The corporate services committee meeting was held on 23 July 2015. Apologies were received from Crs Mirfin, Bouillir and Ensor. All other councillors were present.
The agenda included: (1) treasury report, (2) finance report, and (3) managers report. An informative presentation was also received from council’s treasury advisor Brett Johanson of PricewaterhouseCoopers, Wellington.
Council debt at 30 June 2015 totalled $145 million. The weighted average interest rate on borrowings is 5.166%. Council’s cost of funds including interest rate swaps, bank margins and line fees being taken into account is 5.257%, compared to a budget of 6.10%.
At current levels, the market is now pricing in one 25 basis point (bps) cut in the OCR in July, and one 25 bps cut in the OCR in September.
Prior to the end of the financial year a high level review of council’s bank facilities was undertaken. This review resulted in $20m of bank facilities being cancelled. Now that the long term plan (LTP) has been concluded a more comprehensive review of council’s bank facilities will be undertaken.
The underlying operational result was a favourable variance of $7.159m once the impact of development contributions, vested assets and interest rate swap movements were removed from the accounting result.
The net accounting position is a surplus of $10.365 million, against a budgeted surplus of $5.512 million. The income was $0.438 million below budget, and expenditure was $5.291 million below budget. The key drivers of this were: (1) mark-to-market write-downs on interest rate swaps (-$7.190 million); (2) higher than expected Development Contributions and Financial Reserve Contributions (+$2.893 million); (3) lower than budgeted maintenance expenditure (+$4.4 million); (4) lower than budgeted finance costs (+$0.991 million).
Capital expenditure for the year is $29.401 million against an annual budget of $48.682 million. Total debt is $146.0 million. The projected year-end balance of $168.3 million was not reached, as a result of the effect of the operational surplus, and a request for a number of projects to be carried over to the 2015-16 year.
Council’s working capital position at 31 May 2015 was ($5.178 million) compared to the year-end projection of ($9.616 million). The major reason for this is the lower current debt balance at the end of May 2015.
- Departments financial results. These are showing a strong positive variance against budget (basically expenses are down). The largest area of favourable variance is operating costs. The drivers were: (1) property (cleaning $51,000, main office $17,000, Golden Bay service centre $10,000 and district libraries $12,000); and (2) information services site support ($87,000) down across all it areas.
- Quarterly reporting. With the LTP now adopted the Management Accounting team moves straight to the review of the production of monthly financial reports. The work plan is to move to a more comprehensive format of reports on a quarterly basis. This will enable a higher degree of forecasting.
- Water charge invoicing. The transfer of the daily water charge to the general rates invoices requires ongoing clear communication with customers. This is being done via Newsline.
- Information services. IS staff worked with Community Development to complete the Government Broadband Extension Funding, Registration of Interest (ROI) document by 10 July 2015.
- Electronic document management system. Team workshops are being held in July and August as part of implementing the new document and records structure in our document management system. Work has also begun on upgrading the network connection to Port Tarakohe. GIS and development staff have also been working on the Land, Air and Water Aotearoa (LAWA) national initiative (see http://www.lawa.org.nz/explore-data).
- Property services. The Motueka Recreation Centre lift and stairwell project is on schedule. Wakatu Incorporation has given their approval, as joint land owners, for a minor extension to the Motueka Library (which is awaiting building consent) and the seismic repairs to the Motueka Memorial Hall. The boat shed leases at Kina have been received back from the lessees and executed by the Council. A notice of requirement has been served on members of the Ashton family at Best Island. The notice is to acquire land for road to service the residents at Best Island. The Fittal Street lease has been re-marketed.
- Mapua development. All leases are current, with no arrears. Leases have been signed for 4 of the 7 spaces in the new Shed 4 rebuild. The last 3 are in final discussions/documentation and we expect these to be concluded before month’s end. Hamish’s Cafe announced its closure as at 26 July 2015. The tender price accepted was $1.095 million. The total development cost is now expected to be $1.35 million.
- Forestry. Co-sharing of recreational and commercial activities within council forests has caused some health and safety and operational risk issues this year. A review is currently underway to identify policy and other responses needed to manage these risks.
- Camp grounds. The repurchase of assets at the Motueka park was approved and has been accepted by the lessee. Legal documentation is being prepared and a settlement date of 16 July 2015 was planned. The repurchase negotiations at Pohara have been delayed due to urgent work caused by infrastructure failures at Collingwood.
- Port Tarakohe. Reporting shows large volumes of trade entering and exiting the Port. Weighbridge user error continues with TNL in particular, with new parties not being trained well. They have now been advised that penalty charges will be incurred for incorrect behaviour. No serious health and safety incidences were reported in the past quarter. Moorings remain fully occupied (20 of 20 filled). There are 8 vacancies in the marina berths (32 of 40 filled). The less popular pile berths remain half full (11 of 20 filled). The storage compound is 30% full.
- Commerce commission. The Commission has responded to the marine farmers complaint over the basis for setting port charges. However, they have made no statement on whether charges are appropriate (or not). Rather, the Commission has requested that the parties reach a commercial resolution on this matter. A legal opinion has confirmed that council has set fees correctly under s 12 of the LGA 2002.
Agenda and minutes
The agenda and minutes are located at http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/corporate-services-committee-meetings/?path=/EDMS/Public/Meetings/CorporateServicesCommittee/2015/2015-07-23.