Tagged: Rates remissions

Corporate services committee meeting (24 March)

The corporate services committee meeting was held on 24 March 2016. Apologies were received from Crs Mirfin, Bouillir, Sangster and Ensor for absence, and Cr Dowler and the Mayor for lateness. The agenda included: (1) presentation from ASB Bank Economist, (2) remission application – policy on remission of excess metered water rate, (3) corporate services activity report, and (4) treasury report. I will summarise the main highlights.

Public forum

Public forum included presentations from Maxwell Clark who spoke about the water usage charge for a Murchison commercial property, which had been subject to a leak. He believed that the remission policy was out of date and that the water charges were excessive. He also spoke about freedom camping. He considered freedom campers added value to the regional economy and should be welcomed.

Remission application

A small business in Murchison sought a remission from water charge issued to them in December 2015 which was unusually high ($5,252.40) due to a water leak on the property. The business’s previous bill issued in June 2015 was for $1,194.90 and council records indicated that a letter had been sent to the customer stating their account was high.

The Council’s Policy on Remission of Excess Metered Water Rates states that the policy applies “to applications from ratepayers who have excess water rates due to a leak in the property’s internal reticulation.” The policy further defines internal reticulation as going “directly to the dwelling”, and states how the dwelling must be used only or mainly for residential purposes.

Cr Edgar argued that remissions came at a cost to budgets, and therefore other ratepayers would effectively subsidise the remissions.

In this instance the applicant was a business and they had been given prior notice of a potential leak. Accordingly, council (Cr Edgar moving the resolution) declined to issue the applicant a rates remission. Cr Bryant opposed this decision.

In my opinion it would be useful if an “over time” graph of water usage was presented on the invoice (ideally comparing earlier years) – so that unusual water consumption (ie leakage) could be easily identified by consumers. Digitisation (and on-demand printing of invoices, rather than using pre-printed invoices) would enable this kind of modification to invoices.

I am also of the opinion that there is the potential to do an end of year mop up in the water account and to pro-rata any surplus between valid remission applications submitted during the year. After all, the additional water consumption would not be planned and its likely the water account would have a corresponding surplus.

Corporate services activity report

Council received the corporate services manager’s report. Highlights included:

  • Financials. Year-to-date expenditure was favourable against forecast by $147,000 with favourable variances across most budget lines. The forecast year-end position compared to the budget is a net overhead deficit of $50,000 once the impact of treasury interest costs (down on budget by 0.45%) and depreciation is removed. The driver of the forecast deficit is additional professional fees (ie programmed investment valuations as part of our ongoing review of assets for potential sale). There is a high level of activity with ongoing work on reporting and improved debtor management.
  • Property. The revised Best Island land valuation was received at the start of March. Discussions were occurring with the Property Group and the Ashtons.
  • Information Services. The Confirm Enterprise asset management system was updated to the latest version. Cameras for staff Skype calling, video conferencing and Webinar participation have now been added into the Heaphy, Wangapeka and Sabine rooms. The electronic document and records managements systems project continues with the new Council file structure being installed into the test system in late March. A workshop on the strategy was planned for early April. The Strategy will ensure a more externally-focused strategy with an emphasis on using technology and digitisation to improve functions and processes, providing improved service options and a better customer experience with council.

Council also instructed staff to place on hold the current disposal process for surplus land at Mapua pending a review and report back to council on potential alternate uses of this land.

Treasury report

Council’s debt (at 29 February 2016) totalled $139 million, with an average interest rate of 5.274% (June 2015 was 5.166%). The weighted average interest rate on borrowings is 5.274%. The Council’s cost of funds including interest rate swaps, bank margins and line fees being taken into account is 5.321%, compared to a budget of 5.70%.


At 29 February 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 104% cover over existing debt and 87% over forecast 29 February 2017 net debt (ie 12 month debt). The swap over-hang is due to debt being retired faster than forecast. The over-hang is expected to return to 100% within the next quarter as council takes on new debt.

Debt (funding) source

Bank Debt $19.0 M 13.7%
Private Placement $30.0 M 21.6%
LGFA Debt $90.0 M 64.7%
Total $139.0 M 100.00%

Credit exposure

Bank Cash/Cash Investments $m Notional Swaps $million Credit Exposure $million Compliance
Westpac $1.2 M $63.05 M $13.86 M Within Policy
ASB $10.7 M $41.73 M $21.82 M Within Policy
ANZ Nil $43 M $11.25 M Within Policy

Council’s cash investments total $11.9 million dollars with an average interest rate of 2.85% (June 2015 was 4.43%).

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/2016/2016-03-24.


Corporate services committee (15 October)

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).

Annual report

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.

Information services

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).

Commercial activities

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.

Financial report

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?

Treasury report

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.





Full council meeting (5 March)

The regular full council meeting was held on 5 March 2015. All councillors were in attendance with apologies from Cr Mirfin.

The agenda included the following items: (1) Gowan river east bank access, (2) Best island public road access, (3) rates remission policy for rezoned land, (4) LTP and consultation document approval for public release, (5) chief executive’s report, (6) mayor’s report, and (7) machinery resolutions.

In this post I will focus on the main issues.

Gowan river access

Access to the Gowan river has been a long standing issue. Essentially it concerns the padlocking of a dirt road that is considered on paper to be a public road (ie, the legal road).

By way of background, a public road leads up to the locked gate. Nothing prevents people driving up to the locked gate. Beyond the gate is a dirt road. On either side of this dirt road is farm land. The dirt road is not fenced off from the surrounding farm land.

The dirt road does not always follow the path of the legal road and in some parts it crosses private land (to avoid going into the river). This means that at several “pinch” points, public road access temporarily ceases, either because the legal road enters the river, or the actual dirt road crosses private land. The first pinch point is only 1.7km from the locked gate.

In 2007, an application was made to place a gate across the road. That application did not seek to lock the gate. The lock appears sometime after that application.

In 2009, the council entered an agreement with the owner of the farm land. This agreement allowed the gate to be locked to protect the owners stock, while allowing people to continue to walk or cycle along the dirt road.

The owner also undertook to provide a key to the gate for vehicles requiring access. This was to allow the owner to know who might be in close proximity to stock. Unfortunately there are people about who steal stock.

A sign was also installed explaining the restrictions and process for vehicle access.

In my opinion, this is a very pragmatic solution, that is open to review when the 2009 agreement comes up for renewal or expires.

At all times, the public have access to the legal road. Either from walking, cycling, or (upon request) with a vehicle. The public also have the benefit of using parts of the dirt road that are on private land, rather than having to use the river. The use of private land is clearly a benefit that the public could not otherwise expect.

Council unanimously supported the CEO’s recommendation that the current arrangement remain and not to issue a notice to remove the lock on the gate.

I imagine, that when the agreement comes up for renewal the locked gate could be moved 1.7km further up the dirt road to where the first pinch point is located. This would probably also require the owner to correspondingly fence off the dirt road from their land.

Best island public road

When I first stood for election, I visited all the residents of Best Island (as well as many other ratepayers). At that time, it was apparent to me that a solution to a long standing road access dispute was required, so that everyone could move forward.

Council has since made some headway that involves an initiative to purchase land off residents and formally develop an unsealed public road for the benefit of all ratepayers (as illustrated below). This solution may not necessarily provide restitution for all the complex web of  wrongs or mistakes of the past, but it is a positive decision to move forward.


Unfortunately, progress has stalled over land valuations and it is now felt that council may need to use the Public Works Act. Ideally, the landowners will re-engage with Council to reach a private negotiated settlement. However, if the matter is dealt with through the Environment Court, it is likely to take up to 2 years to reach a conclusion.

The estimated project cost is $335,000. This includes: survey costs, valuation expenses, land purchase, Reserves Act processes (if required), registration of easements, road improvements, and legal expenses for the Council, and the respective Ashton and Irvine families.

Staff expect $35,000 to be spent before 30 June 2015, and the balance, of $300,000 to be funded from existing Long Term Plan roading budgets. In addition, a land owner contribution of around $5,000 per property will be levied to offset the costs and recognise any private benefit from the road.

Council resolved to authorise the chief executive to issue a “notice of desire to acquire land” at Best Island for road and walkways under the Public Works Act. The proposed road will require both the Irvine and Ashton land, but does not provide road frontage to all properties.

Public access to a boat ramp and various beach front walkways will provide benefits for the wider community. While the boat ramp has not had major use in the past and is dependent on the tide, improved road access will enable greater public use. And that must be a good thing.

In my mind the parties need to work on the best solution going forward and not dwell on trying to address the past. It happened and nothing can now change that. I am hopeful that all parties will reach a fair agreement and avoids any future problems, without incurring the additional expense of lawyers. Because the only winners (financially), will be the lawyers.

Rates remission for rezoned land

As discussed in an earlier post, the community development committee considered whether the council’s policy on “rates remission for rezoned land” should include a sunset clause.

The current policy recognises a tension between enabling land to be developed (for residential or commercial property purposes) versus not forcing people off their land. These tensions came to ahead during the Headingly Lane saga, where rural land was rezoned as residential, resulting in an unaffordable 400% rates increase for several ratepayers.

A trade-off between these two tensions was the development of a council discretion to award remissions on these rates increases on an annual basis.

The problem with an annual discretion, is that there is no guarantee or certainty that the discretion will be provided each year. Therefore the ratepayer could never plan ahead and always had hanging over their heads the threat of a dramatic rates increase.

A sunset clause would provide certainty for ratepayers, developers, and council, about how long the remissions would be extended and when the land could be expected to begin development.

A 10 year sunset period was considered a sufficiently long enough time period for the ratepayer to get their affairs in order and develop, or dispose of their land (or part of it) at a fair price, and with dignity.

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 (with the last 3 years remitted at 25%).

The two alternative 6 and 4 year sunset periods were expected to be considered at this meeting. However, Mayor Kempthorne proposed a compromise, 5 year (3+2) sunset period. This was moved by Cr Higgins and seconded by Cr Ensor.

To mitigate the damage of such a short remission period, I proposed an amendment (seconded by Cr Bouillir) – removing the 2 year step down period, so that the 100% remission period would be for the full 5 years. However, I also indicated that I would not support any sunset period less than 10 years.

Without my amendment, the 100% remission period would only be for 2 years. In my opinion, 2 years was far too short and was not in keeping with the spirit of the compromise reached with residents on the current remission policy.

Using the Headingly Lane example, this would mean that the rates would double from year 2 to year 3 (a 100% increase), as they headed towards a 400% increase by year 6 (when there would be no remission allowed).

Cr King then questioned whether this was the time to be curbing the scope of the remission policy when the council had a great message in the LTP to convey to the public. His concern was that this message would be lost in the negativity that would arise from the proposed change to the remission policy.

On this basis he asked Cr Higgins whether he would withdraw his motion to change the remission policy – which he then did. Effectively, the resolution was lost unless someone else moved the same motion.

At this point in the meeting the mayor called for a short adjournment as various councillors discussed what they should do next. Fortunately, none sought to move the motion. Thus, the status quo was held.

The chief executive then proposed an alternative resolution, which sought to place the current remission policy (rather than the proposed policy) before the public, for public consultation. This was unanimously supported by councillors.

Chief executives report

The chief executive issued a report, as a late item, under a separate cover to the agenda. The report covered a number of items including: (1) a review of several strategy and planning issues, (2) a drive to use technology to reduce staff costs (and where feasible increase public participation), (3) an update from the regional sector group and CEO forum, in particular reforms to the RMA and importance of risk management, (4) a financial update, (5) a health and safety update and new initiatives, and (6) the Murchison visitor information centre function being delivered by the local museum.

As well as a reminder that private emails and texts sent by councillors (in that capacity) are official information.

The finance update for the period ended January 2015 showed an accounting deficit of $1.227 million compared with the budgeted surplus of $4 million. A negative variance of $5.232 million. A significant portion due to a book entry loss on interest swap revaluations.

When the loss on interest rate swaps is removed, the council has a positive variance of $3.112 million. With expenditure currently tracking below budget by $3.476 million.

Savings mainly came from: reduced interest costs ($1.2 million), reduced emergency works ($0.144 million), and reduced maintenance costs ($2.582 million).

The balance sheet remains in a strong position. External debt is $149.1 million (forecast to be $174.3 million at the end of the fiancial year in June). The capital expenditure budget is $48.4 million (including carryovers of $17.4 million from previous financial years). Capital expenditure is currently around $18 million compared to the forecast expenditure of $36 million.


The long term plan (LTP) and consultation documents will have been released to the public (see http://www.tasman.govt.nz/policy/public-consultation/2015-2025-long-term-plan/). Submissions close on 20 April 2015.

I hope to provide a summary of the key messages (and my opinions) on the LTP in a subsequent post. Generally, its a good document and our efforts in meeting the new format requirements has received very positive comment from the auditor general.

However, there were items that were added by staff late in the process and which could not be removed before the draft plan was released to the public, due to the finance team being stretched to recalibrate the finances if removed. Such was the pressure to get the plan out on time.

For example, the late addition of two new sets of traffic lights on Salisbury Road (one at the Queen Street intersection and one at the William Street T-junction). In my opinion, these additions are not required, and the money could be better spent minimising storm water risk in Richmond South, Bateup Road, Wensely Road, and other spots in Richmond where homes flooded.

I would advise the public to read the activity management plans. These are the extra documents. These plans outline what work will be done (or not done) and when.

Agenda and minutes

The agenda and minutes can be found at http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/full-council-meetings/?path=/EDMS/Public/Meetings/FullCouncil/2015/2015-03-05.


National business review http://www.nbr.co.nz/article/nz-councils-good-financial-health-debt-costs-dropping-future-funding-still-concern-bd-168450

The Herald http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11399768

The Nelson Mail http://www.stuff.co.nz/nelson-mail/news/67414134/Council-seeks-island-road-solution


Extra full council meeting (19 February)

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).

CEO briefing

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.

Corporate Services Committee (30 January 2014)

The Corporate Services Committee meeting was held on Thursday 30 January 2014. All councillors were in attendance.

The agenda comprised a number of reports. However, the ones of particular interest to me were: (1) rates remission requests, (2) the Takaka service centre proposal, and (3) treasury policy changes.  Other activities were also reported on, including: (1) treasury activities, (2) corporate and finance activities, (3) property management activities, and (3) information services activities.

Rates remission

The first, rates remission, because it seemed peculiar that such a minor sum would come before council for consideration and approval. Especially when the amounts were no more than approximately $300 and $400 respectively. As Cr Sangster rightly pointed out, the authorisation process was not complicated and anything under $1,000 should automatically be authorised under delegated authority, without the need for council to rubber stamp the request. The cost of preparing the two reports for council’s consideration would have probably cost more than what was being allowed by way of the claimed rates reduction.

I also believe that trivial administrative matters should not be coming to council when staff are fully capable of showing some initiative. Thats why we have delegated authority. Hopefully, these will be dealt with in the future by way of a line in future management reports showing trends in rates remission requests and the amounts being approved.

For those wanting to know more about the process for remissions from natural disasters, a helpful decision flowchart is contained on page 11 of the agenda (see link below).

Takaka service centre

At present, due to the existing service centre being earth-quake prone, council staff are operating the service centre from a temporary leased premises.  Council have been presented with a number of options going forward. These include: (1) continuing to lease premises, (2) strengthen the service centre so it is earth-quake compliant, (3) demolish and rebuild the old service centre, or (4) build a new separate building for the service centre that could also be used for other purposes (ie a mixed civic-commercial use). For example, space could be leased to a Government Agency (ie DoC) or other businesses. Council staff support the later option as the better long term option.

Another option could be the expansion of the new Takaka library as a community “hub” for library and service centre functions (and perhaps tourism information too). Why can’t you pay for rates and make general enquiries from a shared library-service centre front desk? Whether it incorporates a mixed civic-commercial use would depend on available space. This option might require a second floor due to limited surrounding land. Unfortunately, it appears that when the new Takaka library was being planned, no one considered bringing all of council’s services together under one roof.

Another option (suggested by Cr Sangster) was to locate a new mixed use service centre building where the current tourism (i-site) building is located. This option had some merit, but might also require acquiring surrounding land or building a two storey building.

A complicating factor is the use of the old service centre building. If it were no longer used for council purposes, it might revert back to central government ownership. It was decided that a working party would be established to investigate all options to find the most cost effective solution.

At the end of the day, whatever option was decided would require some sizeable capital investment in Takaka. What concerns me is that other capital investments are also being considered for the Takaka-Golden Bay region. In particular, a new community centre. When both capital projects are considered together, it seems to me that council is over capitalising in a region that does not have a large population. Especially at a time when we need to be keeping debt and rates down.

In my opinion, council need to be recognising that they cannot do everything at once and may have to shelve a new community centre in Golden Bay until such time as the wider district can afford it. The Golden Bay community centre is a nice to have. It is not critical. Now is not the time to be building another community centre when more pressing capital investment is required. For example, water storage projects (ie Lee Valley Dam) and storm water projects to protect people’s homes.

Treasury policy changes and activities

As part of an overall review and improvement of council’s financial functions, treasury policy has been updated to minimise external borrowing. In effect, the policy changes are operational. Rather than operating a series of separate reserve bank accounts, a whole of balance sheet approach will be adopted (with designated funds and their movement, being recorded on the balance sheet, rather than in a separate bank account). This will allow greater flexibility with the application of funds (and the repayment of debt) as well as reduce the number of bank facilities that the council currently utilises.

TDC has cancelled $25 million of bank facilities (ie, available debt to draw on) due to greater use of the Local Government Funding Agency (LGFA) for borrowing. A further $10 million transfer of debt in bank facilities to the LGFA is expected February and March 2014.

In response to concerns over some loans appearing on ward reserve financial contribution (RFC) funds, a review of RFC’s are being undertaken to ensure loans are correctly recorded against the RFC fund.

It has been proposed that any work on the Mapua wharf be  funded from the Motueka harbour and coastal works account on a fully commercial basis.

As at 31 December 2013, cash investments totalled $5.48 million at an average interest rate of 3.89% and council debt totalled 153.13 million at a weighted average interest rate of 5.189%. As at 31 December 2013, TDC had $130.78 million  of interest rate swaps in place to protect against interest rate fluctuations and provide certainty over the cost of  debt.

It should be noted that council debt fluctuates depending on the time of reporting and should not be confused with the reported projected debt figure for the end of  the 2013-14 financial year (ie at 30 June 2014).

Finance activities

As at 30 November 2013, income was 3.9 million above budget and expenditure was $2.7 above budget –  a net surplus of approximately $1.2 million. While much of the savings may be related to timing, there are good signs that by the end of the financial year (ie 30 June 2014), TDC might be carrying a surplus to address debt (thus reducing the increasing costs of debt for subsequent years as interest rates continue to rise).

While TDC debtors (ie people who owe the TDC money) has reduced by almost $1 million from October 2013 to November 2013 (ie $5.737 million to $4.743 million). Allowing for timing issues (and the processing of invoices), it is still much higher than the same time last year (ie $3.66 million in November 2012).

Agenda and minutes

The agenda and minutes for this meeting can be found at: http://www.tasman.govt.nz/council/council-meetings/standing-committees-meetings/corporate-services-committee-meetings/?path=/EDMS/Public/Meetings/CorporateServicesCommittee/2014/2014-01-30.