I hereby give notice that an ordinary meeting of the Revenue, Expenditure and Value Committee will be held on:

 

Date:

Time:

Meeting Room:

Venue:

 

Tuesday, 14 November 2023

2.00pm

Room 1, Level 26
135 Albert Street
Auckland

 

Komiti mō te Moni Whiwhi, mō te Whakapaunga me te Uara / Revenue, Expenditure and Value Committee

 

OPEN AGENDA

 

 

 

MEMBERSHIP

 

Chairperson

Cr Maurice Williamson

 

Deputy Chairperson

Cr Wayne Walker

 

Members

Cr Angela Dalton

Cr Daniel Newman, JP

 

Cr Chris Darby

Cr Greg Sayers

 

Cr Julie Fairey

Cr Sharon Stewart, QSM

 

Cr Shane Henderson

IMSB Chair David Taipari

 

IMSB Member Tony Kake, MNZM

Cr Ken Turner

Ex-officio

Mayor Wayne Brown

 

 

Deputy Mayor Desley Simpson, JP

 

 

(Quorum 5 members)

 

 

 

Duncan Glasgow

Kaitohutohu Mana Whakahaere Matua /
Senior Governance Advisor

 

9 November 2023

 

Contact Telephone: +64 9 8902656

Email: duncan.glasgow@aucklandcouncil.govt.nz

Website: www.aucklandcouncil.govt.nz

 

 


Revenue, Expenditure and Value Committee

14 November 2023

A close up of a logo

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ITEM   TABLE OF CONTENTS                                                                                         PAGE

1          Ngā Tamōtanga | Apologies                                                                                         5

2          Te Whakapuaki i te Whai Pānga | Declaration of Interest                                         5

3          Te Whakaū i ngā Āmiki | Confirmation of Minutes                                                    5

4          Ngā Petihana | Petitions                                                                                                5  

5          Ngā Kōrero a te Marea | Public Input                                                                           5

6          Ngā Kōrero a te Poari ā-Rohe Pātata | Local Board Input                                        5

7          Ngā Pakihi Autaia | Extraordinary Business                                                              5

8          Statement of Investment Policy and Objectives review for the Self Insurance Fund  7

9          Auckland Council savings progress for the quarter ended 30 September 2023 11

10        Local Government Act 2002, Section 17A Reviews - Background and current reviews underway at Auckland Council                                                                    19

11        Service and financial performance review programme (Covering report)           25

12        Summary of Revenue, Expenditure and Value Committee information memoranda and briefings (including the forward work programme) – 14 November 2023     27

13        Update on the Asset Recycling Programme                                                            29

14        Te Whakaaro ki ngā Take Pūtea e Autaia ana | Consideration of Extraordinary Items

PUBLIC EXCLUDED

15        Te Mōtini ā-Tukanga hei Kaupare i te Marea | Procedural Motion to Exclude the Public                                                                                                                            37

C1       CONFIDENTIAL: Update on the Asset Recycling Programme                               37

C2       CONFIDENTIAL: Variation to Healthy Waters central and Waiheke maintenance contract                                                                                                                         37


1          Ngā Tamōtanga | Apologies

 

 

 

2          Te Whakapuaki i te Whai Pānga | Declaration of Interest

 

 

 

3          Te Whakaū i ngā Āmiki | Confirmation of Minutes

 

            Click the meeting date below to access the minutes.

 

That the Revenue, Expenditure and Value Committee:

a)         whakaū / confirm the ordinary minutes of its meeting, held on Tuesday, 19 September 2023, including the confidential section, as a true and correct record.

 

 

 

 

4          Ngā Petihana | Petitions

 

 

 

5          Ngā Kōrero a te Marea | Public Input

 

 

 

6          Ngā Kōrero a te Poari ā-Rohe Pātata | Local Board Input

 

 

 

7          Ngā Pakihi Autaia | Extraordinary Business

 

 

 

 

 


Revenue, Expenditure and Value Committee

14 November 2023

 

Statement of Investment Policy and Objectives review for the Self Insurance Fund

File No.: CP2023/17064

 

  

 

Te take mō te pūrongo

Purpose of the report

1.       To approve the revisions to the Statement of Investment Policy and Objectives (SIPO) for the Self-Insurance Fund (SIF).

Whakarāpopototanga matua

Executive summary

2.       In line with the SIPO review process the Insurance Management Steering Group (IMSG) has reviewed the SIPO and has endorsed the revisions to the SIPO.

3.       The SIPO outlines how the investments of the SIF are to be managed.

4.       The SIPO has been developed by Russell Investments (council’s SIF investment manager) after consultation with management and had been endorsed by the Insurance Management Steering Group (IMSG).

5.       The high-level investment objectives of the SIPO reflect the long-term growth focus of the fund balanced with the need to maintain sufficient liquidity to pay claims.

6.       The overall investment strategy reflects a balanced approach to investment (with a 50/50 split between income and growth assets).

7.       SIPO governance rests with this committee and the IMSG, with day-to-day operations and investments decisions being the responsibility of Russell Investments (within the parameters set out in the SIPO).

8.       The SIPO incorporates a Responsible Investment (RI) policy. The RI policy is based on a “best endeavours” approach which recognises our limited ability to exclude some securities from the portfolio.

Ngā tūtohunga

Recommendation/s

That the Revenue, Expenditure and Value Committee:

a)      whakaae / approve the revised Statement of Investment Policy and Objectives for the Self-Insurance Fund provided as Attachment A to the agenda report.

Horopaki

Context

9.       The Auckland Council Group established a SIF to manage a significant portion of the group’s insurable risks from 1 July 2022.

10.     The SIF was initially seeded with $20 million on 4 October 2022. A further $25 million was invested in the fund on 1 July 2023.

11.     Russell Investments are the managers of the SIF, appointed following a procurement process.

12.     The SIPO requires formal approval by this committee at least every three years with an annual review by the IMSG.

13.     SIPO governance rests with this committee and the IMSG, with day-to-day operations and investments decisions being the responsibility of the investment manager (within the parameters set out in the SIPO).

14.     The high-level investment objectives of the SIPO reflect the long-term growth focus of the fund balanced with the need to maintain sufficient liquidity to pay claims.

15.     The investment strategy reflects:

i)        a balanced approach to investment (with a 50/50 split between income and growth assets)

ii)       a weighting of 80 per cent to global assets and 20 per cent to New Zealand assets

iii)      investment in collective investment vehicles (pooled funds) rather than individual securities to maximise diversification and liquidity.

iv)      a focus on fixed interest and equities asset classes (rather than real or alternative investments)

v)      a hedging strategy (in relation to global assets) of 100 per cent for fixed interest and 50 per cent for equities.

16.     The SIPO incorporates a Responsible Investment (RI) policy. The RI policy is based on a “best endeavours” approach which recognises our limited ability to exclude some securities from the portfolio. The RI policy has been reviewed by council’s Sustainability team and global experts at Russell Investments. Our approach to RI is broadly consistent with the approach taken by other large NZ investment institutions such as NZ Super and ACC.

Tātaritanga me ngā tohutohu

Analysis and advice

17.     The SIPO has been developed by Russell Investments after consultation and feedback from management. The revised SIPO is attached as Attachment A. A marked-up version of the RI section is attached as Attachment B.

18.     The following changes were made to the SIPO, at the annual review:

i)        the name of the Finance and Performance Committee has been updated to Revenue, Expenditure and Value Committee.

ii)       changes to the Responsible Investment (RI) section to bring in line with the latest industry best practice.

19.     The revisions to the SIPO have been endorsed by council’s IMSG.

20.     The market value of SIF as of 30 September 2023 was $48 million.

Tauākī whakaaweawe āhuarangi

Climate impact statement

21.     Climate change considerations are a key component of the RI policy section of the SIPO.

22.     As stated in the SIPO, council identifies climate change as a top risk and material issue and is working to better understand and manage its exposure. Within the SIF programme and through its investments in the Managed Investment Fund (MIF) (the investment vehicle for the SIF), council is committed to supporting the transition to a resilient, low-carbon economy. Consistent with this commitment, the MIF’s global equities allocation will be invested in a strategy which reduces portfolio exposure to greenhouse gas emissions and fossil fuel reserves and increases exposure to companies with a high responsible investment rating and to those participating in the transition to a green and just economy (relative to a standard, global equity passive portfolio).

 

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

23.     Representatives from all the council-controlled organisations (CCOs) and the council continue to work collaboratively on all insurance matters including the management of the SIF and the associated development of the SIPO. All CCOs are represented on the IMSG.

 

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

Local impacts and local board views

24.     The management of the SIF, including the development of the SIPO for the council group is a region-wide issue and does not specifically impact local boards. Accordingly, there has not been any consultation undertaken directly with local boards.

Tauākī whakaaweawe Māori

Māori impact statement

25.     The SIPO incorporates a RI policy that integrates Environmental, Social and Governance (ESG) considerations into the investment and operational policies of the SIF programme and the MIF where possible. The SIPO itself is general in nature and no decision is sought in this paper that has a direct impact on Māori.

26.     The property insurance arrangements for the Independent Māori Statutory Board, the Tūpuna Maunga o Tāmaki Makaurau Authority, the Ngāti Whātua Ōrākei Reserves Board and Te Poari o Kaipātiki ki Kaipara are included in the Auckland Council Group arrangements.

Ngā ritenga ā-pūtea

Financial implications

27.     The financial performance of the SIF will depend on several factors including the investment returns.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

28.     With any investment fund, there is a risk of negative returns and underperformance against benchmarks.

29.     This risk is mitigated by:

i)        the appointment of a professional investment manager

ii)       having an approved and regularly reviewed SIPO

iii)      regular reporting to the IMSG (monthly) and this committee (quarterly) which will include performance against recognised benchmarks.

 

Ngā koringa ā-muri

Next steps

30.     Once approved by the Revenue, Expenditure and Value Committee, the revised SIPO be used for SIF investment management purposes.


 

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Statement of Investment Policy and Objectives draft November 2023

 

b

Revised RI Section

 

      

Ngā kaihaina

Signatories

Author

Andrew John - Head of Group Treasury

Authorisers

John Bishop - Group Treasurer

Peter Gudsell - Group Chief Financial Officer

 

 


Revenue, Expenditure and Value Committee

14 November 2023

 

Auckland Council savings progress for the quarter ended 30 September 2023

File No.: CP2023/16577

 

  

 

Te take mō te pūrongo

Purpose of the report

1.       To provide an update on the progress towards meeting the $50 million savings target for Auckland Council for 2023/2024 financial year.

Whakarāpopototanga matua

Executive summary

2.       The Governing Body decision-making on the 2023/2024 Annual Budget included an additional $32.8 million enduring operating savings target for Auckland Council. This target was on top of the existing $90 million savings target, of which $17.2 million was still to be achieved at June 2023.

3.       The adopted final Annual Budget therefore includes a total remaining operating savings target for Auckland Council of $50 million per annum over the term of the 2021-2031 Long-term Plan.

4.       At 30 September 2023, Auckland Council has achieved $38.1 million (76 per cent) towards the $50 million operating savings target for the 2023/2024 financial year. The majority of the savings in the first quarter have been achieved through the implementation of the specific annual budget decisions. $9.4 million of the savings are one-off, meaning that further enduring savings are still to be achieved.

5.       There is a pipeline of further savings which includes ongoing budget reviews, procurement contract negotiation, continuous improvement projects such as cash handling, grants administration, system upgrades, the Simplification programme including robotic processing automation and the functional leadership project involving further centralisation of functions within the organisation.

6.       Progress against the savings target is reported quarterly to the Governing Body as part of the Quarterly Performance Reporting, and monitored monthly by the Executive Leadership Team for progress, risks and opportunities.

Ngā tūtohunga

Recommendation/s

That the Revenue, Expenditure and Value Committee:

a)      tuhi ā-taipitopito / note the Auckland Council operating savings progress for the quarter ended 30 September 2023 with $38.1 million or 76 per cent of the annual target achieved.

Horopaki

Context

7.       In June 2023, the Governing Body agreed a mix of levers for the 2023/2024 annual budget to close the estimated $325 million operating budget gap. This mix of financial levers included rates increases, increasing fees and user charges, the sale of some of the council’s Auckland International Airport shares, modest use of additional debt and operating cost savings.

8.       An additional $32.8 million operating spend reduction savings target was set for Auckland Council and the resolution is listed as follows:

 

Resolution number GB/2023/100

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9.       This was on top of the existing $90 million savings target, of which $17.2 million was still to be achieved as at June 2023.

10.     The adopted final Annual Budget 2023/2024 therefore includes a total remaining operating savings target for Auckland Council of $50 million per annum over the remaining term of the 2021-2031 Long-term Plan.

11.     Some reductions were specifically decided by the Governing Body and may have an impact on some services that council currently delivers, such as the withdrawal from the direct provision of early childhood education services on a regional basis.

12.     Savings targets under the delegation of the Chief Executive focus on efficiencies without material changes to service levels to the community.

13.     There are many initiatives underway that deliver savings and efficiencies including:

·    Procurement – reducing contract spend with third parties through negotiating better terms for the council

·    Functional Leadership Project – centralising and reducing internal support functions, leveraging capability and capacity more efficiently, e.g. centralisation of software purchasing and management

·    Simplification programme – improving the efficiency of processes by leveraging robotic processing automation and consolidating transactional services across the organisation, e.g. automating the transfer of data between systems for licensing and regulatory compliance activities  

·    Revenue project – identifying new or growing existing revenue opportunities to improve non-rates revenue

·    Prudent financial management – a strong focus on costs through a culture of questioning and challenging expenditure, reviewing and evaluating budgets and other finance-related transactions, e.g., zero-based budgeting on targeted areas and review of targeted expenditure lines.

14.     The savings target relates to operating expenditure. It excludes any benefits related to capital works and cost avoidance. These benefits are tracked separately.

Tātaritanga me ngā tohutohu

Analysis and advice

15.     In the first quarter ended 30 September 2023, $38.1 million of savings have been realised through the initiatives below:

Operating spending reductions of $23.4 million implemented per the Annual Budget 2023/2024:

·    $4.7 million of ongoing reductions and $1.8 million of one-off reductions from regional services

·    $4.0 million of reductions to local board funding

·    $5.0 million of maintenance optimisation and reduction in open space costs

·    $1.4 million from changes to fees and charges

·    $1.5 million from simplifying and limiting new strategies, savings realised through a combination of the organisational re-design change process and a comprehensive staff vacancy review

·    $0.5 million from the consolidation of corporate office space across the Auckland Council Group, e.g., Auckland Emergency Management moving into Auckland House

·    $2.0 million one-off savings from FY24 amenities grants being agreed lower than the budgeted allowance.

·    $2.5 million staff cost savings from lower annual remuneration increases for Bands I and above compared to the budget

 

16.     In the first quarter, changes in the regional services provided by the council were implemented as agreed in annual budget decision-making. These changes included:

·    Slightly reduced levels of service for day-time noise complaints

·    Reduced in-person research services at libraries and environment/sustainability education programmes

·    Reduced the Live Lightly programme investment and behaviour change initiatives and moved more services online

·    Reduced the funding provided to COMET for the 2023/2024 financial year (a council-controlled organisation that supports education and skills). Funding in future years is no longer required as COMET has become a fully independent charitable trust.

17.     There were also some one-off and multi-year reductions in other regional services. For example, there is reduced communications and response times required for illegal dumping, delayed asset management systems improvements until water reform is advanced, and undertaking some housing infrastructure analysis work internally. There is also a reduction in consequential opex (e.g. maintenance, utilities, rates) based on recalculation of assumptions used and reprioritisation of projects.

 

 

18.     The local board funding reduction consists of $3.3 million reductions from the overall Locally Driven Initiative funded projects and $0.7 million relates to specific reductions in Asset Based Services service and funding levels. This resulted in fewer citizenship ceremonies, lower allocations to local community grants and further reductions in maintenance of open space.

19.     The optimisation and reduction in open space levels of service was delivered through variations to the Parks and Community Facilities full facility maintenance contracts. Specific areas include rationalisation and optimisation of rubbish bins and minor reductions in levels of service in gardens and turf.

20.     Increased fees and user charges were also implemented through the annual budget process to reflect the increased costs associated with providing services, including fees for resource and building consents, bookable spaces and cemetery fees. A further $1.0 million of revenue opportunities have been identified, focusing on improving the bottom line of non-rates revenue in the areas of commercial leases and licensing and regulatory compliance.

21.     Auckland Council’s Executive Leadership Team set a lower annual remuneration increase for kaimahi in Bands I and above. This was less than what had been allowed for in the budget and resulted in permanent savings of $2.5 million in 2023/2024 and $2.0 million savings per annum going forwards. This savings achievement is attributed towards the Chief Executive’s savings target of $5.0 million.

22.     In relation to the exit of the direct provision of Early Childhood Education (ECE) services on a regional basis, the Annual Budget 2023/2024 allowed local boards to allocate additional funding if they wished to continue to operate the ECE centres as local services sitting with local boards. The decisions made by local boards resulted in a three-phase change process for the closure of ECE in the current financial year: four centres closed in October 2023, two centres will close in December 2023 and two boards decided to continue the provision of ECE service in four centres through to June 2024 while investigations are undertaken for future delivery via a third-party provider (under varying conditions).

23.     The latest ECE service financial review showed that no operating savings are expected for 2023/2024 due to existing costs and redundancy provisions. The current service is funded until 30 June 2024 for the four ECE centres that decided to continue the service while an outsourced service provider is sought. Savings from exiting direct provision of the service were estimated at $1.0 million per annum. $0.5 million of ongoing savings are expected to be achieved by 30 June 2024, however $0.5 million of ongoing savings is at risk due to the uncertainty around the extent of overhead cost reductions achievable and the ability to commercially lease the ECE premises.

24.     Savings of $0.5 million have been achieved towards the group shared services target through the consolidation of corporate office space across the Auckland Council Group, although the savings are shared between Auckland Council and the relevant council-controlled organisations (CCOs). Tātaki Auckland Unlimited kaimahi relocated to Auckland House in October and exited or sub-let their premises, with Eke Panuku scheduled to relocate by the end of the calendar year.

25.     Savings of $1.5 million have been achieved towards the group strategy and planning target of $2.5 million, through a combination of the organisational re-design change process and a comprehensive budgeted vacancy review, reducing the number of roles doing planning and strategy work. Further work is underway to simplify the strategy and planning approach across the council group, and this is expected to take at least one year to see benefits.

26.     To cover the timing shortfalls in the identified savings initiatives outlined above, offsetting cost reductions (mostly one-off reductions) will be need to be found in the current year. These are expected to be identified through existing savings programme processes, such as quarterly reviews of spending vs budget.


 

Reductions of $14.7 million under delegation to the Chief Executive:

·    $6.9 million permanent savings through organisational re-design, mainly of support services, which went live in June 2023

·    $2.0 million permanent savings from integrating the remaining six service centres into library facilities

·    $0.8 million permanent savings through the centralisation of software budgets which are all held now by the ICT department to facilitate efficient purchasing, oversight of products and management of contracts

·    $1.8 million one-off saving of consequential opex (repairs and maintenance, utilities and other expenditure), including sub-leasing part of the Tasman building back to the landlord, and some capital and maintenance projects deferred to outer years

·    $2.4 million one-off savings from staff cost budget not spent in the first quarter due to vacancies not filled and $0.8 million one-off savings from elected member annual fees (set by the Independent Remuneration Authority) lower than the budget allowed.

27.     Auckland Council concluded a structural change process in June 2023 that moved the organisation towards its goal of becoming a simpler and more efficient organisation that delivers for Aucklanders in the future. The change resulted in a net reduction of positions – this came from the removal of staff vacancies, the merging of functions for greater efficiency and reducing duplication. Financially, a permanent savings of $6.9 million in 2023/2024, and an average savings of $8.0 million per annum going forward was achieved.

28.     In addition, the integration of Auckland Council’s last six service centres into community hubs, bringing a more sustainable investment approach to community service delivery, has been completed. This approach is less reliant on council assets and more focused on delivery through alternative ways, such as partnership, digital channels, and multi-use facilities. The integration of service centres resulted in permanent savings of $2.0 million, with an average saving of $2.7 million over the remaining years of the current long-term plan. These savings were higher than originally estimated.

29.     Staff costs for the first quarter are below budget due to the effect of longer than normal recruitment time and difficulties in filling some roles due to competition for certain skill sets, particularly engineering, sustainability, and information technology. This means roles remain vacant and therefore budget is not spent. The under-resourcing puts pressure on the delivery of services and programmes and in some cases additional outsourcing is required.

30.     Other one-off savings are mainly due to a continued focus on cost control and budget reviews. They also include savings resulting from actual expenditure being below budget at the end of the first quarter, where it has been assessed that the underspend will not be needed in the current financial year.

31.     Of the $38.1 million savings achieved, $9.4 million is one-off expenditure reductions and $28.7 million is ongoing cost reductions.

32.     Good progress has been made overall, however it remains challenging to find ongoing cost reductions that contribute to future years’ savings targets, given the current inflationary environment for goods, services and labour as well as the previous focus on cost constraint and savings.

33.     A one-page summary of the Auckland Council savings programme as at 30 September 2023 is included as Attachment A to this report.

Tauākī whakaaweawe āhuarangi

Climate impact statement

34.     Projects or activities that have a positive impact on climate change may be affected by the reduction of climate change-related programmes within the regional service reductions.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

35.     The $50 million savings target for 2023/2024 only applies to Auckland Council. Some savings initiatives are to be achieved for the group, for example, corporate property rationalisation, strategy and planning simplification, and group shared services. These initiatives are being led by cross-agency groups.

36.     New tools and process improvements successfully implemented in Auckland Council may also be shared with the council-controlled organisations for greater efficiencies and other benefits.

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

Local impacts and local board views

37.     Local boards provided feedback on the final Mayoral Proposal that included savings targets for local board budgets. The Governing Body agreed to reduce total local board funding by $4.0 million as part of the $32.8 million operating spending reductions for Auckland Council.

38.     With the exception of the $4.0 million local board funding reduction, all savings initiatives and annual budget decisions follow the centralised savings approach, which has been set at a regional level.

Tauākī whakaaweawe Māori

Māori impact statement

39.     This report does not seek any decision. The savings initiatives and targets were set as part of the annual budget process which was subject to consultation and considered impacts on Māori for the purposes of that decision-making.

40.     The Māori outcomes budget is ring-fenced for delivery of the Kia Ora Tamaki Makaurau framework and was not subject to cost reductions.

Ngā ritenga ā-pūtea

Financial implications

41.     This report provides an overview of how Auckland Council is performing against its operating savings target, which supports meeting the 2023/2024 Annual Budget. Savings reporting is included in the Auckland Council quarterly performance reporting to the Governing Body for context as part of the council’s overall financial performance.

42.     There are financial implications on the annual budget if the savings target is not met for 2023/2024. This may result in slightly higher debt levels and would have flow on effects through to financial year 2024/2025.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

43.     Progress towards the savings target is on track, with a sufficient pipeline of expected efficiency improvements, procurement opportunities and anticipated expenditure below budgeted levels.

44.     The significant risks to the achievement of future savings and cost reduction targets include inflationary pressure on staff and operating costs which may reduce savings opportunities; central government legislative and policy changes; and the pace at which process, IT system and efficiency improvements are implemented in order to realise benefits.

Ngā koringa ā-muri

Next steps

45.     The next progress update will be provided after the council’s quarter two results are finalised.

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Auckland Council savings programme overview as at 30 September 2023

 

     

Ngā kaihaina

Signatories

Author

Nicole Heng - Senior Finance Advisor - Programmes

Authorisers

Nicola Mills - General Manager Financial and Business Performance

Peter Gudsell - Group Chief Financial Officer

 

 


Revenue, Expenditure and Value Committee

14 November 2023

 

Local Government Act 2002, Section 17A Reviews - Background and current reviews underway at Auckland Council

File No.: CP2023/16794

 

  

 

Te take mō te pūrongo

Purpose of the report

1.       To update the Revenue, Expenditure and Value Committee on the background of Section 17A[1] reviews at Auckland Council and reviews currently underway.

Whakarāpopototanga matua

Executive summary

2.       Section 17A ‘delivery of service’ reviews have been an important legislative requirement for local government since being introduced in 2014. The reviews are undertaken to support cost-effective service delivery and are also an opportunity to improve the delivery of services to residents and ratepayers.

3.       Auckland Council has been undertaking Section 17A reviews (“Value for Money Reviews”) since June 2017 as per the requirements and triggers for Section 17A.

4.       There are currently four reviews underway – Pools and Leisure Service Delivery Model, Group Property Operating Model, Early Childhood Education, and Holiday Parks. There are a further five services currently being scoped for review – Economic Development, Major Events, Community Leasing Model, outsourcing opportunities and Asset Ownership Framework.

Ngā tūtohunga

Recommendation/s

That the Revenue, Expenditure and Value Committee:

a)      tuhi ā-taipitopito / note the information provided on the Section 17A review process and current status of activity underway.

Horopaki

Context

Legislative context

5.       The Local Government Amendment Act 2014 introduced section 17A (S17A) ‘Delivery of Service’ reviews. The amendment required councils to undertake council-wide service reviews within three years and with the purpose of ensuring cost-effectiveness when meeting the needs of the community. This included the provision of good-quality local infrastructure, local public services, and performance of regulatory functions. The review of the service must also consider options for how the service is governed, funded, and delivered.


 

 

6.       Following the first three-year review of all council services in 2017, there are now three legislative triggers for conducting a service review:

·    when considering significant changes to service levels – if council is considering a significant change, then council must undertake a review of service delivery in conjunction.

·    within two years of expiration of a contract or other binding agreement to deliver a service – if there has been another party delivering the service on council’s behalf, and that is due to expire inside two years, then council will need to conduct a review.

·    a service delivery review exceeds its maximum statutory life of six years – if it has been more than six years since the previous review then a new one must be conducted unless something happened to trigger a review in the intervening period.

7.       Outside of the legislative triggers for S17A reviews, councils can also initiate S17A reviews of their own volition.

8.       There are two statutory circumstances where a review is not necessary, even when a legislative trigger has been activated:

·    when there is a contract or agreement in place that cannot reasonably be changed within two years. if something does occur that makes a change reasonably practicable, then council must review.

·    if the cost of doing the service review outweighs the benefits of doing a review.

Timeline: Auckland Council S17A reviews

9.       In March 2017, the Finance and Performance Committee approved the Value for Money Programme to undertake service reviews throughout Auckland Council and the council-controlled organisations. A multi-year programme was developed with final recommendations for each review presented to the Governing Body on a staggered approach. Completed reviews with the recommendations implemented included:

·    Three Waters (stormwater, wastewater, water supply)

·    Domestic waste

·    Communications and engagement

·    Investment attractions and global partnerships

·    Procurement

·    Information and communication technology

·    Customer services

·    Financial services.

10.     In 2020, the Emergency Budget included tactical service reviews that were required to meet urgent savings targets. A range of measures were implemented including reductions in discretionary expenditure, capital expenditure deferrals, temporary reductions in operating service levels and asset recycling to mitigate the impact of this revenue shortfall as well as the unprecedented drought situation. The Value for Money team was established during this process to support the tactical service reviews and asset recycling targets.

11.     In 2023, the Value for Money team has continued to identify, assess, and deliver on service reviews across the Auckland Council Group. As part of developing the Long-term Plan 2024-2034, the Value for Money team is strategically identifying service review opportunities that will ensure cost-effective services for current and future residents and ratepayers and enable compliance with S17A requirements.

Governance

12.     The Revenue, Expenditure and Value Committee is responsible for approving the terms of reference for individual S17A reviews and monitoring and reporting on the implementation of, and the recommendations arising from those reviews.

Approach to S17A reviews

13.     Each service review is unique, but each review starts with asking a standard set of questions which assesses cost-effectiveness as well as ensuring that the service is fit for future requirements.

14.     Once these questions have been answered, then a review of the current state is undertaken to identify any issues, challenges, and opportunities with the service. As part of this work, a value proposition is identified for the service and a cost-benefit analysis for the improvement opportunities completed.

15.     Results of completed reviews are then reported back to the Revenue, Expenditure and Value Committee. 

Tātaritanga me ngā tohutohu

Analysis and advice

16.     The Auckland Council Group is responsible for the delivery of S17A reviews of service and the Value for Money team has been established to ensure the identification, assessment and delivery of the reviews.

17.     There are four service reviews currently underway (further detail provided in Attachment A).

Service Review

Description

Current Status

Pools and Leisure Service Delivery Model

Review of the service strategy and delivery model for Pools and Leisure

Deliver – The request for proposal submissions deadline was 3 November 2023 and staff are now working on a business case with the recommended pathway to be presented back to the Revenue, Expenditure and Value Committee in May 2024.

Group Property Operating Model

Review of the structure and performance of the council property portfolio management functions

Plan – The scope and options are being investigated. A further update will be provided to the Revenue, Expenditure and Value Committee in May 2024.

Early Childhood Education (ECEs)

Review Operating Model for ECEs and recommend and gain approval for future ECEs operating model.

Closed – Four ECEs have closed, two will close at the end of December with the balance to be closed by the end of the financial year.

Holiday Parks

Review of the business model of three council-owned holiday parks (Orewa, Martins Bay and Whangateau).

Benefits Realisation – Performance improvement being implemented.

 

18.     There are five service reviews being scoped:

·    Economic development – review of all economic development functions across the council group

·    Major Events – review of major events delivered by Tātaki Auckland Unlimited

·    Community Leasing Model – review of the community leasing structure and performance

·    Asset Ownership Framework – optimisation of council’s property portfolio to prioritise ownership of service assets

·    Outsourcing Opportunities - review of potential to outsource other services across Auckland Council.

19.     Once the initial scoping and assessment has been completed for these reviews, then they will be presented to Revenue, Expenditure and Value Committee for approval to progress.

20.     If there are further service reviews that are required or requested by the Revenue, Expenditure and Value Committee, then prioritisation of current reviews will need to be undertaken or additional resource allocated. 


 

Tauākī whakaaweawe āhuarangi

Climate impact statement

21.     Our climate commitments are set out in Te Tāruke-ā-Tāwhiri: Auckland's Climate Plan. With every service review, the climate commitments are considered to ensure the decisions we make positively contribute to achieving the targets. There is a commitment within the plan to reduce greenhouse gas emissions by 50 per cent by 2030 (against a 2016 baseline) and to achieve net zero emissions by 2050. In order to achieve these targets, the value of high emission activities will be assessed. 

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

22.     The S17A reviews occur across the council group. Once a service review has been triggered, then a value for money assessment will be undertaken and options for future service delivery considered. These may result in a change of service delivery to maximise the cost-effectiveness of the service.

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

Local impacts and local board views

23.     Service reviews have different levels of impact on local boards. When a service review assessment will impact the level of service within a particular local board area, then staff will either seek a decision or feedback from the board depending on the allocated decision-making responsibility.

Tauākī whakaaweawe Māori

Māori impact statement

24.     As part of the review of services, consideration will be given to how council services (and any decisions to change) advance Māori health and wellbeing, promote Māori success, and recognise and provide for Te Tiriti o Waitangi and Māori outcomes.

25.     Service decisions will also consider the Independent Māori Statutory Board Schedule of Issues of Significance 2021 – 2025, and where appropriate, the process will include engagement with mana whenua and mataawaka.

26.     In addition, Kia Ora Tāmaki Makaurau outlines the following measures in relation to Māori employment in council-led service provision which will be considered in service reviews:

·    realising rangatahi potential – the number of Māori youth employed in permanent and fixed term roles across the council group

·    an empowered organisation – the percentage of council employees in fixed term and permanent roles who identify as Māori, and the percentage of council staff in senior leadership positions who identify as Māori.

Ngā ritenga ā-pūtea

Financial implications

27.     The basis of S17A is to ensure that services are cost-effective when meeting the needs of the community. This is to ensure that Aucklanders are receiving value for money from the council services that they receive.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

28.     Each S17A review has risks specific to that review. These risks are identified and mitigated as early as possible when the review is scoped by staff.

29.     There is a reputational risk if Auckland Council does not comply with the requirements for S17A. The Local Government Act does not explicitly set out any consequence for not complying with S17A, and therefore the consequences are most likely political or reputational rather than legal, and also depend on the nature of the non-compliance. 

Ngā koringa ā-muri

Next steps

30.     Staff will continue with the review of services as required by legislation or by council decision and an update will be provided to the committee every six months on progress.

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Status update on Value for Money reviews - November 2023

 

     

Ngā kaihaina

Signatories

Authors

Chantelle Subritzky - Head of Value For Money

Andrew Morris - Senior Consultant

Authorisers

Ross Chirnside - General Manager Value For Money

Peter Gudsell - Group Chief Financial Officer

 

 


Revenue, Expenditure and Value Committee

14 November 2023

 

Service and financial performance review programme (Covering report)

File No.: CP2023/17556

 

  

 

Te take mō te pūrongo

Purpose of the report

1.       To agree the approach and initial priorities for reviewing service and financial performance of individual council departments and council-controlled organisation (CCO) activity groups to identify value for money opportunities as set out in the Revenue, Expenditure and Value Committee’s Terms of Reference.

Whakarāpopototanga matua

Executive summary

2.       This is a late covering report for the above item. The comprehensive agenda report was not available when the agenda went to print and will be provided prior to the 14 November 2023 Revenue, Expenditure and Value Committee meeting.

Ngā tūtohunga

Recommendation/s

The recommendations will be provided in the comprehensive agenda report.

 

 

 


Revenue, Expenditure and Value Committee

14 November 2023

 

Summary of Revenue, Expenditure and Value Committee information memoranda and briefings (including the forward work programme) – 14 November 2023

File No.: CP2023/17280

 

  

 

Te take mō te pūrongo

Purpose of the report

1.       To tuhi ā-taipitopito / note the progress on the Revenue, Expenditure and Value Committee forward work programme appended as Attachment A. 

2.       To whiwhi / receive a summary and provide a public record of memoranda or briefing papers that have been distributed to Revenue, Expenditure and Value Committee. 

Whakarāpopototanga matua

Executive summary

3.       This is a regular information-only report which aims to provide greater visibility of information circulated to Revenue, Expenditure and Value Committee members via memoranda/briefings or other means, where no decisions are required. 

4.       The following information items were distributed:

Date

Subject

9/11/2023

Revenue, Expenditure and Value Committee Terms of Reference

5.       There were no workshops held.

6.       Note that, unlike an agenda report, staff will not be present to answer questions about the items referred to in this summary.  Committee members should direct any questions to the relevant staff.

 

Ngā tūtohunga

Recommendation/s

That the Revenue, Expenditure and Value Committee:

a)      tuhi ā-taipitopito / note the progress on the forward work programme appended as Attachment A of the agenda report

b)      whiwhi / receive the Summary Revenue, Expenditure and Value Committee information memoranda and briefings – 14 November 2023.


 

 

Ngā tāpirihanga

Attachments

No.

Title

Page

a

Forward Work Programme

 

b

Memo: Revenue, Expenditure and Value Committee Terms of Reference

 

     

Ngā kaihaina

Signatories

Author

Duncan Glasgow - Kaitohutohu Mana Whakahaere Matua / Senior Governance Advisor

Authoriser

Peter Gudsell - Group Chief Financial Officer

 

 


Revenue, Expenditure and Value Committee

14 November 2023

 

Update on the Asset Recycling Programme

File No.: CP2023/17057

 

  

Te take mō te pūrongo

Purpose of the report

1.       To provide an update on the asset recycling programme.

Whakarāpopototanga matua

Executive summary

2.       Asset recycling programme continues to progress with high confidence to exceed the current 10-year Recovery Budget target of $430 million.

3.       As part of developing the Long-term Plan 2024-2034, the Investment Political Working Group is reviewing the current asset recycling programme. This includes confirming asset recycling targets and a framework to assist with asset ownership as part of Long-term Plan 2024-2034 decision making.

Ngā tūtohunga

Recommendation/s

That the Revenue, Expenditure and Value Committee:

a)      tuhi ā-taipitopito / note the status update on implementing the asset recycling budget in the Recovery Budget 2021-2031.

Horopaki

Context

4.       Achieving financial balance requires careful and deliberate use of all council’s financial levers, including rates, assets sales, debt, fees & charges, and services. 

5.       The asset recycling programme is an important lever for the council to release capital from poorly performing and/or non-service assets to allow greater investment in strategically aligned activities without pulling financial levers (mainly debt) further.

6.       A multi-year programme was established as part of the Recovery Budget 2021-2031. The recovery budget sets up a target of $430 million, four per cent of the operational building and land asset value, for the programme to achieve by June 2027.

7.       A key consideration for asset recycling is the opportunity cost of holding an asset which is:

·    not providing a service or

·    not generating an appropriate financial return against the opportunity of investing in new assets which deliver council services or

·    opportunity cost of reducing debt.

8.       The Finance and Performance Committee agreed on 16 July 2020 that a principles-based approach should be used for asset recycling (resolution FIN/2020/31). The following principles were agreed and are being actively followed:

·    effective governance and decisions-making

·    alternative use

·    value for money

·    transparency

·    efficient and effective process

·    statutory obligations.

9.       The Investment Political Working Group is reviewing the current asset recycling programme as part of the development of the Long-term Plan 2024-2034. The group is looking to improve the sales process, this includes the framework to assist with asset ownership decision-making. This framework is currently draft and uses gates for asset decision making, this is shown in the diagram below.A blue circle with white text

Description automatically generated

 

Tātaritanga me ngā tohutohu

Analysis and advice

10.     A summary of active asset recycling opportunities and their timing is outlined below. The forecasts by project are confidential. If potential buyer/s know this information, it will reduce council’s negotiating position.

 

21/22

22/23

23/24

24/25

25/26 to 27/28

28/29 to 30/31

Recovery Budget Total

Budget

Actual / Forecast*

70

56

70

86

70

80

70

148

150

30

0

30

430

430

By project

Own your Own Home

 

 

 

 

 

 

 

Auckland Film Studio

 

 

 

 

 

 

 

Downtown carpark

 

 

 

 

 

 

 

Other property

 

 

 

 

 

 

 

Carpark concessions

 

 

 

 

 

 

 

Waste disposal services JV

 

 

 

 

TBC

 

 

Waitakere Transfer Station

 

 

 

 

TBC

 

 

* The total forecast is risk adjusted; this means the total is less than the sum of all the projects. Assets identified for sale over the short term have more certainty compared to those identified over the longer term. Reporting is based on the unconditional date of sale, rather than the settlement date (when cash is received)

† Approved for sale

Opportunities not approved for sale


 

11.     Below is a status on projects forecast for sale in 2023/2024:

·    Own your Own Home. We hope to conclude the sale by the end of 2023.

·    Auckland Film Studio. There is reasonable confidence a sale will be in March 2024. The industrial action (screen writers and actors) is causing industry wide disruption and a delay to negotiations.

·    Downtown Carpark. Development agreement concluded with Precinct Properties and due to be executed by the end of 2023 with settlement in 2025.

·    Other property. There are a number of high value properties in the sale process in 2023/2024 and future years. The pipeline of opportunities for the next two years is reasonable but new opportunities need to be identified.

·    Carpark concessions. This project has been put on hold until 2024/2025 due to slow recovery of carpark revenue post COVID-19. 

12.     The direction for asset recycling and its goals will be reset as part of the Long-term Plan 2024-2034, which will also consider prior results and new opportunities. Asset sale results in 2020/2021 were $62 million (target $244 million), 2021/2022 were $56 million (target $70 million), 2022/2023 $86 million (target $70 million). Variance to target is mainly due to sales taking longer than expected and reliance on a few large assets.

Tauākī whakaaweawe āhuarangi

Climate impact statement

13.     The recommendations in this report have a neutral climate impact. However, it is not known at this point what the potential future use of the properties will be and therefore what the potential impacts could be on carbon emissions. It is acknowledged that any form of construction and development can increase carbon emissions.

14.     A sale of the properties could lead to land use changes. Depending on the change, asset recycling could provide funding for council to respond to climate impacts. If debt is reduced carbon emissions could be neutral. There is risk the future use of the asset increases carbon emissions.

Ngā whakaaweawe me ngā tirohanga a te rōpū Kaunihera

Council group impacts and views

15.     Asset recycling takes a group approach. Council and council-controlled organisations (CCOs) all identify potential opportunities and, prior to any disposal, checks are made that council and the CCOs do not have an alternative use.

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

Local impacts and local board views

16.     Local boards provided feedback on the recovery budget. Some local boards support asset recycling as a lever and some do not.

17.     No local board input has not been sought in respect of the asset recycling update, but input is sought as each opportunity progresses.

Tauākī whakaaweawe Māori

Māori impact statement

18.     Māori have an active and specific role in Auckland, including kaitiakitanga (guardianship) of our land and marine resources. Land has a specific role in protecting, enabling, and building Māori social and cultural capital. Local marae, kohanga reo, and other Māori entities offer spiritual, cultural, as well as a range of social, educational, health and justice services for the community.

19.     The importance of effective communication and engagement with Māori about land is understood. The process to date undertaken by Eke Panuku is engagement with mana whenua groups across the region. Each relevant mana whenua group is contacted independently regarding council-owned land subject to rationalisation and requested to give feedback. This provides mana whenua the opportunity to respond with any issues of cultural significance the group would like to formally express in relation to the subject properties. Mana whenua feedback is then considered as part of any disposal decision. All iwi entities are given notice before subject properties are taken to market should they have a commercial interest in acquiring the property.

Ngā ritenga ā-pūtea

Financial implications

20.     Capital receipts from asset recycling contribute to the Recovery Budget 2021-2031 by providing the council with an efficient use of capital and prioritisation of funds to achieve its activities and projects without pulling the financial levers (mainly debt) further.

Ngā raru tūpono me ngā whakamaurutanga

Risks and mitigations

21.     Each asset recycling opportunity has its own specific risks.  All opportunities experience risks due to market conditions which can result in short term delays in realisation of opportunities.

22.     There may be a perceived risk that disposing of the assets noted in this report means that they will not be available for future council group use if required and further purchases may be necessary. This risk is considered low because we have carefully considered and confirmed throughout the group that these assets are not required now or in the future for a council service use.

Ngā koringa ā-muri

Next steps

23.     The Governing Body will continue to receive updates on the asset recycling programme via the Auckland Council Group Quarterly Performance Report.

24.     Asset recycling targets will be confirmed in the Long-term Plan 2024-2034.

 

Ngā tāpirihanga

Attachments

There are no attachments for this report.    

Ngā kaihaina

Signatories

Authors

Andrew Morris - Senior Consultant

Chantelle Subritzky - Head of Value For Money

Authorisers

Ross Chirnside - General Manager Value For Money

Peter Gudsell - Group Chief Financial Officer

 

 

 


Revenue, Expenditure and Value Committee

14 November 2023

 

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

That the Revenue, Expenditure and Value Committee:

a)      whakaae / agree to 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: Update on the Asset Recycling Programme

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 commercial sensitivity and may prefjudice council's commercial position and future negotiations

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: Variation to Healthy Waters central and Waiheke maintenance contract

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.

s7(2)(i) - The withholding of the information is necessary to enable the local authority to carry on, without prejudice or disadvantage, negotiations (including commercial and industrial negotiations).

In particular, the report contains information that could prejudice the council's position with potential suppliers.

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] S17A Local Government Act 2002, introduced by Local Government Amendment Act 2014