The full council meeting was held on 10 September 2015. All councillors were in attendance.
The agenda included: (1) treasury policy change, (2) capital carry-overs, navigation safety by-law, (3) public transport regional plan, (4) speed limits review, (5) unmanned aircraft policy, (6) Nelson regional sewerage business unit, (7) economic development funding agreement, (8) mayor’s report, (9) Waimea community dam, and (10) CEOs report.
Two additional late items were also considered in confidence: (1) audit subcommittee independent member appointment, and (2) Waimea water augmentation project. I’m unable to talk to these items at present, as they were discussed in committee and have yet to have their confidential status lifted.
Finally, two items were raised in public forum – with one raising a very interesting legal issue.
Michael Croxford raised (and tabled) an interesting question regarding the treatment of development contribution levies by the council. By way of background, a developer (being the “consent holder” at the time the development is approved) will normally pay the council a development contribution. This financial contribution helps fund downstream infrastructural impacts from the development or proposed infrastructure that the development would benefit from.
In some instances council might decide not to proceed with implementing proposed infrastructural improvements. In those instances, council refunds the financial contribution to the consent holder (the original payor). In this instance, the Motueka coastal pipeline was removed from the long term plan requiring council to refund the development contribution. In some instances the original developer (the “consent holder” at the time) is no longer operating or has been liquidated. If it is a company it is normally removed from the companies register. However, removal from the companies office does not prevent a company re-registering.
Michael argued that the refund of development contributions, should go to the holder of the consent at the time it is deemed no longer required. Accordingly, where the developer no longer exists, the refund should go to the land owner as the subsequent holder of the consent. Essentially, his argument turned on whether the term “consent holder”, could import a wider meaning from examining other provisions of the Local Government Act (LGA) or Resource Management Act (RMA).
This matter was subsequently discussed during the Mayor’s report. The outcome of that discussion was that the council felt it had discharged its duty to determine (to the best of its ability) the legal position. That advice suggested that the “consent holder” was the payor (the original developer) and did not include the subsequent owner of the developed land. As Michael had not received a copy of the council’s legal opinion, it was felt that he should be provided a copy, so that he (and other residents) could decide whether they wanted to challenge the council’s legal advice.
Kit Maling spoke to the Waimea community dam update report (discussed below) and tabled a document outlining a resolution from the Waimea East Irrigation Company.
Waimea community dam
This item was a second (regular) project update for councillors. At this stage the project has been in slow mode (to avoid unnecessary expenditure) as discussions with WCDL progressed. The confidential briefing to councillors, updated much of what was stated in this part of the report. Once discussions with WCDL have been completed, planned work streams should move forward a little faster. The proposed work streams were outlined in my earlier post (see www.greeningtasman.wordpress.com/2015/09/08/full-council-meeting-30-july/).
Work that can be expected to re-gather momentum once discussions with WCDL have concluded are:
- formation of a biodiversity technical advisory group (BTAG) to prepare a biodiversity management plan (a resource consent condition).
- construction procurement process planning. It is being suggested that a two stage process (that comprises construction and design planning, followed by price negotiation and construction).
- business structure planning. WCDL has been considering a variety of options (prepared by Northington partners). Staff will present a report to full council in October that considers the various issues.
- preparation and review of pre-purchase agreements with landowners. These are agreements that hold open the ability to purchase the relevant land (at agreed prices), without actually entering into land sales. Effectively, the council avoids having to purchase land until there is agreement to proceed with a dam.
By way of background, WCDL acknowledged council’s recent offer to share the resource consent as joint resource consent holders (a 50:50 ownership arrangement). This is a change from councils original arrangement, where WCDL were contracted to secure the resource consent on behalf of the council and handing over the resource consent by a specified date or the formation of a CCO (which ever was earlier). WCDL has attached several conditions to this offer which council representatives have since brought back to council. Hence the confidential session.
I would hope that once all discussions with WCDL are completed, that relevant reports withheld under confidentiality are made public. I will certainly be advocating for this to happen.
So where to from here?
In my opinion, the process is at a critical fulcrum (or tipping point). I believe council needs to re-evaluate its relationship with WCDL. It has become very confusing and the lines between council and WCDL are very blurred. This has resulted in a great deal of uncertainty (and confusion) about who should be doing what, and who should be funding what.
At present council is both (sole) funder and service provider. Council is carrying all the risk (hence the growing concerns of council about the escalating write-off cost). Those roles need to be formally separated. Council should no longer be the sole funder and certainly not the main funder of a water solution that is being developed for the primary benefit of irrigators (who will receive over 2/3rds of the augmented water supply).
In my opinion, (as I have said repeatedly on this blog), WCDL needs to capitalise (as an investment holding entity for interested irrigators), so that it can take over this project as majority shareholder and funder of the dam. Like all investment vehicles, it needs start up capital to come from those investors who truly believe in this venture.
Once initially capitalised, WCDL can invest in developing a prospectus to secure more funding from potential investors to eventually invest into a Dam holding entity. The dam holding entity can then fund the services (and work streams) it needs to bring about the construction of a dam. Council can then evaluate whether it wants to invest in the venture or not. And can also compete against others, to provide project management services and technical expertise.
The parallel issue of water allocation and restrictions
Unfortunately, one of the most frustrating elements of the dam debate for me, is the confusion surrounding the water management (allocation and restriction) rules – which are set to change. Hardly anyone I speak to understands how these rules operate or how they impact on the way water is currently managed.
In my opinion council has done a very poor job in communicating the changing landscape of water management. This should have been communicated by council well before it began its conversation about water augmentation. Because this is “the” reason why council is having a debate about water augmentation solutions. Ironically, council were the ones who brought about these change in the rules, by way of a plan change a number of years ago.
However, the good news is that council has got its act together and is beginning to have this conversation. As part of the consultation process for proposed changes to the district plan rules, council will be hosting 2 open days for residents to meet and discuss the proposed plan changes. These are:
- Wednesday, 7 October 2015 at Richmond Council Chambers (focusing on urban water supply), and
- Thursday, 8 October 2015 at Seifried’s Estate, Redwood Rd (focusing on rural water permit holders).
Changes to water management rules
There are three changes to the water management rules.
First, water allocation is about to change. Basically, the amount of water people receive is likely to reduce. For example, people might have received a water allocation right of 10 litres, but only actually consumed 5 litres. This resulted in an over allocation of water. To correct this over-allocation, council will be reviewing peoples actual water usage. The review will re-calibrate water allocations so that they equal actual usage.
This re-calibration will also have an immediate affect on the impact of water restrictions on some water right holders. This is because water restrictions step down from the allocation right volume. If the allocation right volume was higher than real water consumption volume, the restrictions had no impact on water right holders. However, if the allocation right volume is the same as consumption, then restrictions will immediately affect the amount of water available for the water right holder.
For urban water users the allocation right volume is virtually identical to consumption. Effectively council has not purchased more water than it needs. Whereas, some rural water consumers have. This means any re-calibration of urban water will not result in any change.
The second change is the threshold for imposing water restrictions. The thresholds have changed (by way of an earlier plan change) so that they bite earlier (ie, at lower thresholds). These changes are even more severe for water users who will have their water allocation levels reduced to historical consumption levels (or use).
The third change (currently being consulted on) is the introduction of a dual water restriction system – one for those who are allocated water and are funding an increase in water supply (a dam funder), and one for those who are not. Those who choose not to fund an increase in water supply, will operate under the above rules (ie, the revised allocations that are equivalent to historical use, and lowered thresholds for water restrictions).
Those that fund a water supply increase, will effectively have a system that imposes water restrictions that take into consideration the additional water being added to the natural water supply. Effectively, using a different water restriction threshold, so that they can extract the water they have added to the river, before restrictions apply.
If council purchases water from the dam for urban users (estimated investment of $9 million) then they are less likely to see water restrictions. It should be noted that council has voted to provide $25 million towards the dam. With $13 million (of that $25 million) considered to be the environmental benefit contribution that will be rated across the whole district, against water club members (those people connected to a council provided water supply).
As I have said in earlier posts, I consider that the $13 million should be apportioned between the extractors (urban consumers and irrigators), rather than imposed across the district. Adopting an extractor pays approach would have resulted in council only contributing roughly $14 million towards water augmentation, rather than the $25 million that council has undertaken to provide in the LTP (see www.greeningtasman.wordpress.com/2015/06/02/long-term-plan-meeting-full-council-28-may/). In my opinion, the community should continue to put pressure on the councils (majority) decision to fund $25 million of the dam cost.
The council unanimously agreed to release for public consultation the draft consolidated bylaws on road speed limits for the district (see the “attachments” document at www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/full-council-meetings/?path=/EDMS/Public/Meetings/FullCouncil/2015/2015-09-10).
A number of changes to road speed limits across the district are proposed. For example, Ranzau Road will have its speed limits reduced. Consultation is expected to begin from 14 September 2015 to 16 October 2015.
My advice for people wanting to a submission is to read the attachments document. This is because the attachment document highlights the proposed changes (via track changes), so that you can quickly identify any proposed changes. While the public consultation document will highlight if a speed has gone up or down, it won’t indicate the speed it has changed from.
The attachment document also includes very detailed assessments and reasons for why speed limits were proposed for changed (or not). Those assessments include a recommended speed (based on model), additional staff assessments (that consider aspects not included in the speed modeling), and the working party recommendations (being Crs Norris, Dowler, Higgins, Bryant, and Sangster).
In relation to school zones, the draft bylaw proposes a managed roll out of advisory signs. The only exception is for Brightwater, where the Brightwater school zone will have the benefit of a reduced speed limit. This was achieved by the mayor proposing a separate resolution that proposed a speed limit reduction for the main road in Brightwater. A number of councillors were upset with this move, as it appeared to give special treatment to one particular street (and school).
While, I could agree with those councillors, that this treatment was not fair, I nonetheless supported the separate resolution, as at least one school would benefit from the proposed speed reduction. However, I agree with those councillors who opposed the mayor’s maneuvering, that all other schools zones should have had similar treatment. No doubt those schools will be making a submission to council highlighting the difference in treatment and inviting council to lower speed limits on their roads.
Council’s current treasury policy requires any interest rate swap arrangements that are longer than 10 years to be approved by full council (which meets every 6 weeks). The proposed change sought to extend the delegated authority from 10 years to 12 years, to enable staff to take advantage of the swap market (which is very fluid at present), without having to wait 6 weeks for approval. Both the full council and corporate services meeting unanimously supported the proposed change.
This item was brought to full council from the corporate services meeting (held on 3 September) as the corporate services committee did not have authority to amend the treasury policy. This item was explained in detail at para 9.4 of the corporate services agenda (see www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/corporate-services-committee-meetings/?path=/EDMS/Public/Meetings/CorporateServicesCommittee/2015/2015-09-03) and discussed in an earlier post (see www.greeningtasman.wordpress.com/2015/09/08/corporate-services-committee-3-september/).
Due to the nature of capital works, some projects planned to be undertaken in earlier financial years are either not started, or are not completed in the financial year they were planned. Often delays are due to weather or the cascading effect of other projects being delayed. This means funds that were allocated in an earlier financial year have to be brought forward into this financial year to enable the work to be completed or started.
Council unanimously supported the carry forward of $14.853 million from the 2014-15 year into the 2015-16 year. This does not have a financial impact in the 2015-16 year, as the funds for these projects has already been raised in the earlier years that these projects were planned to be completed. In the previous financial year, council carried forward around $20 million of capital projects. The reduction in carry forwards this year would suggest that council has made some progress in catching up on the delivery of these delayed projects.
A list of the projects being carried forward is listed in the agenda at page 15 to 23.
Council unanimously adopted the proposed “Navigation Safety Bylaw 2015” which comes into effect on 14 September 2015. The new 2015 bylaw replaces the old 2006 bylaw. All bylaws are located on the council website at www.tasman.govt.nz/policy/policies/bylaws/.
The new 2015 bylaw is the result of a review of the old 2006 bylaw that began in December 2013 and involved public consultation during early 2014. During that consultation period council received over 212 submissions.
Since the consultation period the government has further simplified the law. This has meant that the new 2015 bylaw does not have to reproduce all the rules contained in the parent Act. Therefore, anyone referring to the Navigation Safety Bylaw 2015 should also consult the parent Act (the Maritime Transport Act 1994, see www.legislation.govt.nz/act/public/1994/0104/latest/whole.html), associated regulations, and rules.
The regional public transport plan for 2015-18 was received and adopted by council.
I took the opportunity to reinforce the communities concerns that the regional plan is not used to drive (forgive the pun) further road widening projects (Wensley Road comes to mind). In my opinion, any expansion of the public transport network needs to utilise existing infrastructure not place additional financial costs on the community.
For example, a loop around Richmond that uses Hill Street, Hart’s Road, and Bateup Road (which is already earmarked for widening due to the proposed supermarket development) would be more appropriate roads to use as they have the capacity to take buses.
This topic was discussed in an earlier meeting (see www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/corporate-services-committee-meetings/?path=/EDMS/Public/Meetings/CorporateServicesCommittee/2015/2015-09-03).
Full council received and approved the interim policy on unmanned aircraft (also referred to as drones, model aircraft, remotely piloted aircraft systems, or UAVs). The policy should be read in conjunction with the civil aviation authority (CAA) rules (which came into force on 1 August 2015) and are located at www.caa.govt.nz/rpas/.
The council policy document is is located at www.tasman.govt.nz/policy/policies/flying-drones-and-other-unmanned-aircraft-over-council-land/. Essentially, the policy prohibits use of unmanned aircraft within 4 km of identified aerodromes (controlled airspace), unless permission is granted by the council.
In contrast, council has provided general consent to use unmanned aircraft on all other council land, unless prohibited. Prohibited land areas include: council offices, libraries, forestry plantations, Mapua commercial precinct and wharf area, various public and memorial gardens (such as, Washbourn, Pethybridge, etc), cemeteries, Motueka sandspit, leased land to other parties (such as, bowling greens, tennis courts, etc). If on doubt contact the council.
This policy does not cover privately owned land. However, the CAA requires unmanned aircraft operators to obtain permission from a private landowner or occupier before flying over private land.
Nelson regional sewerage business unit
Council agreed to renew the Nelson regional sewerage business unit (NSRBU) memorandum of understanding and reappoint the joint committee that administers the NSRBU.
This item came before full council because both councils failed to enter into a renewed memorandum of understanding before August 2015, resulting in the deemed discharging of NRSBU joint committee. The council’s resolutions effectively corrected this administrative oversight.
Economic development funding
Council received and approved the EDA funding agreement with Nelson council. The agreement looks to fund destination tourism and economic development initiatives for the Tasman region at a total cost of $400,000 per annum. These funds come from general rates. Nelson council will use the EDA and NTT (or other appropriate vehicle) to provide these services (and outcomes).
I note that the Nelson council has begun a review of both organisations and is not proposing to merge both entities (see www.stuff.co.nz/nelson-mail/news/71888656/Nelson-economic-development-and-tourism-merger-could-save-100-000-a-year). I certainly support a merger as I have stated in earlier posts (see my discussion about tourism at www.greeningtasman.wordpress.com/2013/12/18/full-council-meeting-5-december/).
The council also established a liason group (comprising the mayor, Cr King, Bryant and Edgar) to improve accountability arrangements for service delivery for the Tasman district. In my opinion, this is an important element of the new process. Unfortunately the council in the past has not provided clear targets or outcomes for the Tasman district and therefore has struggled to receive anything meaningful in terms of measuring its return on investment.
While attempts had been made to target the cost of destination tourism to the commercial community (being those who directly benefit), rather than general ratepayers, the tools available to council were rather blunt (ie rating commercial land), and in the end the council opted in the interim to continue to use the general rating system.
Highlights of the CEO’s report include:
- strategy and planning. Council’s LTP consultative document was judged to one of the top 8 documents in the country. Council staff are reviewing the winning entry (and the other 6 documents) to make improvements for future consultation documents. Planning for the next financial year (including how we will consult with the public) has begun. A workshop was held on 3 September that discussed several issues including enabling the finance team to focus on forecasting (for the future), rather than just reporting on the past.
- annual report. The annual audit process went more smoothly this year, with the annual report expected to be adopted at the next full council meeting on 24 September 2015. Appointment of an independent member to the audit subcommittee was addressed in a confidential session with the appointment being made by majority vote. The person appointed was Graham Naylor.
- rules reduction taskforce. The government task force concluded that there were few loopy laws with many grievances stemming from service delivery and process problems. My experience has been that the interpretation of legislative rules by central government agencies is also an area of concern, especially in relation to health and safety standards (and there over zealous application).
- people. Council are currently seeking 3 staff replacements. Collective employment agreement bargaining concluded with the union in August. This resulted in a wage increase of 1.2% for most staff – which was “just” within budget. A high level review of councils existing health and safety systems and processes has begun, with a view to implementing an improvement plan. Under the new Health and Safety Act councillors and officers have a duty of due diligence (ie taking reasonable steps to ensure compliance), but cannot be prosecuted for non-compliance.
Agenda and minutes
The agenda, attachments, and minutes are located at http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/full-council-meetings/?path=/EDMS/Public/Meetings/FullCouncil/2015/2015-09-10.
The corporate services committee meeting was held on 19 March 2015. Crs King, Mirfin, and Ensor gave their apologies for their absence, and Cr Dowler for appearing late.
The agenda for the meeting included the following items: (1) corporate services departmental financial performance update, (2) information services update, (3) commercial activities update (forestry, campgrounds, property disposals, Port Tarakoe), and (4) finance and treasury updates.
Council also considered under confidence: (1) the local government funding agency (LGFA) performance report update, and (2) the economic development work plan.
The report on the economic development plan was subsequently made public, although the frank discussion held with a senior Nelson Council staff member remained confidential. The economic development plan effectively consolidated earlier plans for both tourism and economic development outcomes into a single document that would form the basis of contracting such services from Nelson council.
The financial results for the 7 month period ended 31 January 2015 show a saving (or positive variance) of $220,000 below the $4,132,203 budget. This was mainly driven by the lower than expected external interest costs and reduced borrowing (a saving of $323,992) and reduced maintenance costs (a saving of $25,850).
However, the positive variance could have been larger had it not been for larger than expected staff costs ($13,880 above the $1,711,780 budget) and larger general operating costs ($85,923 above the $840,816 budget). The increase in staff costs was mainly due to extra un-budgeted work on the Dam and less than expected staff movement (this is when there is a gap between staff leaving and roles being filled).
Capital expenditure is also lower than the forecast budget. This is mainly a timing issue due to delays in earthquake strengthening work, but is expected to translate to a firmer saving as budgeted expenditure of $500,000 is now expected to cost only $100,000. The IT capital spend is down both in software and hardware and the full budget is not expected to be spent.
It is worth noting that IT expenditure in the long term plan (LTP) has not been inflation adjusted over the 10 years of planned expenditure as software and hardware costs reduce over time.
The new digital LIM process will go live in April 2015. The process will provide greater integration between LIMs and GIS, document management, and local government systems, and should result in improved processing times. A new electronic submissions process has also gone live as part of the long term plan process, now underway. The system is expected to substantially reduce staff time in manually processing submissions.
Quotable value has advised that just over 400 objections have been received to the recent property revaluations and hope to resolve all of them by 30 June 2015.
Initial seismic testing has been received for a number of council buildings. These include: (1) Golden Bay museum (old part, 60% compliant, extension, 100% compliant), (2) Collingwood museum (60%), Ngatimoti hall (55%), Murchison service centre (60%), Brightwater hall (60%), Spring grove hall (50%), and Hope hall (35%). A more detailed report has been sought for Hope hall.
The 6-monthly reports for Port Nelson, Tasman Bays Heritage Trust (the museum), and Nelson Airport were presented at the Joint Nelson-Tasman Councils meeting on 3 March 2015 (which I attended). Generally, the Port and Airport are performing well. The airport has some challenges in terms of the accounting treatment of depreciating assets (such as the runway on reserve land). However, I would expect the main area of focus for both councils will be the future performance and strategic direction of the Nelson museum.
Concerns have been raised about mountain bikes accessing forestry areas and how this will be managed. The new Health and Safety Act places greater risks (both financial and criminal penalties) on council and other organisations. Accordingly, a policy review has begun.
Port Tarakoe cargo volume is expected to grow by 30%, with 13,189 tonne already landed. Billing in December 2014 and January 2015 has been delayed due to data issues from weigh bridge system misuse. This is expected to be resolved by the end of March. The port is now fully secure. No health and safety issues have been reported. And external health and safety audit of port activities has been contracted.
The underlying operational result for the period ended 31 January 2015, has provided a saving (positive variance) of $3.112 million against forecast budget. This figure removes the impact of development contributions and swap movements which cloud a proper assessment of council performance.
The net position is an accounting deficit of $1.227 million against a surplus of $4 million. Income was $8.7 million below budget and expenditure was also $3.476 million below budget. Key drivers included reduced roading subsidies from NZ Transport ($1 million), and accounting market write downs from swaps ($8.9 million). Offset by increased development contributions ($941,000), reduced road maintenance costs ($2.6 million), and reduced finance costs ($1.2 million).
Capital expenditure is $17.989 million. The forecast end of financial year budget is $48.435 million.
Total debt is $149.1 million (as expected) and is still projected to be $174.3 million by the end of the financial year, provided the capital programme is completed (and not carried over).
Council’s working capital position at 31 January 2015 was $8.8 million compared to year-end projection of $9.616 million.
As at 28 February 2015, council borrowing was $142 million. The weighted average interest rate was 5.236%. Council’s cost of funds was 5.345% when interest rate swaps, bank margins, and line fees are included.
As at 28 February 2015, council had $147.78 million of interest rate swaps in place to cover current and future debt. Swap rates are currently below 5%. Swap rates have remained lower than expected and are not expected to move upwards for sometime.
It is noted that the swaps council acquire are paid off (interest and principal) during the swap term, so that there is no outstanding liability at the end of the swap term. For a discussion on swaps, see my earlier post.
Agenda and minutes
The agenda and minutes for the meeting are located at http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/corporate-services-committee-meetings/?path=/EDMS/Public/Meetings/CorporateServicesCommittee/2015/2015-03-19.
The corporate services committee meeting was held on 24 July 2014.
The meeting agenda received several reports including: (1) Port Golden Bay Ltd, (2) Nelson and Motueka airports, (3) Mayoral relief fund, and (4) various financial updates.
Port Golden Bay Ltd
Port Golden Bay Ltd was incorporated on 10 April 2008. It currently has one Director being the Chief Executive Officer, Lindsay McKenzie. It does not trade, and was set up for name protection purposes only. Accordingly, council resolved to exempt this effective paper company from any reporting obligations under the Local Government Act 2002 for the next three years.
Nelson and Motueka airports
The final 2014-15 statement of intent (SOI) from Nelson Airport Ltd was received by council as required under the Local Government Act 2002. The draft SOI from Nelson Airport Ltd was considered by the Joint Shareholders Committee on 4 April 2014. The Committee recommended that the SOI be approved subject to changes to the accounting policy on asset valuations being revised (ie, the depreciation treatment of assets). Council agreed to receive the SOI and authorised the mayor to approve it.
Ian Orange was elected Chair of the Takaka Aerodrome Management Committee at the 6 May 2014 triennial meeting. Richard Molloy from Golden Bay Air was elected to the committee, along with existing members. At the request of the Ombudsman a meeting was held with aerodrome operators and some residents of Upper Moutere to review the Memorandum of Understanding (MOU) between the aerodrome operators and Council. Some amendments have been agreed and are being incorporated into the MOU. An additional section on “neighbourly flying” is also being added to the MOU. The Motueka Aerodrome Operations and Safety Committee and the Motueka Aerodrome Advisory Committee have both met.
Mayoral relief fund
Similar to Port Golden Bay Ltd, the Mayoral Relief Fund (Tasman/Nelson) is a council controlled organisation (CCO) and therefore has reporting and disclosure requirements under the Local Government Act 2002. The current trustees are Chris Clenshaw, Judene Edgar, John Hurley, and Richard Kempthorne.
The Mayoral Relief Fund Tasman/Nelson was formerly the Richmond Pool Charitable Trust. This Trust was dormant for a number of years while council considered whether to wind up the Trust, or change the purposes of the trust. Following the flooding and rain event in December 2011 the former Richmond Pool Charitable Trust’s name and purpose were changed, as this was the most expedient way to setup a Mayoral Relief Fund. The Mayoral Relief Fund was set up to cover the Tasman District and Nelson City regions.
The financial implication of not exempting the Mayoral Relief Fund from the Local Government Act 2002 would required an audit that is likely to cost at least $1,500 per annum. Given the cost of the audit outweighed the financial holdings of the trust, council resolved to exempt the trust from any reporting obligations under the Local Government Act 2002 for the next three years.
At 31 May 2014, the YTD accounting income was $2.75 million ahead of budget, and expenditure was $0.29 million below budget. The net YTD position is an accounting surplus of $8.21 million, against a YTD budgeted surplus of $5.17 million. The underlying operational result was a surplus of $2.224 million once vested assets, development contributions, and the fair value gain on interest rates swaps, have been removed.
Capital expenditure for the year is $18.7 million which is considerably under the budget. The majority of the under spend will be carried over into the 2014/2015 year. Total Debt is expected to be $148.0 million. This is in line with the projected year-end balance of $148.0 million.
Council’s working capital position at 31 May 2014 was $3.99 million compared to the year- end projection of $4.4 million. The major reason for this is a lower trade payable balance at the end of May 2014.
This is a pleasing result. Although, one could also suggest that budgets for the 2013-14 year were overly inflated. However, expenditure incurred in earlier years, that will crystallise at the end of the 2014-15 year, will take councils debt from $148 million to $177 million. The Golden Bay Community sports facility will also see an additional $2 million crystalise in the 2015-16 year. With $1.2 million committed in the 2014-15 year. This type of expenditure will place increasing pressure on rates during the 2015-16 year, unless further cuts can be found before that year begins.
In my opinion, the pressure on finding operational savings must continue. And it must be more vigerous. This will inevitably mean that many of the nice to have services (many of them community publications) will need to be shaved back or retired. These types of savings are the low lying fruit of council expenditure. The harder work will involve a good long look at some of our larger budgets – including staffing. For example, community development initiatives and infrastructural maintenance.
It also means investment in commercial activities will need to be curbed back dramatically, or disposed of, if we are to make any headway in turning this substantial debt ship around. Unfortunately the reality is that past councils have spent the family silver. We currently service over $8 million in interest alone per year. That is equivalent to three community facility buildings a year. At present, the debt continues to grow (albeit slower). This is a good first step. However, the aspiration of this council must be to reduce debt, not just slow it down. I think some councilors are finding such a journey a hard one to come to grips with given their history of increasing revenue (ie rates) rather than making cuts – but one we have to take.
The Department of Internal Affairs (DIA) Rates Rebate scheme continues to provide a strong level of financial assistance to Tasman ratepayers, with 1,622 applications processed for the 2013/2014 year, resulting in $920,200 in rebates.
ASB Aquatic centre
Sponsorship is due for renewal in August 2014. Informal interest has been received from some parties. The opportunity to obtain naming rights will also be considered as part of any sponsorship.
Agenda and minutes
The agenda and minutes for this meeting are located at http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/corporate-services-committee-meetings/?path=/EDMS/Public/Meetings/CorporateServicesCommittee/2014/2014-07-24.
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.