Finance and Performance Committee

Agenda

 

 

Notice of Meeting:

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

 

Date:                                    Thursday 5 December 2019

Time:                                   9.30am

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

 

 

Membership

Chairperson

Deputy Chairperson

Members

Deputy Mayor Andrew Turner

Councillor Sam MacDonald

Mayor Lianne Dalziel

Councillor Jimmy Chen

Councillor Catherine Chu

Councillor Melanie Coker

Councillor Pauline Cotter

Councillor James Daniels

Councillor Mike Davidson

Councillor Anne Galloway

Councillor James Gough

Councillor Yani Johanson

Councillor Aaron Keown

Councillor Phil Mauger

Councillor Jake McLellan

Councillor Tim Scandrett

Councillor Sara Templeton

 

 

29 November 2019

 

 

Principal Advisor

Dawn Baxendale

Chief Executive

Tel: 941 6996

Principal Advisor

Carol Bellette

General Manager Finance and Commercial

Tel: 941 8540

 

 

Samantha Kelly

Team Leader Hearings & Committee Support

941 6227

samantha.kelly@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 December 2019

 

 

 

Finance and Performance Committee of the whole - Terms of Reference / Ngā Ārahina Mahinga

 

Chair

Deputy Mayor Turner

Deputy Chair

Councillor MacDonald

Membership

The Mayor and all Councillors

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

 

Delegations

The Council delegates to the Finance and Performance Committee authority to oversee and make decisions on:

Capital Programme and operational expenditure

·                Monitoring the delivery of the Council’s Capital Programme and associated operational expenditure, including inquiring into any material discrepancies from planned expenditure.

·                As may be necessary from time to time, approving amendments to the Capital Programme outside the Long-Term Plan or Annual Plan processes.

·                Approving Capital Programme business and investment cases, and any associated operational expenditure, as agreed in the Council’s Long-Term Plan.

·                Approving any capital or other carry forward requests and the use of operating surpluses as the case may be.

·                Approving the procurement plans (where applicable), preferred supplier, and contracts for all capital expenditure where the value of the contract exceeds $15 Million (noting that the Committee may sub delegate authority for approval of the preferred supplier and /or contract to the Chief Executive provided the procurement plan strategy is followed).

·                Approving the procurement plans (where applicable), preferred supplier, and contracts, for all operational expenditure where the value of the contract exceeds $10 Million (noting that the Committee may sub delegate authority for approval of the preferred supplier and/or contract to the Chief Executive provided the procurement plan strategy is followed).

Non-financial performance

·                Reviewing the delivery of services under s17A.

·                Amending levels of service targets, unless the decision is precluded under section 97 of the Local Government Act 2002.

·                Exercising all of the Council's powers under section 17A of the Local Government Act 2002, relating to service delivery reviews and decisions not to undertake a review.

Council Controlled Organisations

·                Monitoring the financial and non-financial performance of the Council and Council Controlled Organisations.

·                Making governance decisions related to Council Controlled Organisations under sections 65 to 72 of the Local Government Act 2002.

·                Exercising the Council’s powers directly as the shareholder, or through CCHL, or in respect of an entity (within the meaning of section 6(1) of the Local Government Act 2002) in relation to –

o      (without limitation) the modification of constitutions and/or trust deeds, and other governance arrangements, granting shareholder approval of major transactions, appointing directors or trustees, and approving policies related to Council Controlled Organisations; and

o      in relation to the approval of Statements of Intent and their modification (if any).

Development Contributions

·                Exercising all of the Council's powers in relation to development contributions, other than those delegated to the Chief Executive and Council officers as set out in the Council's Delegations Register.

Property

·                Purchasing or disposing of property where required for the delivery of the Capital Programme, in accordance with the Council’s Long-Term Plan, and where those acquisitions or disposals have not been delegated to another decision-making body of the Council or staff.

Loans and debt write-offs

·                Approving debt write-offs where those debt write-offs are not delegated to staff.

·                Approving amendments to loans, in accordance with the Council’s Long-Term Plan.

Insurance

·                All insurance matters, including considering legal advice from the Council’s legal and other advisers, approving further actions relating to the issues, and authorising the taking of formal actions (Sub-delegated to the Insurance Subcommittee as per the Subcommittees Terms of Reference)

Limitations

·                The general delegations to this Committee exclude any specific decision-making powers that are delegated to a Community Board, another Committee of Council or Joint Committee. Delegations to staff are set out in the delegations register.

·                The Council retains the authority to adopt policies, strategies and bylaws.

Chairperson may refer urgent matters to the Council

As may be necessary from time to time, the Committee Chairperson is authorised to refer urgent matters to the Council for decision, where this Committee would ordinarily have considered the matter. In order to exercise this authority:

·                The Committee Advisor must inform the Chairperson in writing the reasons why the referral is necessary

·                The Chairperson must then respond to the Committee Advisor in writing with their decision.

If the Chairperson agrees to refer the report to the Council, the Council may then assume decision-making authority for that specific report.

 


Finance and Performance Committee

05 December 2019

 

Part A           Matters Requiring a Council Decision

Part B           Reports for Information

Part C           Decisions Under Delegation

 

 

TABLE OF CONTENTS

 

Karakia Timatanga................................................................................................... 8 

C          1.        Apologies / Ngā Whakapāha........................................................................ 8

B         2.        Declarations of Interest / Ngā Whakapuaki Aronga......................................... 8

B         3.        Public Forum / Te Huinga Whānui................................................................ 8

B         4.        Deputations by Appointment / Ngā Huinga Whakaritenga............................... 8

B         5.        Presentation of Petitions / Ngā Pākikitanga.................................................. 8

Staff Reports

performance

B         6.        Performance Exceptions Report October 2019............................................... 9

B         7.        Capital Project Performance Report........................................................... 25

LONG TERM PLAN

B         8.        LTP 2021 Programme Update December 2019.............................................. 35

FINANCE REPORTS

B         9.        Corporate Finance Report for the period ending 30 September 2019............... 41

B         10.      Financial Performance Report for the first quarter ending 30 September 2019. 51

B         11.      Alternative Sources of Revenue................................................................. 73

APPROVALS

C          12.      Development Contributions - Extension of Small Residential Unit Rebate Scheme............................................................................................................. 79

C          13.      Council NEC3 Contracts - Parks and Street Trees Delegated Authority............. 87

CCO/CCTO REPORTS

B         14.      Council-controlled organisations - Annual Results for 2018/19....................... 97

C          15.      Council-controlled organisations - Annual General Meetings 2019................. 285

C          16.      Vbase Ltd - Annual Report for 2018/19 and Quarter 1 2019/20 Performance Report............................................................................................................ 327

C          17.      Appointment of Councillors to Council-controlled organisation boards - recommendations from the Appointments Committee................................ 387

C          18.      Christchurch City Holdings Ltd - Annual Report 2018/19.............................. 395

B         19.      Council-controlled organisations - Quarter 1 2019/20 Performance Reports... 465

B         20.      Regenerate Christchurch - Annual Report 2018/19 and Quarter 1, 2019/20  Performance Report............................................................................... 509

C          21.      Resolution to Exclude the Public.............................................................. 578

Karakia Whakamutunga

 

 


Finance and Performance Committee

05 December 2019

 

 

Karakia Timatanga 

1.   Apologies / Ngā Whakapāha  

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

2.   Declarations of Interest / Ngā Whakapuaki Aronga

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.   Public Forum / Te Huinga Whānui

A period of up to 30 minutes may be available for people to speak for up to five minutes on any issue that is not the subject of a separate hearings process.

It is intended that the public forum session will be held at 9.30am.

4.   Deputations by Appointment / Ngā Huinga Whakaritenga

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

5.   Petitions / Ngā Pākikitanga  

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

 


Finance and Performance Committee

05 December 2019

 

 

6.     Performance Exceptions Report October 2019

Reference / Te Tohutoro:

19/1324128

Presenter(s) / Te kaipāhō:

Peter Ryan - Head of Performance Management Unit

 

 

1.   Purpose of Report / Te Pūtake Pūrongo

1.1       The purpose of this report is for the Finance and Performance Committee to note performance exceptions for October 2019.

2.   Executive Summary / Te Whakarāpopoto Matua

2.1       Corporate performance reports focus on exceptions as follows:

2.1.1   Performance Exceptions Summary for October 2019 for LTP levels of service and Watchlist Capital Project deliveries, Attachment A.

2.1.2   Graph of forecast levels of service (LOS) delivery by Activity, Attachment B.

2.1.3   Level of Service Performance Exception Commentaries. This is a compilation of commentaries and remedial actions from level of service owners, Attachment C.

2.1.4   Attachment D comprises,

(a)  Graph that shows relationship between forecast LOS delivery and forecast controllable net cost (operational expenditure) by Activities, for Activities with significant exceptions only.

(b)  Graph that shows movement from last month to this month for key activities in (a).

(c)  Table for all Activities that shows full year 2019/20 forecast controllable net cost (operational expenditure) and forecast LOS delivery.

3.   Staff Recommendations / Ngā Tūtohu

That the Finance and Performance Committee:

1.         Receives the information in the monthly Performance Exceptions Report, including attachments for October 2019.

4.   Context / Background / Te Horopaki

Issue or Opportunity / Ngā take, Ngā Whaihua rānei

4.1       The reports assist with both transparency and accountability. Their focus is on managing risks to delivery and any remedial actions required.

4.2       This reporting framework is based on the levels of service, budgets and projects approved in the 2018 Long Term Plan.

 

 

Attachments / Ngā Tāpirihanga

No.

Title

Page

a

Performance Exceptions Summary Oct 2019

11

b

Forecast FY 2019/20 year-end LOS delivery Oct 2019

13

c

LOS Exception Commentaries Oct 2019

14

d

Performance Exceptions Graphs and Table Oct 2019

21

 

 

Confirmation of Statutory Compliance / Te Whakatūturutanga ā-Ture

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 / Ngā Kaiwaitohu

Authors

Boyd Kedzlie - Senior Business Analyst

Lerks Stedman - Senior Business Analyst

Approved By

Peter Ryan - Head of Performance Management

Carol Bellette - General Manager Finance and Commercial (CFO)

  


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

PDF Creator


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

 

7.     Capital Project Performance Report

Reference / Te Tohutoro:

19/1353360

Presenter(s) / Te kaipāhō:

Ruth Cable - Head of Programme Management Office

 

 

1.   Purpose of Report / Te Pūtake Pūrongo

1.1       The purpose of this report is for the Finance and Performance Committee to be informed of the Capital Programme Delivery Performance for period ending 31 October 2019.

 

2.   Staff Recommendations / Ngā Tūtohu

That the Finance and Performance Committee:

1.         Receives the information in the Capital Programme Performance Report.

 

 

 

Attachments / Ngā Tāpirihanga

No.

Title

Page

a

Capital Project Performance Report - Oct 2019

26

 

 

Confirmation of Statutory Compliance / Te Whakatūturutanga ā-Ture

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 / Ngā Kaiwaitohu

Author

Ruth Cable - Head of Project Management Office

Approved By

David Adamson - General Manager City Services

  


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

 

8.     LTP 2021 Programme Update December 2019

Reference / Te Tohutoro:

19/1324052

Presenter(s) / Te kaipāhō:

Peter Ryan – Head of Performance Management

 

 

1.   Purpose of Report / Te Pūtake Pūrongo

1.1       The Finance and Performance Committee has requested ongoing monthly update on the implementation of the Long Term Plan (LTP) 2021 project plan.

2.   Executive Summary / Te Whakarāpopoto Matua

2.1       This report contains a brief update on implementation, risks and mitigations against the LTP project plan and the draft Letter of Expectation. See Attachment A from the LTP Programme Manager.

3.   Staff Recommendations / Ngā Tūtohu

That the Finance and Performance Committee:

1.         Notes that the fundamental premise of the LTP process is that all components (Financial and Infrastructure Strategies, Activity Plans, Asset Management Plans, the capital programme) will be completed by staff in draft form by 1 June 2020. 

2.         Notes that this will provide councillors reasonable time to work through proposals, options and budgets in a measured way before finalising a draft LTP in December 2020 and formally adopting the draft in February 2021.

3.         Notes the attached LTP project update, including risks and mitigations.

 

 

Attachments / Ngā Tāpirihanga

No.

Title

Page

a

LTP Programme Update - December 2019

37

 

 

Confirmation of Statutory Compliance / Te Whakatūturutanga ā-Ture

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 / Ngā Kaiwaitohu

Authors

Peter Ryan - Head of Performance Management

Boyd Kedzlie - Senior Business Analyst

Approved By

Carol Bellette - General Manager Finance and Commercial (CFO)

Dawn Baxendale - Chief Executive

  


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

 

9.     Corporate Finance Report for the period ending 30 September 2019

Reference:

19/1171252

Presenter(s):

Diane Brandish – Head of Financial Management
Andrew Jefferies – Manager Funds & Financial Policy

 

 

1.   Purpose of Report

1.1       The purpose of this report is for the Finance and Performance Committee to receive quarterly information relating to the Council’s treasury and debtors risks.

2.   Executive Summary

2.1       Key messages from treasury as at 30 September 2019 are:

2.1.1   All treasury risk positions are within policy limits.

2.1.2   We have pre-funded $125 million of the $128.5 million core external debt maturity on 15 April 2020. We did this in two tranches. Only the first tranche of $50 million of pre-funding appears in this quarterly report. The subsequent tranche of $75 million was pre-funded on 7 October 2019, outside the reporting quarter.

2.1.3   We increased our committed undrawn bank facilities from $100 million to $200 million during the September 2019 quarter to manage liquidity risk.

2.2       Key messages from Non-rates Debtors as at 30 September 2019 are:

2.2.1   Non-rates debtors increased by $0.8m (or 6.1%) over the quarter. The majority of this was due to an increase in general debtors.

2.2.2   There were $28.7K of debts written off in the last quarter versus $35.6k in the quarter before.

Snapshot

 

Sep 19

$m

Jun 19

$m

All non-rates debtors

13.9

13.1

Debtors written off in Quarter

0.03

0.04

 

2.3       Key messages from Rate Debtors as at 30 September 2019 are:

2.3.1   As at 30 September 2019, net rates debtors were ($4.6m) due to the high amount of credit balances held.  This is consistent with the payment pattern experienced at this time of the calendar year.

Snapshot

 

Sep 19

$m

Jun 19

$m

All rates debtors

22.8

20.7

Credit balances

(27.4)

(6.8)

Net rates debtors

(4.6)

13.9

 

3.   Staff Recommendations

That the Finance and Performance Committee:

1.         Receives the information in the Corporate Finance Report for the period ending 30 September 2019.

4.   Treasury

Borrowing, Treasury Lending and Bank Deposits

4.1       Council’s borrowing, treasury lending, and cash deposit balances as at 30 September 2019 (and their movement since 30 June 2019) were as follows.

Note: “Treasury lending” covers all Council lending administered by Council treasury staff. This covers lending to CCHL and to the Local Government Funding Agency (LGFA) via “borrower notes”. It doesn’t cover other lending such as to community groups.

 

4.2       The $50 million increase is general debt is due to our pre-funding activity explained below. The $12 million additional borrowing for CCHL consists of $10 million relating to City Care and $2 million to replace maturing debt from a third party.

4.3       Pre-funding of debt maturing on 15 April 2020: Council has $128.5 million of core external debt maturing on 15 April 2020. This borrowing will need to be rolled over (borrowed for a further term). Large debt maturities can pose some funding risk for Council e.g. if a global financial crisis prevented the Council from borrowing from LGFA. Our practice is to manage this risk by pre-funding most of the maturity. This means we borrow earlier than we need to, depositing the cash until the 15 April 2020 maturity date, then using that cash to repay the original borrowing. We pre-funded $50 million of that debt maturity on 26 August 2019. This increases our general debt by $50 million temporarily (until 15 April 2020), and temporarily increases our cash holdings by a similar amount. Given the low interest rate at which we can borrow from LGFA, Council actually profits slightly from this pre-funding. We pre-funded a further $75 million on 7 October 2019, after the end of our reporting period.

4.4       Cash reduction: Despite the $50 million cash injection from pre-funding during the September 2019 quarter, our cash holdings declined by around $59 million during the quarter. This was due largely to a net cash outflow on the last day of September of around $68 million relating to the global settlement.

Short-term liquidity risk

4.5       Council sources its borrowed funds from the Local Government Funding Agency (LGFA). We have an obligation to LGFA to keep our liquidity ratio above 110%. As at 30 September 2019 our liquidity ratio is well above that minimum level. It is 123%.

Policy Limit (ratio must exceed 110%)Within Limit

Short Term Liquidity

30 Sep 19

$m

30 Jun 19

$m

A – External Debt

1,846.7

1,796.7

B – External Liquid Investments

217.4

276.2

C – Committed Undrawn Bank Facilities

200.0

100.0

Liquidity [(A+B+C)/A]

123%

121%

 

4.6       $200 million committed undrawn bank facilities: Our committed undrawn bank facilities give us the option to borrow funds very quickly if we need it. This demonstrates strong liquidity management and contributes to Standard & Poor’s assessment of our credit rating.  In the September 2019 quarter we increased the amount of committed undrawn bank facilities we hold from $100 million to $200 million in order to remain well within the limit of 110%.

Long term funding risk

4.7       Funding risk is the risk that funds may not be available for Council to borrow at reasonable prices. This includes access to funds for rolling over existing borrowing when it matures. This lack of availability could last days, weeks or months. We manage this risk by ensuring our existing debt does not all mature at a single point in time, but gradually over several years. We have policy limits to guide our debt maturity profile.

Policy Limit (maturity of existing debt only) – Within Limit

Long Term Funding Risk

Actual

Minimum

Maximum

0 to 3 years (ends June 2022)

42%

15%

60%

3 to 5 years (ends June 2024)

22%

15%

60%

5 years plus

36%

10%

60%

 

100%

 

 

 

4.8       Funding risk also includes the risk we will not be able to access new borrowing (as opposed to borrowing to roll over existing debt). A more comprehensive risk profile is shown below:

Interest Rate Re-pricing

4.9       When we borrow funds at floating interest rates, the interest rate normally changes every three months. If we borrow at fixed rates, then the interest rate will change when we roll that debt over at its maturity. If interest rates have increased at the repricing date, our borrowing will cost more. All our borrowing is exposed to interest rate re-pricing risk, but we manage this by fixing the interest rates for varying lengths of time lasting several years. We can use interest rate swaps (“hedges”) to convert floating rate borrowing into fixed rate borrowing.

4.10    Our hedging profile shows the length of time over which our debt is protected from interest rate re-pricing risk. We want to have sufficient protection from re-pricing risk on one hand, while preserving flexibility (e.g. to repay debt) on the other. We have policy guidelines that provide an envelope within which we aim to keep our hedging profile. This is shown in the chart below.

4.11    The chart focuses on core external debt, net of borrower notes and excluding the temporary pre-funding.

Explanation of chart

* Blue solid line: Our existing core external debt, net of borrower notes (BNs). Extending this line across the chart illustrates our typical assumption that this debt will all be rolled over as it matures, at least for the foreseeable future.

* Red bars = amount of our existing core external debt that is protected against interest rate re-pricing as at 30 June each year. So of our $1,227 million of existing core external debt (net of BNs and excluding pre-funding), the red bar for 2024 tells us that $926 million of that remains fixed as at 30 June 2024.  This means that the remaining $301 million will have been re-priced between now and 30 June 2024 (probably at a lower interest rate since interest rates are quite low at present).

* Orange line = projected core external debt (net of BNs and excluding pre-funding), including projected new borrowing

* Dotted blue lines = Policy Limits (maximum & minimum amount) for hedging. These are calculated as a certain percentage (which decreases over time) of the orange line (projected core external debt). This guides the extent to which Council can be protected from interest rate re-pricing risk. The idea is that the red bars should lie between the dotted lines.

4.12    Hedging levels (red bars) are within policy limits (dotted blue lines) both this year (2019/20) and into the future.

Credit risk

4.13    Credit risk is the risk that the Council will suffer loss from counterparties' failure to pay funds owed to Council. This risk is managed by keeping our term deposits, call deposits and investments with any one party within specified limits. All exposures are within policy limits.

4.14    Our exposure to banks consists of our call and term deposits, plus the discounted present value of amounts we would expect to receive from them under swap contracts. The latter is zero since interest rates have been generally declining over recent years (we expect to pay amounts to banks under our swap contracts rather than receive amounts).

Policy Limit (exposure to single creditor)Within Limit

Counterparty ($m)

Credit

Rating

Exposure

($m)

Limit

($m)

Derivative Banks

 

 

ANZ Bank

“AA” Band

73.0

200

BNZ Bank

“AA” Band

22.9

200

Westpac Bank

“AA” Band

0

200

Kiwi Bank

“A” Band

26.0

150

 

 

 

 

Other Banks

 

 

ASB/ CBA Bank

“AA” Band

50.0

150

Rabobank

“AA” Band

50.0

150

 

 

 

 

Government & Semi-Government

 

 

NZ Government

AA+

0

unlimited

LGFA

AA+

28.8

100

 

5.   General Debtors

 

Sep 19

$m

Jun 19

$m

Movement

Sep 19

%

Jun 19

%

Movement

All non-rates debtors

13.9

13.1

Up

100

100

 

 

 

 

 

 

 

 

Greater than 90days

4.7

4.3

Up

34

33

Up

Greater than $5k

12.1

11.3

Up

87

86

Up

Greater than $1m

5.7

3.9

Up

41

30

Up

Debtors written off (Qtr)

0.03

0.04

Down

-

-

 

 

 

 

 

 

 

 

Debtor Category

 

 

 

 

 

 

General

9.3

8.3

Up

67

63

Up

Resource Consent

1.9

2.2

Down

14

16

Down

Building Consent

1.8

1.8

No Change

13

14

Down

LIMS

0.3

0.2

Up

2

2

No Change

Health

0.2

0.1

Up

1

1

No Change

Infringements

0.1

0.1

No Change

1

1

No Change

Others

0.3

0.4

Down

2

3

Down

Overdue Trade Debtors

5.1       The most significant overdue debtor in this report remains the LINZ account for $3.9 million (out of total debt $4.066m). In October 2019 LINZ paid $3.6m after the global settlement was finalised however the interest portion of $0.3m will not be recovered.

5.2       Overdue trade debtors (greater than 90 days) is 34% of total trade debtors, if the LINZ debt is included and reduces to 6% if the LINZ debt is excluded.

Trade Debtors Written Off

5.3       Trade debtors of $28,723 have been written-off in the quarter to 30 September 2019 compared to $252,181 in the year to 30 June 2019.

5.4       The detail is below:

Debtors Written Off

YTD

Sep 19

$

 

 

Residential Rents

400

Regulatory

3,215

Dogs

0

Library

21,612

Sundry

0

Recreation & Sport

1,417

Hall Hire

312

Customer Liquidation

1,369

Street Poles

0

Commercial Rents

398

Others

0

Total

28,723

 

5.5       The significant write-offs (over $2,000) relate to:

1)    A write-off of $2,205 in the quarter relating to pre application invoices was granted as the debtor could not be located and then was adjudicated bankrupt. 

5.6       The Library debtors written off comprise a large number of relatively small amounts where the debt collection agency has been unable to locate the debtor or the debtor has refused to pay.  Only amounts over $30 are referred to debt collection agencies for collection.

5.7       A summary report of trade debtors written off in 2019/20 by month is provided as Attachment A.

6.   Rates Debtors

 

Sep 19

$m

Jun 19

$m

Movement

Net rates debtors

(4.6)

13.9

Down

All rates debtors

22.8

20.7

Up

Credit balances

(27.4)

(6.8)

Up

 

6.1       The active reporting and monitoring of rates debtors is impacted by the instalment dates.  Rates are invoiced at the end of the month and receipts are received over the month end leading up to the penalty date.

6.2       The table below highlights all outstanding rates invoices in arrears.

6.3       This ignores credits recorded for other ratepayers who have paid in advance of the next instalment date.

30 Sep 2019

($m)

General Rates Invoiced YTD
(Sep 2019)

Pre-2019/20 year Arrears

Outstanding Current Year

% Outstanding Current Year vs Invoiced YTD

2019/20

200.5

11.3

11.5

5.7%

 

6.4       In the table below, the arrears reflect the rates outstanding from previous reporting periods.

Quarter Ended

 

Value of Arrears

($m)

Number of Ratepayers in Arrears

Sep 2019

11.3

6,771

Jun 2019

1.0

626

 

6.5       Work continues to reduce the pre-2019/20 rates arrears balances.

6.6       The table below shows the ageing of the $11.3 million and movement since June 2019 when the balance was $1.0 million for the pre-2018/19 arrears:

Year

2010

$000

2011

$000

2012

$000

2013

$000

2014

$000

2015

$000

2016

$000

2017

$000

2018

$000

2019

$000

Total

$000

Arrears

10

12

20

37

102

92

117

141

406

10,376

11,313

∆ in Qtr

-

-

-

-

-

-

-3

-17

-77

10,376

10,279

 

 

 

 

 

 

 

 

 

 

 

 

Year

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

 

Total

Number

11

14

18

23

24

27

33

53

278

6,771

7,252

∆ in Qtr

-

-

-

-

-

-2

-5

-10

-128

6,771

6,626

 

6.7       Arrears are actively managed to the extent possible. Options include payment plans and direct debit arrangements. Rates postponement is offered where appropriate.

 

 

Attachments

No.

Title

Page

a

Debtors Written Off Summary 30 September 2019

50

 

 

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

Brett Hales - Manager Transactions

Andrew Jefferies - Manager Funds & Financial Policy

Approved By

Diane Brandish - Head of Financial Management

Carol Bellette - General Manager Finance and Commercial (CFO)

  


Finance and Performance Committee

05 December 2019

 

PDF Creator


Finance and Performance Committee

05 December 2019

 

 

10.   Financial Performance Report for the first quarter ending 30 September 2019

Reference:

19/1179948

Presenter(s):

Diane Brandish – Head of Financial Management

 

 

1.   Purpose of Report

1.1       The purpose of this report is to update the Finance and Performance Committee on a quarterly basis on the financial results to date and the current forecast for the full year.

 

2.   Staff Recommendations

That the Finance and Performance Committee:

1.         Receives the information in the Financial Performance Report for the quarter ending 30 September 2019, including a forecast year end update as at the end of November.

 

3.   Overview

3.1       Financial information reported to Council covers two key areas. Operational (expenditure and revenue) covers the day to day spend on staffing, operations and maintenance, and revenues. Capital covers the delivery of the capital programme and funding relating to it.

3.2       Generally operational revenues will exceed expenditure. This is because included in the rates revenue is funding for capital renewals and debt repayment. This is removed in the table below to show a true (rate funded) operating result.

3.3       The residual source of funding for the Capital programme is borrowing. 

3.4       This report would normally have come to the Committee in November, but was delayed as a result of the elections. Full October results, including Activity operating results were not available because of the major system conversion during that month.

3.5       The October forecast operating result for the year is a $3.2 million deficit. This is an improvement on the $6.2 million forecast deficit in September which is included in the report detail below.  Key drivers in the $3 million October improvement are forecast lower insurance costs ($0.8m), lower Heathcote Dredging costs ($0.5m), improved net interest revenues ($0.4m), personnel savings ($0.3m), reduced QV valuation contract costs ($0.3m); and increased rates penalties ($0.2m). The forecast lower dredging costs improve the Flood Protection activity with the balance improving Corporate Revenues and Expenses.

3.6       The latest November forecast operating result for the year shows a $1.9 million deficit. Factors underpinning the further $1.3m improvement include reductions in forecast electricity cost increases and global Stormwater consent implementation costs, together with further favourable interest movement and increased rate penalties and traffic fines. Finance Business Partners are continuing to work with General Managers and Unit Heads to identify savings to fully address the remaining deficit.

3.7       The November forecast capital delivery is not significantly changed.


 

 

Year to Date Results

Forecast Year End Results

After Carry Forwards

$m

Actual

Plan

Var

 

Forecast

Plan

Var

 

Carry Fwd

Var

 

Operational

 

 

 

 

 

 

 

 

 

Revenues

(179.8)

(182.0)

(2.2)

 

(774.2)

(777.4)

(3.2)

 

(2.7)

(0.5)

 

Expenditure

160.3

167.7

7.4

 

620.4

617.9

(2.5)

 

2.7

(5.2)

 

Funds not available for Opex

40.4

39.6

(0.8)

 

160.0

159.5

(0.5)

 

-

(0.5)

 

Operating Deficit / (Surplus)

20.9

25.3

4.4

6.2

-

(6.2)

-

(6.2)

 

 

 

 

 

 

 

 

 

 

Capital

 

 

 

 

 

 

 

 

 

Gross Programme Expenditure

89.8

114.5

24.7

 

516.3

533.2

16.9

 

27.8

(10.9)

 

Less planned Carry Forwards

-

(29.3)

(29.3)

 

(108.3)

(136.1)

(27.8)

 

(27.8)

-

 

Capital Programme Expenditure

89.8

85.2

(4.6)

408.0

397.1

(10.9)

-

(10.9)

Revenues and Funding

(97.0)

(102.6)

(5.6)

 

(397.6)

(402.5)

(4.9)

 

(3.6)

(1.3)

 

Borrowing required

(7.2)

(17.4)

(10.2)

10.4

(5.4)

(15.8)

(3.6)

(12.2)

 

4.   Key Points

Operating Deficit                     Full year forecast[1]              $6.2mñ

                                                                                  Budget                                                               $0m

 

Key drivers:  Above budget forecast spend is mainly due to higher Water Supply and Wastewater maintenance costs ($2 million); lower Trade Waste revenues ($1.8 million); additional chlorination costs ($1 million); and higher electricity costs ($0.9 million).

Actions are underway to minimise any full year operating deficit.

Operating Revenue

Year to date $179.8mò            Full year forecast1            $776.9mò

Budget                   $182.0m                               Budget                                               $777.4m

 

Key drivers: Lower Trade Waste Revenues;

lower Housing revenues; lower Consenting volumes. Partially offset by higher rates income and interest revenues.

(Ref. 5.1 and 5.2 for variances and explanations)

Operating Expenditure

Year to date $160.3mò            Full year forecast1                      $623.1mñ

Budget                   $167.7m                               Budget                                                  $617.9m

 

Year to date – year to date under spend is timing related as costs are occurring slower than planned.

Key drivers – full year forecast – Water Supply and Wastewater maintenance; higher debt servicing costs (offset by interest revenue); additional chlorination costs; and higher electricity costs.

(Ref. 5.3 – 5.6 for variances and explanations)

 

¹ after carry forwards

Capital Expenditure

Year to date $89.9m      Forecast delivery       $408.0m      Budget $397.1m

Budget                      $85.2m            Forecast carry forwards          $136.1m¹            26% of gross budget

                                                               Forecast over spend                  $10.9m  ñ     

                                                                           

Drivers: savings not yet confirmed to offset the Town Hall ($6.9 million); and a forecast additional $4.1 million equity injection into CCHL to enable DCL to purchase land off Council (this is offset by the asset sale under Revenues and Funding).

(Ref. section 6)

¹$136.1 million of carry forwards are budgeted.

5.   Operational Details

 

Year to Date Results

Forecast Year End Results

After Carry Forwards

$m

Actual

Plan

Var

Forecast

Plan

Var

C/F

Result

Operating revenue

(37.2)

(41.1)

(3.9)

(159.8)

(165.9)

(6.1)

(2.7)

(3.4)

Interest and dividends

(10.8)

(9.8)

1.0

(88.5)

(87.2)

1.3

-

1.3

Rates income

(131.8)

(131.1)

0.7

(525.9)

(524.3)

1.6

-

1.6

Revenue

(179.8)

(182.0)

(2.2)

(774.2)

(777.4)

(3.2)

(2.7)

(0.5)

 

 

 

 

 

Personnel costs

50.8

51.6

0.8

214.5

213.1

(1.4)

-

(1.4)

Less recharged to capital

(10.5)

(10.9)

(0.4)

(41.2)

(41.5)

(0.3)

-

(0.3)

Grants and levies

15.8

13.5

(2.3)

45.0

44.9

(0.1)

-

(0.1)

Operating costs

54.8

62.2

7.4

188.4

190.4

2.0

2.7

(0.7)

Maintenance costs

25.6

27.3

1.7

115.6

115.2

(0.4)

-

(0.4)

Debt servicing

23.8

24.0

0.2

98.1

95.8

(2.3)

-

(2.3)

Expenditure

160.3

167.7

7.4

620.4

617.9

(2.5)

2.7

(5.2)

 

 

 

 

 

Net Cost

(19.5)

(14.3)

5.2

(153.8)

(159.5)

(5.7)

-

(5.7)

Other Funding

 

 

 

Transfers from Special Funds

(4.1)

(3.8)

0.3

(11.9)

(12.4)

(0.5)

-

(0.5)

Borrowing for cap grants /EQ resp

(0.5)

(1.6)

(1.1)

(7.5)

(7.5)

-

-

-

Less Rates for capex and debt repayment

45.0

45.0

-

179.4

179.4

-

-

-

Funds not available for Opex

40.4

39.6

(0.8)

160.0

159.5

(0.5)

-

(0.5)

 

 

 

Operating Deficit / (Surplus)

20.9

25.3

4.4

6.2

-

(6.2)

-

(6.2)

Revenue

5.1       Revenue is $2.2 million lower than budget year to date, large variances include slower Lancaster park demolition recoveries ($1.6 million - offset by slower expenditure), (a carry forward of $2.7 million is forecast for stage 6 of the project being the physical finish and agreed layout of site); lower parking fines ($0.5 million); lower Housing revenues ($0.4 million); and decreased Trade Waste revenues ($0.4 million).  

5.2       The revenue forecast variances include;

5.2.1   Lower Operating revenue ($3.4 million - after adjusting for carry forwards) largely due to,

·     Lower Trade Waste revenues ($1.8 million) - the plan included revenues from a new client, however extra infrastructure capacity is required to be built; negotiations are underway with the client in regards to this. Also impacting is the Gelita Head office announcing in late June 2019 that they would not be rebuilding the damaged factory to the level of production that it previously had.

·     LTP contractor bonds initiative ($0.4 million) – which will not eventuate.

·     Lower Housing revenues ($0.4 million) – forecast to be revised following confirmation with the Trust in respect to income related rent subsidies projections and property transfer timeframes.

·     Lower Building consent volumes ($0.4 million).

5.2.2   Higher interest and dividends revenues ($1.3 million) driven by,

·     Investing pre-funded debt raised early to repay debt due for rollover in April 2020 ($1.7 million).

·     Higher interest revenues from Christchurch City Holdings Limited ($0.7 million), due to additional on-lending; partially offset by,

·     The Global Settlement paid earlier than planned and a recent drop in the Official Cash Rate flowing through to lower deposit rates ($1.1 million).

5.2.3   Higher Rates income ($1.6 million) due to,

·     Higher rating growth late in the 2018/19 year ($1.5 million), and higher penalties than planned.

Expenditure

5.3       Operational expenditure is $7.4 million below budget year to date, mainly due to:

·   Slower than budgeted Lancaster Park demolition costs ($1.6 million) – offset by matched recoveries, with budgets to be carried forward.

·   Timing of Roads and Footpath maintenance costs ($1.1 million),

·   Timing of Parks and Heritage maintenance costs ($1 million),

·   Slower legal proceedings costs than planned ($0.8 million),

·   Lower personnel costs ($0.8 million), due to vacancies,

·   Timing of Housing maintenance spend ($0.8 million),

·   Election costs timing ($0.6 million), and,

·   Timing of rating valuation expenses ($0.5 million)   

5.4       The $5.2 million forecast expenditure variance after adjusting for carry forwards is mainly due to:

·   Increased debt servicing costs ($2.3 million), driven by pre-funding debt due raised early to repay debt due for rollover in April 2020, and additional on-lending to Christchurch City Holdings Limited. These debt servicing costs are offset by interest revenue, but overall interest revenue is down due to lower interest rates and earlier than planned resolution of the Global Settlement.

·   Higher Water Supply and Wastewater maintenance costs ($2 million), these are considered necessary to delivery the minimum levels of service for these two activities under business as usual conditions.

·   Additional chlorination costs ($1 million), to meet the revised Drinking Water Standards implemented post the Annual Plan and indications that some chlorination beyond the indicated timeframes and peak times will be required.

5.5       Personnel costs variance year to date is driven by vacancies. The forecast reflects an above budget personnel spend in IT ($1.6 million); additional resource has been brought in to support the capital programme. This cost is capitalised.

5.6       Operating costs result year to date is due to timing of expenditure mainly driven by slower Lancaster Park demolition costs ($2.8 million) ( less $1.2 million reported under maintenance); slower Insurance claim costs ($0.8 million); timing of Three Waters and Waste spend ($0.8 million), election ($0.6 million) and rating valuation expenses ($0.5 million); EQ Rebuild programme operating costs are $0.5 million lower (offset by above budget spend in other cost groupings).

5.7       The net cost of individual activities is shown in Attachment A.


 

 

6.   Capital Programme

 

Year to Date Results

Forecast Year End Results

After Carry Forwards

$m

Actual

Plan

Var

Forecast

Plan

Var

C/F

Result

Three Waters

24.6

37.7

13.1

142.1

128.0

(14.1)

(12.9)

(1.2)

Roading and Transport

11.9

14.4

2.5

91.4

98.8

7.4

7.2

0.2

Strategic Land

-

-

-

23.4

24.8

1.4

1.4

-

IT

4.7

8.0

3.3

23.3

23.9

0.6

0.6

-

Other

12.5

14.3

1.8

62.3

73.2

10.9

11.7

(0.8)

Works Programme

53.7

74.4

20.7

342.5

348.7

6.2

8.0

(1.8)

 

 

 

 

 

Infrastructure

7.1

8.3

1.2

37.1

47.4

10.3

8.8

1.5

Transitional / Recovery Projects

1.1

1.5

0.4

10.4

14.8

4.4

3.0

1.4

Facilities Rebuild

30.0

28.9

(1.1)

109.4

109.5

0.1

8.0

(7.9)

Rebuild Programme

38.2

38.7

0.5

156.9

171.7

14.8

19.8

(5.0)

 

 

 

 

 

Capital Works Programme

91.9

113.1

21.2

499.4

520.4

21.0

27.8

(6.8)

Equity Investments

-

1.4

1.4

16.9

12.8

(4.1)

-

(4.1)

Vbase recovery - Town Hall

(2.1)

-

2.1

-

-

-

-

-

Gross Capital Spend

89.8

114.5

24.7

516.3

533.2

16.9

27.8

(10.9)

Unidentified Carry forwards

-

(29.3)

(29.3)

(108.3)

(136.1)

(27.8)

(27.8)

-

Capital Programme Expenditure

89.8

85.2

(4.6)

408.0

397.1

(10.9)

-

(10.9)

 

 

 

 

 

 

 

 

 

Development Contributions

(9.0)

(5.5)

3.5

(22.1)

(21.9)

0.2

-

0.2

Less DC Rebates

0.7

2.1

1.4

10.5

11.3

0.8

0.8

-

Crown Recoveries

(7.6)

(4.6)

3.0

(21.5)

(21.5)

-

-

-

NZTA Capital Subsidy

(2.9)

(11.8)

(8.9)

(37.2)

(48.1)

(10.9)

(3.6)

(7.3)

Misc Capital Revenues

(1.7)

(0.4)

1.3

(9.3)

(8.2)

1.1

-

1.1

Asset Sales

(8.3)

(4.6)

3.7

(17.4)

(5.0)

12.4

-

12.4

Capital Revenues

(28.8)

(24.8)

4.0

(97.0)

(93.4)

3.6

(2.8)

6.4

 

 

 

 

Rates for Renewals

(33.1)

(33.1)

-

(131.7)

(131.7)

-

-

-

Reserve Drawdowns

(35.1)

(44.7)

(9.6)

(168.9)

(177.4)

(8.5)

(0.8)

(7.7)

Other Available Funding

(68.2)

(77.8)

(9.6)

(300.6)

(309.1)

(8.5)

(0.8)

(7.7)

 

 

 

 

 

Borrowing Required

(7.2)

(17.4)

(10.2)

10.4

(5.4)

(15.8)

(3.6)

(12.2)

Capital Expenditure

6.1       Gross capital expenditure of $89.8 million has been incurred for the first quarter of the year. A further $318.2 million is forecast to be spent by year end.

6.2       The forecast is $10.9 million ahead of budget after carry forwards, mainly due to the approved additional spend for the Town Hall ($6.9 million) for which offsetting savings will be found from the capital programme (Council approved up to $15 million additional spend on the project to be found from the capital programme - $7 million of this was spent in the 2018/19 financial year with offsetting savings identified). An additional equity injection forecast into CCHL ($4.1 million) to enable DCL to purchase land off Council is also contributing to the forecast spend (this is offset by asset sales under Revenues and Funding).  

6.3       Group of Activity level variance commentary for the capital programme is shown in
Attachment A.

6.4       Financial results of significant (>$250,000) capital programme projects are shown in
Attachment B.

 

Capital Revenues

6.5       Development contributions are higher than budget year to date because new development has been higher than anticipated. Development contribution rebates have been slower than planned, pending compliance with the scheme criteria (unallocated rebate funding is carried forward).

6.6       Crown recoveries are higher due to an unbudgeted $3 million received as part of the Global Settlement. This money is to be used for decontamination of land; this does not form part of the forecast as unbudgeted expenditure is likely to offset this.

6.7       NZTA capital revenues are $8.9 million behind budget year to date, forecast to be $10.9 million behind at year end. After a forecast carry forward of $3.6 million (subsidies on delayed capital spend) there is currently a permanent variance forecast of $7.3 million. Subsidies have not been forecast where the funding team deems these unlikely to eventuate based on interactions with NZTA.  

6.8       Asset sales year to date reflects Housing assets sold to the Ōtautahi Community Housing Trust ($8.3 million). Included in the forecast result is the sale of land to DCL ($4.1 million), offset by the equity injection above (ref. 6.2).

6.9       Reserve net drawdowns are $9.6 million lower than budget year to date, mainly due to the sale of Housing assets above.

6.10    The budget indicated a $5.4 million funding surplus for the Capital Programme. Due to Town Hall offsets to be found and lower NZTA capital subsidies, there is a current forecast borrowing requirement after carry forwards of $6.8 million ($12.2 million higher than budget). 

 

Special Funds

6.11    The current and forecast movements and balance of the Housing Account, Capital Endowment Fund and Earthquake Mayoral Relief Fund are shown in Attachment C.

6.12    The balance of 2019/20 funds available for allocation from the Capital Endowment Fund were forecast to be $707,627 at 30 September 2019.

 

 

Attachments

No.

Title

Page

a

Financial Performance

59

b

Significant Capital Projects

66

c

Special Funds

72

 

 

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

Ryan McLachlan - Reporting Accountant

Carly Flowers - Reporting Accountant

Bruce Moher - Manager Planning & Reporting Team

Approved By

Diane Brandish - Head of Financial Management

Carol Bellette - General Manager Finance and Commercial (CFO)

  


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 


 

PDF Creator


 


 


 


Finance and Performance Committee

05 December 2019

 


 


 


 


 


 


Finance and Performance Committee

05 December 2019

 

PDF Creator


Finance and Performance Committee

05 December 2019

 

 

11.   Alternative Sources of Revenue

Reference / Te Tohutoro:

19/1351830

Presenter(s) / Te kaipāhō:

Andrew Jefferies - Manager Funds and Financial Policy
Diane Brandish - Head of Financial Management

 

 

1.   Purpose of Report / Te Pūtake Pūrongo

1.1       To report back to Council as requested on:

1.1.1   mechanisms to obtain funding for buildings and infrastructure from beneficiaries outside the district; and

1.1.2   alternative revenue options that could be applied to road users.

2.   Executive Summary / Te Whakarāpopoto Matua

2.1       A wide range of options were considered using a well- researched report which was produced by Development Christchurch Limited along with suggestions raised as part of the Productivity Commission's Local Government Funding and Financing inquiry. The net has been cast widely: ideas within this report do not necessarily have staff support and are not necessarily under further detailed consideration.

2.2       Many of the options were already being implemented or were contingent on a change to the legislation.

2.3       Ideas staff have examined include:

2.3.1   Higher fees and charges for the use of buildings and infrastructure with a discounted rate for Christchurch residents would recover additional revenue from out-of-district beneficiaries. The concept could be extended to buildings for which there is currently no fee such as the Art Gallery.

2.3.2   The introduction of a regional rate to fund the Canterbury Multi-use Arena. This has been discussed at the Mayoral Forum and would require political agreement from other Councils in the region. It may also require a change to the legislation.

2.3.3   A regional fuel tax. Legislation is now in place that would enable a regional fuel tax (RFT) up to 10 cents per litre to be implemented from 2021. This has already been implemented in Auckland. However, the Prime Minister made a commitment (24 October 2018) to not implement any further RFTs during her time as Prime Minister.

2.4       Beyond the specific questions asked by Councillors (focusing on out-of-district beneficiaries and road users) there are several streams of work already occurring within Council that could have the effect of increasing revenue or reducing pressure on rates funding. Any additional revenue from these workstreams will be incorporated within the Council’s normal planning processes (annual plans and long term plans). Examples discussed in this paper are:

2.4.1   Review of three waters fees and charges.

2.4.2   Commercial use of Council real estate.

2.4.3   Workplace Parking Levy (rating commercial properties based on number of staff carparks).

 

3.   Staff Recommendations / Ngā Tūtohu

That the Finance and Performance Committee:

1.         Notes the contents of this report.

2.         Notes that work is progressing on many of the options identified in the report which may feed into the draft Annual and Long Term Plans.

4.   Context / Background / Te Horopaki

4.1       At the Council's Long Term Plan meeting on 22 June 2018 the Council resolved [CLTP/2018/00017]:

12. Alternative sources of funding

a)        Request the Chief Executive to report back to the Council by 30 December 2018 on alternative mechanisms to source alternative and additional funding contributions towards building and maintaining facilities where there are or will be beneficiaries from outside this Council’s rating area; and report back on alternative revenue options that could be applied to road users as a means of supporting sustainable and active travel options.

4.2       This paper addresses that request. It also considers the practicality of a broader range of alternative funding mechanisms. 

4.3       This report discusses the method and sources we have used and identifies:

4.3.1   Options for revenue from out-of-district beneficiaries and road users (section 6).

4.3.2   Wider options for additional revenue (section 7).

4.3.3   Other options considered – unlikely to be helpful or practical (section 8).

5.   Method

5.1       DCL work provided starting point: In preparing this memo we have drawn heavily on work carried out by Development Christchurch Limited (DCL) in late 2017 and early 2018. The DCL work was not limited to out-of-district beneficiaries and road users. It cast the net more widely in gathering ideas for potential additional revenue options including the consideration of revenue sources in several overseas jurisdictions. We have taken DCL’s work as our starting point.

5.2       Sources: In addition to DCL’s work, we have discussed options with relevant Council staff, and considered submissions to the Productivity Commission's Local Government Funding and Financing inquiry.

6.   Options for revenue from out-of-district beneficiaries and road users

6.1       Key options we have considered are discussed below.

6.2       Regional rating for regional assets: The idea of setting regional rates on Canterbury ratepayers to fund the Canterbury Multi-use Arena has been discussed at the Mayoral Forum.  Further discussion is scheduled once the business case has been completed but any solution will take some time to implement.

6.3       Regional Fuel Tax (RFT): From January 2021 Councils will be able to apply to establish an RFT up to a maximum of $0.10 per litre. (Auckland is already able to do this already and has done so). Applications will be subject to a Ministerial approval process, although the Prime Minister made a commitment (24 October 2018) to not implement any further RFTs during her time as Prime Minister. The tax is clearly intended to be established on a regional basis to minimise potential for avoiding the tax by purchasing fuel outside the taxed area and the application would probably be made by ECan. Under the legislation, the Council could propose an RFT if it considers there are one or more capital projects in the regional land transport plan that cannot reasonably be fully funded from sources within the desired time frame. The RFT would need to be for the purpose of enabling the Council to invest more in its transport network. Council could assess its planned capital programme to identify potential projects that could be funded by a regional fuel tax. 

6.4       Increasing fees and charges: Fees and charges are considered each year as part of the annual planning process and raised revenue of $71 million in the year ended 30 June 2019. Higher fees and charges for the use of buildings and infrastructure with a discounted rate for Christchurch residents would recover additional revenue from out-of-district beneficiaries. The concept could be extended to buildings for which there is currently no fee such as the Art Gallery.

7.   Wider options for additional revenue

7.1       There are several streams of work being undertaken within Council that could have the effect of increasing revenue or reducing pressure on rates funding. Any additional revenue from these workstreams will be incorporated within the Council’s normal planning processes (annual plans and long term plans). Some examples are given below.

7.2       Review of three waters fees and charges: The three waters team is undertaking a comprehensive review of fees and charges for all three waters. The team is carrying this out in parallel with a review of the Water Supply, Wastewater and Stormwater Bylaw. The review will consider how some of the extra costs (resulting from changes in the regulatory environment) might be recovered through fees and charges. The review is looking at approaches being taken by other Councils, and at what is unique to Christchurch given our particular resource consents and water safety plans. Any changes to revenue flowing from this review will be reflected in the Long Term Plan 2021-31.

7.3       Commercial use of Council real estate: There is an opportunity to use Council real estate for innovative commercial purposes e.g. allowing commercial monitoring or communication devices to be placed on street lights. The Council's Smart Cities team (Strategy and Transformation Group) is leading Council's thinking on this issue. A key issue is the relative weight to be given to Council revenue compared with achieving community wellbeing outcomes. Again, any new revenue streams resulting from this project will be incorporated within the Council’s normal planning process.

7.4       Workplace Parking Levy (WPL): This idea is being considered by the Planning and Strategic Transport Unit. A rate would be set based on the number of carparks provided by businesses, or more specifically parking spaces intended for staff use. The main purpose of the WPL is to reduce road congestion. Revenue from the rate could be used to support sustainable and active travel options. A similar scheme was introduced in Nottingham, England in 2012 with some success. It is not yet clear whether a scheme of this kind could be implemented under existing rating legislation, but it is possible it could be a viable option. We understand that the WPL option will be raised as a possibility as part of preparing the LTP 2021-31


 

8.   Other options considered

Opportunities requiring legislative change

8.1       Some revenue options would require legislative change to proceed. We don’t regard these options as practical at this stage. The following options are supported by SOLGM's submission to the Productivity Commission, or the Productivity Commission has specifically been asked to address them.

8.1.1   Environmental taxes: Taxes on water pollution and water extraction, and further increases in fuel excise and the extension to other forms of vehicular energy.

8.1.2   Taxation of tourism: An increase in the Visitor Levy (currently $35 on visitors entering the country for less than 12 months, other than Australians and most Pacific Island Forum countries), and local taxation for tourist related purposes (e.g. bed tax).

8.1.3   Crown land: Removing the rating exemption and the exemption from development contributions from Crown land.

8.1.4   Wastewater: Volumetric charging for wastewater.

8.1.5   Vacant land tax: The Government has specifically asked the Productivity Commission to include vacant land taxes within its inquiry into local government funding and financing. This targets land speculation and land banking. 

8.1.6   Fee setting in statute: Some older statutes or regulations specify maximum fees which have become outdated. More recent legislation usually specifies more flexible charging powers to recover costs such as inspections and processing applications. However, there are often costs which are not covered such as the cost of developing policies and liability insurance.

Options considered and rejected

8.2       Road tolling: Road tolling and road pricing is impractical in Christchurch under existing legislation. They are currently possible in limited circumstances, but new legislation would be required to making them practical in Christchurch. The principal roads from Rolleston and Rangiora are state highways so could not be tolled by Council. Tolling requires an Order in Council and the support of the Minister of Transport, and can be used only for certain purposes and in certain limited circumstances (refer to subpart 2 of part 2 of the Land Transport Management Act 2003). It can be used only to recover the cost of a new road: not the cost of an existing road, and not revenue in excess of cost. It can be applied only where a feasible, untolled, alternative route is available. Finally, the toll creates an incentive to use untolled side streets which can create traffic problems for local communities which limits the circumstances in which tolls can be effective.

8.3       Only three roads in New Zealand are currently subject to tolls: the Northern Gateway Toll Road north of Auckland, the Tauranga Eastern Link Toll Road and the Takitamu Drive Toll Road which bypasses the Tauranga city centre and takes traffic in the direction of the Port of Tauranga and Mt Maunganui.


 

8.4       Betterment schemes: A typical betterment charge is set as a fixed percentage of the increase in value of a property caused by new public infrastructure or re-zoning. SOLGM identifies that the major practical impediment to betterment charging lies in the difficulties in separating increases in property value that have arisen from the new infrastructure from those arising due to other factors. This scheme has not been very successful overseas.

8.5       Local income taxes and local expenditure taxes: SOLGM highlights a large number of previous reviews which have drawn conclusions against local income or expenditure taxes. SOLGM argues "in practice debate around local variants of income and expenditure taxes quickly collapse to central government distributing part of the revenues it collects".

8.6       New CCTOs: One option to increase revenue would be to create new CCTOs to pursue established profit-making business opportunities with a strategic connection to the Council's core responsibilities and role, thereby increasing dividend revenue for Council. These business could be funded by the Council's access to relatively low-cost borrowing.  There are some risks associated with this and often substantial capital is required to commence business.

8.7       Development loans: These are loans made to projects that deliver social and economic outcomes for the city. Usually these loans are made for wider non-financial reasons and can be highly speculative in terms of the financial return to Council.

 

 

Attachments / Ngā Tāpirihanga

There are no attachments to this report.

 

Confirmation of Statutory Compliance / Te Whakatūturutanga ā-Ture

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 / Ngā Kaiwaitohu

Author

Andrew Jefferies - Manager Funds & Financial Policy

Approved By

Diane Brandish - Head of Financial Management

Carol Bellette - General Manager Finance and Commercial (CFO)

  


Finance and Performance Committee

05 December 2019

 

 

12.   Development Contributions - Extension of Small Residential Unit Rebate Scheme

Reference / Te Tohutoro:

19/1250065

Presenter(s) / Te kaipāhō:

Gavin Thomas – Principal Advisor Economic Policy

 

 

1.   Purpose of Report / Te Pūtake Pūrongo

1.1       The Small Residential Unit Rebate Scheme expires on 31 December 2019. This report seeks Committee agreement to extend the scheme until the current Development Contributions Policy has been revised (planned for mid-2020).

2.   Executive Summary / Te Whakarāpopoto Matua

2.1       The Council has established a development contributions rebate scheme for small residential unit developments.

2.2       The rebate applies to stand-alone residential unit developments (not to apartments or similar multi-dwelling units) with a gross floor area less than 60 square metres. The rebate effectively extends the small residential unit adjustment provisions in the current Development Contributions Policy to 50 square metres or 50 per cent of the normal development contribution requirement.

2.3       The Small Residential Unit Rebate Scheme expires on 31 December 2019. The reviewed Development Contributions Policy won’t be adopted until mid-2020. To enable continuity of the current approach the Committee could extend the current rebate until the reviewed Development Contributions Policy is adopted.

2.4       The Council has asked for the small residential unit adjustment provision in the Policy to be reviewed with the possibility of proposing an extension to that provision in the draft Policy. If a change proposal of this type is agreed by this Committee and is included in a draft Policy it will be consulted on in early 2020 as part of the draft Development Contributions Policy. If the provision is then included in an adopted revised Policy the current rebate scheme would become redundant and could be removed.

 

3.   Staff Recommendations / Ngā Tūtohu

That the Finance and Performance Committee:

1.         Agrees to extend the life of the small residential unit development contributions rebate until the earliest of:

a.         A reviewed Development Contributions Policy being adopted by the Council, or

b.         The fund is fully allocated, or

c.         31 December 2020.

2.         Adopts the revised small residential unit development contributions rebate scheme criteria (Attachment A).

 

4.   Context/Background / Te Horopaki

Issue or Opportunity / Ngā take, Ngā Whaihua rānei

4.1       The Council has established a development contributions rebate scheme for small residential unit developments.

4.2       The small residential unit provision in the Development Contributions Policy reduces the development contributions required for residential units with a gross floor area of less than 100 square metres on a sliding scale matching the floor area. For example a residential unit with a gross floor area of 80 square metres reduces the development contributions required to 80 per cent of the normal requirement.

4.3       The Policy adjustment stops at 60 square metres meaning the minimum development contribution required under the Development Contributions Policy is 60 per cent of the normal requirement.

4.4       The rebate applies to stand-alone residential unit developments (not to apartments or similar multi-dwelling units) with a gross floor area less than 60 square metres. The rebate effectively extends the small residential unit adjustment provisions in the current Development Contributions Policy to 50 square metres or 50 per cent of the normal development contribution requirement.

4.5       To date 19 developments have received the small residential unit rebate. So far rebates of $36,031.12 excl. GST ($41,435.79 incl. GST) have been granted. There are 15 additional developments that have been highlighted as likely to be eligible for the rebate (but have not yet passed first building inspection).

4.6       As part of the review of the Development Contributions Policy councillors have asked for the small residential unit adjustment in the Policy to be extended past the current maximum adjustment. The draft reviewed Development Contributions Policy will address this request.

4.7       The Small Residential Unit Rebate Scheme expires on 31 December 2019. The reviewed Development Contributions Policy won’t be adopted until mid-2020. To enable continuity of the current approach the Committee could extend the current rebate until the reviewed Development Contributions Policy is adopted.

 

Strategic Alignment / Te Rautaki Tīaroaro

4.8       The Small Residential Unit Rebate Scheme can be expected to contribute positively to the following Council strategic objectives:

Community outcomes

·     Sufficient supply of, and access to, a range of housing - the aim of the rebate is to provide additional support/ incentive for developers of family flats or similar type developments.

Strategic priorities

·     Enabling active citizenship and connected communities.

Consistent with the strategic goals of the following Council documents:

·     Christchurch District Plan

·     Greater Christchurch Urban Development Strategy (UDS)

·     Greater Christchurch Land Use Recovery Plan (LURP)

·     Christchurch City Council Housing Policy

 


 

Expected strategic outcomes of this rebate scheme are:

·     Increased intensification of residential development.

o Encouraging minor residential unit/ family unit developments (on the same site as an existing dwelling) to proceed.

o Encouraging the development of smaller housing options in response to the forecast increase in one-person households and an ageing population.

·     Increase in affordable housing options.

·      Families can to provide supported housing for family members on an existing property.

 

4.9       This report supports the Council's Long Term Plan (2018 - 2028):

4.9.1   Activity: Strategic Planning and Policy

·     Level of Service: 17.0.1.2 Advice to Council on high priority policy and planning issues that affect the City. Advice is aligned with and delivers on the governance expectations as evidenced through the Council Strategic Framework. - Annual strategy and policy work program

 

Decision Making Authority / Te Mana Whakatau

4.10    Finance and Performance Committee of the Whole has delegation from the Council to make all decisions relating to development contributions other than those reserved by the Council. The Committee therefore has the delegation to make this decision.

 

Previous Decisions / Ngā Whakatau o mua

4.11    The rebate scheme was extended by resolution of the Council to the end of 2019 in December 2018. At that time it was expected that the review of the Development Contributions Policy would be completed by mid-2019. This was deferred in early 2019 to enable the Local Government (Community Wellbeing) Bill provisions to be considered in the review process.

 

Assessment of Significance and Engagement / Te Aromatawai Whakahirahira

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

4.13    The level of significance was determined by consideration of there being:

·    a rebate scheme in place already;

·    very low financial impact; and

·    the scheme applies to/ benefits a very small proportion of residential developments.

 


 

5.   Options Analysis / Ngā Kōwhiringa Tātari

Options Considered / Ngā Kōwhiringa Whaiwhakaaro

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

·   Extend the current rebate scheme.

·   Do nothing - allow the current rebate scheme to expire.

Options Descriptions / Ngā Kōwhiringa

5.2       Preferred Option: Extend the current rebate scheme.

5.2.1   Option Description: Remove the expiry date references in the scheme criteria. This will mean the scheme will continue until either the funding limit is exceeded or a reviewed Development Contributions Policy is adopted.

5.2.2   Option Advantages

·     Provides continuity of a rebate approach until the Policy addresses adjusting the development contribution requirement for small residential units.

·     Provides certainty for developers.

·     Partially meets the councillor’s desire for small residential units to be assessed for development contributions at a lower rate than other residential units.

5.2.3   Option Disadvantages

·     Very minor reduction in development contribution revenue (though less than would be the case if a Policy change extends the reduction further).

5.3       Do nothing – the rebate scheme expires on 31 December 2019.

5.3.1   Option Description: Developments that would qualify for the rebate but that haven’t reached the confirmation trigger of having passed first building inspection by 5:00pm on 31 December 2019 won’t receive the rebate. Any developers with projects that have been assessed as qualifying for the rebate but that haven’t passed first building inspection will be advised that the scheme will be expiring.

5.3.2   Option Advantages

·     Very minor financial gain for the Council from any developments that would have received the rebate not doing so.

5.3.3   Option Disadvantages

·     Doesn’t provide continuity of a rebate approach until the Policy addresses adjusting the development contribution requirement for small residential units.

·     Doesn’t provide certainty for developers.

·     Doesn’t meet councillor’s desire for small residential units to be assessed for development contributions at a lower rate than other residential units.


 

6.   Community Views and Preferences / Ngā mariu ā-Hāpori

6.1       Developers of qualifying residential units are specifically affected by this option due to their ability to receive a rebate adjustment.  Their views are unknown other than anecdotal support given to Council’s development contributions team members.

7.   Legal Implications / Ngā Hīraunga ā-Ture

7.1       There is not 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.

8.   Risks / Ngā tūraru

8.1       No risks have been identified with either option.

 

 

Attachments / Ngā Tāpirihanga

No.

Title

Page

a

Draft Small Residential Unit Rebate Scheme Criteria 2019/20

84

 

 

Confirmation of Statutory Compliance / Te Whakatūturutanga ā-Ture

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 / Ngā Kaiwaitohu

Author

Gavin Thomas - Principal Advisor Economic Policy

Approved By

Diane Brandish - Head of Financial Management

Carol Bellette - General Manager Finance and Commercial (CFO)

  


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

 

13.   Council NEC3 Contracts - Parks and Street Trees Delegated Authority

Reference:

19/930642

Presenter(s):

Al Hardy – Manager Community Parks
Pana Togiaso – Team Leader Road Amenity and Asset Protection

 

 

1.   Purpose of Report

1.1       That the Finance and Performance Committee of the Whole resolve delegated authority to the Chief Executive to undertake contract variations for regular business activity, within the terms and conditions of the two Council Tree maintenance contracts.

2.   Executive Summary

2.1       The Council has contracted services with Treetech Specialist Treecare Limited to provide maintenance of park and street trees. The contracts both have pending variations which cannot progress as any existing delegated financial authority to undertake contract variation has been surpassed. The contract changes include a revised rates adjustment process and inflationary adjustments for prices in both contracts as well as a completely revised Key Performance Indictor model to better align with the Parks Unit Levels of Service.

2.2       It is being requested for Council to resolve delegated authority to the Chief Executive to undertake the contract variations for regular business activity, within the terms and conditions of each contract. The preferred option is for the endorsed delegated authority to remain until the term expiry of each contract to provide effective turnaround time for contract documentation.

2.3       Risks are mitigated by abiding with the contract terms and conditions, working within Council Procurement Policy, rules and process, and by appropriately engaging Council’s Legal Services Unit.

2.4       Support for Council’s Strategic Framework is achieved by aligning with the overarching principle and supporting principles for delivering accountability and agility. The request promotes ‘getting things done’ by the timely delivery of contractual process, allowing the business units to achieve their respective Levels of Service.

 

3.   Staff Recommendations 

That the Finance and Performance Committee:

1.         Resolves delegated authority to the Chief Executive to undertake contract variations for regular business activity, within the terms and conditions for:

a.         CN4600000792 - Maintenance and Management of Parks Trees

b.         CN4600001111 - Provision of Street Tree Services

2.         Recommends that Council endorse the preferred option to have delegated authority continue for the remainder of the term of each contract.

3.         Allows the release of public excluded attachment information once both contracts have completed their full term and all contract closeout processes are completed. The date is currently 1 September 2023.

 

4.   Context/Background

Issue or Opportunity

4.1       Council has two contracts for the maintenance of Christchurch city trees. These are CN4600000792 ‘Maintenance and Management of Parks Trees’ and CN4600001111 ‘Provision of Street Tree Services’. Both agreements are contracted to Treetech Specialist Treecare Limited.

The park tree contract was awarded in August 2010 under general financial delegations by the Transport and Greenspace Unit Manager. In November 2012 Council resolved to authorise the General Manager City Environment to enter into agreement for the street tree contract.

The contracts now exceed financial delegations for operational expenditure by both being in excess of ten million dollars value over their contract term. Neither contract has a resolved delegated authority to an authorised General Manager or the Chief Executive to undertake any contract changes through the contract term. Maintenance contracts commonly have an appropriate endorsed delegated authority with appropriate access to background and expertise in the service delivery. This provides for informed decisions and timely transactions.

The contracts currently have pending variations which require approval to complete the transactions. The changes include a revised rates adjustment process and inflationary adjustments for prices in both contracts. The park tree contract also includes a new Key Performance Indicator model to align with Levels of Service.

Currently each variation would need to be approved by Finance & Performance Committee of the Whole.

Strategic Alignment

4.2       This report supports Council’s Strategic Framework overarching principle and supporting principles for delivering accountability and agility.  This alignment with ‘getting things done’ will allow the business units to best deliver Levels of Service without being unduly impeded by time constraints for the process of Council approval to proceed. This ensures the associated activities deliver to the relevant Council key strategies and plans. 

4.3       This report supports the Council's Long Term Plan (2018 - 2028).  

Service Delivery Plan for Parks and Foreshore. 6.0.1 - Parks are provided, managed and maintained in a clean, tidy, safe, functional and equitable manner (Maintenance). Maintenance plan Key Performance indicators ≥ 90% achieved

Service Delivery Plan for Roads and Footpaths - 16.0.1 - 16.0.23. This includes Planned and reactive maintenance to remedy defects and operation of on-street facilities - maintenance of on-street planted areas including street trees and Repair or replacement (renewal) of assets that have reached the end of their life or are in substandard condition – renewal of on-street planting and street trees.

Decision Making Authority

4.4       This report is aligned to the Council Delegations Register operational expenditure value limits. The contracts each exceed an accumulated value over the term of each contract is in excess of ten million dollars. Without Council or Finance & Performance Committee of the Whole endorsed delegation of authority, changes to the contracts must be authorised by Council or Finance & Performance Committee of the Whole.

Previous Decisions

4.5       In 2010 the Maintenance and Management of Parks Trees was awarded and signed under general financial delegations by the then Transport and Greenspace Unit Manager.

The Provision of Street Tree Services contract was resolved by Council on 28 November 2012, to authorise the General Manager City Environment to enter into agreement with Treetech. There was no endorsed delegated authority to undertake any contract changes through the contract term.

Both contracts have had one variation each undertaken in November 2015. These were approved by the then Chief Operating Officer.

Assessment of Significance and Engagement

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

4.7       The level of significance was determined by assessing the impact on Levels of Service by a change in the delegation level.

4.8       Item 6 - Community View and Preferences, outlined in this report, reflect this assessment.

 

5.   Options Analysis

Options Considered

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

·   Request the Finance & Performance Committee of the Whole resolve to assign delegated authority to the Chief Executive to approve the current contract variations. Any further contract variations for regular business activity, within the terms and conditions will be required to seek Council approval to do so.

·   Request Finance & Performance Committee of the Whole resolve to assign delegated authority to the Chief Executive to undertake contract variations for regular business activity, within the terms and conditions of the contracts. This would be for the remainder of both contract terms.

5.2       The following options were considered but ruled out:

·   Request Finance & Performance Committee of the Whole resolve to the appropriate Group General Manager to approve the individual contract variations. This option was not explored further because of the high value of each agreement and with being with the same supplier. It was considered that it would be appropriate for delegated authority to sit with the Chief Executive.

Options Descriptions

5.3       Preferred Option: Delegated authority resolved to the Chief Executive for the remainder of each contracts term.

5.3.1   Option Description: the Finance and Performance Committee of the Whole resolve Delegated Authority to the Chief Executive to undertake variations for the two tree contracts within their terms and conditions.

5.3.2   Option Advantages

·     Required contract changes can be made in good time by keeping the transactions involved streamlined to an appropriate level

·     Elected Members focus and time is not engaged on relatively straight forward operational and contract management process

·     Variations to the contracts are undertaken in alignment with the Procurement Policy, Procurement rules and relevant Legal Services Unit involvement

5.3.3   Option Disadvantages

·     Council are not directly informed of every change within the contracts

5.4       Delegated Authority – resolved to the Chief Executive to undertake the current variations for both contracts

5.4.1   Option Description: Request Finance & Performance Committee of the Whole resolve to assign delegated authority to the Chief Executive to approve the current contract variations. Any further contract variations for regular business activity, within the terms and conditions will be required to seek Council approval to do so

5.4.2   Option Advantages

·     The current variations are completed keeping the contracts current and up to date

5.4.3   Option Disadvantages

·     Any future changes will require a report to Council, requesting that Chief Executive  be authorised to undertake another variation

·     A considerable amount of staff time and resource is expended to undertake this process, at the expense of fulfilling their main role

·     Elected Members time is spent on a straight forward process

Analysis Criteria

5.5       Having delegated authority assigned to the Chief Executive would enable any contract changes to be undertaken in good time. This keeps the contract accurate and significantly reduces the likelihood of out of alignment contract documentation with operational reality

5.6       Maintenance contracts commonly have an appropriate endorsed delegated authority with appropriate access to the background and expertise in the service delivery. This provides for informed decisions and timely transactions.

6.   Community Views and Preferences

6.1       The requested change in delegation will not impact or be a preference of community groups or Committee Boards. Delegated authority to approve commercial arrangements within the existing contract is an internal Council approval process. There is no external association.

7.   Legal Implications

7.1       There is not a legal context, issue or implication relevant to having delegated authority resolved to the Chief Executive.

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

7.3       The attached pending Contract Variations have been fully reviewed by the Legal Services Unit. Reference LEX 20889.

8.   Risks

8.1       There is a risk that contractual changes could adversely affect operations and service delivery by misjudged or unforeseen conditions.

Caused by:

-      Incorrect or incomplete processes being undertaken

-      Operational requirements and implications are not fully understood

-      Not seeking Legal Services recommendations and review of legal implications within a contract variation.

This will result in:

-      Potential contractual/legal disputes

8.2       The number of contract changes required within the contract term are generally low and would generally range within five to ten. The complexity of the contract changes can vary from straight forward to more multifaceted and technical in nature, requiring contractual and operational expertise to undertake and having the correct approvals process in place to ensure correctness.

8.3       The inherent risk likelihood of occurring is unlikely and the degree of impact is moderate. The risk rating is medium. The requested decision does not change the risk rating for residual risk as the change does not alter the existing Council process for contract changes excepting delegated authority.

8.4       Many Council contracts have a very similar risk profile and the risk is mitigated through the appropriate selection or mix of risk treatment for the circumstance.  The risk treatment is to treat and terminate the risk through the following of Procurement process which includes:

-      Following Council Procurement Policy and the procurement manual rules

-      The appropriate early engagement of Legal Services

-      Undertaking a contract review or referencing a current review to ensure the operational requirements are understood in relation to the contract agreement

-      Confirmation of likely financial implications are understood and accounted for

All contract variations include an accompanying file note providing the background and operational rational, financial implications and legal involvement. The purpose is to provide the delegated authority the appropriate information and evidence to make an informed decision on the change.

9.   Next Steps

9.1       Upon the Finance and Performance Committee of the Whole’s decision, the pending variations will be able to be signed by both parties, with the Council authoriser being the Chief Executive. The contracts will continue to operate according to their terms and conditions. If any further variations are required, and dependent on the Council resolution, the process will either be undertaken with the Chief Executive being the Delegated Authority, or another ELT Memo and InfoCouncil report will be required to seek resolution for delegated authority be endorsed to the Chief Executive to complete the variation.

 


Finance and Performance Committee

05 December 2019

 

10. Options Matrix

Issue Specific Criteria

Criteria

Option 1 - Delegated authority resolved to the Chief Executive for the remainder of both contract terms

Option 2 - Delegated Authority – resolved to the Chief Executive to undertake the current contract variations

Financial Implications

Cost to Implement

$0.00

$0.00

Maintenance/Ongoing

$0.00

$0.00

Funding Source

Existing budget

Existing budget

Impact on Rates

$0.00

$0.00

Environmental Impacts

No negative impact

No negative impact

Social and Community Impacts

No negative impact

No negative impact

Accessibility Impacts

No negative impact

No negative impact

 

Statutory Criteria

Criteria

Option 1 - Delegated authority resolved to the Chief Executive for the remainder of both contract terms

Option 2 - Delegated Authority – resolved to the Chief Executive to undertake the current contract variations

Impact on Mana Whenua

No negative impact

No negative impact

Alignment to Council Plans & Policies

No negative impact

No negative impact


Finance and Performance Committee

05 December 2019

 

 

 

Attachments

No.

Title

Page

a

Significance and Engagement Policy - significance assessment - 19/930642 InfoCouncil Report

94

b  

VAR002 CN4600000792 - Maintenance and Management of Park Trees - Confidential

 

c  

CN0792 Appendix B - KPI Model 2 - Confidential

 

d  

VAR002 CN4600001111 - Provision of Street Tree Services - Confidential

 

 

 

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

Angus Allan - Contract Management Specialist

Ian Rowand - Manager Procurement

Al Hardy - Manager Community Parks

Pana Togiaso - Team Leader Road Amenity and Asset Protection

Approved By

Chris Anderson - Head of Procurement & Contracts

Carol Bellette - General Manager Finance and Commercial (CFO)

Al Hardy - Manager Community Parks

Steffan Thomas - Manager Operations (Transport)

Andrew Rutledge - Head of Parks

Richard Osborne - Head of Transport

Mary Richardson - General Manager Citizens & Community

David Adamson - General Manager City Services

  


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

 

14.   Council-controlled organisations - Annual Results for 2018/19

Reference / Te Tohutoro:

19/1072960

Presenter(s) / Te kaipāhō:

Linda Gibb - Performance Monitoring Advisor

 

 

1.   Purpose of Report / Te Pūtake Pūrongo

1.1       This report advises the annual financial results and non-financial performance for the following Council-controlled organisations (CCOs) for the year ending 30 June 2019 - Central Plains Water Trust, Christchurch Agency for Energy Trust, Riccarton Bush Trust, Rod Donald Banks Peninsula Trust and Transwaste Canterbury Ltd.

2.   Staff Recommendations / Ngā Tūtohu

That the Finance and Performance Committee:

1.         Notes the performance of the following Council-controlled organisations for the financial year ending 30 June 2019:

a.         Transwaste Canterbury Limited;

b.         Christchurch Agency for Energy Trust;

c.         Riccarton Bush Trust;

d.         Rod Donald Banks Peninsula Trust; and

e.         Central Plains Water Trust.

3.   Context / Background / Te Horopaki

3.1       Section 67 of the Local Government Act 2002 (LGA) requires CCOs to deliver to shareholders, and make available to the public a report on its operations for the year, and for this to be provided within three months after the end of the financial year.  The report must include the following information (recorded in sections 68 and 69 of the LGA):

·   the information necessary to enable an informed assessment of the organisation’s operations and of its subsidiaries including a comparison of performance with SOI targets and an explanation of variances;

·   the dividends if any authorised to be paid or the maximum dividend proposed to be paid by that organisation;

·   audited consolidated financial statements for that financial year for the organisation and its subsidiaries, prepared in accordance with generally accepted accounting practice; and

·   an auditor’s report on the financial statements and the performance targets and other measures by which performance was judged in relation to its objectives.

3.2       The CCOs that are the subject of this report have met these statutory requirements.


 

Annual results 2018/19

3.3       Short summaries of the key activities of each of the CCOs and its annual results for the financial year ending 30 June 2019 are set out below, in alphabetical order.  The annual result for each CCO is compared with the prior year’s result, and its 2019 Statement of Intent (SOI) target, with explanations provided for the variances.

 

Transwaste Canterbury Ltd (Attachment A)

3.4       Transwaste is owned 50% by Waste Management NZ Ltd, and 50% by Canterbury councils.  Christchurch City Council’s total share of the company is 38.9%.  Transwaste operates a landfill and earthquake demolition waste management and resource recovery business.  

3.5       The Canterbury Regional Landfill Joint Committee was established by the council-owners of Transwaste to interface with the company on behalf of all councils.  The Committee is delegated to handle all governance issues including appointment of directors to Transwaste and performance reporting.  Staff report to Council on all Transwaste matters that come before the Committee (the Committee generally meets twice per year).

 

Transwaste

Actual

$000

Target

$000

Variance

Act v Tar

$000

Last year

$000

Variance

2018-2019

$000

Revenue

49,997

44,852

+5,145

50,196

-199

EBIT

18,441

15,134

+3,307

18,577

-136

Profit after tax

13,448

N/A

N/A

13,436

+12

Dividend

16,400

16,000

+400

18,400

-2,000

EBIT against target:  é $3.3 million – from increased tonnes of waste to Kate Valley landfill than expected ($1.96 million) and increased tonnes of earthquake waste received at the Burwood Resource Recovery Park (BRRP) due to a lower rate of tail-off than expected, and a gain on sale of BRRP plant ($1.26 million).

Profit after tax against last year – no material variance.

Dividend:  é $0.4 million - the dividend paid is $0.4 million higher than target due to increased revenue of $5 million from higher than expected levels of special and high density demolition related waste to Kate Valley landfill and earthquake waste to the Burwood Resource Recovery Park.  The dividend is lower than last year by $2 million, mostly as a result of the 2017 financial year being more profitable than 2018 (with dividends paid out the year after NPAT is earned).

Non-financial performance:  A target of maintaining or improving the total recordable injury frequency rate for the last 12 months was not met (the target to meet was zero).  There was one injury of a minor nature that led to lost time.

 


 

Christchurch Agency for Energy Trust (Attachment B)

3.6       The Trust administers the Christchurch Energy Grant Scheme which supports the uptake of renewable energy and enhanced energy efficiency in rebuild projects. 

3.7       Annual deficits represent grants made, which reduces the cash balance held by the Fund.  The Trust expects to pay out the last grants in the 2019/20 financial year and will be wound up at that point.

 

Christchurch Agency for Energy Trust

Actual

$000

Target

$000

Variance

Act v Tar

$000

Last year

$000

Variance

2018-2019

$000

Deficit for the year

(844)

(87)

-757

(815)

-29

Closing balance of Fund

249

0

+249

1,093

-844

Deficit against target:  ê $757,000 due to grants paid that were expected to be paid towards the end of the last financial year carrying over to 2019.  The closing value of the Fund is $249,000 higher than expected, due to an allocation of funding not meeting the criteria for it to be paid out, and is therefore available for reallocation.

Deficit against last year:  ê $29,000 due to lower interest income as funds deplete ($15,000), higher value of grants paid ($19,000), offset by lower general expenses ($5,000).  Balance of the Fund is $249,000 with an amount of $27,000 already committed.

Non-financial performance:  Target achieved.

 

Riccarton Bush Trust (Attachment C)

3.8       The Trust administers 7.8 hectares of native bush and Riccarton (historic) House.  The Trust was incorporated under an Act of Parliament in 1914.  The Riccarton Bush Amendment Act 2012 underpins the Council’s financing obligations to the Trust.

3.9       Annual Council funding is accompanied by grants from third parties, commission from the on-site café (‘Local’) and a number of other smaller funding sources (e.g. sale of books relating to the history of Riccarton House and grounds, donations).

Riccarton Bush Trust

Actual

$000

Target

$000

Note 1

Variance

Act v Tar

$000

Last year

$000

Variance

2018-2019

$000

Council funding

414

414

-

390

+23

Other funding

226

143

+84

180

+47

Surplus/(deficit)

(55)

0

(55)

(142)

+87

Increased deficit against target:  ê $55,000the variance is a result of grant funding, donations, rental income and other sundry revenue totalling $81,000 that was not expected at the time forecasts were developed.  Offsetting this income were depreciation of $158,474 which is excluded from target expenditure as it is a non-cash item, and a net reduction in general business expenses of $20,000 largely as a result of the insurer’s revised methodology and a timing difference for maintenance costs relating to tree and fence maintenance (these costs will be incurred in the 2019/20 financial year).

Reduced deficit against last year:  é $87,000 largely due to a rent increase for the café on site (Local) as well as commission on increased turnover at the café, of $13,000 and an increase of $2,000 for book sales.  The Council’s operating levy, and capital funding increased by $23,000, and rental for the Ranger’s House increased by $3,000 (following the post-earthquake rebuild, 2019 was the first full year of occupancy).  Donations increased by $5,000 and grants of $24,371 were received.  Offsetting this income were additional expenses of $17,000 for increased employee benefits of $7,000, depreciation on the Ranger’s House of $20,000 and lower project expenses by $29,000 reflecting the write-off of projects in 2018 that would not proceed.  General business expenses decreased by $16,000, of which $13,000 related to a change in the insurance provider’s methodology and $3,000 is for maintenance costs that are expected to be incurred in the following financial year.

Non-financial performance: Three targets were missed as at 30 June but were achieved by 30 September. 

Note 1 The 2019 Target excludes non-cash items like depreciation.  Staff are working with CCOs to create budgets and targets in a form consistent with yearend reporting.

 

Rod Donald Banks Peninsula Trust (Attachment D)

3.10    The Trust supports sustainable management, conservation and recreation on Banks Peninsula.  The Trust expects to have depleted its capital by 2020 and is currently engaging with Council about its strategic future.

Rod Donald Banks Peninsula Trust

Actual

$000

Target

$000

Note 2

Variance

Act v Tar

$000

Last year

$000

Variance

2018-2019

$000

Operating surplus

(330)

144

-474

(338)

+8

Closing balance of Fund

2,240

2,045

+195

2,281

-40

Operating surplus against target:  ê $474,000.  Of this variance, $373,000 was expended on strategic grants and projects which was not included in the target figure.  The balance of $100,000 largely reflects a gain on subdivision and sale of Woodills South land at a higher value than was expected due to successful subdivision (gain on sale was $103,000).  In addition, lower Trust management costs of $20,000 reflecting lower time requirement for the Trust manager were offset with increases in operating costs of the same amount partly due to the target excluding non-cash expenses such as depreciation of $9,000 as well as additional costs for strategic planning.

Operating deficit was largely in line with last year.  Revenue performance in both 2018 and 2019 was consistent as each included significant one off items with $103,000 gain on sale of the Woodills land in 2019, and revenue from strategic grants of $100,000 in 2018.

Non-financial performance:  A number of the Trust’s performance targets are multi-year and are therefore ‘in progress’; all others have been met.

Note 2 The 2019 Target excludes non-cash items like depreciation.  Staff are working with CCOs to create budgets and targets in a form consistent with yearend reporting.

 

Central Plains Water Trust (Attachment E)

3.11    The Christchurch City Council and Selwyn District Council are joint settlors of the Trust, in equal parts.  A Central Plains Water Joint Committee comprising two councillors from each of the Settlor-Councils interfaces with the Trust for administrative and governance matters.  All decisions are referred to the two Councils for final approvals.

3.12    The Trust owns resource consents for the Central Plains Water Scheme, and issues user licences pursuant to the resource consents.  It monitors the company to ensure it is operating consistently with the licences.  The costs incurred by the Trust are negotiated for payment by the Central Plains Water Company.

3.13    The Trust’s membership was refreshed in October 2019 in recognition of the change of focus away from the development of the water schemes to monitoring outcomes from their use.

3.14    The Audit Report came under separate cover and is at Attachment F.

 

Central Plains Water Trust

Actual

$000

Target

$000

Variance

Act v Tar

$000

Last year

$000

Variance

2018-2019

$000

Annual expense/revenue

70

80

-10

58

+12

Expenses/revenue against target ê $10,000 in expenditure and revenue due to an over-estimated target.

Expenses/revenue compared to last year  é $12,000 due to an increase in trustee remuneration rates and meeting fees of $17,000 offset by lower administration fees of $5,000.  In addition, the expenses in 2019 included the cost of the 2017 environmental monitoring report which was not accrued in the previous year.

Non-financial performance:  All targets have been met, including that the Trust “has monitored progress with regard to the various resource consent applications, funding and other priority matters through regular reports, briefings and meetings between the company, the Trust, project management and consultants”.

 

 

Attachments / Ngā Tāpirihanga

No.

Title

Page

a

Transwaste Canterbury Ltd - Annual Report 2018/19

102

b

Christchurch Agency for Energy Trust - Annual Report 2018/19

167

c

Riccarton Bush Trust - Annual Report 2018/19

185

d

Rod Donald Banks Peninsula Trust - Annual Report 2018/19

229

e

Central Plains Water Trust - Annual Report 2018/19

264

f

Central Plains Water Trust Audit Report

281

 

 

Confirmation of Statutory Compliance / Te Whakatūturutanga ā-Ture

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 / Ngā Kaiwaitohu

Author

Linda Gibb - Performance Monitoring Advisor

Approved By

Len Van Hout - Manager External Reporting & Governance

Diane Brandish - Head of Financial Management

Carol Bellette - General Manager Finance and Commercial (CFO)

  


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


PDF Creator


 

PDF Creator


PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

 

15.   Council-controlled organisations - Annual General Meetings 2019

Reference / Te Tohutoro:

19/1092300

Presenter(s) / Te kaipāhō:

Linda Gibb - Performance Advisor

 

 

1.   Purpose of Report / Te Pūtake Pūrongo

1.1       The purpose of this report is for the Council to pass shareholder resolutions for annual general meeting business relating to the inactive shelf companies it owns, and for Civic Building Ltd which is an active Council-controlled organisation that has only Councillor-directors.

2.   Staff Recommendations / Ngā Tūtohu

That the Finance and Performance Committee:

1.         Agrees to execute written shareholder resolutions in lieu of annual general meetings for Civic Building Ltd and the Council’s shelf companies - CCC One Ltd, CCC Five Ltd, CCC Six Ltd, CCC Seven Ltd and Ellerslie International Flower Show Ltd for the year ending 30 June 2019; and

2.         Agrees to appoint the Chief Executive of the Council, Dawn Tracy Baxendale to the positon of director of the shelf companies - CCC One Ltd, CCC Five Ltd, CCC Six Ltd, CCC Seven Ltd and Ellerslie International Flower Show Ltd.

3.   Context / Background / Te Horopaki

Issue or Opportunity / Ngā take, Ngā Whaihua rānei

1.1       Section 120 of the Companies Act 1993 (the Act) provides that a company is required to hold an annual general meeting (AGM) of shareholders, not later than six months after the balance date of the company.  For the Council’s companies, the deadline is 31 December 2019.

1.2       Section 122 of the Act enables shareholders to provide written resolutions for the business that would be conducted at an AGM, in lieu of a formal meeting.  It is proposed that this method is adopted for the following wholly-owned Council-controlled organisations (CCOs):

·    Civic Building Ltd (CBL), an active CCO with Councillor directors only; and

·    Shelf companies - CCC One Ltd, CCC Five Ltd, CCC Six Ltd, CCC Seven Ltd and Ellerslie International Flower Show Ltd[2], all of which are inactive and are held in case the incorporation of a CCO is required urgently.

1.3       The former Chief Executive was a director of the shelf companies along with the General Manager, Finance and Commercial.  It is proposed that the Council agrees to appoint the current Chief Executive to the boards of the shelf companies effective until such time as the shelf companies are activated. 


 

AGM business for shareholder resolutions

1.4       The business normally conducted at an AGM includes:

·    approval of the audited financial statements of the company;

·    appointment of new directors or reappointment of existing directors;

·    approval of directors’ fees for the next year; and

·    appointment of the auditor for the next year. 

1.5       Each company requires a directors’ resolution noting the business that is to be conducted by written shareholders’ resolution in lieu of a meeting.  Shareholders will need to pass resolutions on each of the items of business that would otherwise have been tabled at a meeting, as follows:

CBL – to approve its audited financial statements and appoint next year’s auditor.  CBL’s directors are all Councillors and therefore fees are not paid in accordance with the Council’s Policy for the Appointment and Remuneration of Directors.  The director’s resolution recommending no AGM is at Attachment A and the draft shareholder’s resolution covering the business that would be conducted at an AGM is at Attachment B.

Shelf companies – these companies are not operational and are therefore not required to produce financial statements or appoint an auditor.  Directors’ resolutions recommending no AGMs are at Attachment C.  Draft shareholders’ resolutions covering the business that would be conducted at an AGM are at Attachment D

Audited Financial Statements - CBL

1.6       One of the matters to be considered at an AGM is a company’s audited financial statements.  The shelf companies are not required to furnish financial statements as they are inactive.  CBL has provided its Annual Report for 2018/19 which is at Attachment E.  A summary of its performance is set out below.

1.7       CBL is a 50% joint venture partner with Ngāi Tahu in the Civic Building Unincorporated Joint Venture (JV).  The JV manages the investment in the Civic Building, and CBL manages the Council’s interest in that JV. 

1.8       CBL’s major cost is financing it’s loan of $53.9 million.  This loan, advanced by the Council, financed the redevelopment and fit-out of the civic building in 2009/10.  Effectively, CBL receives 50% of the rental income from the Council as the tenant of the Civic Building.

Civic Building Ltd

Actual

$000

Target

$000

Variance

Act v Tar

$000

Last year

$000

Variance

2018-2019

$000

Revenue

4,725

4,641

+84

5,992

-1,267

(Deficit) before tax

(58)

(345)

+298

(68)

+10

(Deficit) before tax:

·    Reduced deficit against target:  é$298,000, due largely to reduced finance costs as a result of a reduction in its debt following repayment of a $5 million loan;

·    Reduced deficit against last year:  ê $10,000, due to the one-off gain on Civic Building in 2018 of $1.28 million, offset by a reduction in interest expense of $1.33 million. 

 

 

 

Attachments / Ngā Tāpirihanga

No.

Title

Page

a

Civic Building Ltd - Directors' resolution in lieu of 2019 AGM

288

b

Civic Building Ltd - Draft Shareholders' Resolution for 2019 AGM by written resolution

289

c

Shelf companies - Directors' Resolutions in lieu of 2019 AGM

290

d

Shelf companies - Shareholder Resolutions for AGMs 2018/19

295

e

Civic Building Ltd - Annual Report 2018/19

300

 

 

Confirmation of Statutory Compliance / Te Whakatūturutanga ā-Ture

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 / Ngā Kaiwaitohu

Author

Linda Gibb - Performance Monitoring Advisor

Approved By

Len Van Hout - Manager External Reporting & Governance

Diane Brandish - Head of Financial Management

Carol Bellette - General Manager Finance and Commercial (CFO)

  


Finance and Performance Committee

05 December 2019

 

PDF Creator


Finance and Performance Committee

05 December 2019

 

PDF Creator


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

 

16.   Vbase Ltd - Annual Report for 2018/19 and Quarter 1 2019/20 Performance Report

Reference / Te Tohutoro:

19/1092281

Presenter(s) / Te kaipāhō:

Linda Gibb - Performance Advisor

 

 

1.   Purpose of Report / Te Pūtake Pūrongo

1.1       This report accompanies Vbase Ltd’s Annual Report for 2018/19 and Quarter 1 2019/20 Performance Report.

2.   Executive Summary / Te Whakarāpopoto Matua

2.1       Vbase Ltd has posted a loss for the year ending 30 June 2019 of $12 million after tax, which is $15 million lower than target, and $1 million worse than the prior year.  The negative variances relate in large part to a $12 million expense for the Town Hall, which had not been budgeted for because the timing of the recognition was unknown (IRD Private Ruling).  Against the 2017/18 financial year, the deficit was higher by $3.5 million due to a number of one-off expenses including cleaning up an underground diesel leak and associated land contamination at the Arena ($0.7 million) and meeting the costs associated with the 15 March incident ($0.45 million including increased security).

2.2       For Quarter 1, 2019/20 Vbase has reported a deficit before tax of $1.4 million, which is worse than target and the same period in the 2018/19 financial year both by approximately $500,000.  The major catalysts of the result for the quarter were the absence of Super Rugby and Mitre 10 Cup games at the Orangetheory Stadium (played earlier due to the Rugby World Cup), a market downturn in Arena shows and higher than expected Town Hall operating costs.

2.3       Over all Vbase venues there was an increase of 26 events over Q1 2018.  However, there has been a reduction of attendances of 62,000 people, and a consequential reduction in catering revenue of $266,000.  There were 70 events held at the Town Hall in Q1.

2.4       Vbase is projecting a $3.1 million loss by year end, over and above the Council’s $3.25 million operating grant) which Vbase is able to meet from a combination of tax subvention receipts and resolution of other tax matters for which cash is being held.

3.   Staff Recommendations / Ngā Tūtohu

That the Finance and Performance Committee:

1.         Notes Vbase’s Annual Report 2018/19 and Quarter 1 2019/20 Performance Report and that it is projecting a $3.1 million loss by 30 June 2020 which it can fund itself;

2.         Agrees to sign the attached Shareholder’s Resolution for Vbase Ltd to hold its annual general meeting by shareholder resolution in lieu of a meeting.

 

4.   Context / Background / Te Horopaki

Issue or Opportunity / Ngā take, Ngā Whaihua rānei

4.1       Vbase is a CCO that attracts and manages events and owns and maintains event facilities (the Arena, Town Hall).  It also has a management contract for the Orangetheory Stadium (the Stadium), Hagley Oval and the Air Force Museum.  Vbase is currently undergoing a reorganisation that has seen the transfer of staff from Council to Vbase employment.  Work is ongoing to finalise the formation of Vbase’s organisational structure towards ensuring both the value of events for Christchurch and assets (facilities) are maximised.

4.2       Although engaged in trading activities, Vbase is not expected to make a profit.  Aside from the difficult commercial environment it faces, part of the justification for events is the social, cultural and economic benefits they bring to the region’s residents and businesses.  In addition, discounts are provided to community groups for access to venues.  Achieving these wider benefits imposes costs on Vbase that are not fully recoverable in the current market.

4.3       Vbase incurs substantial loss of catering revenue and unrecovered overhead contribution (around $0.7 million per annum) in the management of the Stadium (previously the Christchurch Stadium) and venue rental and unrecovered overhead contribution (circa $0.15 million per annum, depending upon the schedule) in the management of Hagley Oval for international cricket.

4.4       Vbase’s key profitability driver is catering revenue, therefore events such as rugby, multi-day conferences and concerts are generally its highest earners.  The catering contract (currently held by Spotless) falls due in early 2020 and the Vbase board has decided to bring catering in-house which will provide an opportunity for improved net revenue for Vbase.

4.5       The market for events in Christchurch has changed significantly in the past few years, and is likely to continue to do so with Te Pae (the Christchurch Convention Centre) scheduled to open in October 2020.  The following are some of the key challenges Vbase is focussed on addressing as it rebuilds the business following a prolonged period of uncertainty:

·   embracing new venue competition in the form of Te Pae managed by global venue management company AEG Ogden and working with them and other key stakeholders including ChristchurchNZ in the best interests of Christchurch and the region;

·   positioning the Town Hall to compete more strongly for catered conferences and meetings;

·   navigating the transition from Spotless to in-house catering and securing the projected $0.9 million per annum operational efficiencies and financial benefits while also shifting food and beverage procurement to the local market;

·   growing new commercial business for the Town Hall and the Arena and revenue from all income streams – venue rental, catering, technology services and ticketing;

·   overhauling event delivery to improve service, make better use of resources and reduce event costs;

·   securing commercial terms at Orangetheory Stadium that reflect the longer term life of this venue;

·   taking better care of the venues day to day and over their whole of life; and

·   rebuilding people capability and culture while at the same time reducing overhead costs.

4.6       In recognition of the prolonged period of uncertainty that Vbase has encountered and the challenges it is facing, the Council has provided an operating grant of $3.25 million in 2019/20, $2.5 million in 2020/21 and $2.5 million in 2021/22, of which $1 million each year is required for servicing debt.

4.7       The 2019/20 grant is insufficient to support Vbase’s performance.  The extent to which the later year grants are sufficient to meet the company’s needs will be determined by the progress in meeting the challenges above and timing of same.

Reporting requirements

4.8       Section 67 of the Local Government Act 2002 (LGA) requires CCOs to deliver to shareholders, and make available to the public a report on its operations for the year, and for this to be provided within three months after the end of the financial year.  The report must include a record of any undertaking to obtain, or the amount of compensation obtained from shareholders in respect of any activity.

4.9       Sections 68 and 69 of the LGA note the contents of reports to further include:

·   the information necessary to enable an informed assessment of the organisation’s operations and of its subsidiaries including a comparison of performance with Statement of Intent (SOI) targets and an explanation of material variances;

·   the dividends if any authorised to be paid or the maximum dividend proposed to be paid by that organisation;

·   audited consolidated financial statements for that financial year for the organisation and its subsidiaries, prepared in accordance with generally accepted accounting practice; and

·   an auditor’s report on the financial statements and the performance targets and other measures by which performance was judged in relation to its objectives.

4.10    Section 66 of the LGA requires that during each financial year, the board of a CCO must report on the organisation’s operations to its shareholders.  If shareholders have notified the organisation that they require quarterly reporting (as is the case for Vbase), the report must be delivered within two months after quarter end.  It must include the information required to be included in the CCO’s SOI.

4.11    Vbase has did not meet the statutory requirements for the Annual Report but met the requirement for the Quarter 1, 2019/20 report.  Its Annual Report for 2018/19 is at Attachment A and its Quarter 1, 2019/20 Performance Report is at Attachment B.

Annual Report for 2018/19

4.12    The Annual Report and financial statements for Vbase Limited was signed by Directors on 22 November 2019.  Council, Vbase and Audit New Zealand staff worked to resolve the appropriate disclosure requirements for a tax adjustments on de-recognition of an intangible asset.  This resulted in the 30 September 2019 deadline not being met.

4.13    An unmodified audit report was received from Audit New Zealand.

4.14    The following table summarises Vbase’s performance for 2018/19 against its SOI targets and the against the previous year’s outturn.

 

Actual

$000

Target

$000

Variance

Act v Tar

$000

Last year

$000

Variance

2018-2019

$000

Deficit before tax

(20,442)

(10,043)

(10,399)

(16,904)

-3,538

Against target, the deficit before tax is higher than target by $10,399 largely due to the Town Hall expenditure of $12 million which had not been budgeted.  At the time the SOI (budget) was being prepared the additional expenditure arising from the recognition of Town Hall repairs costs were uncertain and subject to the IRD Private Ruling. 

Against last year, the deficit before tax is higher in 2019 than in 2018 by $3.5 million.  This is a result of land remediation costs relating to a diesel spill at Horncastle Arena ($0.7 million), costs for responding to the 15 March attacks and increasing security at venues thereafter (together $0.45 million), Town Hall operational and depreciation costs ($2.2 million), and repair costs for the Town Hall ($12.2 million) offset by the demolition costs for the former Lancaster Park in 2018 ($11.9 million).  Interest income decreased following a reduction of cash due to further capital investment in fixture and fittings at the Town Hall ($0.7 million).  The Council provided a $1 million operating grant to Vbase in 2019.

Non-financial performance:  The following targets were not achieved: 

·    at least 50 event days at Hagley Oval Pavilion (actual: 40 event days) in part due to parking difficulties in the area; and

·    to determine client (i.e. event providers) satisfaction, a minimum of 50 surveys to be completed during the year (actual 30).  Vbase advises that not all event providers respond to the survey and some provide verbal feedback immediately after an event.

Although all other targets were achieved, including utilisation of event venues, the targets need to be re-focussed towards drivers of profit which includes the type and nature of events held, the attraction of attendees to high revenue-yielding events as well as efficiency targets.  We expect that more robust performance targets will be developed for the new events CCO.

Discounts to community groups for use of Vbase venues were $328,848 against a target of $200,000.  Vbase notes the target has been achieved.  However, it is a target expense that has been well exceeded.  Allowing use of venue space is not costless.  Vbase incurs costs of utilities, wear and tear that accelerates maintenance requirements, and post-event cleaning which it is not compensated for.

4.15    Although there were a number of costs incurred in 2019 that were neither budgeted for, nor incurred in 2018, the fundamental problem that is driving Vbase’s losses is a shortfall in events that require catering, are multi-day in duration, and attract high numbers of ticket-paying attendees.  Vbase is working hard on changing the mix of events but will still be the provider of choice for school choral events and civic ceremonies both of which are low value commercially.

4.16    As Te Pae comes closer to opening (October 2020) it is taking bookings that will undoubtedly diminish Vbase’s ability to compete for profitable conferences from that time.  It is important that Vbase focusses its activities where it can extract the best returns on investment. 

Quarter 1, 2018/19 Performance Report

4.17    The following are the key financial highlights for Vbase for Quarter 1, 2019:

 

Q1 2019

Actual $m

Q1 2019

Target $m

Q1 2018

Actual $m

Revenue

4.1

4.5

4.6

Council grant

0.8

0.8

0.25

Total Revenue

4.9

5.3

4.8

Expenditure

6.3

6.1

5.7

Net Profit/(loss)

(1.4)

(0.8)

(0.9)

 

Against target

4.18    Total revenue excluding Council grants is $400,000 lower as a result of a downturn in the ticketed events market particularly as it relates to the Arena, overly optimistic assumptions about the number and mix of events to be held and attendance numbers at events.  Venue and event revenue was $280,000 lower than target, offset in part by higher equipment hire revenue of $102,000 (which had not previously been charged for).  Event ticketing was lower by $77,000 due to lower attendances at events. 

4.19    Events that were expected but did not occur in the quarter included a Black Clash game, Black Caps’ cricket games, a major concert and a Manly rugby league game.  These types of events are all catered and are vital to Vbase’s profitability. 

4.20    Expenditure has increased by $100,000 over target largely due to the higher than expected costs incurred owning and maintaining the Town Hall as an additional venue in the portfolio.  Insurance costs are twice the amount expected at $800,000 per annum, and electricity costs three times higher at $30,000 per month (expectation was $10,000).  Vbase notes that compared to pre-earthquake operating costs, the Town Hall’s utility costs are higher by 125% and the cost of insuring it are close to 400% higher than the cost of insuring all its venues pre-earthquake (including the former convention centre).

4.21    The following charts demonstrate the changes between key profitability drivers for Q1 2018 and Q1 2019:

       

Compared to Q1 2018:

4.22    Total revenue increased by $100,000 in Q1 2019 which included a Council operating grant of $800,000 compared with $250,000 in Q1 2018.  Excluding the impact of the Council’s subsidy in both quarters, the real change in revenue is a reduction of $500,000.  This is mostly due to the earlier scheduling of four super rugby matches and four Mitre 10 Cup rugby matches to avoid clashing with the Rugby World Cup.  These events would ordinarily occur in Q1 each year and although their outturn has been captured in Vbase’s 2018/19 annual result), it has had a significant negative impact on Q1 performance.  The number of attendees at the Stadium in the quarter was lower than Q1 2018 by 71,000, and venue and catering revenue by $800,000.

4.23    Attendances across all Vbase venues declined by 62,000 (32%).  The biggest reduction was for sport, by 26% (74,000 people) over Q1 2018, followed by a reduction of 31,000 at the Arena.  This was largely due to the absence of the rugby matches.  Offsetting this was an increase in Town Hall attendees of 50,000 (not open in Q1 2018).

4.24    Event types that had downturns in attendances were concerts (4,500) and exhibitions (8,000).  There were increases in meetings and seminars (12,400) and importantly conferences (9,500).

4.25    Venue and catering revenue in Q1 2019 was lower by $266,000; the average per event reduced from $36,000 in Q1 2018 to $27,000 in Q1, 2019.  The changes were in line with the reduced sport events ($838,000) and increased number of conferences ($699,000).

4.26    Total expenditure increased by $400,000 over Q1 2018 attributable to the increased Town Hall operating costs.

Looking ahead

4.27    Vbase projects that the year-end operating deficit will be a loss of $3.1 million.  This assumes an ongoing trend for fewer events and attendances, and minimal impact on performance in this financial year through meeting the challenged outlined above. 

4.28    Cash and financial assets held by Vbase amounts to $12 million, from which it must service a net $9 million of payables.  Vbase will be able to meet the increased loss from a combination of tax subvention receipts and resolution of other tax matters for which cash is being held.  However, it is clear that from 2020/21 it will no longer be able to do so.   

4.29    A forecast $10 million equity injection for Town Hall repairs is now expected to be $13.7 million.

4.30    Shareholders’ Funds: Total Assets is 75% against target of 85%.  The target ratio was an error, and should be 79%.  Although running below the revised target, if the value of the Town Hall is impaired following completion, this will reduce total assets and increase the ratio.

Annual General Meeting

4.31    Section 120 of the Companies Act 1993 (the Act) provides that a company is required to hold an annual general meeting (AGM) of shareholders, not later than six months after the balance date of the company.  For the Council’s companies, the deadline is 31 December 2019.

4.32    It is proposed that shareholders provide a written resolution in lieu of an annual general meeting for Vbase Ltd for the year ending 30 June 2019 as permitted by Section 122 of the Act.  The resolutions are:

·    approval of the audited financial statements of the company;

·    approval of directors’ fees for the next year; and

·    appointment of the auditor for the next year. 

4.33    Currently the Vbase Board comprises one councillor, the Chief Executive of Christchurch City Holdings Ltd and an independent Executive Director.  There is also provision for a second Councillor to be appointed as a director and up to two independent directors.  The appointment of Councillors to the boards of CCOs is the subject of a report to Council on 12 December.

4.34    The Vbase board is a transition board of three, with only one member receiving fees.  The fees are paid out of the transition budget, and as they were agreed in September, we propose that they remain the same for the year ahead, including for any new members brought onto the board to fill vacant slots.

4.35    The executed resolution of directors that there be no physical AGM is at Attachment C.  The shareholder’s resolution covering the business that would be conducted at the AGM is at Attachment D.

 

 

Attachments / Ngā Tāpirihanga

No.

Title

Page

a

Vbase Ltd - Annual Report 2018/19

334

b

Vbase Ltd - Quarter 1, 2019/20 Performance Report

373

c

Vbase Ltd - Directors Resolution No AGM

385

d

Vbase Ltd - Shareholders' Resolution No AGM

386

 

 

Confirmation of Statutory Compliance / Te Whakatūturutanga ā-Ture

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 / Ngā Kaiwaitohu

Author

Linda Gibb - Performance Monitoring Advisor

Approved By

Len Van Hout - Manager External Reporting & Governance

Diane Brandish - Head of Financial Management

Carol Bellette - General Manager Finance and Commercial (CFO)

  


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


PDF Creator


PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


 

PDF Creator


Finance and Performance Committee

05 December 2019

 

PDF Creator


Finance and Performance Committee

05 December 2019

 

PDF Creator


Finance and Performance Committee

05 December 2019

 

 

17.   Appointment of Councillors to Council-controlled organisation boards - recommendations from the Appointments Committee

Reference / Te Tohutoro:

19/1321884

Presenter(s) / Te kaipāhō:

Linda Gibb - Performance Advisor, External Reporting and Governance

 

 

1.   Purpose of Report / Te Pūtake Pūrongo

1.1       This report accompanies the Appointments Committee’s report on the appointment of Councillors to the boards of Christchurch City Holdings Ltd, ChristchurchNZ Holdings Ltd, Vbase Ltd and Civic Building Ltd.

2.   Staff Recommendations / Ngā Tūtohu

That the Finance and Performance Committee:

1.         Approves appointments of Councillor-directors for terms of three years until the next triennial election (or earlier if the Councillor-director is no longer a Council elected member) as follows:

·    Christchurch City Holdings Ltd – Councillors Turner, Gough and Templeton;

·    ChristchurchNZ Holdings Ltd – Councillors Turner and Davidson;

·    Vbase Ltd – Councillor Scandrett; and

·    Civic Building Ltd – Councillors Gough (Chair), MacDonald and Mauger;

2.         Notes the Mayor is an ex officio appointee to the Christchurch City Holdings Ltd Board;

3.         Notes that all Councillor-directors to the above named boards in the last triennium are deemed to retire on the date the resolution for this report is passed, and the new appointments to commence on that same day;

4.         Notes the retiring Councillor-directors are as follows:

·    Christchurch City Holdings Ltd – former Councillor Buck;

·    ChristchurchNZ Holdings Ltd – Councillor Scandrett;

·    Vbase Ltd – no change; and

·    Civic Building Ltd – Councillor Davidson and former Councillor East;

5.         Requests staff to draft letters to new and retiring Councillor-directors to formally acknowledge their appointment or retirement, and notices of appointments and removals of Councillor-directors