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Council
07 December 2022
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19. Council's
Strategic Review of Christchurch City Holdings Ltd
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Reference / Te Tohutoro:
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22/1671747
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Report of / Te Pou Matua:
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Leah
Scales, General Manager Resources/Chief Financial Officer
(Leah.Scales@ccc.govt.nz)
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General Manager / Pouwhakarae:
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Leah
Scales, General Manager Resources/Chief Financial Officer
(Leah.Scales@ccc.govt.nz)
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1. Nature of Decision or Issue and Report Origin
1.1 In 2021 Council determined that after nearly 30 years in
existence it was timely and appropriate to take a forward 30 year look at our
commerical holding company to determine if their strategic objectives and
purpose were still valid today.
1.2 Northington Partners Ltd were appointed to undertake this
review on behalf of Council. This report has been written as a result of
receiving their final report and recommendations.
1.3 The
decisions in this report are of low significance in relation to the
Christchurch City Council’s Significance and Engagement Policy. The
level of significance was determined as the decisions requested relate only to
requesting more information to inform the next Long Term Plan.
2. Officer Recommendations Ngā
Tūtohu
That the Council:
1. Receive the Northington Partner report
relating to the Strategic Review of Christchurch City Holdings Limited (CCHL).
2. In line with the recommendations from
Northington Partners in relation to the scope of CCHL:
a. The Council develop a clear Value Strategy in relation to building and
utilising income or value from CCHL primarily informed by Council’s long
term requirements;
b. Working closely with the Council, that CCHL be requested to scope and develop
detailed business cases which
fully considers the costs and benefits of adopting a hybrid approach to
managing the portfolio, including rebalancing and returning capital to council.
That these two
pieces of work are prepared in time to inform and be considered as part of the
Draft Long Term Plan 2024-2034.
3. In line with the recommendations from
Northington Partners in relation to operational improvements, that the Council:
a. Maintain the CCHL structure to continue to provide an independent non-political buffer between
the Council and the commercial companies. Clarify that CCHL’s core
role and purpose is to deliver
commercial-based outcomes for its shareholder.
b. Modify the Statement of Expectations process
to be a more comprehensive, three year process based on a 10 year planning
horizon which becomes part of the LTP process.
c. Acknowledge that the recruitment of the Board of
Directors and Executive of CCHL would need to consider the experience and skill-set required to support
the strategy evaluation and implementation.
d. Reduce the number of Councillor Directors on
CCHL from four to two, which maintains the valued links between CCC and CCHL, while
also providing for the number of independent commercial directors up to six
including the Chair, which will be required to support the nature of the work
ahead for CCHL.
e. That the remuneration for Councillor Directors
appointed to CCHL be considered as part of the review of the Council’s
Policy of Appointment and remuneration of Directors of Council organisations at
the Council meeting on 14th December 2022.
f. Acknowledge that there needs to be a greater
level of engagement between Council/CCHL and its subsidiaries. Whilst
acknowledging the need to ensure an
appropriate balance of transparency (reflecting the public ownership / public
interest dynamic) and ensuring that Council is not overstepping into
operational matters is important. To achieve this, CCHL be requested to
provide:
i. Six-monthly briefings where the CEOs of the CCTOs present
to Council; and
ii. Council to strengthen its CCO monitoring function to
enable more timely reporting and analysis.
g. Request CCHL to seek better engagement with
other aligned stakeholders (both other CCOs like CNZ) and aligned partners like
Ngai Tahu.
h. Consider all other recommendations as provided
by Northington Partners in their report in full following the completion of the
work as outlined in resolution 2 above.
3. Reason for Report Recommendations Ngā Take mō te
Whakatau
3.1 To
allow the Council to consider the Northington Partners Ltd report on the CCHL
Strategic Review, and to consider the recommendations as provided in their
report in regard to the future direction of CCHL.
4. Alternative Options Considered Ētahi atu Kōwhiringa
4.1 The
only alternative is to not consider the recommendations of the report by
Northington Partners Ltd.
5. Detail Te Whakamahuki
5.1 Christchurch
City Holdings Ltd (“CCHL” or the “Company”) is an
investment company which owns Christchurch City Council’s
(“CCC” or the “Council”) shareholding in a number of
operating subsidiary companies.
5.2 CCHL
was established in 1993 to act as an independent and non-political buffer between
the Council and the trading companies that it owned. The main objective was for
CCHL to invest in and promote the establishment of key infrastructure and the
Company now owns a significant portfolio of commercial assets operating across
the following sectors: electricity distribution, airport, port, fibre
broadband, construction and maintenance and recycling.
5.3 In
December 2021, the Council requested CCHL in its Letter of Expectations (LOE):
“the Council is asking the CCHL
Board to consider the role of CCHL and asks you to reflect after nearly 30
years, whether it’s original core purpose remains relevant and/or whether
it could be enhanced to provide more support to the city. We ask that you
consider this in light of the current environment, our city’s experiences
over the last ten years and the future national and global challenges we are
all facing.
The Council sees this initiative as an opportunity to
work together to ensure CCHL’s future direction is aligned to deliver our
strategic priorities and community outcomes.”
5.4 Due
to personnel changes at CCHL, in August 2022, the Council took over managing
the review and appointed Northington Partners Ltd (Northington) to undertaken
the review with an expectation that the review would be complete and presented
to the new Council in November/December 2022. The terms of reference that
were provided for the review are attached as Appendix 2 to this report.
5.5 The
full Northington report and recommendations are attached to this cover report
as Appendix 1.
5.6 The
approach to the review undertaken by Northington is detailed on page 5 of their
report, but can be summarised as follows:
· Strategy and Scope
– review CCHL’s purpose, role and objectives and how these align to
support Council’s strategic priorities and community outcomes
· Financial –
review CCHL’s investment mandate/parameters, investment opportunities and
optimal capital structure needed to support its role and purpose
· Structure and
Governance – review of the current governance structure and
identification of areas of improvement to best support CCHL’s purpose and
objectives.
The
review has addressed two important functional questions:
· What is the status
of the current structure, effectiveness and performance of CCHL (How is it
working?)
· How can CCHL’s
structure and remit be modified to best meet Council’s long term
objectives ( How could and should it be working?)
5.7 Northington
interviewed over 50 people that included key stakeholders, including a number
of current and past Councillors, Mayors, Directors and Executives, and other
key partners.
5.8 The
review has analysed the performance of CCHL and its underlying assets, it has
reviewed Council’s past and future income requirements, and its debt
burden now and in the future as outlined in our current LTP. The review
has considered the risks and opportunities of our current portfolio, and
considered this in line with our future requirements.
5.9 As
part of their review Northington has debated and contested the case for Council
ownership:
· “CCC’s
investment strategy for CCHL and the case for ownership has not been clearly
established. We believe there is a strong case to objectively reconsider
CCC’s core objectives and develop a strategy for CCHL which assists in
delivering those identified priorities.”
· In our view, the core reasons that CCC owns the CCHL assets fall
into the following categories.
o Security of Services / Control of Key Assets
o Income for CCC /Reduce Rate Burden
o Build Value
o Support CCC Nonfinancial Objectives
5.10 Reflecting
on the answers to the above questions the Northington review has provided a
range of alternative operating models and structures that could be considered
to improve performance and potentially recycle capital back to Council for debt
reduction or reinvestment into other new city investments. The
alternative approaches detailed in the report are:
o Retain – effectively status
quo
o Rebalance – transition to a
more active management approach – recycle and reinvest to improve
risk/return profile while maintaining control over current assets
o Reduce – transition to a
more active management approach, with options to either recycle capital back to
Council or redeploy into other assets within CCHL
o Realise – effectively
counterfactual to status quo, liquidate portfolio.
5.11 The
Northington report has recommended a hybrid approach, one that considers
options under both a rebalance and reduce operating model. It does not
recommend either status quo or realise options, as such neither of those
options are recommended by staff to pursue.
5.12 The
Council current LTP recognises most of the assets held by CCHL as strategic.
This means that any consideration of a change to the portfolio would need to be
considered as part of the next draft LTP and consulted on.
5.13 The
Northington report recommends that two pieces of work are undertaken to prior
to any consideration to a change to the portfolio:
Council should set a clear Value Strategy in relation to building
and utilise income or value from CCHL:
o This strategy should be
primarily informed by Council’s long-term requirements, with a deliberate
balancing of its target capital structure, financial capacity and requirements,
and an acceptable rates path (incorporating a realistic long-term population
growth path).
o That strategy should then inform
CCHL of Council’s requirements, which will allow it to tailor its
portfolio to best meet shareholder requirements.
Scoping Studies / Detailed Business
Cases – an evaluation of each asset
should be conducted to identify the best strategy to release capital. This
evaluation should take into account:
o CCC’s optimum / minimum
strategic shareholding;
o Identifying opportunities that
can be unlocked through strategic co-investment;
o Detailed financial analysis /
market valuations / investor market soundings; and
o Broad stakeholder consultation
process.
The core output from these connected
processes should be a range of explicit and market-tested options for
introducing co-investment into current CCHL assets and redeploying capital into
other investments or to debt repayment.
5.14 The
work above will provide options/considerations for the Council and community to
consider as part of the draft long term plan next year.
5.15 The
Council recognises the significance and importance of the CCHL group to the
residents of Christchurch and as such they wish for the public to be part of
any decisions relating to the future direction of this portfolio.
However, to be able to consider any changes in the draft long term plan, the
Council need the work to be completed so detailed options are available and
impacts including risk and opportunities are provided for consideration.
5.16 The
Northington Report also highlighted a number of operational recommendations
that they suggest should be implemented to support the above work that would
need to be done, but also to improve current engagement/communications between
Council/CCHL and the subsidiaries.
5.17 The
review highlighted that a number of things were working well, the original
purpose of CCHL to provide a non-political buffer between Council and the
commercial entities, does and should continue to work effectively. In
addition the core role of CCHL should be to deliver commercially based outcomes
for its shareholder.
5.18 However
there are a number of improvements that the Northington report are implemented
which Council staff support:
· The current
Statement of expectations (SOE) process needs to be more comprehensive, and
aligned to the 10 year planning horizon of the LTP. The SOE should aim to
provide a set of explicit and measureable expectations in relation to long term
performance.
· The CCHL Board
should be strengthened with directors who have the experience and skill sets to
support the recommended strategy evaluation and implementation. In light
of this, the Councillor Directors are recommended to be reduced to two from
four. This also removes the concern of having so many Councillor
Directors having to step back from the discussion and voting around the Council
Chamber when recommendations come back from CCHL. This will allow up to
six independent Directors be appointed (including the Chair).
· The discussion
around whether Councillor Directors should receive remuneration will form part
of the review of the Council’s appointment and remuneration policy which
is scheduled to be received by Council on the 14th December 2022.
· The report
recommends a higher degree of scrutiny over the performance of the CCTO’s
at the CCHL level that includes driving financial performance and being
prepared to take action, when results are not satisfactory. To help with
this, the report recommends that the CCO monitoring function at Council is
refocused to enable Council to monitor, interrogate and communication information
provided by CCHL to Councillors. Increasing the transparency between CCHL
and Council will be required to achieve this.
· Finding an
appropriate balance of transparency (reflecting the public ownership/public
interest dynamic) and ensuing that Council is not overstepping into operational
matters is important. However a process of trust-building is required and
therefore a degree of direct and regular engagement between Council and the
CCTO’s is recommended by six monthly briefings in which the CEO’s
of the CCTO’s present to Council.
· The report has
noted that CCHL has the capacity to add significantly more value through better
engagement with other aligned stakeholders (both other CCO’s like
ChristchurchNZ (CNZ), and commercially aligned partners like Ngai Tahu
holdings. Northington recommend that the Council lead and instruct a
tighter relationship between CCHL and CNZ to pursue shared and
mutually-beneficial objectives.
· There are a
number of other recommendations that are proposed by Northington that are
dependent on the proposed model going forward, and as such staff are
recommending they are considered once the work proposed under 5.13 above is
completed.
6. Policy Framework Implications Ngā Hīraunga ā- Kaupapa here
Strategic
AlignmentTe Rautaki
Tīaroaro
6.1 This report supports Council's
Long Term Plan (2021 - 2031).
Policy
Consistency Te Whai
Kaupapa here
6.2 The
decision is consistent with Council’s Plans and
Policies. Except for recommendation 3(d) which is requesting a change to the
current Appointments and remuneration of directors on Council organisations.
Impact
on Mana Whenua Ngā
Whai Take Mana Whenua
6.3 The
decision does not involve a significant decision in
relation to ancestral land or a body of water or other elements of intrinsic
value, therefore this decision does specifically impact Mana Whenua, their
culture and traditions.
6.4 The
decisions in this report do not involve a matter of
interest to Mana Whenua and will not impact on our
agreed partnership priorities with Ngā Papatipu
Rūnanga.
6.5 Once the work as requested has been completed and prior to the draft
long term plan being agreed, engagement with Mana Whenua will be requested.
Climate
Change Impact Considerations Ngā Whai Whakaaro mā te Āhuarangi
6.6 There
are no Climate change implications in relation to the decisions being requested
in the report.
6.7 The
Council will consider climate change implications as part of its value strategy
work.
6.8 More
regular communication with CCHL and the subsidiaries will give the Council a
better understanding of the work that they are doing on emissions reduction and
our climate change initiatives.
7. Resource Implications Ngā Hīraunga Rauemi
Capex/Opex Ngā Utu Whakahaere
7.1 Cost
to Implement – the cost of resourcing for the work on the detailed
business cases will be determined by CCHL.
8. Legal Implications Ngā Hīraunga ā-Ture
Statutory power to undertake proposals in the report
Te Manatū Whakahaere Kaupapa
8.1 Local
Government Act 2002, and Companies Act 1993
Other Legal Implications Ētahi atu
Hīraunga-ā-Ture
8.2 There
is no legal context, issue or implication relevant to this decision as the
request is to seek more information before any decision is considered as part
of the Long Term Plan.
9. Risk Management Implications Ngā Hīraunga Tūraru
9.1 As
this report is only seeking a decision to prepare more information, there is no
risk to the Council in relation to this report.
9.2 In
the event that a decision is made to not seek further work to be undertaken,
the risk will be that the Council will not have all relevant information
available to it to determine the risks and opportunities of a changed model.
Attachments Ngā Tāpirihanga
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No.
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Title
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Reference
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Page
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a ⇩ 
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Review of CCHL
2022 - Northington Report
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22/1698827
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12
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b ⇩ 
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CCHL Review
Terms of Reference
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22/1698842
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125
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In addition to the attached documents, the following background
information is available:
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Document
Name – Location / File Link
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Not
applicable
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Confirmation of Statutory
Compliance Te Whakatūturutanga ā-Ture
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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.
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Signatories Ngā Kaiwaitohu
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Author
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Leah Scales -
General Manager Resources/Chief Financial Officer
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Approved By
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Dawn Baxendale
- Chief Executive
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Council
07 December 2022
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20. Terms of Reference - Insurance Subcommittee
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Reference / Te Tohutoro:
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22/1676649
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Report of / Te Pou Matua:
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Helen
White, Head of Legal & Democratic Services (helen.white@ccc.govt.nz)
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General Manager / Pouwhakarae:
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Dawn
Baxendale, Chief Executive (Dawn.Baxendale@ccc.govt.nz)
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1. Nature of Decision or Issue and Report Origin
1.1 This is a decision to adopt new Terms of Reference for the
Insurance Subcommittee.
1.2 This is a staff report arising out of the matters before
the Insurance Subcommittee.
1.3 The
decision in this report of low significance in relation to the Christchurch
City Council’s Significance and Engagement Policy. The level of
significance was determined by considering the impact of this decision against
the factors identified in the Policy.
2. Officer Recommendations Ngā
Tūtohu
That the Council:
1. Adopts the Terms of Reference for the
Insurance Subcommittee in Attachment A.
3. Reason for Report Recommendations Ngā Take mō te
Whakatau
3.1 The
Terms of Reference in Attachment A expand the current responsibilities of the
Subcommittee to encompass final decisions including settlements. It
maximises the benefit of the expertise of the Insurance Subcommittee and
reduces the potential for duplication of decision-making.
3.2 The
Insurance Subcommittee has been consulted informally and its members have
indicated agreement to the change in responsibilities.
4. Alternative Options Considered Ētahi atu Kōwhiringa
4.1 It
would be open to the Council to make no change. This is not recommended
as the Subcommittee has received extensive specialist internal and external
advice on complex matters within its remit. It is not an effective use of
resources to duplicate the knowledge sharing to the parent Committee or Council
solely to make final decisions on the matters that have been extensively
considered by the Subcommittee.
4.2 Alternatively,
the final decisions could be delegated to named individuals by the
Council. This is not recommended as the Subcommittee has received the
specialist and in-depth information on matters before it. Delegation to
the Subcommittee allows for increased governance oversight. It would be
open to the Subcommittee with its experience to further delegate in its
discretion.
5. Detail Te Whakamahuki
5.1 On
2 November 2022, the Council received the Mayor’s governance committee
structure. One of the principles in the Mayor’s memorandum to
councillors that was before that meeting (page 8 of that Agenda) is that
decisions should be made once.
5.2 At
3.10 of the accompanying staff report (page 6 of that Agenda), it is recorded
that committees will review their respective Terms of Reference and
‘propose amendments to the council for consideration.’
5.3 The
Subcommittee was established to provide governance oversight and interim
decision making in relation to significant insurance claim and other
significant insurance related matters. Attachment A contains Terms of Reference
that are expanded to provide responsibility for all decisions relating to these
matters.
5.4 The
Subcommittee receives detailed and in-depth information about the complex and
nuanced matters within its remit. This information is provided from a
range of highly skilled specialists.
5.5 It
is staff advice that the Subcommittee is best placed to make all decisions
relating to these matters as it:
5.5.1 Already
provides governance oversight to the progress of matters, gives interim
direction and makes interim decisions.
5.5.2 Receives
in-depth specialist and technical advice from both internal and external
sources.
5.5.3 Reduces
the need to duplicate resources in order to provide sufficient information for
final decision making at the parent Committee or the Council.
5.5.4 Increases
the governance options for decisions to be taken at pace if required as matters
progress.
5.6 On
this basis, the Subcommittee is best placed, given its knowledge of the matters
before it, to further delegate any of its responsibilities and decisions on
such terms as it sees fit.
5.7 For
logistical reasons, the Subcommittee was not able to consider and recommend
these Terms of Reference to Council. However, the members of the
Subcommittee have informally indicated it supports the changes recommended.
6. Policy Framework Implications Ngā Hīraunga ā- Kaupapa here
Strategic
AlignmentTe Rautaki
Tīaroaro
6.1 This report supports the Council's
Long Term Plan (2021 - 2031):
6.1.1 Activity: Governance and decision-making
· Level of Service: 4.1.28.3 Establish and maintain
documented governance processes that ensure compliance with the local
government legislation - Governance processes are maintained and
published on council's website.
Policy
Consistency Te Whai
Kaupapa here
6.2 The
decision is consistent with the Council’s Plans and
Policies.
Impact
on Mana Whenua Ngā
Whai Take Mana Whenua
6.3 The
decision does not involve a significant decision in
relation to ancestral land or a body of water or other elements of intrinsic
value, therefore this decision does specifically impact Mana Whenua, their
culture and traditions.
6.4 The
decision does not involve a matter of interest to Mana
Whenua and will not impact on our agreed partnership priorities with Ngā Papatipu Rūnanga.
6.5 This matter relates to the decision making responsibilities of a
Subcommittee.
Climate
Change Impact Considerations Ngā Whai Whakaaro mā te Āhuarangi
6.6 Not applicable.
Accessibility
Considerations Ngā
Whai Whakaaro mā te Hunga Hauā
6.7 Not applicable.
7. Resource Implications Ngā Hīraunga Rauemi
Capex/Opex Ngā Utu Whakahaere
7.1 None.
Other He mea anō
7.2 None.
8. Legal Implications Ngā Hīraunga ā-Ture
Statutory power to undertake proposals in the report
Te Manatū Whakahaere Kaupapa
8.1 The
Local Government Act 2002 allows the Council to appoint subordinate
decision-making bodies as it considers appropriate (cl 30 Sch 7).
8.2 The
Council is able to delegate any matter to a subordinate decision-making body,
unless it is expressly prohibited by the Local Government Act 2002.
The delegations within Attachment A are not prohibited (cl 32 Sch 7).
Other Legal Implications Ētahi atu
Hīraunga-ā-Ture
8.3 None
additional.
9. Risk Management Implications Ngā Hīraunga Tūraru
9.1 No
direct implications.
Attachments Ngā Tāpirihanga
|
No.
|
Title
|
Reference
|
Page
|
|
a ⇩ 
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Insurance
Subcommittee - Terms of Reference
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22/1683563
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131
|
In addition to the attached documents, the following background
information is available:
|
Document
Name – Location / File Link
|
|
Not
applicable
|
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
|
Helen White -
Head of Legal & Democratic Services
|
|
Approved By
|
Dawn Baxendale
- Chief Executive
|
