of the meeting in public, as follows:

 

C1       CONFIDENTIAL: Auckland Council Group and Auckland Council quarterly performance reports to 30 June 2021

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

Ground(s) under section 48(1) for the passing of this resolution

The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 7.

s7(2)(h) - The withholding of the information is necessary to enable the local authority to carry out, without prejudice or disadvantage, commercial activities.

In particular, the report contains information that may not be released to the public until it is released to the NZX on 28 September 2021

s48(1)(a)

The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 7.

 

C2       CONFIDENTIAL: Recommendation of the draft Auckland Council Annual Report 2020/2021 and draft Auckland Council Summary Annual Report 2020/2021

Reason for passing this resolution in relation to each matter

Particular interest(s) protected (where applicable)

Ground(s) under section 48(1) for the passing of this resolution

The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 7.

s7(2)(h) - The withholding of the information is necessary to enable the local authority to carry out, without prejudice or disadvantage, commercial activities.

In particular, the report contains information that may not be released to the public until it is released to the NZX on 28 September 2021.

s48(1)(a)

The public conduct of the part of the meeting would be likely to result in the disclosure of information for which good reason for withholding exists under section 7.

 



[1] Schedule 8 Assets for which development contributions will be used and the Funding area maps are not included in the draft policy. When the policy is adopted they will be able to be viewed on our website. These are attached respectively as Attachments H and I.

[2] Growth is expressed in household unit equivalents (HUEs) which are our basis for setting development contribution prices. Dwellings numbers are higher than household unit equivalents because we charge less for apartments and smaller dwellings.

[3] The majority of the development in the Drury area is expected to take place in the new Drury-Opaheke funding area. We have also created a new sub-regional funding area, Southern Growth Area. This encompasses the southern part of Drury and neighbouring areas, to recover a share of the transport costs from developments which will benefit. The price increase in the Southern Growth Area is around $1,400 as a result of adding investments beyond 2031.

[4] The latest housing capacity assessment for Auckland was released in July 2021. This shows that the city is able to cater for this growth and the projected demand for housing over the next 30 years. Across urban Auckland there is sufficient plan-enabled development capacity and feasible development capacity, under current market conditions, to cater for this growth and the projected demand for housing over the next 30 years. Plan-enabled development capacity is estimated to provide for up to 909,000 dwellings. Under current market conditions, feasible development capacity is estimated to be around 840,000 in a maximum profit scenario.

[5] In 2014 the Government passed legislation that precluded councils from funding most community infrastructure, including swimming pools and libraries, through development contributions. This legislative change was reversed in 2019.