The corporate services committee meeting was held on 13 March 2014. Apologies were received from the Mayor, Cr Norris, and Cr Mirfin. All other councillors were in attendance.
The agenda comprised a number of reports. These included reports on: (1) the local government funding agency, (2) council controlled organisations (ie airport, port, Tasman Bays Heritage Trust, Nelson regional sewerage business unit), (3) a proposal for a revised financial strategy, (4) human resources (staff) update, and (5) treasury report and financial activities. In attendance were officers of PWC, who presented information on the councils treasury management.
The agenda also contains (by way of separate attachment) the December 3013 financial reports. If you want to know where your money was spent, have a wander through this document.
I intend to provide a short snap shot of the contents of the agenda. Much more detail is available in the agenda itself and I recommend readers with an interest in financial matters read the agenda (and attachments) in full.
The local authority protection programme (LAPP) provides 40% of the council’s insurance cover for infrastructural assets. The remaining 60% is covered by central government. A review of local body insurance was published in December 2013 by Local government NZ (LGNZ). That review has recommended the replacement of the LAPP with a local authority owned agency and the replacement of the current 60/40 natural disaster co-funding arrangement, with a tiered\mixed approach to insurance cover involving levels of self insurance, commercial insurance, and taxpayer support.
The council is a member and shareholder of the local government funding agency (LGFA) which provides financial funding for participant councils. For the 2013-14 year, council can expect a 7% return on its founding investment. The dividend will be used to cover interest and debt used to purchase the original shares in the LGFA. The advantage of being a participant in the LGFA is access to funds at a lower interest rate than charged by the major trading banks.
The council is a joint shareholder of several council controlled organisations (CCO’s) with Nelson council. These include: Nelson Airport, Port Nelson, Nelson Regional Sewerage Business Unit (NRSBU), and Tasman Bays Heritage Trust.
Staff recommended the NRSBU adopt a treasury policy in respect of its funding and management activities. Under the policy, treasury management will formally be the responsibility of Nelson council acting on behalf of both councils (which is current practice). Having an treasury policy will also improve our audit rating as the council can show the asset is being prudently managed.
As at 31 January 2014, there was a significant variance to forecasted budgets. Accounting income was $4.9 million ahead of budget and expenditure was $1.6 million above budget. The net position was a year-to-date surplus of 3.1 million and an underlying surplus of $6.3 million. While some of the variance can be attributed to timing, there were very large gains of $3.1 million made from interest rate swaps (ie the refinancing of debt at lower interest rates). Our ability to continue to get good interest rates is a reflection of our credit rating and involvement in the LGFA. Interest rate swaps are managed by PWC. Council received a very good presentation from PWC on their funding and liquidity management and strategy. Together with how they see the market trending. Needless to say the trend on interest rates is a rising one. Generally, council is funded by banks (58% or $92 million) and the LGFA (41% or $65 million). Part of the liquidity strategy is to reduce any finance facilities not being fully used. For example, a bank might provide the council a loan facility of $10 million. The council draw down $9 million and are charged interest on that $9 million. Leaving $1 million available for future drawing (this might be reserved for disaster funding). The availability of the $1 million incurs a bank charge. The bank charge might be higher than borrowing the money elsewhere or it might be cheaper to hold the $1 million in cash reserves? These decision will be based on the interest rates council is able to obtain. Overall, PWC appear to be doing a good job, given the savings council is making on interest rate swaps.
As at 31 December 2013 council had a total staff of 257 people.
|Environment & planning||75||15||1||1|
|Chief executive’s office||3||1||1|
Of course, staff numbers alone do not provide a great deal of insight. However, some benchmarking of staff numbers against other councils who process a similar number of resource consents might show greater insight into the productivity of our environment and planning team. The same comparisons could made for other departments too. If council intends to reduce service levels then that might also mean we may need less staff. The key point here is that productivity is the focus, not just how many staff we have. Although clearly less staff mean less cost, but it might also mean less income. Like any business, its a balancing act.
Revised financial strategy
To address reliance on debt funding staff have recommended a new financial strategy for the long term plan (LTP). This involves setting a fiscal envelope prior to engaging in a review of councils management plans for assets and activities. The focus will be on core infrastructure and debt repayment. This may mean that some projects and service level expectations from the community will have to change. For example, reducing our expenditure of community development initiatives such as upgrading recreational facilities in the short-term until we can get our books back into a healthier state. It might mean, we reduce our service levels of community facilities (parks and reserves) and instead engage with the community and volunteers to take ownership. This is not a new concept. In the past, the community (often Rotary or Lions) funded a number of community facilities or beautification projects in Richmond. Many residents would fund the purchase of a park bench for a favourite spot in a local reserve. As a council we need to enable the community to fund those projects it wants, rather than council trying to anticipate and fund what people may want. As I have said in earlier posts, we also need to contain our total rates bill below the consumer price index (CPI) if we are to make any headway on getting some parity with other councils.
Agenda and minutes
The agenda and minutes for this meeting can be found at http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/corporate-services-committee-meetings/?path=/EDMS/Public/Meetings/CorporateServicesCommittee/2014/2014-03-13.