Finance and Performance Committee

Agenda

 

 

Notice of Meeting:

An ordinary meeting of the Finance and Performance Committee will be held on:

 

Date:                                     Wednesday 5 July 2017

Time:                                    9am

Venue:                                 Council Chambers, Civic Offices,
53 Hereford Street, Christchurch

 

 

Membership

Chairperson

Deputy Chairperson

Members

Councillor Raf Manji

Deputy Mayor Andrew Turner

Councillor Vicki Buck

Councillor Jimmy Chen

Mayor Lianne Dalziel

Councillor Mike Davidson

Councillor Anne Galloway

Councillor Jamie Gough

Councillor Yani Johanson

Councillor Deon Swiggs

 

 

30 June 2017

 

 

 

Principal Advisor

Carol Bellette

General Manager Finance and Commercial

 

Aidan Kimberley

Committee and Hearings Advisor

941 6566

aidan.kimberley@ccc.govt.nz

www.ccc.govt.nz

Note:  The reports contained within this agenda are for consideration and should not be construed as Council policy unless and until adopted.  If you require further information relating to any reports, please contact the person named on the report.
To view copies of Agendas and Minutes, visit:
https://www.ccc.govt.nz/the-council/meetings-agendas-and-minutes/

 


Finance and Performance Committee

05 July 2017

 

Terms of Reference Finance and Performance Committee

 

Chair

Councillor Manji

Membership

Deputy Mayor Turner (Deputy Chair), Mayor Dalziel, Councillor Buck, Councillor Chen, Councillor Davidson, Councillor Galloway, Councillor Gough, Councillor Johanson, Councillor Swiggs and a non-voting independent member to be appointed by an Appointments Panel established by the Council.

Quorum

Half of the members if the number of members (including vacancies) is even, or a majority of members if the number of members (including vacancies) is odd.

Meeting Cycle

Monthly

Reports To

Council

 

Responsibilities

The focus of the Finance & Performance Committee is the financial and non-financial performance of the Council and its subsidiaries.

 

The Finance & Performance Committee:

·         Seeks to enhance the Council’s accountability with the community in relation to the Council’s financial and non-financial performance

·         Promotes active citizenship, community participation and community partnerships, including participatory budgeting

·         Works in partnerships with key agencies, groups and organisations

The Finance & Performance Committee considers and reports to Council on issues and activites relating to:

·         The preparation and adoption of the draft and final Annual Plan and Long Term Plan (based on the strategic direction of the Strategic Capability Committee)

·         Performance  against the  Long Term Plan (LTP) and  Annual Plan (AP), including financial performance and non-financial performance including:

-          medium to long term asset management

-          treasury investment and borrowings

-          organisational performance and capability

·         Insurance matters including to:

-          consider legal advice from the Council’s legal and other advisers,

-          approve further actions relating to the issues,

-          make recommendations to Council concerning formal actions.

·         Performance of a number of subsidiaries including Council Controlled Organisations (CCO). 

·         Recommendations   from   Council’s   Subcommittees,   Community Boards, the public, stakeholders and providers in relation to finance and performance.

·         Overseeing the development to the Annual Report for consideration by the Council

·         Development of the financial policy of the Council

·         Development of a Genuine Progress Indicator

Process for appointing Independent Members to the Finance and Performance Committee

 

The following principles will guide the appointment process for Independent Members of the Finance and Performance Committee:

 

1.              Council Officers, in consultation with Elected Members, will compile a longlist of candidates and provide this list to the General Manager Finance and Commercial for consideration.

 

2.              If appropriate, the Chair of the Finance and Performance Committee and the General Manager Finance and Commercial may endorse the nominations.

 

3.              Candidates will be contacted at the appropriate time to confirm their willingness to serve as an independent committee member and, if confirmation is received, appropriate background checks as determined by the General Manager Finance and Commercial will be conducted. Candidates will also be informed of Council policies.

 

4.              The Chair and Deputy Chair of the Finance and Performance Committee, and the General Manager Finance and Commercial, will review the candidates to develop a shortlist by assessing the following:

 

a.              Professional credentials and relevant experience.

b.             Their understanding of relevant legislation.

c.              Experience overseeing or assessing the performance of organisations.

d.             Potential conflicts of interest.

e.             Affiliations or connections with the Council and its related entities.

f.               Reference and background check reports.

 

5.              The shortlist of candidates will be presented to an Appointments Panel. The Panel will select from that shortlist the independent member to be appointed to the Committee. The resolution to appoint the independent member should specify the dates on which the appointment commences and concludes. 

 

6.              The Chair of the Panel will inform the Council in writing of the Panel’s decision.

 


Finance and Performance Committee

05 July 2017

 

Part A        Matters Requiring a Council Decision

Part B         Reports for Information

Part C         Decisions Under Delegation

 

 

TABLE OF CONTENTS

 

C       1.       Apologies.......................................................................................................................... 5

B       2.       Declarations of Interest................................................................................................... 5

C       3.       Confirmation of Previous Minutes................................................................................. 5

B       4.       Deputations by Appointment........................................................................................ 5

B       5.       Presentation of Petitions................................................................................................ 5

STAFF REPORTS

C       6.       Asset Management Unit Status Report....................................................................... 11

C       7.       Review of the Rates Postponement Scheme.............................................................. 17

C       8.       Resolution to Exclude the Public................................................................................. 27  

 

 


Finance and Performance Committee

05 July 2017

 

 

1.   Apologies

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

2.   Declarations of Interest

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

3.   Confirmation of Previous Minutes

That the minutes of the Finance and Performance Committee meeting held on Wednesday, 31 May 2017 be confirmed (refer page 6).

4.   Deputations by Appointment

There were no deputations by appointment at the time the agenda was prepared.  

5.   Presentation of Petitions

There were no petitions received at the time the agenda was prepared.  


Finance and Performance Committee

05 July 2017

 

 

 

Finance and Performance Committee

Open Minutes

 

 

Date:                                     Wednesday 31 May 2017

Time:                                    9am

Venue:                                 Council Chambers, Civic Offices,
53 Hereford Street, Christchurch

 

 

Present

Chairperson

Deputy Chairperson

Members

Councillor Raf Manji

Deputy Mayor Andrew Turner

Councillor Vicki Buck

Councillor Jimmy Chen

Councillor Mike Davidson

Councillor Anne Galloway

Councillor Jamie Gough

Councillor Yani Johanson

Councillor Deon Swiggs

 

 

30 May 2017

 

 

 

Principal Advisor

Carol Bellette

General Manager Finance and Commercial

 

Aidan Kimberley

Committee and Hearings Advisor

941 6566

aidan.kimberley@ccc.govt.nz

www.ccc.govt.nz

To view copies of Agendas and Minutes, visit:
www.ccc.govt.nz/Council/meetingminutes/agendas/index

 


Part A        Matters Requiring a Council Decision

Part B         Reports for Information

Part C         Decisions Under Delegation

 

 

 

The agenda was dealt with in the following order.

1.   Apologies

Part C

 

 

Committee Resolved FPCM/2017/00018

That the apology from Mayor Lianne Dalziel and apology for early departure from Councillor Gough be accepted.

Councillor Swiggs/Councillor Davidson                                                                                                               Carried

 

2.   Declarations of Interest

Part B

There were no declarations of interest recorded.

 

3.   Confirmation of Previous Minutes

Part C

Committee Resolved FPCM/2017/00019

Committee Decision

That the minutes of the Finance and Performance Committee meeting held on Wednesday, 3 May 2017 be confirmed, subject to the following amendment:

1.         Removing Councillor Gough’s apology for early departure.

Councillor Davidson/Councillor Gough                                                                                                               Carried

 

4.   Deputations by Appointment

Part B

There were no deputations by appointment.

5.   Presentation of Petitions

Part B

There was no presentation of petitions.


 

 

6.   Maintenance Levels - Road Maintenance, Land Drainage, Water and Waste Water Maintenance Status Report

 

Committee Decided FPCM/2017/00020

Part A

That the Finance and Performance Committee recommends that the Council:

1.         Receives the information in the Report,

Councillor Gough/Councillor Johanson                                                                                                              Carried

 

7.   Parks Maintenance Status Report

 

Committee Decided FPCM/2017/00022

Part C and A

That the Finance and Performance Committee:

1.       Recommends that the Council receives the information in the report.

2.         Request staff to provide advice to the Council on increasing maintenance resourcing, to be considered as part of the 2017/18 Annual Plan.

Councillor Johanson/Councillor Galloway                                                                                                         Carried

 

8.   Tuam Limited - Dividend payment

 

Committee Decided FPCM/2017/00023

Part A

That the Finance and Performance Committee recommends that the Council:

1.         Note that the future need to retain Tuam Limited as a separate legal entity is still being determined.

2.         Approves the payment of a cash dividend of $814,374 to the Council on 28 June 2017. Noting that:

a.         this dividend is considered a major transaction under section 129 of the Companies Act 1993 which requires shareholder approval.

3.         Delegates to the Chief Executive and the General Manager Finance and Commercial the authority to sign the shareholder resolution approving the dividend on behalf of the Council.

Councillor Gough/Deputy Mayor                                                                                                                         Carried

 


 

9.   Development Christchurch Limited - Update Report

 

Committee Decided FPCM/2017/00024

Part A

That the Finance and Performance Committee recommends that the Council:

1.         Receives the information in the update report from Development Christchurch Limited.

Councillor Swiggs/Councillor Gough                                                                                                                    Carried

 

10  Resolution to Exclude the Public

 

Committee Resolved FPCM/2017/00025

Part C

That the following people remain after the public have been excluded for the respective items of the public excluded agenda as they have knowledge that is relevant to those items and will assist the Committee:

a.         Paul Munro and Leah Scales of Christchurch City Holdings Limited for items 12, 14 and 15.

b.         Tom Hooper of Transition Holdings Limited for item 18.

c.         Helena McIntyre and Alex Skinner of the World Buskers Festival Trust for item 18.

d.         Rob Hall, James Stewart, Joel Lieschke and Steve Clarke of Development Christchurch Limited for item 12.

AND

That at 10:19am the resolution to exclude the public set out on pages 92 to 94 of the agenda be adopted.

Deputy Mayor/Councillor Davidson                                                                                                                       Carried

 

The public were re-admitted to the meeting at 12:44pm.

 

   

Meeting concluded at 12:44pm.

 

CONFIRMED THIS 5TH DAY OF JULY 2017

 

Councillor Raf Manji

Chairperson

 

   


Finance and Performance Committee

05 July 2017

 

 

6.        Asset Management Unit Status Report

Reference:

17/519845

Contact:

Piers Lehmann

Piers.lehmann@ccc.govt.nz

941-5452

 

 

1.   Purpose and Origin of Report

Purpose of Report

1.1       The purpose of this report is to inform the Finance and Performance Committee about the Asset Management Improvement Programme activity.

Origin of Report

1.2       This report provides Finance and Performance Committee with information about the Asset Management Programme focus, content and delivery.  The Monthly Portfolio Dashboard Report is created by the Asset Management Centre for Excellence and presented to the monthly Asset Management Governance Board meeting.

2.   Significance

2.1       This is a ‘for information’ report therefore consideration of significance is not required.

 

3.   Staff Recommendations

That the Finance and Performance Committee:

1.         Receives the information contained in this report and the May 2017 Portfolio Dashboard Report

2.         Confirms the monthly Portfolio Dashboard Report meets the Finance and Performance Committee needs; or

3.         Advises type of reporting required

 

4.   Key Points

4.1       Asset Management Unit is currently overseeing two streams of work

4.1.1   The Advancing Asset Management Programme commenced in July 2016 and is currently delivering 16 projects, including three SCIRT Transition projects.

4.1.2   The development of the Asset Management Improvement Programme following the completion of the Asset Management Maturity Assessment in January 2017.

4.2       As the Asset Management Improvement Programme projects move through the project lifecycle they will be visible for reporting and monitoring purposes in the monthly Portfolio Dashboard Report.

4.3       The Finance and Performance Committee requested visibility of the Asset Management Programme and the Asset Management Improvement programme following the presentation of the Asset Management Maturity Assessment report and recommendations to the Audit and Risk Management committee on 2 May 2017.

 

5.   Context/Background

Establishment of Asset Management Unit

5.1       The Asset Management Unit was established in April 2016 to provide cross functional responsibility to deliver a sustainable and appropriate Advanced Asset Management service delivery framework to support the community outcomes, levels of service and business requirements. 

Advancing Asset Management Programme

5.2       The Asset Management Unit scope is to continuously improve asset management in Transport, Three Waters and Waste, Vertical Capital & Delivery, Parks and Facilities business units.

5.2.1   The Asset Management Unit Centre for Excellence Programme Team, in collaboration with the business unit representatives put together an initial Advancing Asset Management Programme and presented it to the Asset Management Governance board in August 2016 to enable some work to begin.

5.2.2   This programme is underway and progress is reported monthly by the Programme Manager to the Asset Management Governance Board and includes the Portfolio Dashboard report.

Asset Management Maturity Assessment

5.3       The Treasury Investment Confidence Rating framework’s Asset Management Maturity Assessment tool was selected as the most appropriate methodology for assessing Council Asset Management Maturity to provide assurance to local government and central government as part of the SCIRT Transition work.

5.4       The Asset Management Unit initiated the Asset Management Maturity Assessment and provided project support as a joint effort in collaboration with Risk and Audit who funded the work. Kathy Dever-Tod conducted interviews with over 50 staff from within the business units in Asset Management related roles.

5.5       The final report and recommendations went to the Asset Management Governance Board on 10 March 2017 and to the Audit and Risk Management Committee 12 May 2017.

Asset Management Improvement Programme

5.6       The Asset Management Improvement Programme development methodology collates the recommendations from the 2015 Asset Management Plans (AMPs), 2015 GHD review, the Asset Management Maturity Assessment Report, and includes reference to the WSAA benchmarking exercise for Three Waters, to provide a complete picture of improvement items identified to date.

5.7       The recommendations have been workshopped and reviewed by business unit representatives to ensure they are still required by the business unit and then prioritised.

5.8       The Asset Management Improvement Programme will be presented to Asset Management Governance Board on 5th July 2017 for endorsement.

2017-2021 Asset Management Programme Delivery Framework and Timeline

5.9       The Asset Management Improvement Programme takes Council from 2017 to 2021 through one LTP cycle.  The themes for each year for Asset Management are:

2016-17 Asset Management Foundations

2017-18 Enabling Core Asset Management

2018-19 Evidence Based Planning

2019-20 Optimised Asset Management

2020-21 Advanced Asset Management/ LTP

5.10    The figure below shows the building blocks for the Improvement Plan by categories People, Process, Information and Technology.

5.11    Reporting on projects related to the Building Blocks above will be visible in the monthly Portfolio Dashboard report as they moe through the Asset Management Programme Lifecycle.

 

 

Attachments

No.

Title

Page

a

Assets Management Dashboard

15

 

 

Confirmation of Statutory Compliance

Compliance with Statutory Decision-making Requirements (ss 76 - 81 Local Government Act 2002).

(a) This report contains:

(i)  sufficient information about all reasonably practicable options identified and assessed in terms of their advantages and disadvantages; and

(ii) adequate consideration of the views and preferences of affected and interested persons bearing in mind any proposed or previous community engagement.

(b) The information reflects the level of significance of the matters covered by the report, as determined in accordance with the Council's significance and engagement policy.

 

Signatories

Author

Wendy Walker - Senior Asset Management & Programme Advisor

Approved By

Piers Lehmann - Head of Asset Management

David Adamson - General Manager City Services

  


Finance and Performance Committee

05 July 2017

 

PDF Creator


Finance and Performance Committee

05 July 2017

 

 

7.        Review of the Rates Postponement Scheme

Reference:

17/543612

Contact:

Steve Ballard

Steve.ballard@ccc.govt.nz

941 8447

 

 

1.   Purpose and Origin of Report

Purpose of Report

1.1       This report considers the appropriateness of the current Rates Postponement Scheme and recommends that the current scheme should not be adjusted.

Origin of Report

1.2       This report responds to a request from the Council expressing concern that the current scheme’s low level of uptake may indicate that the intended recipients are not getting the intended benefits.

2.   Significance

2.1       The decision in this report is of a low significance in relation to the Christchurch City Council’s Significance and Engagement Policy.

2.1.1   The level of significance was determined by the relatively low number of people potentially affected and the expected low cost to other ratepayers of all options presented.

2.1.2   No community engagement has been conducted.  Operational adjustments to the scheme may be achievable without consultation, but changes to Policy wording would require consultation through an annual planning process.

 

3.   Staff Recommendations 

That the Finance and Performance Committee recommends that the Council:

1.         Makes no adjustment to the current Rates Postponement Scheme.

 

4.   Key Points

4.1       This report supports the Council's Long Term Plan (2015 - 2025).

4.2       The following feasible options have been considered:

4.2.1   Option 1 – No change to the current scheme, on the grounds that it provides adequate access for those in significant need, and that its low uptake is driven by a lack of underlying demand and the availability of alternative sources of cash.  (preferred option) Note – support increased public awareness.

4.2.2   Option 2 - Adjust the current scheme by making the qualifying criteria more formulaic – in effect, a universal system where the level of entitlement is abated depending on the applicant’s income.  This is similar to the government’s Rebate scheme and Hamilton City Council’s Postponement scheme, and may help to increase uptake (depending on the generosity of the abatement formula).

4.2.3   Option 3 - Expand the current scheme by eliminating all income and asset thresholds – effectively making it on-demand, although minimum home equity and independent advice requirements should be retained.  This is similar to the approach taken by Auckland City Council, and could significantly increase uptake.

4.3       Option Summary - Advantages and Disadvantages:  The advantages and disadvantages of each option are described in sections 6-8 below.

 

5.   Context/Background

Current Scheme & Origin of this Review

5.1       A property-owner’s rates liability may be reduced through three mechanisms:

5.1.1   Rebate – This is a government scheme to support pensioners, where some rates are effectively paid by the government.

5.1.2   Remissions – These are council-approved discounts, which are effectively paid for by all other ratepayers.  They may be on-going (such as discounts to community benefit organisations) or temporary (such as earthquake and flooding remissions).

5.1.3   Postponement – This is where rates liabilities still accrue, but the ratepayer does not need to pay them immediately and no late payment penalties are added.  Postponement is effectively a loan from the Council to the ratepayer, secured by the ratepayer’s equity in their property and funded by Council borrowing (the on-going cost of which is mostly recouped by adding an interest charge each year to the amount postponed).

5.2       Council’s current Rates Postponement Policy is intended primarily but not exclusively for pensioners, and states that:

Up to 100% of rates may be postponed for a period determined by the Council where the ratepayer is experiencing financial hardship.

5.3       The Policy has historically had a very low level of uptake – there is currently only one postponement in place (down from five in 2013), and there has been only one new application over the past year.  Councillors have expressed concern that this low uptake may reflect a lack of public awareness of the Policy and/or a practical difficulty in applying.

Considerations

5.4       Council’s borrowing & financial position

5.4.1   Any rates that are postponed and therefore not collected must be borrowed for.  A Postponement Scheme with a very high level of uptake would therefore increase Council’s financial risk, and could undermine its ability to achieve the investment goals set out in the long-term Financial Strategy.

5.4.2   In practice, however, this risk appears to be very low – even Auckland’s effectively “on demand” scheme has to date not increased uptake sufficiently to have a material impact on the council’s financial position.

5.5       Equity:

5.5.1   Rates postponement is explicitly aimed at relatively wealthy households – at one extreme, the poorest households are typically not ratepayers;  at the other, rates tends to place greatest pressure on fixed incomes for those living in more expensive homes.

5.5.2   Nevertheless, the scheme’s cost to other ratepayers is minimal.  This report has therefore not considered options to narrow the current qualification criteria (such as only providing postponement where the applicant also has bank debt, or where the relatively low value of the home makes down-sizing a less practical alternative).

5.6       Alternative funding sources:

5.6.1   The scheme’s low uptake may be due in part to the alternative sources of funding available to potential recipients, including bank debt (particularly reverse mortgage products, which target the same ratepayer group as the postponement scheme), relatives (especially future estate beneficiaries), and down-sizing.  Potential recipients may also have a generational aversion to borrowing.

5.6.2   Although this consideration does not imply that the scheme should be discontinued (there are likely to be some ratepayers for whom these other sources of funding are unavailable), it does suggest that low uptake is driven by lack of demand not lack of access, and that significant loosening of current financial criteria is not required.

Government’s Rates Rebate Scheme

5.7       The Government’s Rates Rebate scheme is a useful comparison, because of its similar basic aim of providing rates support to pensioners on fixed incomes.

5.8       The government’s approach is to treat the Rebate as a universal entitlement (all that is required is that the applicant is over 65, owns the property, and lives there as their primary residence on 1 July each year), where the maximum benefit is limited (currently to $610) and the amount actually provided is based on a formula:

5.8.1   The amount of Rebate is abated as household income rises (so higher-income households do not qualify for anything).

5.8.2   The speed of this abatement is adjusted in proportion to the amount of rates payable (so a household paying more rates may get more than a household with similar income but lower rates).

5.8.3   In any event, a Rebate only applies above a minimum threshold (i.e. everyone must pay at least some rates).

5.8.4   There is no asset testing.

5.9       The system is relatively complex in that the formula is difficult to describe and very few recipients are able to understand how their actual benefit is calculated.  Nevertheless, its universality and strict formula approach makes it in some ways more useful than the judgement-based approach inevitable in any scheme based on un-defined “hardship”.

Other Councils’ Approaches

5.10    The policies of Auckland, Wellington, Hamilton, Tauranga, and Dunedin have been reviewed.  These are considered the most relevant because, together with Christchurch, they represent the six largest urban centres and more than half of the country’s population.

5.11    Wellington, Hamilton, and Dunedin provide schemes which are broadly similar to ours, with a focus on support for financial hardship, a charge on land, and an annual administration and interest charge (although this is optional in Dunedin).  Differences include:

5.11.1 Wellington and Dunedin emphasise “extreme” financial hardship, although it is unlikely that their qualification thresholds are more stringent than ours in practice.

5.11.2 Hamilton addresses just “normal” financial hardship, with “extreme” hardship qualifying for a Remission.  Qualification and amount provided under either policy is relatively complex, calculated by formula based on the government’s Rate Rebate formula plus annual rates or CPI increase adjustments.  Unlike the Rebate scheme, Hamilton also applies an asset threshold ($17,947 excluding house, car, and normal chattels).

5.11.3 Dunedin’s is not primarily aimed at pensioners, and emphasises changes in personal circumstances as a driver.

5.11.4 Wellington and Hamilton require re-application annually.

5.12    Auckland has adopted a far broader scheme, which is virtually on-demand with no income or asset testing (although a minimum level of owner’s equity in the home is required, for security purposes).  An annual administration fee is added, but no interest charge, resulting in significant risk of perverse incentives.

5.12.1 This more generous approach was initially driven by the desire to provide relief in those areas most affected by the super-city amalgamation.  An additional push occurred in 2015/16, aimed at delinquent accounts – rates staff would actively contact delinquent ratepayers to offer postponement.

5.12.2 These initiatives were apparently well received.  Interestingly, however, the level of uptake is still relatively low, albeit higher than the virtually zero update of the previous, less generous scheme – as at November 2016, postponements were applied to 203 properties, amounting to a total cumulative postponement of $2.3 million.

5.13    Tauranga has adopted an opposite approach, with no Postponement for financial hardship from its 2012 Long Term Plan (although there is still some postponement available for re-zoned farmland that’s still being used as a farm).

5.13.1 This approach has been adopted as a result of the increasing availability of equity release products that homeowners with significant home equity can access if they’re in genuine need, combined with a perception that the Council should not be in the business of providing economic assistance to relatively wealthy ratepayers.

5.13.2 Tauranga also believes that the costs and risks of postponement schemes are higher than commonly perceived – in particular, the need to demonstrate an acceptable level of independent financial advice to all recipients, the need to register charges over affected titles in LINZ, on-going record-keeping and audit requirements, and the risk that at least a portion of postponed amounts may be non-collectable in future (particularly for amounts postponed for a long time, or where there are significant interest and administration charges applied).

 


 

6.   Option 1 – No Change  (preferred)

Option Description

6.1       The current scheme should be retained, including:

6.1.1   Qualification based on demonstrable financial hardship – in practice, financial data demonstrating an income level low enough to make rates payments difficult, plus an absence of cash deposits or similar easily-realisable financial assets.

6.1.2   Full Postponements of all rates payable.

6.1.3   An annual interest charge added to the rates account, based on Council’s own average cost of borrowing.

Financial & Legal Implications

6.2       Nil.

Option Summary - Advantages and Disadvantages

6.3       The advantage of this option is simplicity, in that there is no change to current processes.  There is an implicit assumption that the scheme’s current low uptake is driven by low demand rather than lack of public awareness and/or difficulty in the application process – adequate public awareness may be supported by:

6.3.1   Continuing to highlight the scheme in the annual Guide to Rates brochure included with all first instalment invoices in July;

6.3.2   Ensuring that the scheme is described on a specific page on our public website (alongside other rates-related pages), including a downloadable Application Form; and

6.3.3   Ensuring that rates and call centre staff consider the potential for Postponement where overdue rates accounts appear to be caused by financial hardship.

6.4       The key disadvantage of this option is that it does not make the current scheme either more generous or more straightforward to apply for – if these are considered significant issues, then this option is not satisfactory.  However, it should be noted that any scheme based on financial hardship will require the disclosure of relatively intrusive personal information – current requirements are consistent with normal banking practice.

7.   Option 2 – Make the scheme more formulaic (and potentially more generous)

Option Description

7.1       Design the scheme along the same lines as government’s Rebate scheme, although with a more straightforward formula based only on household income (not the amount of rates payable).  Under this approach:

7.1.1   Support should only be given where there is a minimum level of owner’s equity in the property (say, 75% of the current Rating Valuation), to ensure full future recovery of postponed amounts.

7.1.2   Some postponement may be provided at relatively high levels of household income, with the amount available decreasing in a formulaic way as income increases (i.e. to make the scheme more generous than currently, as well as being formula-driven).

7.1.3   Postponed amounts will be funded through Council borrowing, with on-going interest and administrative costs recovered through an annual Postponement Fee.

7.1.4   Re-application should be required each year, to ensure that all postponements are adequately monitored and remain appropriate.

Suggested Policy Wording

7.2       The Objective of this Policy is to assist low-income residential ratepayers who want to defer the payment of rates by using the equity in their homes.

7.3       Applicants must meet all of the following criteria to qualify:

7.3.1   The applicant must be the legal owner, and the property must be their primary place of residence.  All postponed amounts and associated fees will become due and payable as soon as this ceases to be the case.

7.3.2   The amount postponed will be calculated each year based on the following formula:

7.3.3   All ratepayers must pay at least $700 per year (including any amount effectively paid through the government Rebate scheme).

7.3.4   For rates charges in excess of this amount, the ratepayer must pay 5 cents for every dollar of household income in excess of $30,000 (e.g. a household with a total income of $40,000 must pay the first $500 of rates in excess of the $700 minimum amount).

7.3.5   This calculation will be based on total household income as shown in the most recent year’s Statement of Earnings from IRD (which the applicant must provide).

7.3.6   No postponement will be granted if the total amount of household liability (including previous Postponed amounts, mortgage loans, and personal loans, including credit cards) exceeds 75% of the property’s most recent Rating Valuation.  The applicant will be required to provide bank statements confirming the amount of debt outstanding at the time of application.

7.3.7   When applying for a postponement for the first time:

7.3.8   The applicant must provide evidence that they have sought independent financial advice enabling them to understand the liability they are incurring and its potential impact on their future equity in their home.

7.3.9   A charge securing Council’s interests will be registered on the property’s Certificate of Title.  The cost of this shall be charged to the applicant’s Rates account in addition to the annual Postponement Fee described below.

Each year:

7.3.10 The ratepayer must re-apply for the Postponement to be continued into the following rating year.  Applications must be received by 31 August (postponements will be back-dated to the 1 July start of the rating year where necessary), and must include a current Certificate of Insurance for the property.

7.3.11 A Postponement Fee will be charged to the applicant’s Rates account at the time the application is approved.  This fee is intended to cover Council’s administrative and interest costs, and is set at 6% of the amount being postponed in that rating year (including any rates and Postponement Fees carried forward from previous years).

7.3.12 Applications must state briefly in writing why they have not sought alternative funding arrangements – specifically, taking out a personal loan, downsizing to a less expensive house, using savings or other assets, and seeking family assistance.

7.3.13 If the ratepayer does not re-apply on time or if they no longer qualify, then all previous amounts postponed (including Postponement Fees) shall become due and payable.  The ratepayer may contact Council’s rates staff if a tailored payment arrangement is required.

7.3.14 Ratepayers may pay Postponed amounts in full or in part at any time, but no adjustments will be made to any Postponement Fees already charged to the rates account.

Financial & Legal Implications

7.4       This option has minimal financial implications for Council, as the costs of the scheme are expected to be funded from borrowing and serviced by charging those ratepayers receiving the postponement.

7.5       The updated policy wording would require consultation, most straightforwardly through an Annual Planning process.

Risks and Mitigations

7.6       There is a risk that the annual Postponement Fees and/or rates amounts that have been postponed for a long time may be successfully challenged as unenforceable by a future court decision.  This risk has not been tested, but is considered low as the Local Government (Rating) Act 2002 specifically permits Councils to add administration and interest amounts to the rates account to cover the costs of such schemes (section 88).

Implementation

7.7       This option could be implemented relatively quickly from the start of any rating year (1 July), through an annual planning process.  A pro forma Application Form, plus adequate operational process documents and management tools would need to be developed for use by the rates transactions team.

7.8       The administrative burden per application would be rather more than the current scheme’s, which relies on subjective staff judgement for qualification.

Option Summary - Advantages and Disadvantages

7.9       The advantages of this option include:

7.9.1   Transparency – the adjusted qualification criteria are more explicit and transparent than the current “financial hardship” criteria.

7.9.2   Uptake – more generous financial thresholds and removal of emphasis on pensioners may increase the scheme’s attractiveness and uptake.

7.10    The disadvantages of this option include:

7.10.1 Risk that the scheme may be used as simply a cheap source of funding by ratepayers (especially given that we can only charge an annual Postponement Fee sufficient to cover our costs, and this may be less than the cost of bank debt).

7.10.2 Risk that future collection of postponed amounts may be challenged in court by future ratepayers.

7.10.3 Risk that uptake remains minimal, given still-significant application requirements and the availability of other sources of funding – qualification still requires a significant disclosure of personal financial information, although no more than would be required for similar bank lending.

8.   Option 3 – Eliminate financial qualification criteria

Option Description

8.1       This option expands the current scheme by eliminating all financial qualification criteria (except for essential equity and independent advice requirements).  The rationale for this approach is that all financial criteria are inherently arbitrary, so it is simpler to reach all the people you want by providing open access rather than trying to envisage all types of circumstances.

8.2       The potential for significant scheme growth under this option increases the importance of setting Postponement Fees at a level sufficient to cover all costs, although the experience to date at Auckland Council is that such open access will not result in unacceptably large numbers of new applicants.

Suggested Policy Wording

8.3       The Objective of this Policy is to assist residential ratepayers who want to defer the payment of rates by using the equity in their homes.

8.4       Applicants must meet all of the following criteria to qualify:

8.4.1   The applicant must be the legal owner, and the property must be their primary place of residence.  All postponed amounts and associated fees will become due and payable as soon as this ceases to be the case.

8.4.2   No postponement will be granted if the total amount of household liability (including previous Postponed amounts, mortgage loans, and personal loans, including credit cards) exceeds 75% of the property’s most recent Rating Valuation.  The applicant will be required to provide bank statements confirming the amount of debt outstanding at the time of application.

8.4.3   When applying for a postponement for the first time:

8.4.4   The applicant must provide evidence that they have sought independent financial advice enabling them to understand the liability they are incurring and its potential impact on their future equity in their home.

8.4.5   A charge securing Council’s interests will be registered on the property’s Certificate of Title.  The cost of this shall be charged to the applicant’s Rates account in addition to the annual Postponement Fee described below.

Each year:

8.4.6   The ratepayer must re-apply for the Postponement to be continued into the following rating year.  Applications must be received by 31 August (postponements will be back-dated to the 1 July start of the rating year where necessary), and must include a current Certificate of Insurance for the property.

8.4.7   A Postponement Fee will be charged to the applicant’s Rates account at the time the application is approved.  This fee is intended to cover Council’s administrative and interest costs, and is set at 6% of the amount being postponed in that rating year (including any rates and Postponement Fees carried forward from previous years).

8.4.8   Applications must state briefly in writing why they have not sought alternative funding arrangements – specifically, taking out a personal loan, downsizing to a less expensive house, using savings or other assets, and seeking family assistance.

8.4.9   If the ratepayer does not re-apply on time or if they no longer qualify, then all previous amounts postponed (including Postponement Fees) shall become due and payable.  The ratepayer may contact Council’s rates staff if a tailored payment arrangement is required.

8.4.10 Ratepayers may pay Postponed amounts in full or in part at any time, but no adjustments will be made to any Postponement Fees already charged to the rates account.

Financial & Legal Implications

8.5       This option has minimal financial implications for Council, as the costs of the scheme are expected to be funded from borrowing and serviced by charging the ratepayers receiving the postponement.

8.6       The updated policy wording would require consultation, most straightforwardly through an Annual Planning process.

Risks and Mitigations   

8.7       There is a risk that a very high level of uptake may have a material impact on Council’s own cash position (if the amount postponed becomes a material proportion of total rates income).  However, this risk is considered small based on Auckland City Council’s experience in establishing a similar scheme.  On-going monitoring would be required, with the Scheme amended in future if necessary.

8.8       There is a risk that the annual Postponement Fees and/or rates amounts that have been postponed for a long time may be successfully challenged as unenforceable by a future court decision.  This risk has not been tested, but is considered low as the Local Government (Rating) Act 2002 specifically permits Councils to add administration and interest amounts to the rates account to cover the costs of such schemes (section 88).

Implementation

8.9       This option could be implemented relatively quickly from the start of any rating year (1 July), through an annual planning process.  A pro forma Application Form, plus adequate operational process documents and management tools would need to be developed for use by the rates transactions team.

8.10    The administrative burden per application would be similar to the current scheme, but overall administration cost would probably rise due to increasing volumes and monitoring requirements.

Option Summary - Advantages and Disadvantages

8.11    The advantages of this option include:

8.11.1 Simplicity & Transparency – the virtually “on demand” qualification criteria are significantly more straightforward than either of the other Options presented.

8.11.2 Uptake – the elimination of income and asset thresholds and removal of emphasis on pensioners should significantly increase the uptake of the scheme.

8.12    The disadvantages of this option include:

8.12.1 Risk that the scheme may be used as simply a cheap source of funding by ratepayers (especially given that we can only charge an annual Postponement Fee sufficient to cover our costs, and this may be less than the cost of bank debt).

8.12.2 Risk that uptake is so significant that a material proportion of rates income is no longer collected, threatening Council’s own financial position.

8.12.3 Risk that future collection of postponed amounts may be challenged in court by future ratepayers.

8.12.4 Risk that the scheme becomes perceived as inappropriate, given the easy access that all qualifying ratepayers are likely to have to similar bank lending products.

 

Attachments

There are no attachments to this report.

 

Confirmation of Statutory Compliance

Compliance with Statutory Decision-making Requirements (ss 76 - 81 Local Government Act 2002).

(a) This report contains:

(i)  sufficient information about all reasonably practicable options identified and assessed in terms of their advantages and disadvantages; and

(ii) adequate consideration of the views and preferences of affected and interested persons bearing in mind any proposed or previous community engagement.

(b) The information reflects the level of significance of the matters covered by the report, as determined in accordance with the Council's significance and engagement policy.

 

Signatories

Author

Steve Ballard - Manager Funds and Financial Policy

Approved By

Diane Brandish - Head of Financial Management

Carol Bellette - General Manager Finance and Commercial (CFO)

   

 


Finance and Performance Committee

05 July 2017

 

 

8.    Resolution to Exclude the Public

Section 48, Local Government Official Information and Meetings Act 1987.

 

I move that the public be excluded from the following parts of the proceedings of this meeting, namely items listed overleaf.

 

Reason for passing this resolution: good reason to withhold exists under section 7.

Specific grounds under section 48(1) for the passing of this resolution: Section 48(1)(a)

 

Note

 

Section 48(4) of the Local Government Official Information and Meetings Act 1987 provides as follows:

 

“(4)     Every resolution to exclude the public shall be put at a time when the meeting is open to the public, and the text of that resolution (or copies thereof):

 

             (a)       Shall be available to any member of the public who is present; and

             (b)       Shall form part of the minutes of the local authority.”

 

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 are as follows:


Finance and Performance Committee

05 July 2017

 

 

 

ITEM NO.

GENERAL SUBJECT OF EACH MATTER TO BE CONSIDERED

SECTION

SUBCLAUSE AND REASON UNDER THE ACT

PLAIN ENGLISH REASON

WHEN REPORTS CAN BE RELEASED

9

Public Excluded Finance and Performance Committee Minutes - 31 May 2017

 

 

Refer to the previous public excluded reason in the agendas for these meetings.