The corporate services committee meeting was held on 15 October 2015. Apologies were received from Cr Mirfin and myself (also apologies for lateness from Crs Dowler and Bryant). All other councillors were present.
The agenda included: (1) Local government funding agency (LGFA) appointments, (2) rates remission application, (3) corporate services activity report, (4) financial report, and (5) treasury report.
Local government funding agency
The annual general meeting (AGM) for the local government funding agency (LGFA) is set for November. Nominations for the appointment of new board members was received by the LGFA. There were two nominations for two positions. TDC will likely be supporting those two nominations (although, it could vote against them).
The LGFA shareholder council is recommending an increase in the number of directors (from 5 to 6 directors) and a 15% increase in directors fees (spread over two years), as a result of a recent remuneration review. Apparently the boards current remuneration is 23% below the market for similar directorships. This translates to total board remuneration in 2015-16 of $324,000, and $348,000 in 2016-17. The board meets (no less than) 6 times a year.
TDC’s representative on the LGFA shareholder council is corporate services manager, Mike Drummond.
Rates remission application
The committee was asked to consider a rates remission application.
The owners of a property applied for remission of rates arising from a council initiated zone change for the 2015-16 year. The application was submitted two weeks after the due date, due to a family bereavement. Council had already granted a 100% remission (of $4,409) for the 2014-15 year on 20 November 2014. And 100% remissions for the 2012-13 and 2013-14 years.
I was not involved in considering the original application (in August 2013), but the subsequent applications had for consistency, carried over the earlier decision to allow 100% remissions, as there had apparently been no material change to the original facts.
On 4 October 2013, a resource consent was issued to operate a holiday park and construct a kitchen\laundry ablution block. The amenity building received consent on 15 August 2014 and according to the holiday park’s website, construction has been completed. The holiday park’s website (see http://www.holidayparknelson.co.nz/index.php/about-us) states (emphasis added):
The idea for Queen Street Holiday Park came about in early 2013 when Rod & Linda applied for planning permission to start a holiday park. Things have moved quite quickly since then with the introduction of a one bedroom fully self contained holiday unit. Then came the insertion of a roading system throughout the park, along with power and water access to over 58 powered and unpowered sites. The ablution block has recently been finished which gives campers a communal laundry and kitchen along with toilets and showers which offer separate facilities for wheelchair access.
Although, in their application they have stated that the ablution block is “not quite finished”. Council staff have also made phone calls to the applicant seeking clarification. The owners have confirmed that the ablution block is unfinished. At present, the holiday park caters to the self contained type of motorhome/caravan, and later in the year it is expected that they will open for those who don’t have self-contained toilet facilities.
The holiday park also has a cottage and holds 58 powered and unpowered camp sites. The holiday park advertises its cottage on trade me (see www.holidayhouses.co.nz/properties/59617.asp). The web page states:
This very comfortable self contained cottage is nestled in a corner of our ongoing newly developed Holiday Park situated just over 1 km from the Richmond CBD. With its own hedged in area, parking for two cars or maybe car and boat, relaxing lounge/dining/kitchenette with two single beds, separate bedroom with Queen size bed, bathroom, laundry, veranda with outdoor furniture and BBQ looking out to the lovely Richmond Hills this all makes for a relaxing holiday home away from home with an added advantage of maybe a friend with a caravan or motorhome parking up close by.
Wonderful view of Richmond Hills and the lights at night looking over Stoke & Nelson. Situated on a newly developed Holiday Park (ongoing development), on the front of the property we operate a Caravan & Motorhome sales yard
The owners also operate a caravan and motorhome sales yard (0.2ha of the 2.8965 ha property) at the front of the property. This business was present before the zone change (from residential to commercial). The commercial services committee on hearing the original application (in August 2013) for the first time, determined that no reduction in remission would be made for commercial activities, where the area used for that activity and the extent of the activity was unchanged from the period prior to the zone change.
In my opinion, this was a very generous concession in not excluding the caravan sales yard from the remission (as it potentially locks this land up for remissions in perpetuity). Whether it should be considered to be a precedent for future remission determinations might well be up for reconsideration.
Finally, the holiday park’s facebook page (see www.facebook.com/Queen-Street-Holiday-Park-437063009778241/, on 24 January 2015) stated:
Stage one now open! Self contained motorhomes and Caravan sites available with power and water. Also “Cottage in the Park” sleeps 4, fully self contained including laundry, kitchenette, separate double bedroom tv lounge/dining area, bathroom shower and toilet.
The facebook page also presents photo’s of customers using the park. As well as glowing endorsements from happy customers.
The remission policy
The councils remission policy (located at http://www.tasman.govt.nz/policy/policies/property-rates-policies/remission-policies/policy-on-rates-remission-for-land-subject-to-council-initiated-zone-changes/) states:
This Policy is to allow Council, at its discretion, to remit rates charged on any rating unit used for residential purposes that is rezoned as a result of a Council initiated zone change. The aim of this Policy is to allow the Council to consider remitting rates for those ratepayers most adversely affected by an increase in rates when the land value of their rating unit increases as a result of a Council initiated zone change. The Council’s preference is to allow a transition period before affected ratepayers are required to pay the increased rates in full. It is accepted that the rates remitted will be paid by other ratepayers.
Application to facts
First, in my opinion, council should allow the application to be considered even though it was late by two weeks. This is because of the following reasons. The lateness provides no advantage to the applicant. In fact, quite the opposite. It allows the council to consider other facts that might have appeared after the application was suppose to have been submitted. Further, given this is a remission application, the financial advantage is with the council, as without the remission being approved, the owner would have to pay the increased rates. I consider a bereavement to be a valid reason to waive any lateness. Finally, as noted earlier, the application is only two weeks late, which is not substantial.
In my opinion, the council has made a generous concession in not taking into account the caravan sales yard business in earlier remission applications. This is an activity that is consistent with the rezoning (ie commercial use). In my opinion, the concession should not have been made, as the logical conclusion of that concession is to provide a remission for that part of the land in perpetuity. That in my mind is not the purpose of the remission policy. In my opinion, the 0.2 ha should have been excluded, so that the original remissions were 94%, not 100%. I reach a figure of 94% by apportioning the excluded land (ie 0.2/2.9 ha = 6% used for business activity – 100% = 94% remission).
As I understand it, the purpose of the remission policy is to provide owners a transitional period to either undertake an activity consistent with the new zoning (so they can afford the rates increase from the zone change), or provide the owners enough time to dispose of the land, without being forced off their land or to sell at a lower than fair market price.
In my opinion, council should acknowledge that they made a mistake, but not seek to retrospectively claw back the concession. This would remove this treatment as a precedent for future remission applications.
The question then becomes whether the owner of the land has made the transition from a residential or rural activity (consistent with the original zone) to a business activity (consistent with the new zone). Where land has not been applied to a business use, some apportionment might be necessary, thus allowing for some remission.
In my opinion, no single fact should be determinative. Rather all the facts must be weighed together to determine if there is a business activity being operated on the land. While the holiday park webpage shows the owners are marketing a business, it is not absolutely clear if the webpage is still in development. It might be the business is still being established. For example, the webpage states the ablution block is finished, yet the owner states it is not.
However, the presence of other marketing initiatives on facebook and trade me would suggest that the there is now a business activity being operated from the land (consistent with the new commercial zoning). Subsequent enquiries have also confirmed that they are operating a business, although not at this stage for people requiring toilet facilities. The single ablution block, not being “quite” finished, should also not be determinative of whether a business exists (or not). All business operations will have ongoing development issues. This is one of them. The question to answer is whether there is a business activity now operating on the land consistent with the zone.
The residential home is described on the webpage as the manager’s onsite residence and should now be considered part of the overall business activity. Only a small portion of land at the end of the property appears to be unused. However, it is obvious, that this land is also earmarked for commercial development at a later stage and could be considered to be part of the overall holiday park activity.
Taking into consideration all of the evidence, I would decline the application. In my opinion, all of the land is being applied for a business activity consistent with the zone change. The owner is now using the commercial zone to operate both a caravan sales yard and holiday park. I suspect that the owners will be claiming their rates bill as a business expense and claiming tax deductions.
The committee unanimously resolved to decline the application.
Corporate services activity report
Highlights from the manager’s information update report are outlined below.
Overall, financial performance is good, with a strong positive variance on all budgeted activities. This has been driven in part by timing issues for information services expenditure, together with lower than budgeted interest costs (from good treasury management).
This was a significant milestone for the finance team. Improvements in the audit process ensured a smoother audit this year. Departmental overheads were under budget (due to cost containment and deferred work). Overhead surpluses were allocated across departments as a reduced charge.
The team is also revising reporting templates and input processes for budget managers, to ensure more accurate and timely data for the 2016-17 year.
A project to enable digital invoicing is progressing well. The project has provided an additional benefit of moving away from pre-printed invoices, which will provide the council greater flexibility.
In my opinion, a culture of continuous improvement appears to be establishing itself – and this is very welcome. Long may it continue.
Council has begun rolling out a new document management system (SilentOne), as well as upgrades to microsoft office (which is expected to be completed in early December 2015).
Out-of-region weekly data back ups (stored in Auckland) has begun. Nightly backups within Richmond continue.
IT has also tightened up user configurations in response to recent ransomware (where IT systems are locked up) and whaling attacks (where senior staff are targeted to approve financial transfers).
Mapua development (Shed 4) is now fully let (7 leases), with construction expected to be completed in mid-October and handover to council in November.
Shed 5 (Golden Bear building) will also undergoing re-development with the previous corner tenant (Hamish’s cafe) having departed and the Golden Bear taking over the lease from November.
Forestry management tenders have begun. A panel has been established to review the tenders. Recommendations will come back to council for approval. Co-sharing of recreational and forestry activities continues to create tensions for health and safety. Key areas for improvements involve greater separation, security, enforcement, and better communication.
The Motueka campgrounds repurchase of assets by council is planned for 9 October 2015. Work on building cabins started in August and will be completed by November 2015. Repurchase negotiations are continuing in Pohara. The urgent maintenance work in the Collingwood campground continues to take priority, with urgent works having been completed. One of the older cabins (at 3 William Street) is for sale to enable reinvestment in the campgrounds.
Port Tarakohe cargo volumes were up by 12% in September. Weigh bridge users are receiving weekly reports and are billed monthly. Talley’s have now accepted the councils methodology for weigh bridge billing, but disputed the treatment of TARE weights. A meeting was held to discuss a way forward. Their bills remain unpaid. A health and safety work plan has been developed. No serious incidences were reported for the past quarter. Recreational boating occupancy has remained stable at 77% and the storage compound at 30%.
A commerce commission complaint was made by the mussel farmers. The commission advised no action was being undertaken and advised the parties to reach a commercial resolution. Council has engaged PWC to review the charging methodology (including asset valuation and depreciation). This work is expected to be completed in January 2016.
Port Nelson will be updating its company constitution to enable the appointment of new directors without falling below its minimum number of directors.
The LGFA has declared a dividend of 6.43% for 2014-15. This amounts to $119,982 for TDC’s shareholding.
This was an information update report (no decision required).
For the 2 month period, ended August 2015, the councils financial performance has been good, with an operational surplus of $137,000 (against a budgeted deficit of $3.395 million) for this period. This represents a positive variance against budget of $3.532 million (excluding: development contributions, vested assets, interest rate swap movements).
The net accounting position shows income was down ($1.632 million below budget) and expenses also down ($2.208 million below budget). The net result shows the budgeted deficit of $631,000 for this period, is actually $56,000 – a positive variance (or saving) of $575,000 (I note that the spreadsheet refers to $576,000, which I suspect is due to rounding up within the spreadsheet). Key drivers were: write downs on interest rate swaps (-$2.823 million), reduced operating expenditure (+$1.718 million), and lower finance costs (+$0.377 million).
Capital expenditure for the year is $2.093 million (against an annual budget of $34.301 million). This figure excludes the capital carry forward of $14.853 million from the 2014-15 year into the 2015-16 year.
Total debt is $145 million. Projected (budgeted) debt for year end (June 2016) is expected to be $168 million. A revised forecast will be undertaken in October 2015.
The total amount owing from debtors reduced from $6.439 million in July to $5.456 million in August. However, this is higher than the $4.652 million owing at the same time last year. In my opinion, better management of debtors needs to be an area of focus for council. I would like to see some aspirational targets set. Why can’t we get this down to $3 million over the next year or two?
This was an information update report (no decision required). The report confirms council is complying with its treasury management policy.
As at 30 September 2015, total borrowings were $140 million (as excess cashflow from the first rates instalment was used to repay debt). The total cost of funds is 5.385% (compared to the budgeted cost of funds rate of 5.7%). The weighted average interest rate (cost of funds) on borrowings is 5.294% (compared to 5.166% in June 2015).
As at 30 September 2015, council had $147.78 million of interest rate swaps in place (including some forward swaps). Adjusting for forward swaps, council has 103% coverage for existing debt, and 87% coverage over forecasted (June 2016) debt. Remembering that council forecasts debt to be $168 million by June 2016.
Councils current debt mix is roughly: (1) bank debt, $21 million (15%), (2) private funds, $30 million (21%), and (3) LGFA debt, $90 million (64%).
Agenda and minutes
The agenda and minutes are located at www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/corporate-services-committee-meetings/?path=/EDMS/Public/Meetings/CorporateServicesCommittee/2015/2015-10-15.
The Corporate services committee meeting was held on 3 September 2015. Apologies were received from Crs King and Bryant. Crs Boullir, Sangster, Ensor, Canton and the mayor arrived later during the meeting. There were no public forum presentations.
The agenda included a number of information updates (or decisions to receive reports). The agenda included the following topics: (1) koha policy, (2) Motueka clock tower trust, (3) IS staff restructure, (4) property services, (5) Motueka aerodrome and UAVs, (6) Richmond unlimited, (7) commercial activities (Mapua shed 4 development, forestry, campgrounds, Port Tarakohe), (8) Nelson airport, (9) treasury update and swap rate policy change, and (10) information services strategy and work programme.
A financial report for the corporate services team was absent in this report due to activity pressures on the team.
This meeting was fairly straight forward and all the agenda resolutions were approved without amendment by council.
The council’s koha policy document (enclosed in the agenda at page 17) was reviewed by staff and no changes were recommended. The policy was adopted by council in June 2013 and was developed to clarify the circumstances in which donations and gifting of koha by council to third parties is appropriate.
Paragraph 7 of the policy document makes it clear that council will only give cash donations under “rare and exceptional circumstances”, which must receive the prior written approval of the chief executive. Payments are not koha if they have tax implications (for example, a payment for personal services).
Cr Dowler noted that the koha policy document (and all other policy documents) should have the name of the authorising officer who signed the policy (as the policy document only had a signature).
Motueka clock tower
The Motueka Clock Tower trust has provided a copy of its financial statements as required by the loan arrangement. The trust is required to make annual repayments of $12,000. This comprises $5,000 from the trust and $7,000 from council’s reserve financial contributions. The council loan to the trust has an outstanding balance of $74,724.
Richmond unlimited (representing local businesses) has submitted a copy if its annual report and financial statements to council. This organisation is funded by council through a targeted rate.
IS staff restructuring
The information services (IS) structure review is nearing completion with updated job descriptions and job mapping circulated to affected staff. The revised structure aims to improve internal customer service and prepare for future delivery and technology challenges. Three positions have changed. Minor cost savings have been achieves with no increase to overall staff numbers.
Operating expenditure for information services was 97% of budget, and capital expenditure was 55% of budget. This reflects a shift away from in house maintenance of software and hardware.
- lift and stairwell project for Motueka recreation centre completed
- seismic repairs to Motueka memorial hall competed
- new compressor for Richmond aquatic centre acquired ($21,000)
- sale of 95 wharf road under negotiation
- various licenses to occupy roads, road boundaries confirmations for land parcel surveys, and compensation agreements, made.
The civil aviation authority has released new rules relating to unmanned aerial vehicles (UAVs). This can be found on their website (see https://www.caa.govt.nz/rpas/index.html).
The Motueka aerodrome advisory committee will be meeting to consider the new rules. The Motueka aredrome operations and safety committee has already met to consider a request to operate a UAV within 4km of the airport. Any UAV operating within the 4km zone requires prior approval. The committee has drafted a set of rules to apply to the applicant (a land surveyor) and will consider future applications on a case by case basis.
The commercial subcommittee report (28 August 2015) also reported that the Nelson drag racing association has released its racing days. These are: 7 November 2015, 9 January 2016, 6 February 2016 (or 7 February if wet), 26 March 2016 (or 27 March if wet). See http://www.tasman.govt.nz/council/council-meetings/subcommittee-meetings/commercial-subcommittee/?path=/EDMS/Public/Meetings/CommercialSubcommittee/2015/2015-08-28.
The Nelson airport constitution was recently updated to include references to the appropriate legislation. The constitution now refers to the appropriate updated legislation (see http://www.nelsonairport.co.nz).
Great also to see some new operators in the region – with Jetstar, Origin, and Kiwi Regional Airlines now providing services for the Nelson region (see http://www.nelsonairport.co.nz/air/bacon-and-eggs-welcome-jetstar-to-region/, http://www.stuff.co.nz/nelson-mail/news/69661139/new-airline-originair-set-to-go, http://www.stuff.co.nz/business/industries/69662951/Kiwi-Regional-Airlines-names-start-date-and-routes, and http://www.nelsonairport.co.nz/air/air-rivalry-in-regions-welcome/). This is fantastic news for the region. Making the opportunity for travel to and from the region much easier (and cost effective).
The corporate services report touched on a number of topics covered in much more detail in the commercial sub-committee agenda (28 August 2015). I would recommend anyone with an interest in the councils commercial activities read that report (see http://www.tasman.govt.nz/council/council-meetings/subcommittee-meetings/commercial-subcommittee/?path=/EDMS/Public/Meetings/CommercialSubcommittee/2015/2015-08-28).
The shed 4 development has hit a few snags and is experiencing delays. Ground work is expected to be completed soon. Discussions are ongoing for the last three lease spaces in the new Shed 4 development. Hamish’s cafe has closed and moved out. The Golden Bear has developed draft plans for the former cafe space.
During questions, staff suggested that toilets would be developed in part of the former cafe space to separate the Golden Bear from the grass area.
Information about the development is located on the council page at http://www.tasman.govt.nz/tasman/projects/community-projects/shed-4/. For a time lapse update on the construction process (scroll mouse across the picture to see time lapse progress) see http://www.tasman.govt.nz/tasman/projects/community-projects/shed-4/#Progress.
- Fearon’s bush (Motueka Top 10 Holiday park). The repurchase of assets has been approved by the leasee. Legal documentation is being prepared and settlement is expected soon. The financial performance of the asset for the year ending June 2015 shows: net profit $194,000 (revenue $233,000 less expenses $39,000).
- Pohara beach (Pohara Top 10 Holiday park). Repurchase negotiations have started and are expected to be concluded in early 2016. The financial performance shows a net profit of $195,000 (revenue $318,000 less expenses of $123,000)
- Collingwood (motor camp). Infrastructure failures (electrical, gas and plumbing) were completed in June/July for $40,000. The financial performance shows a net loss of $5,000 (revenue $198,000 less expenses of $203,000).
- Riverview (Murchison). The new operators have delivered their development commitments and the debt write off of $49,000 has ocurred. The financial performance shows a net loss of $38,000 (revenue $38,000 less expenses of $76,000).
The annual report was presented in the 28 August commercial subcommittee report (see link above). The financial results were positive and were presented to the corporate services committee as the “best financial result to date”. Net revenue was $318,534 (126%) above budget.
At first glance, TDC’s forestry looks in good shape. However, a detailed read of the annual report shows that the result was if anything a very fortunate one, and could be better described as a result of good timing and very pro-active management, operating in a downward (bear) market.
According to the annual report, the “excellent revenue results were realised despite dramatic drops in export pricing alongside softening of the domestic pricing”. An average market price fall of 16% is certainly dramatic. And like dairy, the collapse of the export market price, was to a large extent driven by the china crisis (and their glut of timber).
Further, given we also cut more timber than we had planned to harvest, revenue should have been above budgeted forecasts (volumes were 104% of budgeted harvest volume). Added to the mix was the fall of the NZ dollar which increased wharf charges, although off-set by more competitive ocean freight charges.
Added to all of these factors was timing (ie the harvesting cycle). This year, Rabbit Island logs were due for harvesting. Fortunately, Rabbit Island logs (which was all of the harvested logs for the year) produced a high density (premium) log. Apparently its high density being attributable to the sandy soils and fertiliser (or bio waste) that it grows in. Supplying premium high grade logs meant the price drops were much softer than they would have been, had TDC harvested lower quality logs.
In addition, much of the fall in export markets was softened by selling into the domestic market. Roughly 86% of the 22,000 ton of logs harvested were sold domestically. While the domestic market price also fell, it did not fall as much as the export market. According to the annual report, the “strategy for growing domestic customer base and market access has been financially advantageous for the TDC. A comprehensive understanding of wood quality and matching supply to market demand resulted in domestic log sale growth, which also minimised the exposure to export log price volatility”.
TDC’s financial performance can also be attributed (in part) to other domestic timber suppliers backing off harvesting, as they wait for better prices. This allowed TDC to sell its timber in a domestic market that was not over-supplied (so domestic prices remained higher than they might have been).
Yet, there is still a risk of harvests (and revenue) being lost. The annual report observed that in “November 2014, 0.6 hectares of 21 year old radiata was burned. There was potential for significant losses”. This loss was on Rabbit Island. Fortunately, health and safety performance was excellent this year (although there were 8 minor incidents recorded).
When all of these additional factors are taken into consideration (other than just looking at the net revenue), the picture for TDC’s forestry (going forward) is not necessarily as good as it first appeared. The long term future remains very uncertain. I do wonder if council should continue in this space, or dispose of its forestry rights.
The new weigh bridge shows large volumes of trade entering the port that was not previously measured under the old system. The first seven months of operation (to June 2015) have been invoiced. All users have paid their charges, except Talleys, who continue to challenge the charging methodology.
A review of the methodology has been undertaken in light of the commerce commissions directions for the parties to reach a commercial resolution. Until the review by PWC is completed, no further action is being undertaken.
Occupancy has stabilised with: (1) moorings 100% (20 of 20), (2) marina 78% (31 of 40), and (3) pile berths 50% (10 of 20). The storage compound remains 30% full.
The financial performance of the asset shows a net loss of $106,000 (budget $154,000 profit vs 2014 $123,000 profit), with revenue $553,000 (budget $771,000 vs 2014 $486,000), less expenses $659,000 (budget $617,000 vs 2014 $610,000). The net loss is attributable to a drop in occupancy fees down $150,000 on budget, wharf income down $33,000 on budget, and boat ramp fees down $13,000.
The current plan strategic plan for information services is expected to be reset in 2016. The current plan has 4 strategic outcomes, with associated improvement projects to deliver those outcomes. Those outcomes are: (1) a customer focus that puts customers at the centre of processes, systems, and architecture, (2) active information management that provides easier access in a more transparent and useful way, (3) building better, more aligned processes, that reduce waste and improve efficiency, and (4) providing solid robust and resilient infrastructure that delivers that information.
Within these four aspirational pillars, a number of projects have been undertaken, including: implementation of an improved document management system (silentOne) and accounting software (MagiQ), digitisation of various manual paper based processes and forms (eg, resource consents, submission forms, etc) , and upgrading services (eg intranet, MS software, etc).
Setting the 2016-19 strategic plan is planned for the first quarter of 2016.
Councils debt (at 18 August 2015) was $151.5 million. The weighted average interest rate was 5.06%. Councils cost of funds (including interest and bank fees) was 5.15%.
As at 18 August 2015, council had $147.78 million of interest rate swaps in place (reflecting 86% cover of debt). In August, council undertook 4 swap extensions
A review of banking facilities resulted in $20 million of available credit facilities being cancelled. In light of the LTP’s forecasted debt levels, a further review of banking facilities will be undertaken and a reduction and consolidation of existing bank facilities is expected.
Standard and Poors credit rating review is expected on 8 September 2015.
The committee also resolved to extend the current swap policy requiring council authorisation from 10 years to 12 years. The reason for this change it to allow PWC to take up low interest swaps more easily (given the lowering of interest rates). In a fast moving financial environment, a delay of 6 weeks (being the length of time between council meetings) might prevent PWC taking up a good swap arrangement.
This resolution will come before full council for approval (as the corporate services committee does not have the necessary delegated authority). This is a good example, of the repetition of topics and issues that come before committees (and full council) and why I do not always feel the need to attend every meeting. A great deal of committee meetings either are dominated by information only updates, or require decisions to merely receive reports (hardly decisions at all).
My approach is to make sure that I do attend those meetings where I can actually make a meaningful contribution to policy outcomes, or where activities need to be challenged (or supported). This ensures my time is used efficiently – and I am not just attending meetings for the sake of attendance. In my mind its the quality of a councillors involvement (and the position they advocate), not just the fact they were at the meeting.
Agenda and minutes
The agenda and minutes are located at http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/corporate-services-committee-meetings/?path=/EDMS/Public/Meetings/CorporateServicesCommittee/2015/2015-09-03.
The corporate services committee meeting was held on 23 July 2015. Apologies were received from Crs Mirfin, Bouillir and Ensor. All other councillors were present.
The agenda included: (1) treasury report, (2) finance report, and (3) managers report. An informative presentation was also received from council’s treasury advisor Brett Johanson of PricewaterhouseCoopers, Wellington.
Council debt at 30 June 2015 totalled $145 million. The weighted average interest rate on borrowings is 5.166%. Council’s cost of funds including interest rate swaps, bank margins and line fees being taken into account is 5.257%, compared to a budget of 6.10%.
At current levels, the market is now pricing in one 25 basis point (bps) cut in the OCR in July, and one 25 bps cut in the OCR in September.
Prior to the end of the financial year a high level review of council’s bank facilities was undertaken. This review resulted in $20m of bank facilities being cancelled. Now that the long term plan (LTP) has been concluded a more comprehensive review of council’s bank facilities will be undertaken.
The underlying operational result was a favourable variance of $7.159m once the impact of development contributions, vested assets and interest rate swap movements were removed from the accounting result.
The net accounting position is a surplus of $10.365 million, against a budgeted surplus of $5.512 million. The income was $0.438 million below budget, and expenditure was $5.291 million below budget. The key drivers of this were: (1) mark-to-market write-downs on interest rate swaps (-$7.190 million); (2) higher than expected Development Contributions and Financial Reserve Contributions (+$2.893 million); (3) lower than budgeted maintenance expenditure (+$4.4 million); (4) lower than budgeted finance costs (+$0.991 million).
Capital expenditure for the year is $29.401 million against an annual budget of $48.682 million. Total debt is $146.0 million. The projected year-end balance of $168.3 million was not reached, as a result of the effect of the operational surplus, and a request for a number of projects to be carried over to the 2015-16 year.
Council’s working capital position at 31 May 2015 was ($5.178 million) compared to the year-end projection of ($9.616 million). The major reason for this is the lower current debt balance at the end of May 2015.
- Departments financial results. These are showing a strong positive variance against budget (basically expenses are down). The largest area of favourable variance is operating costs. The drivers were: (1) property (cleaning $51,000, main office $17,000, Golden Bay service centre $10,000 and district libraries $12,000); and (2) information services site support ($87,000) down across all it areas.
- Quarterly reporting. With the LTP now adopted the Management Accounting team moves straight to the review of the production of monthly financial reports. The work plan is to move to a more comprehensive format of reports on a quarterly basis. This will enable a higher degree of forecasting.
- Water charge invoicing. The transfer of the daily water charge to the general rates invoices requires ongoing clear communication with customers. This is being done via Newsline.
- Information services. IS staff worked with Community Development to complete the Government Broadband Extension Funding, Registration of Interest (ROI) document by 10 July 2015.
- Electronic document management system. Team workshops are being held in July and August as part of implementing the new document and records structure in our document management system. Work has also begun on upgrading the network connection to Port Tarakohe. GIS and development staff have also been working on the Land, Air and Water Aotearoa (LAWA) national initiative (see http://www.lawa.org.nz/explore-data).
- Property services. The Motueka Recreation Centre lift and stairwell project is on schedule. Wakatu Incorporation has given their approval, as joint land owners, for a minor extension to the Motueka Library (which is awaiting building consent) and the seismic repairs to the Motueka Memorial Hall. The boat shed leases at Kina have been received back from the lessees and executed by the Council. A notice of requirement has been served on members of the Ashton family at Best Island. The notice is to acquire land for road to service the residents at Best Island. The Fittal Street lease has been re-marketed.
- Mapua development. All leases are current, with no arrears. Leases have been signed for 4 of the 7 spaces in the new Shed 4 rebuild. The last 3 are in final discussions/documentation and we expect these to be concluded before month’s end. Hamish’s Cafe announced its closure as at 26 July 2015. The tender price accepted was $1.095 million. The total development cost is now expected to be $1.35 million.
- Forestry. Co-sharing of recreational and commercial activities within council forests has caused some health and safety and operational risk issues this year. A review is currently underway to identify policy and other responses needed to manage these risks.
- Camp grounds. The repurchase of assets at the Motueka park was approved and has been accepted by the lessee. Legal documentation is being prepared and a settlement date of 16 July 2015 was planned. The repurchase negotiations at Pohara have been delayed due to urgent work caused by infrastructure failures at Collingwood.
- Port Tarakohe. Reporting shows large volumes of trade entering and exiting the Port. Weighbridge user error continues with TNL in particular, with new parties not being trained well. They have now been advised that penalty charges will be incurred for incorrect behaviour. No serious health and safety incidences were reported in the past quarter. Moorings remain fully occupied (20 of 20 filled). There are 8 vacancies in the marina berths (32 of 40 filled). The less popular pile berths remain half full (11 of 20 filled). The storage compound is 30% full.
- Commerce commission. The Commission has responded to the marine farmers complaint over the basis for setting port charges. However, they have made no statement on whether charges are appropriate (or not). Rather, the Commission has requested that the parties reach a commercial resolution on this matter. A legal opinion has confirmed that council has set fees correctly under s 12 of the LGA 2002.
Agenda and minutes
The agenda and minutes are located at http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/corporate-services-committee-meetings/?path=/EDMS/Public/Meetings/CorporateServicesCommittee/2015/2015-07-23.
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 first Corporate Services Committee Meeting of the new council was held on 7 November 2013. The Mayor, Judene Edgar, Michael Higgins, and myself sent in our apologies.
The agenda comprised a number of reports from council staff being presented to council. These included: (1) a series of reports seeking to draft amended rates remission policies for low value properties, sporting, recreation, or community organisations, and dwellings affected by natural disaster; (2) a report on the activities of the Corporate Services department (including forestry, tourism, council’s credit rating, port nelson, and property services); (3) a report from the Information Services department about the use of a reduced digital logo for archiving purposes, (4) a report on some Health and Safety matters, and (5) the Port Tarakohe Development Plan, which had been made public for public consultation and feedback.
In effect, this was an activity update session for council, with council staff updating council on various council activities. Many of the reports from council staff were interesting reading and gave insight into many of the council’s commercial activities. Whether council retain its forestry activities will need to be discussed as part of the planning process and part of a wider funding discussion about future water storage (ie, the lee valley dam). This should make for an interesting discussion.
The information services report raises the issue of branding in terms of cost savings. The Tasman Council logo uses a number of different colours and this makes it difficult to use printers to generate the logo. Instead pre-printed paper has to be purchased. I believe any brand change would have to ensure there is no additional costs involved and older logo’s are only replaced when required. However, this is a discussion for the communications subcommittee to discuss further.
The meeting also considered one other confidential matter that I had earlier advised the CEO of my opinion on.
A copy of the agenda and minutes of the 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/2013/2013-11-07