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Governing Body
23 April 2024
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Consideration
of the Auckland Regional Amenities Funding Act Levy 2024/25
File No.: CP2024/04450
Te take mō te pūrongo
Purpose of the report
1. To
consider the
2024/2025 levy request from the Auckland Regional Amenities Funding Board
(Funding Board).
Whakarāpopototanga matua
Executive summary
2. Each year the Funding Board collects a levy from Auckland
Council and distributes it as grants to Specified Amenities named in the
Auckland Regional Amenities Funding Act 2008 (the Act). See Table 2 below for
list of Specified Amenities.
3. The Funding Board is seeking $17,905,750. This represents an
overall increase of $558,571 (or 3.2 per cent) compared
to 2023/2024.
4. The
Governing Body resolved at its 28 March 2024 meeting to ask the Funding Board to remove a $17,500 increase to the
Funding Board’s member remuneration and to remove the $500,000 increase
for the Auckland Theatre Company (ATC). Staff recommended the removal of the
$500,000 increase for ATC to allow the council and ATC the opportunity to find
a complete solution for not only the ATC’s operational shortfall for
running the ASB Waterfront Theatre but also an outstanding $4.9 million ground
lease payment due to Eke Panuku from the wider group associated with the
theatre.
5. The Funding Board has removed the $17,500 increase for
member remuneration and reduced the increase for ATC by $347,000 to $153,000 on
the understanding that the council will work with the Funding Board and ATC to
find a solution by 31 October 2024 for the ATC funding issues. If no solution
can be found, the Funding Board may use some of its reserves to assist ATC.
6. Governing Body at its 28 March 2024
meeting directed staff to work with ATC to
find a solution for their funding issues. Staff will continue with this work
and bring options to the Governing body as soon as possible and before 31
October 2024.
7. Council must now consider the levy
request in accordance with the Act. This
report recommends approving the levy because staff consider
that the funding for the specified amenities is reasonable and in accordance
with the funding principles set out and provided for in section 21 of the Act. Analysis for this recommendation is set out at paragraphs
14 - 28.
8. The Funding Plan is provided at Attachment A. The Funding Board have not had the opportunity to resubmit the Funding Plan with the amended funding increase for
ATC, instead they have provided written confirmation of the intention to adopt
the Funding Plan with an ATC grant allocation of $2,375,000 and a total levy of $17,905,750.
9. Under
the Act, not approving the levy will require the council and Funding Board to
enter arbitration.
Ngā tūtohunga
Recommendation/s
That the Governing Body:
a) whakaae
/ approve the Auckland Regional Amenities Funding Board levy request for
2024/2025 of $17,905,750;
b) tuhi
ā-taipitopito / note that the Funding Board has reduced
the grant allocation for the Auckland Theatre Company from the amount submitted
in their Funding Plan on the understanding
that the council will work with the Funding Board and the Auckland Theatre Company to find a
solution by 31 October 2024 for the ATC funding issues. If no solution can be
found, the Funding Board may use some of its reserves to assist ATC; and
c) tono / request staff to engage with the Funding Board and
the Auckland Theatre Company to work on a solution to address Auckland Theatre
Company’s funding issues and report back by the committee by 31 October
2024.
d) whakamihi / thank the Funding Board for their cooperation
in dealing with the Auckland Theatre Company’s funding issues.
Horopaki
Context
10. Under the Act the Funding Board collects a levy from Council and distributes it as
grants to eight Specified Amenities named in the Act and set out in Table 2
below.
Funding
History
11. Table 1 illustrates the previous two years levy payments, the
proposed 2024/2025 levy requests and indicative amounts for the following two
financial years, based on the 2024/2025 Funding Plan for the Funding Board.
Table 1: Agreed, proposed and
indicative levies 2022/2023 to 2026/2027
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Entity
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2022/2023
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2023/2023
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Proposed
2024/2025
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Indicative draft annual plan
2025/2026
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Indicative draft annual plan
2026/2027
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ARAFB
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$16,910,479
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$17,347,179
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$17,905,750
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$19,714,452*
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$20,720,766*
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12. The
indicative amounts are the sum of the amenities’ requests, as required by
section 25 of the Act, and not a projection by the Funding Board itself.
The final amount is usually lower after the Funding Board reviews each
application.
13. The
funding process for the entities has been complicated by the impacts of rising
interest and inflation costs on both the entities and the council. Notably, the
Consumer Price Index (CPI) inflation rate stood at 4.7 per cent for the 12
months leading up to the December 2023 quarter. Throughout the process, the
financial position of the council and the challenges it is facing have been
well communicated to each entity.
Tātaritanga me ngā tohutohu
Analysis and advice
Levy Request
14. The Funding
Board is seeking approval of the Board’s recommendation on the levy of
$17,905,750. This represents an overall increase of $558,571 (or 3.2 per cent)
compared to 2023/2024.
15. The Funding
Board’s Funding Plan is provided at Attachment A. The Funding
Board have not had the opportunity to resubmit the Funding Plan with the
amended funding increase for ATC, instead they have provided written
confirmation of the intention to adopt the Funding Plan with an ATC grant
allocation of $2,375,000 and a total levy of $17,905,750.
16. Table 2 below
sets out the proposed grant allocations to each of the eight Specified
Amenities for 2024/2025.
Table 2: Proposed
grant allocations to each Specified Amenities for 2024/2025
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Specified Amenity
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Grant Allocation 2023/2024
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Amenity Funding Application
2024/2025
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Grant Allocation 2024/2025
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Year on Year Change 2023/2024
to 2024/2025
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Auckland Festival Trust
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$4,187,000
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$4,942,000
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$4,187,000
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0
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Auckland Philharmonia Trust
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$4,741,729
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$5,087,967
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$4,900,000
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+$158,271
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Auckland Rescue Helicopter Trust
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$450,000
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$0
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$0
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0
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Auckland Theatre Company Ltd
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$2,222,000
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$2,444,299
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$2,375,000
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+$153,000
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Drowning Prevention Auckland
-WaterSafe Auckland Incorporated
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$1,178,750
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$1,351,980
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$1,260,000
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+$81,250
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New Zealand Opera Limited
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$1,260,000
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$1,351,980
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$1,260,000
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0
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Stardome - Auckland Observatory and
Planetarium Trust Board
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$1,488,000
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$1,592,160
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$1,570,000
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+$82,000
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Surf Life Saving Northern Region Inc
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$1,897,450
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$2,105,000
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$1,975,000
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+$77,550
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Total Grants Payable
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$16,974,929
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$18,875,386
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$17,527,000
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+$552,071
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Funding Board Administration Budget
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$372,250
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$396,000
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$378,750
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+$6,500
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Total Grants and Administration Costs
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$17,347,179
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$17,905,750
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+$575,821
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Less Paid from Funding Board Retained
Earnings
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Total Levy Payable by Auckland Council
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$17,347,179
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$17,905,750
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+$575,821
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17. The
biggest increases are directed to the Auckland
Philharmonia Orchestra ($158,271) and ATC ($153,000).
The reasons for these increases are explained below.
Auckland Philharmonia Orchestra (APO)
18. 2023-2024 represented the final stage of a three-year staged
introduction of the new salary model for APO musicians that commenced in
2021-2022 and was previously agreed with the council. The introduction of this
new salary model and the associated additional funding was delayed one year due
to the impacts of COVID-19, which saw all grants for 2020-2021 frozen at the
same levels as 2019-2020. The increase for the 2024-2025 year of $158,271 is in
recognition of additional non salary costs incurred by the APO since 2020.
Auckland
Theatre Company
19. Last
year ATC indicated that previous grant allocations have been insufficient to
ensure the sustainability of the organisation. In response, ATC and the Funding
Board commissioned Grant Thornton to undertake a review of the operations of
ATC, which was conducted August- November 2023.
20. The
Grant Thornton review found that the original business case for the development
of the ASB Waterfront Theatre was overly optimistic by suggesting that the
theatre would generate sufficient income to cover its costs. Whilst ATC’s
productions are modestly profitable, the cost of operating the theatre has
resulted in a funding gap of a minimum of $500,000 each year for ATC.
21. The
Funding Board considered the submission by ATC and the information provided by
Grant Thornton and decided to include a $500,000 increase in the Funding Plan.
22. Because
there is also the issue of the outstanding $4.9 million ground lease, the
council asked the Funding Board to remove the
$500,000 increase for ATC to allow the council and ATC the opportunity to find
a complete solution for not only the ATC’s operational shortfall for
running the ASB Waterfront Theatre but also an outstanding $4.9 million ground
lease payment due to Eke Panuku from the wider group associated with the
theatre.
23. The Funding Board has reduced the increase for ATC by
$347,000 to $153,000, which is the amount that was initially consulted on in
their draft Funding Plan. The reduction of $347,000 is made on the
understanding that the council will work with the Funding Board and ATC to find
a solution for their funding issues by 31 October 2024. If the council and ATC
cannot find a solution, the Funding Board may provide ATC with additional
funding from their reserves.
24. Staff
consider that this response from the Funding Board is appropriate and will
allow the council the opportunity to work with ATC to explore all options to
find a complete solution for their funding issues.
25. Governing Body at its 28 March 2024
meeting directed staff to work with ATC to
find a solution for their funding issues. Staff will continue with this work
and bring options to the Governing Body as soon as possible and before 31
October 2024.
Options
26. The
Committee has two options available:
· accept the levy
recommendation of the Funding Board; or
· not accept the levy
recommendation and the matter will be referred to an arbitrator to make a
decision on the levy.
27. The
below table sets out the advantages and disadvantages of the decision:
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Option
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Advantages
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Disadvantages
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Accept levy
recommendation of the Funding Board
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· Staff consider that the funding for the
specified amenities is reasonable and in accordance with the funding
principles set out and provided for in section 21 of the Act.
· The reduction in the ATC grant allocation
allows the council the opportunity to work with ATC to explore all options to
find a complete solution for their funding issues.
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Staff have not
identified any significant disadvantages with approving the recommended levy
given the limited options under the current legislative regime. The council
is exploring options to amend the legislation, but that matter will be dealt
with separate to this decision.
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Not accept
the levy recommendation of Funding Board
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Staff have not
identified any significant advantages with not approving the recommended levy
given the limited options under the current legislative regime. The council
is exploring options to amend the legislation, but that matter will be dealt
with separate to this decision.
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· The matter will be referred to an arbitrator
to make a decision on the levy.
· Arbitration would need to be conducted under
urgency and would impose a significant cost on the council and Funding Board.
· As staff consider the levy to be reasonable
and in accordance with the funding principles set out and provided for in
section 21 of the Act the likelihood of success at arbitration is limited.
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28. Staff
consider that the funding for the specified amenities is reasonable and in accordance
with the funding principles set out and provided for in section 21 of the Act
and therefore recommend approving the levy.
Climate impact statement
29. The
Funding Board is a statutorily independent organisation and the council is
unable to direct it on climate change issues. However, the Funding Board
is required to ensure that amenities align their activities with Auckland Plan
objectives, which include Auckland’s response to climate change.
Council group impacts and views
30. Consideration
of the levy does not require any assessment of views or impacts on the council
group. Staff will include Eke Panuku and Tātaki Auckland Unlimited in the ongoing work to explore options to
address the funding issues of ATC.
Financial implications
31. During
the recent group budget refresh process, entities across the group reviewed and
refined the draft LTP projections. The requested levy of $17,923,000 (the
amount including the since removed $17,500 board remuneration increase) from
ARAFB in February has been incorporated for the final draft LTP.
Risks and mitigations
32. There
are three main risks associated with considering the levy request.
33. The
first risk is that the levies will materially exceed the council budget
allocations. This has been mitigated by council representatives working with
Funding Board to communicate the council’s financial challenges.
34. The
second risk is the possibility that the activities of the amenities will not
meet the stated goals of the funding plan and do not align with council goals.
For the eight Specified Amenities, this risk is minimised because a requirement
of funding is to demonstrate alignment with the Auckland Plan.
35. The
final risk is of arbitration if the levies are not agreed by 30 April. This
risk is mitigated by communicating with the entities and having a mutual
understanding of the financial pressures and objectives of all parties.
Tauākī whakaaweawe
Māori
Māori impact statement
36. The
Specified Amenities are required to align their activities with the Auckland
Plan 2050 developed by the council. The current Auckland Plan 2050 details six
outcomes which, among other outcomes, include Māori Identity and
Wellbeing. The Specified Amenities continue to identify specific outcomes relating
to the interests of Māori that are being incorporated into the day-to-day
operations of each organisation where appropriate.
Ngā whakaaweawe
ā-rohe me ngā tirohanga a te poari ā-rohe
Local impacts and local board
views
37. The
relationship with the Funding Board is of Auckland-wide relevance, and as such
decisions about funding contributions are made by the Governing Body or its
committees.
Ngā koringa ā-muri
Next steps
38. If
the recommended levy is agreed, the Funding Board will adopt their final
2024/2025 Funding Plan and the agreed levy will be paid within the appropriate
statutory timeframe.
Ngā tāpirihanga
Attachments
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No.
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Title
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Page
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a⇩
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Draft Funding Plan
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11
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Ngā kaihaina
Signatories
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Author
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Chris Levet - Principal Advisor
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Authorisers
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Alastair Cameron - Manager - CCO
Governance & External Partnerships
Phil Wilson - Chief Executive
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