Christchurch City Council

Supplementary Agenda

 

 

Notice of Meeting:

An ordinary meeting of the Christchurch City Council will be held on:

 

Date:                                    Thursday 12 September 2019

Time:                                   9.30am

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

 

 

Membership

Chairperson

Deputy Chairperson

Members

Mayor Lianne Dalziel

Deputy Mayor Andrew Turner

Councillor Vicki Buck

Councillor Jimmy Chen

Councillor Phil Clearwater

Councillor Pauline Cotter

Councillor Mike Davidson

Councillor David East

Councillor Anne Galloway

Councillor James Gough

Councillor Yani Johanson

Councillor Aaron Keown

Councillor Glenn Livingstone

Councillor Raf Manji

Councillor Tim Scandrett

Councillor Deon Swiggs

Councillor Sara Templeton

 

 

10 September 2019

 

 

 

Principal Advisor

Mary Richardson

Acting Chief Executive

Tel: 941 8999

 

 

Christopher Turner-Bullock

Community Governance Manager

941 8233

christopher.turner@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.
Watch Council meetings live on the web:
http://councillive.ccc.govt.nz/live-stream

 


Council

12 September 2019

 

 


Council

12 September 2019

 

TABLE OF CONTENTS

 

46.      Resolution to Include Supplementary Reports....................................................... 4

47.      Updated Water Safety Plan Progress.................................................................... 5

48.      Funding and Financing Options for Improving Warmth and Dryness of Social Housing.. 9  


Council

12 September 2019

 

 

46. Resolution to Include Supplementary Reports

1.      Background

1.1          Approval is sought to submit the following reports to the Council meeting on 12 September 2019:

47.   Updated Water Safety Plan Progress

48.   Funding and Financing Options for Improving Warmth and Dryness of Social Housing

1.2          The reason, in terms of section 46A(7) of the Local Government Official Information and Meetings Act 1987, why the reports were not included on the main agenda is that they were not available at the time the agenda was prepared.

1.3          It is appropriate that the Council receive the reports at the current meeting.

2.      Recommendation

2.1          That the reports be received and considered at the Council meeting on 12 September 2019.

47.   Updated Water Safety Plan Progress

48.   Funding and Financing Options for Improving Warmth and Dryness of Social Housing

 

 


Council

12 September 2019

 

 

47.   Updated Water Safety Plan Progress

Reference:

19/1005005

Presenter(s):

 

 

 

1.   Purpose of Report

1.1       To update the Council on the progress of the updated Water Safety Plan and the earliest date that temporary chlorination can be removed.

2.   Executive Summary

2.1       The Drinking Water Assessor for the Community and Public Health division of the Canterbury District Health Board (“CDHB”) signed off the Christchurch City and Lyttelton Harbour Basin Water Safety Plan in March 2018. This confirmed the management process for a safe and secure supply of drinking-water in Christchurch.

2.2       In December 2018, the Ministry of Health announced a new framework for developing Water Safety Plans. The Council agreed on a voluntary basis to develop new Water Safety Plans in accordance with the guidelines issued in January 2019. Council has revised five Water Safety Plans for Banks Peninsula water supplies in accordance with these guidelines.

2.3       In August 2019, the Ministers of Health and Local Government announced preliminary decisions on the establishment of a new regulatory framework for drinking water.  This announcement advised under the new framework, secure bore status’ is no longer sufficient to demonstrate safety of a drinking-water supply, as it does not prevent contamination that may occur in the pipes between the bore and the household consumer, effectively making residual disinfection (usually chlorine) mandatory. At the same time they announced that exceptions/exemptions would be allowed in special circumstances, and that is what Council is preparing for.

2.4       The new standards and regulatory frameworks mean that we need to take an even more proactive approach to risk assessment and management at each point in the drinking water supply network including the clear identification of control points. 

2.5       The Christchurch City and Lyttelton Harbour Basin Water Safety Plan is on track to be submitted to the Drinking Water Assessor for approval on 30 September 2019.

3.   Staff Recommendations

1.              That the Council notes the report and advice from staff contained within it.

4.   Context/Background

Issue or Opportunity

4.1       The Havelock North inquiry has resulted in a much lower tolerance for risk across suppliers, expert assessors and the regulatory agencies. The Government has recently announced proposals for strengthening the regulatory arrangements for drinking water. These arrangements will significantly strengthen compliance, monitoring and enforcement of drinking water regulation.


 

4.2       The Council agrees with the findings of the inquiry and is well aware of the very high standard of care and diligence that should apply to the Council’s drinking water supply. The Council remains opposed to mandatory residual disinfection, as it is confident that it will be able to supply safe drinking water without permanent chlorine treatment.  

4.3       There are important differences between the situation that existed in Havelock North and the Council’s approach to drinking water safety. For example, the Council has: 

4.3.1   An up-to-date Water Safety Plan for each community water supply to identify and manage risks to public health, four of which have been developed and submitted under the new framework

4.3.2   An excellent groundwater source and a well deepening programme for the Christchurch supply

4.3.3   An accelerated wellhead remediation programme underway and pending completion of that programme, and interim procedure to shut down flood-prone, below-ground wells in storm events

4.3.4   A good relationship with Environment Canterbury

4.3.5   Full bacterial compliance for all urban distribution zones.

4.4       The Council has a lengthy record of bacterial compliance with the New Zealand Drinking Water Standards. There is no evidence of elevated levels of water-borne disease in Christchurch compared to cities such as Auckland and Wellington which have residual chlorine disinfection.  

4.5       The tightening of the regulatory environment for drinking water supply is reflected in the recently revised New Zealand Drinking Water Standards (2018) and the new framework for Water Safety Plans (2018). 

4.6       Council staff are working with the CDHB to develop a Water Safety Plan for the Christchurch city urban zone under that new framework. This will be submitted for approval by 30 September 2019.

4.7       Working collaboratively, both organisations are undertaking a rigorous risk assessment of the network and the current and future steps for managing this risk. Given the lower tolerance for risk under the new regulatory framework it is possible that the new Water Safety Plan would stipulate residual chlorine disinfection where there are unacceptable risks within the distribution network. This may be due to risks at one or more reservoirs and/or where we have poor condition mains and sub-mains that could be vulnerable to contamination.

Water Safety Plan progress

4.8       The Christchurch and Lyttelton Basin Water Safety Plan is on track to be submitted to the Drinking Water Assessor for approval on 30 September 2019.

4.9       The Water Safety Plan has been developed with input from Council staff and Citycare as well as staff from the CDHB and the Ministry of Health. Key work undertaken since the Drinking Water Supply Update to Council on 29 August 2019 includes two risk assessment workshops with staff from the Council and Citycare Ltd. The Medical Officer of Health and other staff from the CDHB attended the first workshop. These workshops have focused on identifying the key risks to the water supply, the residual risk after taking into account mitigation measures, the level of certainty around a risk and the acceptability of the risk post mitigation.


 

4.10    To meet submission deadline, completed chapters of the Water Safety Plan are being sent for an external peer review from 9 September 2019. Feedback from the external reviewers is due on 23 September 2019. Any edits and amendments that occur at this point in time will be in response to the reviews being undertaken.

4.11    Once the Water Safety Plan is submitted to the Drinking Water Assessor, it will be reviewed by a panel of experts determined by the Ministry of Health. The review could take up to three months.

4.12    While the Council is waiting for the Water Safety Plan to be reviewed, work on the well head remediation programme will continue.

Temporary Chlorination Removal

4.13    The recently announced regulatory policy proposals would introduce requirements in regard to residual disinfection. However, the regulations include the ability for the regulator to exempt suppliers from requirements to use residual disinfection in the distribution system, if the supplier can demonstrate that all risks to the safety of the water are being managed appropriately. It is the Council’s intention that it put itself in the best position to seek such an exemption.

4.14    The Medical Officer of Health and the Drinking Water Assessor for the CDHB have recently raised concerns as to whether there is an effective barrier against contamination within the network, due to factors such as high leakage rates and excessive pipe leakages. Their advice was that until a new Water Safety Plan is submitted to the Drinking Water Assessor for approval the risk of contamination within the network remains unquantified. The Medical Officer of Health’s preference is for the entire network to be protected by residual chlorine, with the ideal level being at least 0.2 mg/l until the Water Safety Plan approval is completed.

4.15    The Council has undertaken a significant well head improvement programme. So far 77 of the Council’s wellheads at 148 operating water supply bores have been remediated, with work in progress on 53. By the end of September 2019 sufficient progress will have been made to supply the whole of the city with water from wells that have been upgraded and certified as secure by an independent expert.

4.16    Until the end of June 2019 the standard practice was to have the wells inspected and signed off by as secure by an appropriate expert and then seek the agreement of the Drinking Water Assessor before discontinuing the chlorine treatment. Until the Water Safety Plan has been approved, the Drinking Water Assessor is not providing that agreement.  In the interim the Council will need to maintain a minimal chlorine dose of 0.2 mg/l at wellheads certified as secure by an appropriate expert but not by the Drinking Water Assessor.  Wellheads that had previously been certified as secure by both an appropriate expert and the Drinking Water Assessor will continue to be chlorine-free.

4.17    The regulations and lower tolerance for risk under the new regulatory framework mean the removal of temporary chlorination will likely depend on the progress of the zone by zone assessment of the state of the network. It is also unlikely that the removal of temporary chlorination would be agreed by the Medical Officer of Health and the Drinking Water Assessor until a new Water Safety Plan is approved.


 

 

 

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

Authors

Sarah Hemmingsen - Senior Advisor

Bridget O'Brien - Programme Manager

Peter Doolin - Director Strategic Support City Services

Approved By

John Moore - Manager of Planning and Delivery

David Adamson - General Manager City Services

  


Council

12 September 2019

 

 

48.   Funding and Financing Options for Improving Warmth and Dryness of Social Housing

Reference:

19/1027762

Presenter(s):

Bruce Rendall – Head of Facilities, Property and Planning

 

 

1.   Purpose of Report

1.1       At its meeting of 22 August 2019 the Council requested staff to review, and report back to the 12 September 2019 Council meeting, the possibility of borrowing to bring forward the social housing warm and dry programme so that funding is available to complete the programme by the 31 December 2020. 

2.   Executive Summary

2.1       The Council has requested staff report on the possibility of borrowing to accelerate the delivery of warm and dry upgrades to social housing.

2.2       It is possible to borrow with current policy and financial settings and pay back the loan over a ten year period. If Council borrows to bring forward the insulation improvements, these are likely to be completed by the end of calendar year 2020. 

2.3       The costs of financing mean that the total cost of the upgrades would be greater than completing the programme as currently planned.

 

 

3.   Staff Recommendations 

That the Council:

1.         Borrow a sum of up to ten million dollars ($10,000,000) to allow the acceleration of warm and dry upgrades to social housing units that Council has an interest in.

2.         Delegate authority to the Chief Financial Officer to approve all necessary steps to borrow, administer and repay this loan.

3.         Note that the costs to accelerate the programme will be greater than the cost of undertaking it over 4 years, however, these costs are justified by the quicker achievement of social and other benefits.

 

 


 

4.   Context/Background

Issue or Opportunity

4.1       A proportion of Council’s social housing units need upgrades to improve warmth and dryness.

4.2       Under current policy and financial settings it is unlikely that these upgrades can occur in a timeframe consistent with Councillor and tenant expectations.

4.3       This paper examines the policy and financial settings with the aim of identifying opportunities to accelerate the upgrades.

Background

4.4       The background of this matter was extensively canvassed in the report of 22 August 2019 and is not repeated.

Funding Context

 

4.5       The Housing Fund under its existing financial settings retains a modest surplus from operating its portfolio of properties.  The level of surpluses generated does not provide for increased levels of proactive, reactive or preventative maintenance across the entire portfolio of properties.  Maintenance priorities are continually being reset to remain within the restrictions of the fund.

4.6       Council’s Housing and Finance staff have undertaken a robust review of the future projections of the financial performance of the Housing Fund.  This review looked at the three, ten and seventy years financial strategy for the Housing Fund and has identified some opportunities to accelerate the delivery of outcomes in line with Council’s policies and current initiatives.

4.7       The most important initiative being considered is the Housing Fund’s – Warm and Dry Initiative (WDI).  The WDI is essentially a $16 million two year programme of activity.  The $16 million is a blend of existing Housing Fund funds that is being called equity ($6m), and a proposed borrowing facility ($10m) which reflects the blend in maintenance, renewal and development activities being undertaken and will cover both operating and capital expenditure.

4.8       The borrowing is needed because the existing equity in the Housing Fund is insufficient to complete the programme of works and reflects the long term nature of activities being undertaken especially the long term payback on capital expenditure.  This long term view also reflects the structure of the proposed borrowing where it is envisaged that during the early years of the programme no principal will be repaid by the Housing Fund. 

4.9       It is hoped that social and other benefits will begin to accrue immediately from this programme.  While there may not be any direct financial benefits from the programme, there may be indirect benefits, such as a reduction in health care costs, these will only accrue in the mid to later stages.

Financial Impact

4.10    The impact of borrowing on the Council’s financial performance and position for the WDI is twofold, firstly an impact on costs (interest) and secondly on prudential ratios.

4.11    The Housing Fund is forecasting a net surplus gain (rents less operating expenses) over time to offset the additional interest costs for these activities.  These surpluses are generated from the increase in additional lease payments from the Otautahi Community Housing Trust.

4.12    The impact on prudential ratios of the Council is especially important, as the 2018-28 Long Term Plan already highlighted significant pressure on borrowing limits and key funding ratios.

4.13    In particular, Section 21 of the Local Government (Financial Reporting and Prudence) Regulations 2014 requires a local authority to meet the debt servicing benchmark for a year if its borrowing costs for the year equal or are less than 10% of its revenue (excluding development contributions, financial contributions, vested assets, gains on derivative financial instruments, and revaluations of property, plant, or equipment) for the year. 

4.14    Presently, the Council is forecasting to exceed the quantified limit of 10% for nine of the ten years in the current Long Term Plan due to the amount of borrowing required to fund the rebuild.  Since this measure includes total borrowing costs and not net interest, as seen in the LGFA prudential ratios, any borrowing will exacerbate the problem, even in a low interest rate environment.

4.15    Based on an interest rate of 3% on the proposed borrowing of $10 million and repaid in the latter half of the programme, it is anticipated that there will be an absolute increase of up to 0.03% in the debt servicing benchmark.

4.16    The increase in external debt reduces the headroom available between the Council’s actual borrowings and the assessed quantified limit under the debt affordability benchmark as disclosed in the 2018-28 Long Term Plan. The loss of headroom reduces the Council’s ability to borrow in emergency situations. The Long Term Plan headroom is lowest in 2023 at $252 million before climbing to a more acceptable level.

 

Implications

4.17    The acceleration of the programme will have some benefits, particularly to those units which comply with legislation by way of exemption.   These units will see warmth and dryness improvements earlier.

4.18    There are negative consequences. The borrowings will effectively be paid for through deferring interior redecorations of units and delayed accumulation of funds to replace units. 

4.18.1 The deferral of the interior decoration programme is likely to impact most on long term tenants who look after their units. We would still continue to undertake ad hoc redecorations at the end of tenancies where the condition of the unit justifies expenditure, however, these benefits accrue to new tenants only.

4.18.2 Any ability for the Council to use its social housing fund to fund replacements and growth is effectively pushed out by ten years. 

4.19    We examined all maintenance and renewal line items in preparing this report.  We considered that work programmes such as external painting, roof replacements, tree pruning and footpath repairs were essential.  These programmes had been deferred or reduced in scope in the years immediately after the earthquakes, but were now ramping up.  These programmes have warm and dry, asset life, and safety benefits.

4.20    Other programmes such as those for ad hoc appliance, hot water cylinder, carpet and curtain replacements are still required to allow the continued use of units. 

4.21    The proposed programme is unlikely to reduce ongoing interest in the warmth and dryness of units. 

4.21.1 For instance, we propose installing heat pumps as part of the programme and, even with education about the most efficient use of these, we anticipate concerns from some tenants about the running costs. 

4.21.2 The programme is based on improvement, not compliance, and there are some low cost methodologies that can be used to improve warmth, but will not meet insulation standards.  These methodologies allow for quick, inexpensive improvements with minimal disruption. There are also more expensive methodologies that will require tenants to be relocated during the major building works, but do ensure that insulation meets standards.  There is potential for ongoing interest in the specific methodology, particularly if insulation standards are not meet.

Strategic Alignment

4.22    The provision of social housing contributes directly to Council’s desired community outcome, particularly A Liveable City (see Table 1 and 2 below)

4.23    Council’s Housing Policy 2016 contains the vision that:

·   all people in Christchurch have access to housing that is secure, safe, affordable, warm and dry.

4.24    Goals that support this vision include:

·   Retaining affordable housing - Develop a range of creative, collaborative and innovative ways to ensure the co-ordinated long term promotion, provision and retention of both social and affordable housing.

·   Housing quality - Improve the standards, regulations and monitoring on housing design and quality to achieve healthier housing for households irrespective of their income.

4.25    The policy guidance indicates that Council wants to retain social housing and supports improving its quality.

4.26    Similar themes appear in the Social Housing Strategy 2007.  In addition, there is a focus on financial sustainable management of Council’s portfolio and financially affordable rents for tenants, within a framework of no funding from rates. 

4.27    Taken together Council policy focus is on retaining existing social housing at an affordable level, while improving its quality - particularly its warmth and dryness.  Achieving these outcomes needs to be achieved without calling on rates for funding. 

4.28    The Council also sets direction through the levels of service it sets for delivering social housing.  Relevant levels of service in the 2018-2028 Long Term Plan include targets for the number of units that Council supplies, maintaining rates neutrality, and the installation of insulation where it is practically possible.

4.29    There can be tension between these policy outcomes, particularly growth, quality and affordability.

Decision Making Authority

4.30    The recommendation in this report is to borrow money that has not been contemplated in the Long Term Plan.  Only Council can make this decision. 

Assessment of Significance and Engagement

4.31    If the preferred option is adopted the decision in this report is of low significance in relation to the Christchurch City Council’s Significance and Engagement Policy.

4.32    The primary reasons for the low assessment are:

4.32.1 The low number of people affected by the proposal and the low level of impact.  Ratepayers are not affected as no rates funding is required.  Some current tenants are affected positively, as they will receive upgrades to their units.  These tenants are likely to prefer the upgrades occurring faster, however, this does not materially change the significance rating.

4.32.2 There are known groups interested in this matter who are likely to support improvement in warmth and dryness of social housing.  This proposal will have a low positive impact on these groups. Again these groups are likely to prefer the upgrades occurring faster.

4.32.3 The limited financial impact and low financial risk of the proposal.  There is no rates expenditure required and the costs can be met within the fund (subject to close monitoring of cash flow).

4.32.4 While social housing is a strategic asset, the proposal will not lead to a change of ownership or control.   

4.33    In line with Council’s policy, the recommended engagement approach is to inform the community about these decisions.

 

 

5.   Options Analysis

Options Considered

5.1       The following reasonably practicable options were considered and are assessed in this report:

·   Status quo – implement upgrades as funding becomes available. 

·   Borrow to bring forward warm and dry upgrades. 


 

Options Descriptions

5.2       Preferred Option: Borrow to bring forward the programme. 

5.2.1   Option Description: This option involves borrowing money now to finance warm and dry related upgrades to social housing units.

5.2.2   The programme would see some progress by next winter and is likely to result in substantial improvements by December 2020. 

5.2.3   The loans and interest would be paid back over time through the additional rent and deferring some maintenance and renewal works. The “additional rent” is a proportion of any surplus that the Trust generates from Council’s portfolio, with surplus primarily being derived from Income Related Rents. Council has projected additional rents based on 2015 estimates of the take up and numbers of IRRS funded places.  Both the rate of take up and the number of subsidised places has been higher than expected.  Additionally there is the ability for Council to defer some maintenance to assist in servicing a loan.

5.2.4   Option Advantages

·     Insulation upgrades can be brought forward by a year.

5.2.5   Option Disadvantages

·     The number and availability of temporary accommodation units will restrict the ability to bring forward the upgrades.   

·     The loan will need to be serviced from the fund potentially resulting in other maintenance and renewal works, and replacements being deferred.

5.3       Option 2: Status quo – implement upgrades as funding becomes available.

5.3.1   Option Description:  There is sufficient existing funds and projected revenue to allow the warm and dry programme to be complete in June 2022 and healthy homes upgrades by June 2023.  The phasing of the projected spend will need to be carefully managed so that the fund remains solvent. 

·     This option would involve focusing on upgrading mechanical ventilation and heating as a priority, with insulation upgrades over time. While detailed implementation planning is still being worked on, we would aim to have the ventilation and heating upgrades completed on the “exempt” properties by next winter, and insulation upgrades completed by before the winter of 2022.

·     All options assume expenditure both on those units retained by Council and those transferred to the Trust. We are suggesting inclusion of the properties transferred to the Trust because of moral considerations - tenants who are transferred should not be worse off than those in units that were not transferred. As an independent body, the Trust would need to make their own decision on whether or not to accept such an offer.

5.3.2   Option Advantages

·     Delivery can be achieved within existing forecasts.

·     Other renewal and maintenance programmes are not affected.

·     The cumulative fund balance over the long term is generally consistent with the estimated balance undertaken prior to setting up the Trust.

·     Improvement for tenants by next winter.

·     Achievable within constraints (particularly temporary accommodation).

5.3.3   Option Disadvantages

·     Tenants will not get the full extent of benefits until 2022.

·     There is likely to be ongoing tenant and interested party concerns including the possibility of media attention.

Analysis Criteria

5.4       Criteria to assist decision making are based on councillor guidance, Council policy and financial management considerations.  The criteria used in this report are:

5.4.1   Certainty for tenants.

5.4.2   Implementation as quickly as possible with substantial progress by next winter.

5.4.3   Ability to deliver.

5.4.4   Current maintenance or renewal stays at the same level.

5.4.5   Meet Healthy Home Standard Deadlines.

5.4.6   Affordable.

5.4.7   Unit Numbers.

5.4.8   Wasted investment.

5.5       Certainty for tenants:  There is a desire to make a decision in this term of Council so that tenants can have certainty when units will be upgraded.

5.6       Implementation as quickly as possible with substantial progress by next winter: There is a desire to accelerate delivery of upgrades so that more units are warm and dry next winter.

5.7       Ability to deliver: Implementation considerations include allowing sufficient time for unit specific data collection and planning, procurement time frames, product supply constraints and the need for temporary accommodation in some cases.    

5.8       Current maintenance or renewal stays at the same level: Council’s social housing portfolio has a substantial deferred maintenance problem.  Continuing maintenance and renewals at the same level will help address this problem. While there is a desire to improve the warmth and dryness of some units, it is considered desirable that this does not come at the expense of maintenance and renewals across the portfolio.

5.9       Meet Healthy Home Standard Deadlines: Council has a legal responsibility to implement upgrades to meet the Healthy Home Standards. Current budgets have allowances included so that the works can be completed by the 2023 deadline. We are currently collecting data across the portfolio and will commence the main roll out of this programme in January 2020 (noting that some upgrades are already included in the EQ repair programme and we are allowing for ad hoc upgrades when units are repaired or redecorated between tenancies).

5.10    Affordable: The likely cost of upgrades is currently affordable within the fund, albeit with some deferral of future renewals. To bring forward the works will require borrowing, so the cost of servicing the loans also needs to be affordable.

5.11    Unit Numbers:  Council’s policy is to maintain unit numbers and if possible grow them.  Any option needs to at a minimum maintain unit numbers at current levels. A plan that sees the closure of units with planned replacement with at least the same number of units could be seen as being consistent with that policy, as long as the time between closure and replacement is minimised.

5.12    Wasted investment:  Many of the units that require upgrades are poor performers and likely contenders for redevelopment. The money spent on warmth and dryness upgrades, Healthy Homes Standards upgrades, and the associated costs that are likely (e.g. asbestos removal, electrical system renewals and upgrades, redecoration costs) may be a wasted investment on these units.   

Options Considerations

5.13    All options allow for improvements in the warmth and dryness of social housing units by next winter through an initial focus on improving mechanical ventilation and heating.

5.14    The choice for the Council is essentially a choice between the faster time but greater cost of option 1 and the lower cost but slower time of option 2. The timing is driven by funding availability rather than work methodology.  The cost difference relates to interest costs associated with borrowing. 

6.   Community Views and Preferences

6.1       It is anticipated that there will be general community support for improving the warmth and dryness of social housing units.

6.2       There will potentially be differing views on accelerating this work, with some preferring that upgrades are undertaken quickly through borrowings, while others supporting a slower “pay as you earn” approach. The first group would argue that the general societal benefits of improvements in warmth and dryness of homes outweighs the additional costs of paying interest and delaying works. 

7.   Legal Implications

7.1       There is a legal context, issue or implication relevant to this decision.

7.2       This report has not been reviewed and approved by the Legal Services Unit.

7.3       The legal consideration relates to Council’s obligation to meet Healthy Homes Standards by June 2023.

 


Council

12 September 2019

 

8.   Options Matrix

Issue Specific Criteria

Criteria

Option 1 - Borrow

Option 2 – Status Quo

Financial Implications

Cost to Implement

Warm and Dry Programme

·    Compliant but exempt properties:  $7.8 to $9.2 million dependent on specific heating solutions

·    Other Healthy Homes Upgrades: $7 million

 

Say $16 million

Warm and Dry Programme

·    Compliant but exempt properties:  $7.8 to $9.2 million dependent on specific heating solutions

·    Other Healthy Homes Upgrades: $7 million

 

Say $16 million

Maintenance/Ongoing

Maintenance of upgrades: $120,000 per annum for servicing heat pumps

 

Loan servicing: $1.6 to $1.8 million over the life of the loan

Maintenance of upgrades: $120,000 per annum for servicing heat pumps

Funding Source

Housing Fund

·    The first $6 million can be accommodated with existing budgets in  FY 20 and 21

·    The remaining $10 million will ultimately be funded by future rents (paid into the Housing Fund) but financed by a loan

Housing Fund - There is sufficient existing funds and projected revenue to allow the Council to complete the insulation component by June 2022 and healthy homes upgrades by June 2023. 

Impact on Rates

Nil

Nil

Certainty for tenants

Tenants will know that they will see some improvements by next winter and that warm and dry upgrades should  be completed by December 2020

Tenants will know that they will see some improvements by next winter, improved insulation by June 2022 and healthy homes upgrades by June 2023.

Rapid Implementation

Yes

Partial – if heating and ventilation upgrades are prioritised

Ability to Deliver

Likely achievable but at some risk.

Achievable

Maintain existing levels of maintenance and renewals

Some deferral of maintenance and renewal funding to allow for the interest costs to be met.

Yes

Meet Healthy Homes Standards

Yes

Yes

Maintain unit numbers

Yes

Yes

Best Use of Resources

Some of the investment in upgrades will be wasted if complexes are redeveloped  in the medium term

Some of the investment in upgrades will be wasted if complexes are redeveloped  in the medium term

Statutory Criteria

Impact on Mana Whenua

No impact greater than on the general population

No impact greater than on the general population

Alignment to Council Plans & Policies

While this option is generally aligned with Council’s policies, there is no planned borrowing

Aligned

 

·  


Council

12 September 2019

 

 

 

Attachments

There are no attachments for 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

Bruce Rendall - Head of Facilities, Property & Planning

Approved By

Carol Bellette - General Manager Finance and Commercial (CFO)

Leonie Rae - Acting General Manager Corporate Services