Tagged: Annual Plan

Full council (3 March)

A full council meeting was held on 3 March 2016. Apologies were received from Crs Edgar, Dowler and Mirfin for absence and myself for being 10 minutes late. Cr King departed halfway through the meeting.

The agenda was rather brief and included: (1) 2016-17 annual plan briefing and engagement material, (2) Regional landfill joint venture proposal, (3) December 2015 quarterly financial update, and (4) Plan Change 59 – late machinery resolution. No public forum presentations were received.

2016-17 annual plan briefing and engagement material

Council approved the release of the engagement material contained in Attachment 1 of the agenda. Overall, the budgets for the 2016-17 financial year are not significantly or materially different to those outlined in the Long Term Plan (LTP) for 2015-25. Changes that have occurred have improved council’s financial position and reduced rates income rises. Rates income rises are now 1%, well below the forecast of 2.96% in the LTP for the 2016-17 year. Capital and operational budgets and programmes remain largely unchanged from that set out in the LTP for 2015-25.

Council intends to spend $32.5 million on capital projects and $105.9 million on operational activities throughout the District during 2016-17. These figures do not include funds that may be carried over from the 2015-16 budgets.

2016-17 Annual Plan – Comparison with 2015-25 LTP

2015 LTP AP 2016-17 Var Inc/Dec
000’s 000’s
Rates increase 2016-17 2.96% 0.97% -1.99% Decrease
Net Debt 2016-17 $178,593.00 $166,423.00 -12,1700 Decrease
Net Debt Peak (in 2018-19) $197,518.00 $185,428.00 -12090 Decrease
Capital Spend 2016-17 $32,524.00 $32,550.00 26 Increase
Debt to Equity ratio 13.78% 12.74% -1.04% Decrease
Net Debt/Operating – (Limit 225%) 165.13% 155.98% -9.16% Decrease
Net Interest Expense to Annual Rates Income (up to 25%) 13.86% 13.58% -0.30% Decrease
Net Interest Expense to Revenue (Policy limit is 15%) 9.06% 8.82% -0.25% Decrease

Regional landfill joint venture proposal

In early 2014, council agreed that the optimum solution for the region’s waste was to enter into a shared services arrangement with Nelson council’s York Valley landfill (until it reached capacity in around 15 years) and to retain the Eves Valley site for future operations. Such an approach would defer substantial capital investment into Eves Valley in the short term – and reduce pressure on councils unsustainable debt position. A shared services approach also offered opportunities for scale efficiencies and reduced operational costs for both councils.

In August 2014, the two Councils signed a Memorandum of Understanding (MoU). The MoU outlined a “contract-for-service” approach, where Nelson City Council would own and operate York Valley and TDC would pay commercial disposal fees, but receive an annual lump sum and a share of the operating surplus of the landfill. In December 2014, following public consultation by Nelson council, the councils considered a modified MoU and in April 2015 the MoU was signed by the councils.

Unfortunately agreement was not reached on the “contract for service” approach due to differing interpretations of the service contract. In order to avoid the proposal being derailed, council pursued a joint venture approach, using an NRSBU model of governance. One familiar with both councils. Under this revised joint venture approach, a valuation of each councils assets was required. The Deloitte valuation report (at page 49) and peer review by Morrison Law (at page 73) was attached to the agenda. The reports concluded that if both councils were to make an equal contribution to the joint venture, TDC would have to top-up the arrangement by paying Nelson council $4.2 million.

Council resolved to enter into a joint venture with Nelson council to start on 1 July 2017, with a one-off top-up payment of $4.2 million.

December 2015 quarterly financial update

The report sets out council’s financial performance and position for the 6 months ended 31 December 2015, as well as a re-forecast to the end of the current financial year. The report forecasted a year-end operating surplus of $2.852 million.

Year End Forecast Revised Budget Variance
Accounting Surplus/(Deficit) $9.16 M $5.67 M $3.49 M Favourable
Operating Surplus/(Deficit) $1.674 M -$1.178 M $2.852 M Favourable
Total Net Debt $155.2 M $173.63 M -$20.427 M Favourable
Expenditure $99.79 M $101.63 M -$1.84 M Favourable
Income $108.95 M $107.3 M $1.65 M Favourable
Capital Expenditure $45.34 M $50.4 M -$5.07 M

The positive result is compared against the revised budget, which is a total of year 1 (2015-16) of the LTP 2015-25, plus carry overs from 2014-15, approved as part of the 10 September 2015 carry over report to council.

Staff anticipated that approximately $5 million will be carried forward into the 2016-17 financial year for capital projects that have not been able to progress this financial year (2015-16). Staff also advised that that the $4.2 million payable to Nelson City Council on 1 July 2017 for the difference in the price for the landfill joint venture would affect the net debt figure (ie $159.4 million, being $155.2 million + $4.2 million).

During the general debate, questions were also asked about overspending on the Mapua development. Staff were unable to provide any figures, but advised that the overspend would be reported in full to the next commercial sub-committee meeting (on 24 June 2016).

Increased building coverage

Plan Change 59 allowed for increased building coverage in the residential zone in Richmond, Motueka, Wakefield and Brightwater. It was notified on 28 November 2015 and submissions closed on 2 February 2016. No submissions were received. I have expressed my opinion on building coverage in earlier posts (see greeningtasman.wordpress.com/2015/10/15/environment-and-planning-committee-meeting-8-october/ and greeningtasman.wordpress.com/2013/08/03/high-density-housing-a-sensible-approach/).

Council resolved to approve Plan Change 59 to commence as an operative change from 12 March 2016.

Agenda and minutes

The agenda and minutes are located at www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/full-council-meetings/?path=/EDMS/Public/Meetings/FullCouncil/2016/2016-03-03.

Advertisements

Extra Full council meeting (17 December)

An extraordinary full council meeting was held on 17 December 2015. The last meeting of the year. Apologies were received from Cr King and Cr Bouillir, with Cr Mirfin and Cr Sangster arriving late.

The meeting was called to discuss one item: engagement and consultation on the 2016-17 Annual Plan. A late confidential item reviewing the council’s banking facilities was also discussed.

Annual Plan 2016-17

Council resolved not to release an Annual Plan consultation document for 2016-17, but instead prepare a communication process for public engagement. This was because council agreed that there were no material changes from the fiscal plan for 2016-17 as contained in Long Term Plan (LTP).

Effectively, the cost of consultation (roughly $100,000) was not justified, given the small overall net change in fiscal outlook. Basically, council were holding the line on plans contained in the LTP. A first for this council for sometime!

Key changes from the LTP for the 2016-17 period are:

  • capital expenditure: proposed to be $32.55 million in 2016-17, compared to the LTP forecast of $32.524 (a $250,000 increase),
  • debt: proposed net debt is proposed to be $166 million, compared to the LTP forecast of $178 million (a $12 million reduction),
  • operating expenditure: proposed to be $105.9 million, compared to the LTP forecast of $106.3m (a $400,000 reduction),
  • rates: proposed to be a 1% increase, compared to LTP forecast of 2.96% (a reduced increase),

Service levels remain unchanged from those forecast in the LTP. Although, I hope that in the next LTP council will take a harder look at some services (for example, publications, communications, education services). These are ll nice to have services for an affluent council. But in the short term, need to be shelved, until such time as we can afford them.

To ensure ratepayers were kept informed of 2016-17 activities, council released a brief document outlining key activities (see http://www.tasman.govt.nz/policy/plans/annual-plans/annual-plan-2016-2017/).

Agenda and minutes

The agenda and minutes are located at http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/full-council-meetings/?path=/EDMS/Public/Meetings/FullCouncil/2015/2015-12-17.

 

 

 

 

Audit sub-committee meeting (19 March)

The audit sub-committee meeting was held on 19 March 2005. All councillors (Crs Higgins, Inglis, Sangster, and myself) were present with apologies from Cr King.

The meeting agenda included the following items: (1) 2013-14 annual plan audit report, (2) mayoral relief fund audit report, (3) motor vehicle audit report, (4) authorisation and delegation audit report, and (5) internal audit programme.

Annual plan 2013

In my opinion, the 2013-14 annual plan received a good audit report. In fact the council received an un-modified audit opinion.

By way of background, auditors are charged with the task of verifying the effectiveness of a business’s internal controls and must report any incidences they find that suggest mis-management, waste, or fraud. After the audit, the auditor must express a formal opinion on the records they have reviewed in their report, which may be either a modified or unmodified audit opinion.

When the financial statements “give a true and fair view” and the organisation under audit has complied with all the statutory and prescribed requirements, the auditor will issue an un-modified audit opinion. A modified audit opinion is issued when there are identified issues. For example, there is a possibility of a material mis-statement (or actual material mis-statement) in the financial records, or there is a material deviation from the financial reporting standards. Material mis-statements are differences or omissions of amounts and disclosures that are considered likely to influence a reader’s understanding of the financial statements.

However, the audit did identify several areas of non-compliance (although these were not material). For example, use of the word “GST exclusive” in the annual report, when it should have read “GST inclusive” (the figures were correct), insufficient explanation of the services level differences in the four differentiated rural zones, maps not being attached to resolution minutes when the resolution referred to attached maps, and the financial impact statement not including objectives of differentiated rates, or examples showing the impact of rating proposals. All things that have been addressed in the long term plan (LTP).

Mayoral relief fund

The audit report identified no significant matters. However, the audit report did draw to the council’s attention a future change in the applicable accounting standard – being the new “public benefit entities” (PBE) standard.

Given the trust does not hold a great deal of funds, and given the cost of auditing the fund is likely to increase substantially, consideration should be given to widening the purpose of the trust (and its ability to hold more funds), or winding it up.

A wider charitable purpose would allow the public to continue to provide charitable donations and receive tax credits. Donations directly to council do not have a tax benefit for the donor, as the council cannot be registered as a charity.

Staff propose to report back on a recommendation going forward.

Motor vehicle audit

A review of vehicle fleet use confirmed vehicles were being used for proper purposes and not for private benefits that might result in fringe benefit tax (FBT). All vehicle sales were conducted through Turner’s auctions or the council’s Trade Me account, and fully transparent. All vehicle purchases were conducted through authorised “All of Government” suppliers.

The scope of the audit of vehicle sales and purchases went back to October 2013. In my opinion, the sample size was good. A further audit on earlier periods will be carried out and reported back to the next audit sub-committee.

Delegation

Staff have delegated authority to incur expenses. Generally, the higher the management level, the larger the delegated authority. Below general management level, delegated financial limits are based on job designation and function. All delegations are recorded in a delegations register.

The audit reviewed a random sample of electronic purchase orders in the last 2 payment runs. No issues with exceeding delegated authority were found. No other issues were found. The external audit of the annual report also did not identify any delegation issues.

However, in my opinion, the sample size was to small, and I suggested that a larger sample (over a different period) should be undertaken. Staff advised that the next review would be widened.

Internal audit programme

The audit sub-committee requested three internal audits on motor vehicles, delegated authority, and leases, that were reported back to this meeting. The audit sub-committee also endorsed commissioning an external contractor to provide audit planning services, with audit work plans being carried out by the finance team, and peer-reviewed by an external auditor before reporting to the audit sub-committee. Any costs will come from the existing audit budget. This approach should make some cost savings from not having to engage full audit services.

Agenda and minutes

The agenda and minutes are located at http://www.tasman.govt.nz/council/council-meetings/subcommittee-meetings/audit-subcommittee-meetings/?path=/EDMS/Public/Meetings/AuditSubcommittee/2015/2015-03-19.

The Annual Plan – Full Council meetings (30 May, 5 June, and 30 June)

A full council meeting was held on 30 May 2014 and subsequently carried over to 5 June 2014. There were no apologies for the 30 May meeting. However, apologies from Cr Canton were received for the 5 June meeting.  The annual plan was then finalised by full council at the 30 June 2014 meeting.

The 30 May full council meeting was the official meeting to discuss the final cut of the 2014-15 annual plan and any expenditure that would be undertaken (or not) during that year. And an opportunity to take on board feedback on the draft annual plan circulated earlier in the year to the community. The agenda was to consider the following big items: Motueka library, Golden Bay service centres, Golden Bay recreation centre, Tourism funding, and Cycle trail extension – as separate resolutions, with a single resolution for all the other items.

However, before this meeting, several workshops had already been held in the preceding weeks to consider submissions, debate the issues, reconsider positions, and provide the opportunity for like minded councillors (or blocks of councilors) to strike any deals. Therefore, this meeting was to a large extent a formality, but for some councilors like myself, it was also the last opportunity to convince others around the table to change their minds.

Day One – the debt grenade

The full council meeting on Friday (30 May) was to be the big day when we would confirm council’s expenditure program for the forthcoming financial year. Things began, as outlined in the meeting agenda, with the Motueka library proposal leading the discussion.

Motueka library

All councillors were in support of removing the $1 million refurbishment of the Motueka library from the draft annual plan. Why it was ever included in the draft annual plan remains a mystery to me – given the lack of support it had around the council table before the draft annual plan was released. Yet the majority of councilors still voted for it to be included in the draft annual plan. Yet here we were, listening to the same arguments and now agreeing to remove it. Was it’s inclusion in the draft annual plan (and eventual removal in the final plan) just a straw-man for something else?

I for one, thought it should have been removed form the draft annual plan (and deferred for consideration in the long term plan), in the same manner the Golden Bay recreation centre was. This would provide the community a transparent and clear direction from council about what projects were to be deferred, and importantly, why.

Generally, the argument around the table during pre-draft annual plan workshops was that a redeveloped hub in Motueka (that included a service centre, library, and other council services) in one location on Decks reserve, was the way to go. I certainly agree with that direction, as it consolidates overhead costs for a number of council services. But the archilles heel for the hub project was its cost. It was just too expensive, at a time when council needed to be taking stock of its debt position. In my mind, the time was not right to undertake such a project and the prudent step was to consider this project (and others, like the Golden Bay recreation facility) as part of a longer term strategy.

The alternative to the hub concept was to invest $1 million in a refurbishment of the existing Motueka library – that included minor expansion of space and earthquake strengthening. This was the proposal that eventually made its way into the draft annual plan. However, on the day, councilors agreed that this work was also not a good idea. It was felt that the earthquake work would not be required given the governments announcements that it was reducing the earthquake strengthening standard from 66% to 34%. Furthermore, some councilors around the table felt that investing any more funds into a building that was on leased land, was not desirable.

Rather it was better to invest any funds in a hub concept on land owned by council. Finally, it had been noted in earlier reports to council that book useage at the Motueka library was in decline and the use of web based services (eg ebooks) was trending upwards. In light of this trend it was unclear whether the pressure on space within the library was also in decline – and perhaps more time was required to see how this trend would impact on future spacial needs. Accordingly, it was decided to reduce funding from $1 million to $76,000 to allow for any earthquake strengthening work required.

In my opinion the inclusion of the $1 million refurbishment of the Motueka library in the draft annual plan (and its eventual removal in the final annual plan) was a $1 million straw-man for other items to be kept or included in the final annual plan (eg the Golden Bay recreation centre). This is because some around the council table considered that the removal of the library (and deferment of the service centre) gave them room to do other projects within the existing budgeted program of expenditure. And as observed above, the inclusion in the draft annual plan of a refurbished Motueka library had little support during earlier workshops.

If I had been forced to chose between a $3 million Motueka hub concept and $3.5 million Golden Bay recreation centre, I probably would have chosen the hub concept. Why? Because the Golden Bay recreation centre still had a number of years of good service left within it. If we could sweat our roads (eg, defer maintenance of roads in the annual plan), we could easily sweat a recreation centre for a few more years. Furthermore, during an inspection of the recreation centre we were told that the main concerns with the centre were access to showers from the visitor changing sheds (which currently involved a toweled walk to the showers) and the closure of the grandstand (on the roof of the centre) due to earthquake risk. Both minor inconveniences and costs. Finally, some in the Golden Bay community also did not support another recreation facility if it added more debt. In contrast, the Motueka hub concept provided service improvements and potential operational cost savings.

A debt grenade

After consideration of the Motueka library refurbishment, the finance manager was invited to make a presentation on our financial (and debt) position in light of council’s intended expenditure program. This was to be a later item in the agenda.

During this presentation, the finance manager informed council that due to the 2014-15 annual plan being the last year of the previous long term plan, all outstanding capital projects (eg work that had yet to start or had not been completed) would have to be recognised in the 2014-15 financial accounts. This would also provide a clear financial position when considering the next long term plan.

Basically, council had committed to $20 million of capital expenditure in earlier years that would be catching up with the council’s balance sheet in the 2014-15 year. In effect, around $9 million dollars of debt funded capital works that had yet to completed would be added to the 2014-15 financial accounts.

Some councillors were quite shell shocked by this apparent increase in the council’s debt position. Although others recognised that this was actually debt funded expenditure that council had already undertaken to spend in earlier years. At this point the mayor asked that the meeting be suspended until the financial implications of the debt could be analysed. Subsequently, the revised (and very real) debt position was reported in the media (see Waimea Weekly. see “Shock as $18M blow-out found” (4 June 2014) http://issuu.com/waimea-weekly/docs/040614/1?e=1913941/8122090).

The reality was that the council’s closing debt position, based on forecasted opening debt (of $167 million) would be higher than forecast in the draft annual plan. However, due to the forecast of $167 million being higher than actual debt of $148 million, the increase in recognised debt meant that the forecasted closing debt position would remain close to what was forecasted (around $173 million).

The reality was that our debt was still going up. It’s just the forecasted increase from $167 million to $173 million (a $6 million increase) would instead go up from $148 million to $171 million (a $23 million increase).

In both scenarios, new debt increases by approximately $6 million. That’s the real figure to watch. As is the closing debt position – which will translate into increasing interest payments.

A figure we cannot afford. At a time when we should be trying to minimise debt funding so we can begin to turn the debt funding of council activities around. We already spend $8 million a year in interest payments. Thats three community recreation centres a year!! Thats why I could not at this time support any debt funding of assets that are not critical.

Sorry Golden Bay, but getting our debt under control has to come first, and saving $3.5 million is an easy first win that would have made a sizeable dent in a very large debt ship that we have to begin turning around. Adding $3.5 million of fuel to an “interest repayment” fire just makes no sense to me especially when we not under any real pressure to replace the recreation centre. Finally, in my opinion, more pressing issues (like storm water) required council funds before we could spend money on recreational facilities.

If anyone tells you we do not have a debt problem they are deluded. We have got to stop spending on the nice to have items to ensure we have the head room to turn around our dependence on debt funding, preserve our credit rating, and ensure we spend our money on the more pressing priorities (like storm water). That should have started now. Alas, its been kicked for touch till next year.

Day two – a fait compli

Council reconevened on Tuesday (5 June 2014) to move through the remaining items on the agenda. Apologies were received from Cr Inglis and Cr Canton. All other councillors were present. By this time, the shock of the debt had lulled and many councillors felt that it was just funds moving around on paper. But as I alluded to above, the reality is that council debt was increasing by a further $6 million.

Golden Bay service centre

The draft annual plan proposed adding just under $1 million dollars to the 2013-14 annual plan for a rebuild of the council service centre.

This building was a council services building used by council staff and for the public to make enquiries, pay rates, and obtain resource consent information. The building is located on crown granted land. If the land is not used for council purposes, it will revert back to the crown. Staff were removed from the building when it was identified as earthquake prone (eg, below the approved 66% earthquake compliance requirement). Accordingly, staff were shifted to a temporary building, opposite the back of the Motueka public library.

This left the council with several options: (1) refurbish the service centre so its 66% earthquake compliant costing $380k, (2) rebuild a new centre for no more than $1 million, or (3) relocate the service centre to another location – either the library or information centre. Added to the decision mix were several additional considerations. First, the council could receive additional insurance funds if it included a commercial space in any rebuild. Second, any relocation would require additional expenditure of expensive fibre for sending data to the service centre. This effectively ruled out relocation.

In terms of a rebuild it was argued that there was little financial difference in cost for a new build and any refurbishment that met the 66% earthquake standard. Especially if the new build would enable a commercial space to be added that would be partially funded by the additional insurance and future rental income.

However, there was a larger financial difference if the refurbishment was only required to meet a 34% earthquake standard. The expected cost would probably be something less than $380k. Given the government had announced a forthcoming change in the earthquake standard (from 66% to 34%), it was felt that the financial argument for a rebuild did not stack up, and earthquake strengthening to a 34% standard was the more cost effective option. Accordingly, the project was deferred to the long term plan for further consideration and no budget for a rebuild was required in the 2014-15 annual plan.

I think this was a very sensible financial decision. And one that perhaps preserves the heritage value of the building. And due credit also to the Golden Bay councilors (Cr Sangster and Cr Bouillir) moving the change to the draft annual plan. Although I also appreciate this was a tactical concession to get the Golden Bay recreation centre across the line.

Yes, it would mean that staff would have to continue to operate from a very small temporary space – but only for another year or two. In my opinion, there is also still scope for some functions (not all) to be moved to the library, so that only planning functions operate from the temporary building. This might alleviate in the short term some of the spacial pressure. However, that is for a future discussion.

Moving forward, the council will be investigating how much refurbishment work is required to meet a 34% compliance requirement so staff can return quickly to their former building.

Golden Bay community centre (or recreation centre)

This proposal sought the replacement (and upgrade) of the existing rugby clubrooms and squash courts. The upgrade also proposed the addition of net ball courts. The co ncept and plans can be viewed on the councils website (see http://www.tasman.govt.nz/policy/public-consultation/recently-closed-consultations/feedback-form-golden-bay-community-recreation-facility-concept-plan/).

I attribute its demise in the draft plan on the finance manager’s presentation to councilors on our debt position just before it was considered. And Cr Higgins vigerous support of that message. That presentation emphasised the cost of adding any more debt funded programs to the council books.

We also heard that there was no legal obligation on council to provide a recreation centre in Golden Bay. In effect, the inclusion of a new recreation centre was a luxury that we did not have to commit to in the next financial year. We could take a “tea break” and consolidate our financial position. Rather than rush in, we could take the time to improve our financial position before embarking on any more projects.

Shifting the recreation centre to the long term plan would also give the Golden Bay community more time to raise the necessary finance while signaling the project had not been forgotten. We just needed time to sort out the councils finances first. All very rational and prudent.

However, in my opinion, the reality was that the inclusion of the Golden Bay recreation centre (together with other items) in substitution of the Motueka library was a missed opportunity to reduce debt at a time when interest rates are going up. The time to spend on nice to have items (like recreation centres), is when interest rates are low or trending downward. Not when they are trending up or when the demand (and price) for builders and contractors will be high as the Christchurch rebuild gathers stream.

While I appreciate that the councils commitment was changed from $3.5 million to $3.2 million (a $300k reduction). It still commits council to debt that in my opinion was unnecessary to commit to, when were are also starring down the barrel of a Dam proposal, as well as a strain on our storm water infrastructure, as rainfalls are projected to increase due to climate change.

At this point I note a recent article in the Nelson mail on stormwater (see http://www.stuff.co.nz/national/10236222/Flooding-battle-to-cost-millions). In that article it was stated that storm water and flood protection would mean more borrowing and more debt. In my opinion, this misrepresents the debate. The tension is not between addressing storm water issues and debt, it is between addressing storm water issues and spending money on other nice to have projects. Its a question of prioritising spending. Surely protecting peoples homes, comes before building recreation facilities?

As a community we band together to protect one another during a crisis. Mitigating the potential cost to the community of a major flood (not to mention the risk of potential insurance fee hikes or non-insurance, as well as litigation risk for council) surely warrants the investment. Not to mention removing the unnecessary worry ratepayers have whenever there is a major rainfall event. This is a political decision and the community need to speak up.

If Champion Rd can have Q100 storm water solution why can’t the other three or four hotspots in Richmond. For example, the Hart Rd\Bateup Rd intersection which receives rainfall from the higher Richmond south developments and was under water during the last three heavy rainfall events since 2011. Or the cemetery dam overflow (at the back of the Richmond cemetery), that nearly overflowed were it not for the valiant mid-night efforts or nearby residents removing flood debris from storm water grills – averting what could have been a major disaster for homes below the cemertery.

Finally, while the Golden Bay recreation centre will only add another $1 million of debt to the 2014-15 plan, the proposal is funded across two years. This means that council has already committed to the remaining $2 million of debt in the 2016-17 year. This places another road block in prioritising available funds on storm water in future years. And the overall increase in debt remains the same $3.2 million.

For the record, Cr Murfin and I opposed this expenditure. Cr Norris also voted against the amended resolution, although he voted against it on the basis it should have remained at $3.5 million.

Tourism

This issue has generated a lot of confusion – and it has not been helped by poor communication of what council (or at least some councilors) set out to do – which was to review the return on investment from tourism funding. I’ve discussed this issue in earlier posts so I will not revisit the debate. However, the outcome of the annual plan puts in place funding for destination tourism for the 2014-15 year, with some incentive for the relevant stakeholders to resolve future funding before the end of this year.

Great Taste Trail (or cycle trail extension)

This proposal sought to build the next planned segment of the trail beyond Wakefield. During workshops leading up to the draft annual plan being finalised, many councillors were opposed to this proposal on the basis of the ongoing operational costs council would be exposed too against the limited financial return it might offer Wakefield businesses. However, the Mayor suggested that if he could secure 50% government funding would councilors support the cycle trail being added to the draft annual plan. On that basis it got support during the workshops. However, between the workshop and the proposed resolution, the funding source got widened to include other third parties (potentially including institutions that might received council grants).

To reinforce councils commitment that funding the cycle trail extension was only on the basis of government funding, and not from another entity that might be indirectly funded by council grants, I moved that the last three words of the resolution be removed – namely “or another third party”. Unfortunately, I received no support for this amendment and it was defeated.

Everything else (including the Mapua development)

Surprisingly (or perhaps not), the $1.2 million Mapua development was lumped into the fill-a-buster resolution – together with 70 other items for consideration.

As it was part of a single resolution, you had to either support the resolution or not. This meant that disagreement with one of the 70+ items meant you had to vote the whole resolution down, or note your dissent on any of the 70+ items being considered. For example, the $1.2 million Mapua development proposal.

I had thought given a number of residents raised concerns about this item, the level of general public interest, the size of the investment, and the fact the cycle trail (involving only $300k) had received a separate resolution, that the Mpaua development proposal would also have been separated out from the rest of the items, that were less controversial. However, the Mayor (who is responsible for setting the agenda) preferred to leave it in amongst the rest. However, as concession the Mayor allowed councillors to note their disapproval of any single item – which I chose to do – rather than seek to separate the item from the main resolution.

By way of a brief background, the Mapua development initiative proposes to build on the former acquarium site. Two build options were outlined by a WHK report. The first was a container option (similar to the one used in Christchurch) for around $100k. The second was a standard build for $1.2 million. This would be partially debt funded. A third option was to just lease the land and let a developer build and lease any new building.

In my opinion, its not for council to seek more equity from ratepayers in order to embark on new commercial activities. If ratepayers want to invest their money in new commercial activities they should not be compelled to do it through increases in rates. And lets be frank, thats what is being proposed.

I also do not believe it is for council to attempt to control what businesses operate in the Mapua precinct other than by regulations. That is for the market to decide. If there are undesirable businesses, they can be controlled through regulations, not buying up all the buildings so the council becomes the sole lease holder of the entire precinct. However, if councilors want to employ a strategy of ownership, then they should be doing it for the least cost.

In my mind the container option would achieve the desired outcomes in a more cost effective manner, as well as bringing back a buzz to the Mapua precinct, in the same way it has happened in Christchurch (see http://www.thefifthestate.com.au/archives/49798/ and http://www.china.org.cn/photos/2011-12/04/content_24070673_3.htm). The added benefit of a container development is that it would reduce the lease costs for tenants while providing a very efficient space to operate their businesses from.

Arguments have been made around small space a container would offer, but the type of family businesses some councillors seek to retain in the precinct could easily operate from smaller spaces – as is the case in Wellington. Although I should add containers can be made into larger spaces (as the pictures of the ChCh precinct show). A container development would also allow more space for public seating which is at a premium in this area. After staff costs, lease costs are a major hurdle for start-up businesses, especially craft businesses. A container development would provide opportunities for new businesses to establish themselves. Surely this is a good thing.

An argument was advanced by staff that the $1.2 million should remain in the budget so that full council could at least consider whether the proposal had merit. If it was removed, council could not consider whether the proposal had any merit. In my mind, council should have nipped the project in the bud then rather than waste any further effort by staff. However, that argument found favour and the majority of councillors (but not all).

In my mind, expenditure of $1.2 million (or for that matter anything above $200k) that would require more debt funding, did not have any merit. Accordingly, I voted against it and noted my dissent on the item.

 Agenda and minutes

The agenda and minutes for the annual plan are found at: http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/full-council-meetings/?path=/EDMS/Public/Meetings/FullCouncil/2014/2014-05-30 and http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/full-council-meetings/?path=/EDMS/Public/Meetings/FullCouncil/2014/2014-06-30.

Newspapers

http://www.tasman.govt.nz/council/media-centre/news/minimising-the-impact-on-ratepayers-remains-a-major-focus/

http://www.stuff.co.nz/nelson-mail/news/10227950/Final-decision-on-rates-plan

http://nelsonweekly.co.nz/funding-cut-to-cycle-trail/

http://www.stuff.co.nz/nelson-mail/news/10018498/Tasman-to-tackle-debt-crisis

“Shock as $18M blow-out found” (4 June 2014) http://issuu.com/waimea-weekly/docs/040614/1?e=1913941/8122090

http://www.stuff.co.nz/nelson-mail/news/9828399/Tasman-rates-to-rise-up-to-3-5pc

http://www.stuff.co.nz/national/10236222/Flooding-battle-to-cost-millions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate Services Committee (24 April)

The corporate services committee meeting was held on 24 April 2014. Apologies were received from Cr King.

The agenda contained only a few brief reports with the contents of the main finance report already being substantially reported by the chief executive at the full council meeting on 17 April (see earlier post). However, this report also includes detailed spreadsheets (for those with an accounting interest) together with a useful table illustrating information about our debtor ledger. The treasury report also provides some informative tables illustrating council’s debt position and the manner in which council debt is being managed.

Interestingly, the government funded rates rebate scheme continues to provide strong financial assistance to Tasman ratepayers, with 1,485 ratepayer applications amounting to $840,000 of approved rebates.

Workshops

I have spent a lot of time over the last few months attending various workshops with other councillors – including the draft annual plan. Workshops will also be held after the draft annual plan submissions have closed.

Whether councillors truly comprehend the financial (and debt) position of council will be shown at the forthcoming full council meeting on 30 May, when the annual plan is debated and passed by council. The financial constraints on council have meant that we could not do all of the storm water work we would have liked to do. Much of the work was deferred for the next financial year. Similarly, roading infrastructure was sweated out so we could squeeze the most out of any investment. I still believe further cuts could have been made to the draft annual plan (as did many submitters).

In particular, reducing the $1.2 million for the Mapua building development to $180,000 (reflecting the amount of insurance money we would receive if invested in a commercial activity), and a reduction in the council’s publishing budget. Ratepayers are tired of being called upon to front up with the equity for council’s commercial investments, and prefer to make their own financial decisions with their money. I believe if council wants to build on the Mapua waterfront, it should be assessing the value of its existing commercial portfolio, rather than asking for more funds from ratepayers.

The annual plan will be the mayor’s first real test since being elected of whether he is prepared to follow through on his electoral promises – and reduce debt and cut spending on the “nice to haves” (and a new recreation centre is clearly a nice to have when its competing against more important infrastructure like storm water).

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/2014/2014-04-24.

 

Full Council meeting (17 April)

A full council meeting was held on 17 April 2014. Apologies were received from Mayor Kempthorne and Crs King and Norris.

The meeting considered the following agenda items: (1) disestablishment of the communications subcommittee, (2) portable seating policy, (3) report from the joint nelson and tasman regional transport committee, (4) mayor’s report, (5) chief executive’s activity report, (6) machinery resolutions report, and (7) action items – previous council meetings. I intend to summarise the main issues below.

Communications subcommittee

The disestablishment of communications subcommittee was discussed in an earlier post (and was passed unanimously by council with little debate) so I will not re-litigate the merits of disestablishing this committee. This was a good decision. However, in my opinion a working group needs to be established to review (and reduce) councils publishing costs. Especially if some publishing decisions are been driven by political, rather than regulatory, requirements.

Portable seating

In 2007, the council purchased 3000 portable seats as part of its commitment to upgrading the Trafalgar Park (as part of a number of rugby world cup initiatives). Interestingly the Trafalgar Park upgrade also included removing the cycle velodrome (located on the edges of the rugby field) and shifting it to Saxton field as part of improving the park for rugby viewing. To pay the $449,369 cost of the portable seats, $322,369 was taken from the regional facilities budget (ie the shared facilities rate) with the remaining $127,000 taken out on a 40 year loan. The balance on the loan balance is currently $106,500.

Unfortunately, the seats have been poorly managed, and during their use at the rugby world cup, parts were mixed with another supplier’s parts, resulting in the council having a number of inferior parts. Before the council could obtain the parts back, the supplier went bankrupt and any claim to the parts was not pursued further. Flooring planks are now delaminating and an estimate for their replacement is approximately $10,810. Unfortunately, due to parts being mixed it is unlikely a valid warranty claim could be made. However, community groups have provided their time for free in fixing the seats as well as assembling (and removing) them for major rugby events.

Since acquisition the council has spent a further $69,136 (including another $45,136 on replacement parts, $3,500 on maintenance, and $20,500 on loan payments). Over the same period the portable seats have raised $22,838 in income. In effect, an overall loss of around $40k.

Community organisations continue to seek use of the portable seats. However, there remains a tension in the council continuing to supply portable seats and the costs of providing those seats. Given the ongoing pressures the council has to confront increasing cost recovery for the use of the seats against their disposal. In effect leaving the community to hire the seats from a private vendor for higher charges.

Council decided in the short term to retain the seating (given hire interest from the Mako’s and the world cup cricket), but increase the charges and bonds for their use. Given much of the replacement costs had already been incurred, there seemed little merit in disposing of the assets.

Regional transport committee

On 10 February 2014, the NZ transport Agency (NZTA) asked the regional councils to support a joint transport committee. Council authorised the Mayor and the Chair of the engineering committee to advance a joint regional transport committee.

Mayors report

A number of items were raised in this report (including the training and travel budget, currently $17,000 for the 2013-14 year). Of interest to me was a proposal to establish an economic development advisory forum that would comprise business leaders and selected council representatives (p 30).

Chief executives report

The following summary is based on the contents of the chief executive’s report to the full council and the subsequent finance report to the corporate services committee (on 24 April 2014).

Councils net financial position (as at 28 February 2014) has been a good one and there appears to be a good chance that their might be a surplus at the end of the financial year against the planned annual budget for 2013-14. The year to date accounting income (against plan) was $4.4 million ahead of budget and expenditure was $440,000 below budget. The net position is an accounting surplus of $8 million achieved against the year to date budgeted surplus of $3.1 million. The underlying position was a surplus of $0.58 million.

The significant positive variance is mainly due to a $2.5 million gain on unrealised interest swaps, the sale of $110,000 of property and vehicles, vested assets of $2.2 million being lower than the budgeted year to date figure of $3.1 million, a positive variance of $850,000 in development contributions due to recent land development activity in Richmond, and the early arrival of some grant funds.

Capital expenditure at $12.4 million was below the year to date budget. However, this is mainly a timing issue that will be corrected as the richmond water treatment plant begins construction.

As at 31 January 2014, TDC’s working capital position was $5 million, compared to the year end projection of $4.4 million.

As at 31 March 2014, council debt was $151 million, paying a weighted average interest rate of 5.173%. TDC’s cost of funds (including interest rate swaps, bank margins and line fees) is 5.411%. A simple calculation suggests we are roughly paying $8 million in interest payments. Thats several community facilities (or one water treatment plant).

Agenda and minutes

The agenda and minutes for this meeting are located at http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/full-council-meetings/?path=/EDMS/Public/Meetings/FullCouncil/2014/2014-04-17.

 

 

Full Council Meeting (13 March) – for the Annual Plan

A full council meeting was held on 13 March. This was solely to pass the annual plan. Much of which had been subject to discussions at earlier workshops.

Councillor’s Mirfin and Norriss submitted their apologies. All other councillors were in attendance.

Draft Annual Plan

This meeting confirmed the 2014-15 draft annual plan, which has since been published (see http://www.tasman.govt.nz/policy/public-consultation/draft-annual-plan-2014-2015-and-draft-rates-policies-submissions/). Submissions close on Tuesday 15 April 2014 at 4:30pm.

In effect, it sets the expected budgets for council expenditure. From a ratepayer’s perspective it is all about the amount of rates one has to pay.  I went into the process with the aim of containing any rates increases between 2.0% to 2.5%. I admit it was an aggressive target for this council, based on the last decade of rates increases, but a good starting point. But we must aim to keep rates increases as low as possible (ideally well below the consumer price index (CPI)), so that over time, our total rates bill will become more comparable to that of Nelson. At present it is much higher.

I also realise that council is very much like steering a container ship. Its a big vessel and will take a little time to turn her around. However, if we maintain our course of continually reducing expenditure – we will eventually be able to achieve this goal (see http://www.stuff.co.nz/nelson-mail/communities/9874213/TDC-axes-community-projects).

Debt

A large part of this years rates will also go towards debt repayment. With rising interest rates this is critical. Especially if council is to reduce its servicing costs of borrowing. Getting the cost of debt down will give council more room to make savings, which should feed through into reduced rates.

A lot of different numbers have been referred too when discussing debt, and this can be confusing.  I hope to provide some clarity in a future post. To quickly summarise, the 2013-14 budget projected council debt to be around $193 million by June 2014. This is a best estimate of debt, based on planned debt funded expenditure as outlined in the 2013-14 annual plan. If debt funded expenditure is reduced (or new income streams are used during the year to pay off debt), then the actual reported debt figures will come in lower than the projected figures. In December 2013 (about half way through the financial year), the reported debt figure was around the $157 million mark. This was lower than expected. If the trend continues, projected debt will be lower than the expected $193 million.

Its also worth noting that our long term plan projects debt to be as high as $311 million by 2022. An amazing figure when you consider council debt in 2007 was only $77 million (see http://www.stuff.co.nz/nelson-mail/features/weekend/9197579/Debt-danger-and-rates-risk).

Relevant documents and calculators

Council has provided a calculator where you can see what your rates will be for the next financial year. See http://www.tasman.govt.nz/property/rates/rate-record-search/.

A copy of the annual plan can be found at http://www.tasman.govt.nz/policy/public-consultation/draft-annual-plan-2014-2015-and-draft-rates-policies-submissions/.

 

 

 

 

Full Council Meeting (19 February)

Yes, another full council meeting. This one focused on the annual plan. All councillors were in attendance other than Crs Bouillir and Mirfin.

The meeting agenda comprised: (1) the mayors trip to china, and (2) the annual plan budget and projects for solid waste, storm water, wastewater, transportation, community development and facilities, tourism funding, rates remission policies, and general charges.

The Mayor’s Trip to China

Council were asked to approve financial support of approximately $8,000 for the Mayor’s travel (and associated costs) for a 10 day (10-20 April 2014) business trip to China with a delegation led by the Chief Executive of the Economic Development Agency (EDA), Bill Findlater. The $8,000 being made up of $3,500 return airfares plus $4,500 to $5,000 for accommodation and incidental costs. The aim of the trip being to strengthen business relationships and promote Tasman products to the chinese market.

According to the staff report (see agenda link below), Bill Findlater had asked the Mayor to join the delegation [page 6 at [4.6]). It was noted in this report that the role of Mayor was held in high esteem in China and the Mayor’s presence would help the delegation. It was also stated by the Mayor that he had been invited by the Chinese embassy to visit China. How that invitation came about was not fully explained. On further enquiry it materialised that the delegation only comprised two businesses (one being the Nelson Polytechnic (NMIT)) and would not be accompanied by the Nelson Mayor.

I opposed any ratepayer funding of this trip.

In my mind, regardless of the Chinese embassy’s invitation, the delegation was to small to justify the expenditure. If the business participant’s sought an advantage from the Mayor’s presence, they should have been willing to pay for that presence.  If they were not, then clearly the trip was not justified. I noted that some councillors had made similar arguments in relation to not funding Nelson-Tasman tourism (ie, that tourism businesses should fund their own promotion). Given the delegation of businesses was a far smaller group of businesses, than those that benefited from wider tourism funding, I found it surprising that those same councillors would support spending $8,000 promoting only two businesses (leaving aside the fact one of the businesses was a Nelson based business). Given other councils had found that such business trips to China require repeat visits for any degree of success, and are highly dependent on follow up activities from council staff (which would not be provided by TDC), there seemed very little prudence in funding such a trip, that was unlikely to be successful or provide immediate and direct benefits for Tasman.

Unfortunately, I was a lone voice of dissent. However, I do wish the Mayor well on his trip to China, and look forward to learning of the financial benefit delegates have obtained, that will offset Tasman ratepayer investment.

Annual Plan

Council were also asked to formally pass a number of resolutions that would enable the formal release of the draft annual plan. This is the budgeted income and expenditure of council for the 2014-15 year. What was passed by council appears in the draft annual plan that the public will be able to make submissions on. This is also an opportunity for the public to make suggestions for making further cost savings that will result in reducing rates. Equally, any suggestions for putting expenditure back into the plan, will result in rates going up.

Workshop discussions held earlier in the month had resolved much of the debate around where expenditure should be (hence the lack of discussion around many of the proposed resolutions), although there still remained a degree of disagreement on a number of spending issues. In particular, the Golden Bay recreational facility. I have discussed the merits of this facility in earlier posts, so will not re-litigate my reasons for opposing further funding of recreational facilities. Needless to say, it is a debate about priorities (infrastructure over nice to haves) and debt (keeping debt down as interest rate rises eat into rates income).

Unlike other years, the council has approached the 2014 plan on the basis of a proposed fiscal envelope (ie how much did we want to spend, and what was the level of rates increase we wanted to operate within). In my opinion a target of 2.0 to 2.5% should have been the preferred target for 2014.  However, a target of 2.0 to 2.5% is still achievable with further cuts. Some cuts are achievable in this draft budget\plan. For example, do we need the Mud&Roses publication? Do we need a Newsline of more than 2 pages long? Should the staff budget be tightened in order to drive organisational efficiencies? Are there road work projects we should not be doing?

With further reductions over the forthcoming years (and holding rates increases down below the rate of inflation) we can begin to make some headway towards rates parity with Nelson. At present our total rates bill is nearly twice that of Nelson. If you have ideas for expenditure cuts, make sure you make a submission on this draft plan. Give councillors the confidence to make further cuts.

Agenda and minutes

The agenda an minutes for this meeting can be found at http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/full-council-meetings/?path=/EDMS/Public/Meetings/FullCouncil/2014/2014-02-19

Note! The draft annual plan has been released. For information on the plan and making a submission see http://www.tasman.govt.nz/policy/public-consultation/draft-annual-plan-2014-2015-and-draft-rates-policies-submissions/.

A summary of the draft annual plan is provided in Newsline at http://www.tasman.govt.nz/council/media-centre/news/latest-newsline/.

See also http://www.stuff.co.nz/nelson-mail/news/9828399/Tasman-rates-to-rise-up-to-3-5pc.