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.