The corporate services committee meeting was held on 5 May 2016. Apologies were received from Cr Mirfin and Cr Dowler for absence, and Cr Ensor for lateness. All other councillors were present.
The agenda (requiring no decisions of council, other than to receive reports) included: (1) Treasury presentation from PWC, (2) Treasury report, and (3) Corporate services activity report. A confidential (in-committee) report in relation to the proposed sale of 11 Fittal Street in Richmond was discussed.
Brett Johanson and Jason Bligh from PricewaterhouseCoopers (PWC) gave a presentation on treasury matters. This included responding to questions presented by councillors.
Cr Bouillir and myself submitted several questions on behalf of some concerned residents of Golden Bay – much to the frustration of the chair (apparently this was not normal practice). In my opinion, one of the roles of a councillor is to ensure residents concerns are adequately addressed and answered – even if they may disagree with the outcome.
Unfortunately, Cr Norris took the opportunity throughout the rest of the day (as a bit of a running joke) to ask councillors if they were asking questions on behalf of someone else. While I could see the amusing side, some people might suggest this is a form of bullying or intimidation (ie, don’t ask questions on behalf of others, otherwise I will make fun of you all day).
My three questions on behalf of a Golden Bay resident were:
1. Why is our local authority paying an interest rate higher than I could obtain by walking into my local building society? At the time of the question was submitted, TDC was paying around 5.331% in interest.
2. Could the TDC provide factual examples of local authorities that have derived significant financial benefit from dealing in interest rate swaps?
3. If interest rates were to fall to say 1% for the remaining duration of existing swap contracts, what would the financial impact on TDC’s finances be at that time?
Before jumping into PWC’s responses, its useful to understand how council borrows money and what “swaps” are.
At present, council continues to carry a large amount of debt. However, this total debt is actually made up of much smaller parcels of debt that have been entered into at different times, have different durations and end dates, and have different interest rate obligations. It’s also why council often talks in terms of “average” interest rates.
So what is a “swap”? A swap is a derivative contract whereby two parties exchange financial instruments (containing specified obligations). The swap agreement defines the dates when cash flows are to be paid and the way they are accrued and calculated. Swaps do not trade on exchanges.
Swaps can be used to: (1) hedge certain risks such as interest rate risk (which is what TDC is doing), or (2) speculate on changes in the expected direction of underlying prices or interest rates, in order to make money.
This later (revenue earning) type of swap is common in America, where local government might have their income (or total rates take) capped. In order to raise additional revenue above their cap (perhaps for an unexpected infrastructural expense), they use their capacity to service debt to raise income (by underwriting the interest rate risk of the other parties).
In the UK, the Hammersmith council entered into such an arrangement, and while making money at first (when interest rates were low), subsequently made substantial losses, when it had to underwrite the rising interest rate obligations of the other party. The TDC is “not” engaged in these type of swap arrangements. Rather, the TDC has entered into swaps to reduce exposure to interest rate risk, not make money.
The most common type of swap is an interest rate swap that has the effect of transforming a fixed rate loan into a floating rate loan (or vice versa). TDC has a number of floating rate loans. In order to obtain interest rate certainty and mitigate risk, TDC has entered into a number of swap contracts. Council also has the the opportunity to blend (and\or extend) SWAP agreements where they provide TDC financial advantage (ie as interest rates lower).
Is TDC paying to higher an interest rate?
PWC advised that TDC borrows at commercial rates, not domestic mortgage rates. TDC also borrows funds on longer terms than the average domestic mortgage. Most domestic mortgages will be on a short term 1-year floating rate, or fixed for short durations (perhaps 1-3 years, before they are reviewed). The approach of PWC is to borrow funds on the 5 year interest rate market. This is because most TDC assets will have a life expectancy of at least 5 years (or more). At present, TDC’s borrowing costs are tracking well below the 5-year mortgage rate.
Does TDC (or PWC) have evidence of swaps benefiting local authorities?
PWC advised that they did not have an immediate answer to this question (as they were not given these questions in advance of this meeting, but were open to providing this information from their global network of resources). At this point, the chair intervened, and suggested the question was not an invitation for PWC to charge TDC for making further investigations. The chair, then asked if I had any other questions.
In answer to the question, over the past 10 years, TDC has consistently achieved a lower interest rate than either budget or the 5-year mortgage rate (see above graph). Further, between 1999 and 2008, as interest rates were climbing, significant financial benefits accrued to TDC.
It is also widely acknowledged that some councils have benefited from swaps. Significantly, the following observation comes from a website (www.debtresistance.uk/the-ghosts-of-hammersmith-fulham-the-return-of-toxic-council-derivatives-debt/) that criticises some forms of swaps. It states:
… some councils had “guessed right” with their interest rate bets, and were profiting handsomely from the trades, whilst others, such as Hammersmith taxpayers faced a potential bill …
Importantly (and to avoid any confusion) the Hammersmith scenario was a different type of swap arrangement to the type TDC has entered into. Hammersmith was benefiting from rates going down (effectively covering others from rates going up), rather than hedging against rates going up.
TDC is not entering swaps to make money, nor is it covering other parties from interest rate increases. Rather it is using swaps to consolidate a mixture of different interest rates and debt parcels, as well as mitigate the risk of 5-year interest rates going up. Effectively, swaps are being used as a risk management tool.
In my opinion, the above information supports the proposition that some councils have benefited from swaps.
What happens if interest rates drop?
PWC advised that they are continually reviewing the swap market to take advantage of any downward movements. Unlike a domestic mortgage, TDC has a large number of loan arrangements that have different start and end dates. TDC does not have one single loan arrangement. Similarly there are a number of separate swap arrangements that cover those loans. As arrangements come up for renewal, there is an opportunity to take advantage of a lowering market. This is why TDC’s average interest rate has been falling over the last year or two.
In reality the Council acts within the overall strategy of keeping rates down, as interest rates move. When interest rates drop the Council uses tools such as “forward starts”, or “blends and extends”, to take advantage of the movement at the time and to capture the low rates, as swaps come due.
Council’s ability to manage the forward risk in interest rate movements is greater than the person who goes into their local building society and borrows say $100,000 for 2 years at a fixed interest rate of 4.99%. If interest rates fall to say 1% for the remaining duration of their loan agreement they are faced with a break fee or toughing it out until their mortgage matures. TDC has more options than that.
Council’s debt at 31 March 2016 stood at $134.5 million, with an average interest rate of 5.417% (contrasted to June 2015 when it was 5.166%).
Council’s actual weighted average cost of funds at 31 March 2016, including interest rate swaps, bank margins, and line fees at 5.464% against a budgeted rate of 5.7%. The gradual decrease is from more favourable terms resulting from the refinancing of the bank facilities and favourable 2 to 4-year term swap rates. The ‘spike’ in the weighted average cost of funds for September and December 2015 and March 2016 are due to a lower debt position. This has meant that the Council’s debt is currently over covered by interest rate swaps which are at a higher rate than current floating debt rates.
At 31 March 2016, the Council had $147.78 million of interest rate swaps in place, including some “forward start” swaps. After adjusting for the forward start swaps, $144.78 million is “live” which is equal to 108% cover over existing debt and 87% over forecast 31 March 2017 net debt (ie 12-month debt). I asked staff when the debt levels and swap coverage would realign. Staff advised that they anticipated alignment by the end of June 2016.
Existing committed bank facility expiry dates and term debt maturity dates are spread based on defined maturity band limits of 0-3 years, 3-5 years and 5 years plus. Minimum and maximum percentage limits within each time band ensure a spread of maturities and reduce the risk of maturity concentrations.
The Council currently has $30 million in private placements. The private placements allow the Council to place longer term debt in the years between the Local Government Funding Agency (LGFA) issues. The Council also has $90 million of debt placed with the LGFA.
|Bank||Cash/Cash Investments $Million||Notional Swaps $Million||Credit Exposure $Million||Compliance|
The objective is to have a mix of 80% debt capital markets (such as the LGFA, private placements and commercial paper) and 20% committed bank facilities. The current mix is as follows:
Corporate services activity report
Highlights from the manager’s report included:
- Finances. The department will end the year with a surplus, mostly driven by the treasury function. Tight and active management of treasury combined with benign external factors have reduced loan costs and high cash balances have increased interest income above budgeted levels. It is intended that part of the surplus will be used to repay outstanding treasury loans in relation to the LGFA share purchase.
- Commerce commission. Work on port charges (and valuation) by PricewaterhouseCoopers and Simpson Grierson is drawing to a conclusion and a response to the Commerce Commission from council should be made within the next 6 weeks (ie June 2016).
- Property. The Property section continues to operate at reduced capacity. A replacement for the Property Officer has been appointed and started on 2 May.
- Aerodromes. Aerodrome landing charges are set to increase by $1 from 1 July 2016. The Motueka road sealing (hangar access) is currently on hold and likely to be cancelled.
- Campgrounds. Overall campground income is up and expenditure down slightly on budgeted levels. The overall profit is $156,000 which confirms a good season and tight financial management. Infrastructure failures at Collingwood campground have stabilised.
- Mapua. The tail end of the works related to the Shed 4 build and improvements to the public areas is underway. A report on the budget over-run is being prepared and is subject of a separate report to this Committee. Council officers are arranging for an additional temporary resource to assist in developing a Strategic Plan for the wider Mapua area (including the wharf, waterfront park, Grossi Point and remediated land). This strategic plan will assist in managing the competing interests in the area and ensure that agreed outcomes are met. The prospective purchaser of the Mapua causeway has advised that they no longer wish to pursue the purchase option. They have a right of renewal for five years under the current license to occupy.
- Forestry. The forestry management tender process has been completed with PF Olsen Ltd being the successful tenderer. Income in forestry is forecast to be up on budget for the year due to higher market prices and increased cutting volumes. The current underspend on maintenance will correct by year end due to roading work in the Sherry and Borlase forests as we prepare for upcoming harvesting at those sites.
- Port Tarakohe. Volumes over the wharf are good. The marina occupancy is stable. The YTD profit (for February) is $20,000, against a budgeted loss of $78,000.
- Port Nelson. Port Nelson Ltd has declared an interim 2016 dividend of $1.5 million, of which $750,000 comes to TDC. Cr King is currently a director on the Port Board and is due to retire at the AGM on Friday 23 September 2016. His appointment was extended until March 2017 to allow a newly formed council to make the next appointment. It should be noted that council policy prohibits the reappointment of a director for a fourth successive term, unless there are special circumstances. Given the experience of other directors already on the board (see http://www.portnelson.co.nz/about-the-port/directors/), I cannot see why a any re-appointment of Cr King would be required.
- Legal. The Council sought legal advice around the ability to ban (wicked camper vans) from the Council’s campsites, the summary being: (1) Any ban needs to be around the offensive slogans or images, not around specific provider, (2) Leased sites are not able to be controlled by the Council, unless our leases specifically permit it (which they currently do not) or each lessee agrees to it. It would not be commercially prudent to exert this control over our lessees’ businesses. However, discussions with the lessees has indicated a willingness to work with the Council. Collingwood campground is the only current operated site that can be controlled via an immediate Council policy. All four Council-owned commercial campgrounds, regardless of being leased or operated, are insisting on those slogans being covered before entry into our campgrounds. Staff recommended that no formal action is required, as the matter is being dealt with effectively at each campground.
- Information technology. Digital Strategy interviews and staff workshops have been completed and the findings and proposed strategic priorities will go to a Councillor workshop on 28 April 2016. The new Council file structure is being tested across all departments between April and July 2016. Once testing has been completed and signed off, the new structure will be installed into our document management system and the process of moving departmental documents and records across will begin. This will involve document process reviews and training of staff to ensure the transition is successful. It is planned for all departments to be working within the system by the end of 2016. The final upgrade of the Confirm Enterprise asset management system took place during the weekend of 16 April 2016. Additional security cameras are being added to the Customer Services area of the Main Office. Information Services are now managing the security camera infrastructure.
- Nelson Airport. The airport half yearly report and draft 2016-17 Statement of intent were considered by the Joint Shareholders Committee (comprising the mayor, deputy mayor, committee chairs, and audit subcommittee chair) on 15 April 2016.
- Action items. Mapua land (vacant corner site) – Mike Drummond to report back within 12 weeks on potential alternate uses of this land.
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/2016/2016-05-05.
The environment and planning committee meeting was held on 17 March 2016. Apologies were accepted from Mayor Kempthorne and Crs Inglis and Mirfin. All other councillors were present.
The agenda included: (1) protected tree update, (2) building control manager’s report, (3) regulatory manager’s report, (4) presentation report from Nelson environment centre, (5) River water quality monitoring programme review, (6) Environment and planning activity report, and (7) Chairs report.
Public forum included presentations from Karen Steadman and Murray Dawson.
Karen (a real estate agent and resident) spoke about the rural review and allocating a rural zone in Murchison to allow lifestyle blocks and more subdivision. She thought the community needed to attract people to the area in order to sustain the town and that affordable homes were required.
Murray Dawson spoke about the need for weirs and suggested that weirs be considered as an alternative water augmentation option to the Waimea Community Dam.
Council agreed to remove 13 protected trees from the Protected Tree Schedule.
The trees were ranked originally as either Category B or C trees. There were no Category A trees. The request was based on the council arborist’s assessment that the trees no longer met the STEM assessment criteria to qualify as protected trees, because they had been storm damaged, had developed poor form, or had deteriorating health.
The trees were located in Takaka, Riwaka, Marahau, Appleby, Richmond (at the far end of Appaloosa Avenue), Brightwater and Wakefield and are comprised of a mix of species. A map of the relevant tree locations is enclosed in the agenda (at page 21 to 41).
Council received the building manager’s report for the period from 1 March 2015 to 29 February 2016. Highlights included:
- IANZ audit. Completed in October 2015. Four corrective actions were issued with a clearance date of February 2016. The most significant issue was skilled resourcing levels. All corrective actions have now been resolved with the BCA being reaccredited in February 2016. A further audit will be completed in October 2016.
- Go Shift. TDC joined the Go Shift initiative that will lead to consistent consenting and inspection practices across 21 councils in the Lower North Island and Top of the South.
- Team rebranding. Building Control rebranded as Building Assurance.
- Staff. 6 staff are departing and 6 replacement staff have been recruited. In response to the IANZ audit, some staff capacity and capability has been lifted. Any cost implications will be covered by reduced spend in direct costs and non-rate income, so as to avoid any impact on general rates.
- Building consent fees. A review will take place in the first quarter of 2016-17 financial year.
The number of consents issued is illustrated below (and shows a 9.2 % increase across all work streams).
Council received the regulatory manager’s report for the period from 1 March 2015 to 29 February 2016. Highlights from the manager’s report included:
- Restructuring. Building Section became a stand-alone entity in April 2015 and the Compliance Section (previously part of Environmental Information) came into the Regulatory fold. There have been no staff changes or additions. Three members of staff reduced their hours by 4 hours per week; this has in part, allowed an increase in administrative support for the department which will commence on 1 July 2016.
- Development contributions (DCs). The DC policy was recently challenged in the court and successfully defended. However, the commissioner’s comments indicated that the use of better defined catchments would make our Policy less likely to be challenged in future. Staff intend brining a report to council on this issue.
- Freedom camping. There were 152 complaints received over the period 1 May 2015 to 29 February 2016. Eighteen Infringement Notices were issued at Motueka Beach Reserve and Control Services have spent approximately 250 hours on policing and enforcement activities (they are contracted for a total of 120 hours).
- Oil spill response. The regulatory manager is the only Regional On-Scene Commander (ROSC) at TDC. This is not a cause for alarm as Nelson council have two ROSC employed as contractors and TDC work in tandem with them.
- Civil Defence (CD). The Ministry of Civil Defence and Emergency Management (CDEM) recent “Monitoring and Evaluation report”, showed that the Nelson Tasman CDEM’s overall score was-82.1%, the highest in New Zealand.
- Rural fire. The Government has progressed a Fire Service Review that will ultimately see the NZ Fire Service and Rural Fire Forces combine to make a single service.
- Alcohol and food licensing. This has increased by an average of 12% with only Special Licenses showing a fall in applications. Other licensing (Food and Health premises) has increased by 15%. The effects of the Sale and Supply of Alcohol Act have been effectively absorbed into the team roles.
- Food safety. The new Food Act requirements have started to take effect from 1 March 2016. Over the last three years only about 30% of eligible food businesses moved over to the new requirements before the 1 March deadline.
- Noise complaints. This have risen by over 12%, primarily through complaint of noise from parties.
- Insanitary housing. Environmental Health Officers (EHOs) dealt with 3 insanitary dwellings over the period. In all cases cleansing orders were issued to ensure compliance.
- Dog registrations. 99.46% of known dogs were registered at 29 February 2016 (total dogs 1,044, registered 10,450, unregistered 57). Two prosecutions were taken for dogs attacking humans.
- Parking. Parking infringements dating back to 2006 that have been processed to court, but are still outstanding, totals $101,855.00. Infringements issued: 1671 (2014-15), 1961 (2015-16). Fines issued: $79,149.00 minus cancellations of $8,742.00 (2014-15), $84,586.00 minus cancellations of $14,834.00 (2015-16). Revenue: $70,407.00 (2014-15), $69,752.00 (2015-16).
- Harbour master. The Harbour master has done about 48 days at sea over the last 12 months. A number of derelict boats have been notified for removal within the district and the Harbour master currently has five vessels to dispose of. The Harbourmaster has also towed eight recreational vessels to safety, and attended and co-ordinated the recovery of three vessels that had sunk. The new harbour master’s boat is nearing completionwith a pre-handover inspection completed on 10 February.
- Port Tarakoe (Takaka). After 5 years in Port Tarakohe the Santa Monica (42 metres long, 392 tonnes) has moved to Westport.
River water quality
Council’s River Water Quality Monitoring Programme is currently being reviewed. This is the first major review in 16 years of operation. Implementation of the revised programme is expected in July 2016.
The major change proposed I the review is to increase the sampling frequency to monthly, with sampling to occur at all flow conditions (currently council only samples at low flows), while reducing the number of sampling sites by about half. There should be no impact on budgets from this change.
Presentation report from Nelson environment centre
Carolyn Hughes presented on water conservation and Nelson Environment Centre’s (NEC) proposal for smart metering and promoting behavioural change within Tasman District communities. NEC sought funding from TDC to cover trialling this initiative. NEC was asked to provide cost estimates to staff and for staff to report back on the impact on existing budgets.
Environment and planning activity report
Council received the managers report. Highlights included:
- Wetlands. Staff are planning for two meetings with land owners of wetlands in Golden Bay in the next couple of months.
- Native habitat survey. The next part of the Native Habitat Survey under the auspices of Native Habitats Tasman (NHT) is also about to move in Golden Bay towards the middle of this year.
- Rainfall. Data on rainfall is viewable from TDC webpage (by clicking the relevant point on the map) at www.tasman.govt.nz/environment/water/rainfall/.
- Finance. At 67% of the way through the year, expenditure is under budget overall and non-rate income overall is slightly ahead of budget. So looking good.
Council approved the specified delegations to staff so they could properly execute functions assigned to TDC under the Food Act 2014.
Council also agreed to establish, with Nelson City Council, a Regional Pest Management Joint Committee and appointed Crs Bryant, Ensor and Norriss to the Regional Pest Management Joint Committee.
Highlights from the chairs report include:
- Westport link road. Gary Howard, Mayor of Buller, has met with both the Murchison and Tapawera community councils and gave a brief outline of Buller’s roading proposal from Little Wanganui near Karamea, through the Wangapeka to the Motueka Valley. The plan can be viewed on the Buller District Council website link at: http://bullerdc.govt.nz/council-to-discuss-a-new-roadlinking- nelson-and-westport/.
- Rural land use changes. The rural land use & subdivision plan change, Proposed Change 60, has been open for submissions since January, and the submission period closed 14 March. Three open public briefing meetings were held at: Wakefield, Takaka and Motueka.
- Developer’s Forum meeting. A half year report to the Minister of Housing on the Housing Accord showed there is a lot of development going on with 110 new residential sections and 199 new residential houses, compared to a six-month target of 65 and 150 respectively.
Agenda and minutes
The agenda and minutes are located at www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/environment-and-planning-committee-meetings/?path=/EDMS/Public/Meetings/EnvironmentPlanningCommittee/2016/2016-03-17.
The corporate services committee meeting was held on 26 November 2015. Apologies were received from Crs Bouillir, Dowler, and myself.
The agenda comprised: (1) treasury report, (2) corporate services activity report, and (3) Mapua causeway report. I will highlight the main points of interest. A workshop followed this meeting.
As at 31 October 2015, council debt was $144 million with an average interest rate of 5.240% (June 2015: 5.166%). The weighted average interest rate on borrowings was 5.240%. Council’s cost of funds (including interest rate swaps, bank margins and line fees being taken into account) was 5.331%, compared to a budget of 5.70%. The decrease is from refinancing of the bank facilities and favourable 2-4 year term swap rates.
A review of council banking facilities concluded that a reduced total bank facility amount of $42 million was appropriate (down from $70 million).
Standard and Poor’s Ratings Services completed their annual review of the Council’s credit rating and affirmed TDC’s “AA-” (long-term) and “A-1+” (short-term) credit ratings – with a “stable” outlook. This is a lower rating than Nelson City (“AA-” with a “positive” outlook). Amongst the positive comments for recent improvements there is comment on council’s very high debt levels and the negative financial impact that the Waimea Dam (as a large debt-funded capital project) will have on council debt.
As at 31 October 2015, the Council had $147.78 million of interest rate swaps in place, including some “forward start” swaps (yet to be begin) which is equal to 101% cover over existing debt, and 86% over forecast 31 October 2016 net debt (ie 12 month debt).
Corporate services activity
The managers report included the following items:
- Department performance. Overall the department had an adverse variance to budget of $21,000 (7%). The 2 big drivers for this were general operating costs and depreciation. The over spend in general operating related to a payment of $20,000 for a major water tank upgrade at Awaroa. This project used $15,000 of the surplus in the closed account. Depreciation was under budget in Information Technology (IT) as less capital was spent in 2014-15 than planned, and this has lowered depreciation costs in the following year (ie 2015-16). This is also a good example of cascading savings when costs are reduced earlier and upfront.
- Property. Best Island access discussions are now focused on valuation issues. Its expected that the matter will come back to council in early 2016 for consideration. Seismic repairs have been completed at the Richmond Town Hall. A preliminary design has been received for the Takaka Service Centre refurbishment. Depending on costs and budget, the work is expected to be undertaken in the early part of 2016 and the building will be reoccupied by July 2016. The incidence of cracked and broken tiles at the competition pool at the Richmond Aquatic Centre is increasing.
- Delegated authority. A number of documents were entered into, including: a partial surrender of easements for Greenacres Golf Club.
- Commercial activity. Shed 4 rebuild expected to be completed on 27 November 2015. A draft landscaping concept for the commercial precinct was presented to the Mapua Waterfront Advisory group for community feedback on 4 November 2015. The Forestry Management Contract tender process is expected to conclude consideration of the 3 accepted tenders (4 applications were made) by December 2015, with a recommendation to council expected in early 2016. Port Tarakohe cargo has shown a seasonal lift, but total volumes are still below last year’s figures. Dolomite is down 3.3 tonne on last year, wetfish is even, and mussels are up. Occupancy has dropped by 5% in the marina and 5% in pile berths during the past month/6 weeks to an average occupancy of 73% (comprising: moorings 100% (20 of 20) occupied; marina 73% (30 of 41) occupied; and pile berths 45% (9 of 20) occupied. The storage compound remains only 30% full.
- Information services. Council has successfully upgraded to Microsoft Office 2016 while maintaining integration with the NCS local government system, InfoCouncil, and SilentOne. Council’s local government computer system, NCS had a server upgrade on 5 November 2015. The old server was decommissioned and the system was moved into the main virtual server environment. This environment lowers risks of hardware failure and improves the system backup process, including the capability to back up the system out of region to our Auckland backup provider.
Adventure Properties Limited (also known as Mapua Leisure Park) has asked the council to consider selling the Mapua causeway to them, and offered council easements to protect the public access to the coastline (but not vehicles) and to protect the infrastructure (water and sewerage) and the culverts which drain the estuary.
At present, the Mapua causeway is licensed to the owners of the Mapua Leisure Park (Adventure Properties Limited) until 2021. The license is not exclusive. and provides for public access and contractors to maintain the causeway and infrastructure. The license also provides that the road surface of the causeway is maintained by Adventure Properties Limited.
The Mapua causeway was originally constructed by a private landowner and subsequently legalised as a reclamation and vested in council (on Nelson Harbour Board) where it is held in freehold title.
The sale of land is not signaled in the Long Term Plan. Accordingly, public consultation would have to be undertaken with the Mapua community before any sale could take place.
Council resolved to consult with the public before any disposal was considered.
In my opinion, the only reasons for disposal would be raising capital for reducing debt, or mitigating any maintenance costs for council. Given the licensee (Adventure Properties Limited) is already obliged to maintain the road, there do not appear to be any immediate cost savings for ratepayers from this proposal. Thus the issue is whether the costs of disposal (ie public consultation and legal costs) would significantly offset debt servicing savings. And whether council have confidence in the easements being offered (ie walking (and cycling?), but no vehicles).
At first glance, the proposal looks appealing. But like all good looking deals, the devil is in the detail. I will be watching this space with interest.
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/2015/2015-11-26.
If minutes are not displayed at the above location, please request a copy of the draft minutes from council.
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 full council met on 19 February 2015. This meeting was not part of the normal cycle of full council meetings as it was dedicated to the long term plan (LTP) for 2015-25 and associated consultation document. Cr Mirfin submitted his apologies, otherwise all councillors were present.
The agenda considered the following items: (1) CEO briefing, (2) Waimea community dam, (3) rates remissions policy review, (4) commercial subcommittee terms of reference, (5) maori consultation processes, (6) other supporting documents for the LTP.
This meeting was then followed by a workshop on the content and layout of the consultation document.
In relation to the full council meeting the main areas of interest for me were the first three items and I intend to concentrate on these items.
The maori consultation process was confirmed, as was the publication of supporting documents for the LTP. Although I continue to have issues with a number of spending proposals in these documents (eg, William Street traffic lights proposal costing $1 million, and the timing of storm water work in the Richmond South area – more urgency is required).
Council were given a brief update on the following items:
- Finance: For the 6 month period, ended 31 December 2014, council produced an accounting adjusted surplus of $2.6 million (after adjusting for capital income, vested assets, development contributions and interest rate swap revaluations) against budget. Interestingly, revaluation of interest rate swaps (which total $147.78 million) provided an accounting loss of $1.8 million. By way of background, interest rate swaps are a hedge against higher interest rates (a bit like fixing your mortgage). This month our swap rate was higher than the market. Which is surprising given our average interest rate for swaps is 5.288%. So, if we had sold our interest rate swaps back to the bank at the current market rate this month, we would have made a loss. Conversely, if our swap rate is lower than the market then we would make a theoretical gain, although we would have to refinance our debt at higher rate. This fluctuation does not cost council any cash, as we are not selling them (although it might be a good time to buy more swaps, if we were in the market) – rather its done for accounting purposes, which we are required to report on. It’s likely that as current interest rates hold up (above our swap rate) council will continue to build up an accounting loss, until such time as the market interest rate trends back up.
- Jackett Island: the claim for future costs has been settled by agreement ending the environment court proceedings – the insurers are managing any civil claim.
- Building control: last year the IANZ accreditation audit identified an issue with TDC’s tracking system for responding to building consents approaching the 20 day limit. In the last month, no building consent application exceeded the 20 day limit, the backlog had been reduced, and compliance was now over 90%.
- Restructure: A new building control manager (tier three) position had been created which has taken over management of the building compliance function and will operate within the regulatory section of TDC.
- Port Tarakohe: The mussel industry has made a pricing compliant to the commerce commission alleging TDC is making super profits from its new commercial charges regime. In my opinion, the new weigh bridge and more timely and accurate billing is clearly having an impact on some operations bottom line.
- Best island access: Several meetings have been held with affected residents on a proposal for council to acquire land for a public road in order to address access issues for those residents.
- Nelson tourism and economic development agency: Meetings have been held to discuss work plans for both organisations. In my opinion, strategic activities (including more actively supporting the international education sector) and measurable performance outcomes need to be agreed.
The council wage bill
Council staff were also asked to provide information on council’s wage budget (currently round 18% of total expenditure) and how it compares to other authorities. Cr Inglis, Higgins, and myself have been pursuing this issue for sometime.
While there are few unitary councils to make comparisons with, and unitary council functions are broader than district or regional councils, the councils wage bill is still a percentage (or ratio) of its overall cost of performing its functions. If a council has more functions it will have more income and more expenditure, but wage expenditure should still be comparable.
In my opinion, benchmarking the councils operational activities and costs is important. Given unitary councils comprise both district and regional council functions, some detailed analysis separating out those separate functions, could be undertaken with a little effort (with shared services apportioned), to provide direct comparison with district or regional councils.
I understand the local government association (LGA), have on its agenda, the provision of benchmarking tools for council governance. If the government want to see local government costs come down, I would have thought they would have been a keen supporter (and potential funder) of such tools.
Note! As pointed out by one reader, Local authorities must disclose their performance in relation to identified statutory benchmarks (see section 9 of the Local Government (Financial Reporting and Prudence) Regulations 2014). I agree. However, these statutory benchmarks are very different to the type of benchmarking I am suggesting. I am talking about benchmarking “between” councils on information not currently required by statute to be benchmarked. The statutory benchmarks listed in section 10 of the Local Government (Financial Reporting and Prudence) Regulations 2014 are: rates affordability (reg 17), debt affordability (reg 18), balanced budget (reg 19), essential services (reg 20), debt servicing (reg 21), debt control (reg 22), and operations control (reg 23). These benchmarks are generally a high level comparison against quantified limits set by council or statute. For example, comparing the council’s planned rates increase with a quantified limit on rates increases contained in the council’s financial strategy.
I also believe its about time council was subject to an independent organisational review. As a governance body, council should regularly review if the council is operating efficiently. An independent review will either confirm the organisation is right sized and operating efficiently, or make suggestions for improvements.
Either way ratepayers would have greater confidence in the organisation of council and that their money is being spent wisely. Unfortunately, there appears to very little support around the council table (including the mayor) for such a review. Hopefully a wage comparison, might push them towards a much needed review.
Waimea community dam
There were two issues to be considered: (1) a revised structure of the arrangement, and (2) funding of a new private entity.
The suggested re-structure was not a surprise as we had been briefed at an earlier workshop. These days I tend to find the workshops more informative (and useful) than the actual committee meetings (that formally present the staff paper and recommendations).
This is because, much of the debate and councillors positions on the issue, have been worked through at the workshop. This means much of the debate around the table is often making a last argument for not supporting (or supporting) the staff recommendation.
A revised structure
In essence, the proposed arrangements confirmed at the earlier council meeting of 9 December 2014 has changed. At the December meeting it was proposed (and supported by the majority of council) that a CCO would be formed and it would co-ordinate external funding (amongst other tasks). That structure is outlined below.
Ironically, my opposition to forming a CCO and allowing the irrigators to form their own investment holding company (Waimea Community Dam Ltd, or “WCDL”) has now been taken up by the irrigators. They now proposed a revised structure whereby WCDL secures funding from the Crown and irrigators. This new structure is illustrated below.
This new structure reflects the fact that irrigators will now be the major financial contributors to the dam, as they look to secure funding from the Crown and irrigators.
By way of background, the council’s contribution to a dam is limited to $25 million – made up of urban water ($8 million) and environmental ($14 million), with the remaining $3 million for administration costs. This would suggest that WCDL has to secure the remainder ($50 million) from irrigators and the Crown.
I agree with this structure. Its very similar to what I suggested in my dissenting opinion in December. However, I maintain that a CCO does not yet need to be established, until a decision on whether we proceed with a dam (or not), is decided. If a dam is agreed, then the reasons for forming a CCO need to be considered at that time.
In my opinion, the cost of establishing and maintaining a CCO does not warrant its formation at this time. During the consultation phase on governance formation of a CCO was estimated to cost about $100,000 (plus ongoing costs, like directors fees). Establishing a company also invites tax, accounting, and company compliance costs that a “council” does not need to bother itself with. Council could quite easily enter into contractual negotiations with WCDL directly for the supply of water augmentation services. As it has done with NCC over the delivery of tourism services.
A reason to form a CCO is the benefit of skills and knowledge that directors could provide. However, in this instance, the CCO would not be managing the dam, unlike governance struture 1. Rather, it is a holding company for council investment. Furthermore, management and technical skills would be provided by TDC under contract. So there do not appear to be any benefits at this time in forming a CCO?
Given no government funding for urban or environmental contributions has been forthcoming, there seems little reason to form a CCO at this time. It might be that such funding is not contingent on a CCO being formed? Why jump the gun?
To date, the mayor has made no noise about securing government funding for the environmental contribution, or seeking government to underwrite any cost blow outs for the council’s contribution.
Having looked at a guide on when councils should form a CCO (see http://wellington.govt.nz/~/media/your-council/council-controlled-organisations/files/whatworks.pdf), I could find no compelling case for forming a CCO.
Given assurances during the consultation phase that cost blow outs were unlikely, I would have thought it would have been easy for the government to underwrite any cost blow outs above the $8 million urban water supply contribution. And given the broad public benefit of protecting the environment, the government should have come to the party on the environmental cost. Perhaps its time to write to Nick myself?
The other issue before council was the provision of “ongoing funding” for WCDL to engage with irrigators and the Crown. The source of this funding was proposed to come from the Waimea Water Augmentation Project surcharge which generates about $81,000 per year. This amount would be given to WCDL in the 2015-16 year.
I proposed loaning these funds (as an amendment to the resolution), rather than just handing them over to WCDL. Cr Canton seconded my motion, but no other councillors supported this change. In my mind, this was a private investment holding vehicle, not a council owned or controlled entity, and council had a duty to protect public funds.
Giving the money as a loan would provide security as a creditor should WCDL prove unsuccessful. Giving WCDL the money, provide no security at all. Further, when questioned, the CEO could see no reason why the funds could not be provided as a loan. Either way, WCDL would obtain funding. Although some councillors raised there own reasons for why it should not be a loaned during the debate.
Rates remissions policy review
At present, the council has a policy that remits rates on properties that have been subject to re-zoning. The policy provides the council a discretion in terms of how long the remission period will last.
To provide certainty (and transparent fairness) to the process it was raised during a workshop whether council should prescribe the length of the remission period. At that workshop it was suggested that a 10 year period be provided, with the last 3 years stepping down the remission towards the payment of the full rates bill. At that meeting other lengths of time were discussed, including 6 and 4 years. Some on council felt there should be no grace period, effectively rescinding the remission policy.
In my mind, a reasonable period of time should be provided. Through no fault of their own, but rather due to council’s actions of rezoning, they are placed in the very awkward financial position they find themselves in. Providing a reasonable period of time enables people to leave their land with dignity and without being pressured to sell for a low price. Alternatively, ratepayers should be given the opportunity to re-engineer their incomes so they can afford to stay or redevelop the land themselves. In my opinion, to do otherwise, only benefits the next purchaser.
The fundamental issue for me, is that council should not be in the business of forcing people off their land and out of their homes. This principle has strong support in the community – as evidenced by the submissions made on the governance and funding options for the proposed Waimea community dam.
This principle also had some support around the council table. Although there are a few councillors who adopt a more extreme utilitarian approach to the issue. That approach reared its head again during this debate.
Essentially the question before council was whether there should be a sunset clause added to the remission of rates on land that has increased in value due to re-zoning.
In such cases, re-zoning can exponentially increase the value of a property based on its new potential value. The Headingly Lane incident was apparently the driver for this remission policy. The increase in rates can be unsustainable for the property owner, and often they are forced to dispose of the land to a property developer or someone who can obtain more income from the land to afford the new rates bill.
Against this, is the need to ensure land is available for development. A key part of the housing shortage (and high values) is the supply of land. Although, whether this is a driver in the Tasman region, is a moot point.
I supported a 10 year period, comprising a 100% remission of the increase in rates for the first 6 years, and a stepped down remission (of 20%) for each of the next 4 years (eg, 6+4 year remission policy). I moved this motion as an amendment to the current policy, supported by Cr Bouillir.
No other councillors supported this motion, as they favoured a shorter period – either: 4+2 years (with the last 2 years remitted at 33%), or 1+3 years.
Cr Ensor questioned why I would support such a long time given the cost to council and given my drive to reduce costs for council. I explained, that my support of a longer remission period (the 6+4 year period) reflected the tension between saving costs and ensuring people were not force out of their homes. I also did not perceive there was any “real” cost to council. The increase in value did not affect the councils costs. In fact, remitting the rate just meant that council did not get an increase in income. Councils costs remained unchanged, whether the land increased in value or not.
On losing this amendment, I made it clear I could not support any shorter period as I considered it unfair and mean spirited, and would prefer council discretion (the current policy) to anything else.
Especially when placed in the context of the Tapu bay issue, where some councillors supported giving a life interest in a holiday bach (or crib if you are from the deep south) to the owner of the bach (that was not that person’s home), rather than enforce the councils policy of removing private bachs from public land, and yet were willing to force people out of their homes within a much shorter period.
On that basis I informed council I would be voting against both shorter remission periods.
Other councillors realising that a no vote on a 4+2 remission period, might force an even shorter period, asked to defer this item to the next full council meeting.
The full council meeting on 5 March will be deciding on the final state of this policy.
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/2015/2015-02-19.
Its not a word I like to use. But its one I feel compelled to use.
It was recently reported that the Council has decided to purchase the Golden Bear Brewery building near the Mapua wharf (see http://www.stuff.co.nz/nelson-mail/news/9547920/TDC-in-talks-to-buy-Mapua-property and http://www.stuff.co.nz/nelson-mail/news/9480445/Council-aims-to-buy-Mapua-Wharf-building). This building also is home to two other smaller businesses.
This was a decision that came from a recently held “extraordinary” full council meeting held on 19 December 2013. For those unfamiliar with council meeting processes, “extraordinary” meetings are meetings that fall outside the normal diary of planned meetings. In effect, its an extra meeting called with limited notice.
For those with busy diaries (or other pre-arranged commitments), extraordinary meetings will sometime mean one cannot attend such meetings. For me (and Cr Sangster, Cr Inglis and Cr King) , this was such an occasion. However, with new found confidence in the council’s ability to say no to old spending habits (albeit in hindsight misguided), I felt confident that the staff recommendation to purchase the building would be rejected. But alas, I was wrong. Hence my disappointment.
I might add, that my disappointment is also shared by others that have commented on the first report (above). One commentator (Atrout), called it “Truly a foolish move by TDC. Who is driving this acquisition?”. Another, (Joeblogg), added “I thought the council was meant to be getting back to core business and reducing rates, not being a commercial property developer”.
So why am I against the purchase of the Golden Bear building?
First, the role of council (in my opinion) is to set clear plans, guidance, and regulations that enable desired community outcomes. For that reason there should be no need for council to actively participate in business activities if one is adequately regulating those activities. Such that the market should be deciding what is a successful business venture, not the council.
Secondly, the council owns the land. At some point the lease will expire and at that point the owner of the building will either have to remove the building or sell it (probably at a discounted rate) to the council – subject to the terms of the lease. So why buy the building now, at what will undoubtedly be a much higher value? Why the urgency?
Thirdly, the former aquarium land (not 20 meters from the Golden Bear building) is ripe for development. If any of the existing businesses were to be forced out of their current leases due to the success of the Golden Bear Brewery, they (or other similar businesses) could (and would) establish themselves in this new location, without any loss of perceived amenity value provided by those businesses.
I add “perceived” amenity value, as I really do question what amenity value is offered by some of the other businesses that appear to have been protected by the purchase of the building. For example, I recently observed a UK tourist being turned away at one of the businesses because they did not accepted credit cards. What foreign tourist has a NZ cheque account that enables them to pay by eftpos? The tourist left the shop grumbling in dismay and clearly disappointed in the level (or absence) of service.
Finally, I feel the council needs to be consistent with its message. That message has to be, we are keeping debt down by focusing on core services. If it can’t find $100,000 for Port Tarakohe, how can it find more money for a building in Mapua? A building that may well have ongoing maintenance costs for council. I feel the money would have been better spent developing the aquarium site in Mapua (which is currently vacant and ugly) or paying off debt.
The extraordinary full council meeting also discussed other issues including: (1) the granting of a lease of 5 years to the Wanderers Sports Club and the Tasman Volleyball Association over part of the Brightwater Recreation Reserve for the purposes of operating a Gymnasium and undertaking Volleyball administration, and (2) the appointment of Cr Norriss (as Chair) and Cr Dowler (as Deputy Chair) to the Tasman Regional Transport Committee.
For the agenda and minutes of the extraordinary full council meeting, see http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/full-council-meetings/?path=/EDMS/Public/Meetings/FullCouncil/2013/2013-12-19.
A full Council meeting was held on 5 December 2013. The agenda was substantial (taking over the allotted 6 hours to be considered) and comprised:
- public forum presentations;
- freedom camping rules;
- port Tarakohe proposal;
- appointment of directors;
- Murchison visitor centre proposal;
- regional tourism proposal;
- parking and other traffic restriction rules;
- Saxton field transmission lines;
- Kina peninsula boat shed proposal;
- Water storage (known as the lee valley dam) project issues;
- Brightwater domain deliberations;
- Chief Executive’s activity report; and
- replacement of the mayor’s car.
All councillors were in attendance.
To keep this post short, I have summarised below the main items that took up most of the councils time.
A number of submissions were received – most on the trans-pacific partnership agreement (TPPA) and Port Tarakohe.
Trans-Pacific Partnership Agreement
Having received a number of public submissions on the TPPA council resolved to ask that staff report back briefly on the public’s draft resolution so that it might be considered at the next full council meeting. By way of background, the previous Council had already passed a very short resolution in September 2013 (see http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/full-council-meetings/?path=/EDMS/Public/Meetings/FullCouncil/2013/2013-09-19) which was followed by a letter from council to the Minister of Trade (a copy enclosed in the agenda at p 309). However, the proposed draft resolution put before council proposed using similar wording as used by the Auckland and Nelson councils resolutions.
The Auckland council resolution (item 26) can be found at:
- http://www.itsourfuture.org.nz/wp-content/uploads/2012/09/Auckland-City-resolution.pdf; or
The reports and presentations that gave rise to that Auckland council resolution can be found at (item 26, pp 385-419):
The Nelson council resolution and minutes can be found at:
Council decided to direct staff to report back at the next full council meeting on the draft resolution’s consistency with the Auckland and Nelson resolutions, so that it could consider whether it wanted to pass a more though resolution.
Since then, Greater Wellington Regional (GWR) council has also passed a resolution (dated 12 December 2013) on the TPPA (see http://www.stuff.co.nz/dominion-post/news/politics/9513659/Council-wades-into-trade-debate). It is noted that the proposed resolution (http://www.gw.govt.nz/assets/council-reports/Report_PDFs/13.1049.pdf) and final resolution (reproduced below) were much shorter than the Auckland and Nelson resolutions. The final GWR resolution (dated 12 December 2013) states:
“That the Council expresses concern at the lack of information available on the potential implications of the Trans-Pacific Partnership Agreement for New Zealand and for local government and, while accepting that treaty negotiations are general confidential:
1: Notes public reports that the New Zealand negotiators, along with those from other like-minded countries, do not agree with a number of proposed measures including those pertaining to pharmaceuticals, intellectual property protection and environmental measures;
2: Notes that the TPP, as with all trade agreements, will go through the full parliamentary process and, once that is complete, any law changes necessary to ensure New Zealand’s compliance with the treaty must be passed by parliament; and
3: Urges the Government to instruct its negotiating team to continue to oppose measures that would have unjustifiable negative impact on the ability of local government to make decisions on a range of options including procurement that are currently available under New Zealand law.”
For information on the process of adopting a treaty into New Zealand law (see http://www.mfat.govt.nz/Treaties-and-International-Law/03-Treaty-making-process, http://www.scoop.co.nz/stories/PO1212/S00035/treaty-making-101-for-ministers-bloggers-and-lobbyists.htm, http://www.parliament.nz/en-nz/pb/business/qoa/50HansQ_20131210_00000008/8-trans-pacific-partnership—release-of-information, http://www.parliament.nz/en-nz/pb/business/qoa/50HansQ_20131211_00000005/5-trans-pacific-partnership%E2%80%94ratification-process, http://www.lawcom.govt.nz/sites/default/files/publications/1996/05/Publication_38_101_R34.pdf).
For a recent update on the TTPA see http://werewolf.co.nz/2013/12/tpp-all-cards-on-the-table/
I’ve spoken to this topic in an earlier post. Essentially Tasman now has two freedom camping bylaws. One governed by the Local Government Act (LGA) and now another governed by the new Freedom Camping Act. Designated areas in Motueka have been selected for coverage by the new bylaw as empowered under the Freedom Camping Act. Other proposed areas (for example, Liga Bay) will continue to be controlled by the older bylaw empowered under the LGA, as is most of Tasman District. Council will be monitoring the application of the new bylaw to gauge its success and whether further role out is warranted (if at all).
This was a controversial proposal. The premise for the proposal was the removal of financial support from the general rates so that users of the port were paying for its ongoing operation, rather than ratepayers. In order to do this charges for using the port would have to be increased to make it self sustaining. The port is used by recreational users and commercial fishers (mainly mussel farmers). After, what I consider to be, a very brief consultation period (given its complexity and magnitude), it was decided that the original proposal would be softened. In effect, the impact of the proposed charges would be spread over a longer term (ie the charges would progressively be stepped up over a five year period) producing a working capital surplus by year 5 of nearly $300,000.
During council discussions I had asked staff if the projected working capital could adopt a zero surplus position (in effect reducing the charges so no working capital was accumulated). However, I was advised that without sufficient working capital no improvements to facilities or services on the wharf could be made (and this had been requested by community board members and some councillors).
I believe that council and the Golden Bay community still need to come up with a longer term strategy for the port to be sustainable. The real issue is the amount of business that the port generates (or does not generate). If there was more business going across the wharf, then there would be less pressure to increase port charges. In my opinion, if products (like milk) were able to use the port for shipping product to and from Golden Bay, rather than being trucked over the hill (causing road repair costs for the community), then the port (and our roads) might be in safer hands. The challenge is to make shipping a cost effective option. It might also be suggested that business activity around the port could be increased by providing the right incentives for new port businesses to be established and grow.
Tourism is another significant issue for Tasman. It is also a multi-faceted issue that essentially involves two layers of tourism promotion. First, there is promotion (usually the provision of information) from visitor centres within the region. This is the most visible form of tourism that ratepayers might experience or see themselves. Secondly, there is the promotion of Tasman to the outside world – both domestically and internationally. This type of destination promotion is pitched at attracting people to the region, rather than giving them information once they are here.
At present, tourism for Nelson and Tasman is managed by a company called Nelson-Tasman Tourism Ltd (NTT) that is jointly owned by the Nelson and Tasman councils. NTT operate a number of licensed “i-sites” (effectively branded visitor information centres) across both Nelson and Tasman. The most used and most visible being the Nelson “i-site”.
As part of NTT’s review of its operations, it proposed to close down two loss making “i-sites” – namely the Golden Bay and Murchison “i-sites”. At this point, its worth noting that a separate proposal for the continuation of a visitor centre in Murchison was also considered by council. In effect, the proposal sought to provide a visitor centre as part of a single central service hub that would be housed in a common building with other council services (for example, the council services centre). The recommendation was that a visitor centre needed to be on the main road. However, this is open to debate, as effective signage on the main road that points to a side road, only a short distance away, might be just as effective. It’s only when the journey from the signage to the visitor centre is more convoluted, that a presence on a main road is required. In Murchison, there is no danger of the journey being very long, as there are only a few side streets off the main highway through Murchison.
In terms of visitor centres, I am of the opinion that a single central service hub for visitor centres is the way to go. This would mean that NTT would not be required to manage visitor centres and council would directly fund them. A shared service hub, be it with other council services or the Department of Conservation (DOC) should provide cost savings, both from shared building space and shared staff. For example, in Motueka, a visitor centre could be part of the Motueka library. Similarly, a visitor centre could be part of the Richmond library or Golden Bay library. This would enable visitors to have access to computers to make bookings, as well as have access to library staff who can point them to the relevant resources. I should add, that this would not mean that the Richmond visitor centre on Gladstone Road would be abandoned (as its incredibly cost effective due to being run by volunteers), but rather tourism could be run from the Richmond library as well, for very little additional expenditure.
Bringing all visitor centres under the direct control of council is the direction that is being pursued. And I agree with that direction, provided it delivers cost savings. This would mean that half of NTT’s function (and funding) would no longer be required and that funding would be redirected away from NTT and back to council. Whether council wish to withdraw from the second function of NTT (the promotion of Tasman as a destination) is still open to debate. Certainly the resolution that was passed by council invited further consultation on the issue, although it also made it clear to NTT, that council was considering withdrawing all funding of NTT for destination tourism. To make it absolutely clear, the council has yet to make that decision.
At this point its also worth considering the council commissioned report from OPUS. That report examined NTT’s role and suggested that it merge with another agency – the Economic Development Agency (EDA). Whether that is a well thought out proposal is hard to gauge at first glance as there was very little in terms of evidence in the report to suggest where the efficiencies and cost savings were from such a merger.
In my opinion, Tasman still requires investment in destination tourism. The question is what entity is best suited to provide that service. Is it NTT or is it another entity. Of course there is also another question tied up with this issue, which is funding. Who should be funding destination tourism – ratepayers or business? In my opinion, if council is funding visitor centres, then from a position of consistency, council should also be funding destination tourism. Lets not forget, businesses also pay rates.
So what was decided. First, council approved ongoing funding of NTT for the 2014-15 year at a maximum level of $426,000 (which is what Nelson council recently agreed). Second, council undertook to directly fund all visitor information centres in the region for the 2014-15 year (and correspondingly reduce NTT funding to a maximum level of $170,000). Thirdly, council sought, as part of its consultation over the 2015-25 long term plan, consideration of a proposal to withdraw all funding of NTT. Whether this proposal is adopted has yet to be decided. Fourthly, council agreed to consider the Murchison proposal to merge visitor information and council services centres into a single hub. Finally, council requested that financial proposals for Motueka, Golden Bay, and Murchison visitor information be completed by 31 January 2014, so they could be assessed.
See also http://www.stuff.co.nz/nelson-mail/news/9518177/Tourism-body-threatened, http://www.stuff.co.nz/nelson-mail/news/9489922/TDC-set-to-pull-the-plug-on-tourism-bodys-funding, http://www.stuff.co.nz/nelson-mail/opinion/9498567/Editorial-Fine-tourism-line-for-Tasman, http://www.nelsoncitycouncil.co.nz/council/news/recent-media-releases-and-news/council-commitment-to-tourism-remains.
Water Storage – The Lee Valley Dam
Council were also briefed on the processes and requirements council could be expected to follow when considering any future water storage proposal. As part of that discussion the chief executive had devised a memorandum of understanding with the key players to date. Namely the Waimea Water Augmentation Committee (WWAC) and a proposed holding company (Dam Co) that would be established by the WWAC. Dam Co would be used to apply for the various resource consents required for any water storage solution. Council was advised that wrap-around legal documentation with Dam Co, securing various property interests and rights for council, would be entered into between Dam Co and the council.
In my opinion, council should be establishing its own holding company, rather than using a privately owned entity, regardless of the legal protections council might put in place. This is because it shows to the public that no ownership outcomes have been pre-determined and avoids the need for unnecessary legal complexities. As history shows, complexity is the father of unforeseen surprises and this is not a project where we need surprises.
Appointments – Director of Airport
The council resolved to appoint Cr Edgar as a council appointed director of the airport. Cr Edgar holds a number of chair positions on council committees and is an experienced councillor. Readers of this blog will also remember that Cr Edgar was also nominated for deputy mayor at the first council meeting, which she subsequently declined to accept (see earlier post).
Agenda and Minutes
A copy of the agenda an minutes of 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/2013/2013-12-05