Agenda of Strategy and Operations Committee Meeting

Strategy and Operations Committee Meeting Agenda

5 December 2019

8 Reports

8.1 The 2009 Beach Bylaw Review Project

Author: Brandy Griffin, Senior Policy Advisor

Authoriser: Mark de Haast, Group Manager

Purpose of Report

1 This report provides the Committee with a progress update of the 2009 Beach Bylaw Review Project.

Delegation

2 Section B1 of the Governance Structure and Delegations for the 2019-2022 Triennium states that the Strategy and Operations Committee is responsible for the development and review of strategies, plans, policies, and bylaws.

Background

3 The Beach Bylaw Review is on the Council-approved Policy Work Programme, and commenced in February 2019.

4 Bylaw reviews are generally carried out in three phases:

4.1 Phase 1 includes:

4.1.1 pre-consultation engagement, data collection, and analysis;

4.1.2 the identification of issues and options; and

4.1.3 the development of proposed revisions to the existing bylaw.

4.2 Phase 2 includes the development of a draft Bylaw and public consultation on any proposed revisions, carried out in accordance with the LGA 2002 requirements for special consultative procedures.

4.3 Phase 3 involves the analysis of written and oral submissions, leading to a final draft of the revised bylaw, which is then presented to Council for final consideration and adoption.

5 This progress update provides information on the data collection and analysis that has been undertaken to date, and the proposed approach and timeframes for the remainder of the review.

DISCUSSION

Phase 1: pre-consultation data collection and analysis

6 The pre-consultation phase seeks to identify issues with the existing Bylaw to be considered in the review.

7 To date, Council Officers have completed the following:

7.1 Analysis of service requests, emails, and other correspondence that Council received in relation to the existing Beach Bylaw from January 2017 to December 2018;

7.2 Analysis of beach patrol data from the summer of 2016/17 to the present;

7.3 Initiated a legal review to better understand several aspects of the Bylaw, particularly in relation to legislative requirements and jurisdiction of other government agencies;

7.4 Completed a review of other coastal Councils to understand how they address similar issues; and

7.5 Carried out some initial discussions with New Zealand Police and Greater Wellington Regional Council (GWRC) to discuss jurisdiction and implementation.

8 Table 1 below lists the key issues that were identified from the review of Council’s service requests. Service requests from 1 January 2019 to 31 October 2019 are currently being analysed.

Table 1: Issues raised in service requests, January 2017 to December 2018

Issue	Number of service requests	Percentage of total*
Vehicles on beaches - concerns about pedestrian safety and/or harm to the natural environment	76	72%
45 (59%) of these were in the area between the Kapiti Boating Club and the Waikanae Boating Club.	76	72%
Beach access areas - improvements requested for beach access ways, parking, signage, and boat ramps	31	30%
Horses on beaches - some callers raising complaints about the presence of horses on the beach, while others wanted to see improvements to facilitate horse riding on the beaches	8	8%
Total number of service requests	105	-

* Note: percentages add to more than 100% because some service requests included more than one issue.

9 During the summer beach patrols, Officers collected information on 281 cars and spoke to 173 drivers (62%). Of the 173 drivers, most were not familiar with the rules for cars on beaches. Common non-compliant activities included: watching the surf, fishing, surfing (further north), parking (without a disability permit or boat launch), dog walking, and freedom camping. For those that identified where they were from, 47% were from Kāpiti, 31% were from the wider Greater Wellington region, 12% were from Horowhenua and Manawatu, and 10% were from elsewhere in New Zealand. Table 2 below lists the locations where the beach patrol data was collected.

Table 2: Beach patrol data (2016 to the present)

Location	Number of cars (n=281)	Percentage of total
Ōtaki	21	8%
Te Horo	18	7%
Waikanae (North of boating club)	16	6%
Raumati	10	3%
Paraparaumu (Boating club to WSR)	216	76%

10 The reviews of emails and other correspondence, as well as discussions across Council and with the New Zealand Police and GWRC, suggest that other issues requiring further consideration in this review will include:

10.1 Promoting safety around the use of kontiki longline fishing systems;

10.2 Protection of sensitive sites;

10.3 Permitting for special events; and

10.4 Implementation and enforcement.

11 Data collection and analysis will continue throughout the review, primarily in response to any new issues that become identified that require further information.

Next steps for early engagement

12 It is important that early engagement occurs with our iwi partners, key stakeholders, and members of the public before a draft Bylaw is developed.

13 Council Officers have worked with the Iwi Relationships Team to seek advice and guidance from each of the three iwi on how they would like to work with us on this project.

14 As for engagement with the community and key stakeholders, a detailed engagement plan has been developed.

15 Table 3 below provides a general overview of the engagement planned.

Table 3: Planned engagement and timeframes

Type of engagement	Target Timeframes
Meetings with iwi partners
Iwi partners	To be determined.
Meetings with key stakeholders
Governance partners (e.g., GWRC, MPI, DOC, Police)	November to December 2019, with the understanding that some discussions will carry over into the new year depending on the number of meetings required and/or stakeholder availability
Emergency responders
Residents’ associations
Community Boards
Special topic interest and/or advisory groups (KEAG, CWB, OPC, etc)
Boating clubs
Commercial operators and other businesses
Environmental groups
Recreation groups
Mass communications + ongoing meetings with key stakeholders
On-line survey (4 weeks), with widespread advertising and promotion	13 Jan – 9 Feb 2020
Information pop-ups (Paraparaumu Beach Market, Waikanae Surf Club, Paekākāriki and Ōtaki)	18 Jan 2020 (Sat) 25 Jan 2020 (Sat)
Beach walks	19 Jan 2020 (Sun) 26 Jan 2020 (Sun)
Facilitated workshops in Ōtaki, Waikanae, Paraparaumu, and Paekākāriki (4x)	February 2020 (exact dates TBD)

Phases 2 and 3

16 The information collected during Phase 1 will be used to develop a draft 2019 Bylaw and Statement of Proposal that will be released for public consultation in accordance with the LGA 2002 requirements for special consultative procedures.

17 During this formal consultation period (Phase 2), some public drop-ins will be held to ensure the public has had sufficient opportunity to provide feedback and hearings will be held to ensure that submitters are given an opportunity to speak to their submissions. More information on the public drop-in sessions and hearings will be provided when the draft 2019 Bylaw and Statement of Proposal are presented to Council.

18 The information collected from the formal consultation period will then be considered and will input into a final draft 2019 Bylaw, which will be presented to Council for final consideration and adoption (Phase 3).

19 The proposed timeframes for Phases 2 and 3 are outlined in Table 4 below.

Table 4: Tentative timeframes for the Beach Bylaw review for Phases 2 and 3

Action	Target Dates¹
Briefing to Council, with a focus on the initial results of the early engagement phase and next steps	27 February 2020
Briefing to Council on the development of the Draft Bylaw and Statement of Proposal	26 March 2020
Council approves special consultative procedure on Draft 2020 Bylaw and Statement of Proposal to Council	28 May 2020
Special consultative procedure, including discussions with Community Boards and public drop-in(s)	8 June to 5 July 2020
Hearings	30 July 2020
Report to Council for adoption of Beach Bylaw 2020	23 September 2020

¹ These dates are tentative. The nature of the feedback received during Phase 1 will impact the proposed timeframes.

Considerations

Policy considerations

20 There are no policy considerations in addition to those outlined in this report.

Legal considerations

21 The current Beach Bylaw was adopted on 7 May 2009. In accordance with s159 of the Local Government Act 2002 (LGA 2002), the Bylaw was due to be reviewed by 7 May 2019.

22 Because the review was not completed by 7 May 2019, s160A of the LGA 2002 has come into effect which states the Bylaw will be revoked automatically if the review is not completed by 7 May 2021.

Financial considerations

23 This review will be carried out within existing budgets.

Tāngata whenua considerations

24 It is important that we work with our iwi partners on this review, and we have been in contact with each of the three iwi to learn how they would like to participate in this project.

Strategic considerations

25 Toitū Kāpiti includes aspirations for strong, safe communities and a thriving environment. The Beach Bylaw assists in the attainment of these aspirations because it seeks to enhance the safety of the public on the beach, while also protecting the beach natural environment.

SIGNIFICANCE AND ENGAGEMENT

Significance policy

26 In accordance with the LGA 2002, a special consultative procedure will be required for this Bylaw review.

Consultation already undertaken

27 Conversations have started with New Zealand Police, GWRC, DOC, MPI, and emergency responders.

Recommendations

It is recommended that the Strategy & Operations Committee note this progress update on the 2009 Beach Bylaw Review Project.

Appendices

Nil

Strategy and Operations Committee Meeting Agenda

5 December 2019

8.2 2018-2021 Policy Work Programme Update

Author: Brandy Griffin, Senior Policy Advisor

Authoriser: Mark de Haast, Group Manager

Purpose of Report

1 This report provides the Committee with a progress update on the 2018-2021 Policy Work Programme (PWP), and requires Committee approval of proposed changes to the PWP.

Delegation

2 The Committee has delegation to consider this matter under Section B.1 of Governance Structure & Delegations 2019-2022 Triennium, which states that a key responsibility of this Committee will include “Setting and approving the policy and strategy work programme.”

Background

3 On 31 January 2019, the Strategy and Policy Committee, a Committee of the previous term, approved the Council’s PWP from 1 July 2018 to 30 June 2021.

4 At its meeting on 5 September 2019, the Strategy and Policy Committee considered a PWP progress update, approved revised timeframes to five existing policy projects, and approved two new policy projects (i.e. Market Support Policy and Gifting of Vested Assets Policy).

5 This progress update to the PWP reports on projects that:

5.1 have been completed;

5.2 are in process with no known concerns;

5.3 are in process with some delays;

5.4 are currently on hold; and

5.5 are proposed as new additions to the PWP.

DISCUSSION

Completed projects

6 Since 1 July 2018, 13 projects on the PWP have been completed (see Table 1 below, and those that are marked as blue in Appendix 1 to this report).

Table 1: Completed projects

Project		Completion date
1.	Annual Report 2017/18	27 September 2018
2.	Alcohol in Public Places Bylaw	6 December 2018
3.	Trade Waste Bylaw Review	24 January 2019
4.	CEMARS	31 January 2019
5.	Dog Bylaw and Policy Review	14 March 2019
6.	Class 4 Gambling and TAB Venue Gambling Policy Reviews	11 April 2019
7.	Annual Plan 2019-20	23 May 2019
8.	Speed Limit Review	13 June 2019
9.	Film Friendly Policy & Screen Wellington MoU	5 September 2019
10.	Annual Report 2018/19	26 September 2019
11.	Housing & Business Development Capacity Assessment (HBA)	8 November 2019
12.	On-going NPS UDC quarterly reports	Five quarters ending 31 August 2018, 30 November 2018, 28 February 2019, 31 May 2019, and 31 August 2019
13.	On-going quarterly activity reports	Six quarters ending 30 June 2018, 30 September 2018, 31 December 2018, 31 March 2019, 30 June 2019, and 30 September 2019

Projects currently in process with no known concerns

7 There are currently 26 policy projects in process, with no known concerns (see those marked as green and yellow in Appendix 1 to this report).

Projects currently in process with some delays

8 There are four policy projects in process that are experiencing some delays (see Table 2 below, and those marked as amber in Appendix 1 to this report).

Table 2: Projects in process, with some delays

Project	Current status	Impact on completion date
Development Management Strategy Review	Commencement of this review was delayed because it was dependent on the completion of the HBA. The HBA report for the Wellington Region has now been publicly released, and a project plan is currently being developed for the Development Management Strategy Review.	No change
Welfare Plan	The Kāpiti Plan has been drafted, but will not be finalised until the Wellington Regional Welfare Plan has been completed.	The expected completion date for the Wellington Regional Welfare Plan is March 2020.
Environmental Monitoring Strategy	The Research & Policy team is reviewing the existing Strategy in order to recommend next steps on this project.	No change
Regional Waste Management and Minimisation Plan (RWMMP) Local Outcomes Plan	The Plan has been drafted, but will not be completed until the Mayoral Waste Minimisation Taskforce completes its report to Council recommending the prioritisation of the waste minimisation actions under the RWMMP.	The Taskforce will present a report to Council on 12 December 2019.

Projects on hold

9 There are three policy projects that are currently on hold (see Table 3 below, and those marked as pink in Appendix 1 to this report).

9.1 Two policy projects are on hold while discussions occur with iwi; and

9.2 One policy project is on hold awaiting the outcome of the Housing Programme Assessment.

Table 3: Projects that are on hold

Project	Status	Reason for hold
Biosolids Strategy	A considerable amount of work has been undertaken over the last two years through the Lower North Island Collective Biosolids Strategy Study, which received significant MfE funding.	The management of waste in our District (and, in particular, the impact on land and water) is of significant interest to tāngata whenua, and will be progressed when capacity within iwi allows.
Joint Iwi Management Plan	This is a project that Te Whakaminenga o Kāpiti (TWOK) requested. There has been no active conversation with iwi on this plan in 2019. Te Ātiawa Ki Whakarongotai published their Kaitiakitanga Plan in June 2019.	The Iwi Partnerships Team will discuss this item with TWOK to determine whether there is still an appetite to develop this Plan.
Older Persons’ Housing Policy Review	Internally, responsibility for this work is to be determined as well as its relationship to the wider housing programme.	This project is on hold, awaiting the outcome of the Housing Programme Assessment.

New policy projects proposed for approval

10 Since the last PWP progress update, two additional policy projects have been identified (see those marked as yellow in Appendix 1 to this report):

10.1 the Regional Land Transport Plan; and

10.2 the Library Strategy.

Regional Land Transport Plan

11 Regional land transport plans (RLTPs) are six year plans that document the regions' land transport objectives, policies, and measures as well as providing a statement of transport priorities for the region. The plans incorporate programmes of regional land transport activities, including those activities proposed for inclusion in the National Land Transport Programme. They are reviewed after three years.

12 The review of the Wellington RLTP is in progress, and it was recently determined that the RLTP should be moved from the ‘list of submissions in process for regional government’ to the PWP in order to reflect the workload associated with its development.

13 The RLTP commenced in January 2019, with an expected completion date of June 2021.

The Library Strategy

14 The Library Strategy is also in progress, having commenced in October 2019 with an expected completion date of August 2020.

15 The Library Strategy will identify possible future library services across the District, reflecting the increased ‘social investment’ approach that accompanies the reintroduction of the four well-beings into the Local Government Act.

CONSIDERATIONS

Policy considerations

16 There are no policy considerations in addition to those already outlined in this report.

Legal considerations

17 Legal Counsel has reviewed and confirmed the timeframes for the review of all policies and bylaws.

18 Section 159 of the Local Government Act 2002 (LGA02) requires bylaws to be reviewed within ten years. The Beach Bylaw 2009 was adopted on 7 May 2009 and was due for review by 7 May 2019; however, section 160A of the LGA02 provides that a bylaw is revoked if it has not been reviewed within two years of the date on which the bylaw should have been reviewed. Thus, the Beach Bylaw remains valid and legally binding until 7 May 2021. Council is focussed on ensuring this bylaw is fully reviewed and a new bylaw is adopted within this timeframe.

Financial considerations

19 There are no financial considerations arising from this report.

Tāngata whenua considerations

20 This report will be presented to Te Whakaminenga o Kāpiti at their next meeting in February 2020.

21 As the implementation of the PWP is carried out, planning is undertaken to ensure that individual policy projects are created in partnership with tāngata whenua.

Significance and Engagement

Significance policy

22 While some individual policy projects will have a medium to high level of significance, this progress report on the overall PWP has a low level of significance under Council’s Significance and Engagement Policy.

Other Considerations

23 The Beach Bylaw Review is currently in process with no known concerns, but the discussions with governance partners (i.e. Greater Wellington and New Zealand Police) about jurisdiction are ongoing, so the completion date for this project has been amended from June 2020 to September 2020 to ensure sufficient time for these discussions.

24 The Traffic Bylaw Review is currently in process with no known concerns, but the Sustainable Transport Strategy Review is a priority, so the completion date for this project has been amended from June 2020 to September 2020 to ensure sufficient time.

25 The PDP Variation 2 – Waikanae Beach is in process, but it has taken the Court some time to issue a decision on the application for immediate legal effect. This will delay the completion of the variation. Whereas the current PWP indicated that this variation would be completed by February 2020, the completion date for this project has been amended to July 2020 to account for the time taken by the Court to issue a decision.

26 The Open Space Strategy Review is currently in process with no known concerns. Consultation was tentatively scheduled for March 2020, but will now be April 2020 to allow sufficient time to develop the draft strategy. The completion date will be June 2020, and the PWP has been updated to reflect this.

27 The Land Audit is currently in process with no known concerns. The expected completion date for this project was March 2020 but, since this is a sizeable piece of work, June 2020 is considered to be more likely, and this will have flow on effects for the Property Strategy and Encroachment Policy. The PWP has been updated to reflect this.

28 When the PWP was approved in January 2019, it was thought that the CEMARS review (Certified Emissions Measurement and Reduction Scheme) occurred once every 3 years. It is now understood that there is a 3-yearly plan, accompanied by a yearly audit so the PWP has been updated to reflect this detail.

29 The Waste Levy Allocation Policy is not required until the grant application period opens in June 2020. The timeframe for the Waste Levy Allocation Policy Review has been updated so the review will commence once the update from central government on available funding has been received (estimated in February 2020) and be completed by June 2020.

Recommendations

30 It is recommended that the Strategy & Operations Committee note the projects on the PWP that:

30.1 have been completed;

30.2 are in process with no known concerns;

30.3 are in process with some delays; and

30.4 are currently on hold.

31 It is recommended that the Strategy & Operations Committee approve the following proposed amendments to the 2018-2021 Policy Work Programme:

31.1 Review of the Regional Land Transport Strategy be added, with the understanding that the project commenced in January 2019 and has an expected completion date of June 2021; and

31.2 Review of the Library Strategy be added, with the understanding that the project commenced in October 2019 and has an expected completion date of August 2020.

32 It is recommended that the Strategy & Operations Committee note the following updates to the 2018-2021 Policy Work Programme:

32.1 The Beach Bylaw Review expected completion date is September 2020;

32.2 The Traffic Bylaw Review expected completion date is September 2020;

32.3 The PDP Variation 2 – Waikanae Beach expected completion date is July 2020;

32.4 The Open Space Strategy Review expected completion date is June 2020;

32.5 The Land Audit expected completion date is June 2020;

32.6 CEMARS (Certified Emissions Measurement and Reduction Scheme) is comprised of a 3-yearly plan, accompanied by a yearly audit; and

32.7 The Waste Levy Allocation Policy is expected to commence in February 2020 and be completed by June 2020.

Appendices

1. Council Cross Policy Work Program ⇩

Strategy and Operations Committee Meeting Agenda

5 December 2019

8.3 NPS-UDC Quarterly Monitoring Report with annual update

Author: Hamish McGillivray, Senior Policy Advisor

Authoriser: Mark de Haast, Group Manager

Purpose of Report

1 To provide the Committee with a National Policy Statement on Urban Development Capacity (NPS-UDC) quarterly monitoring report from 1 June to 31 August 2019, including an annual update from 1 July 2018 to 30 June 2019.

2 The full monitoring report is attached as Appendix 1 to this report.

Delegation

3 The Strategy and Operations Committee has the authority to consider this matter under section B.1 of the Governance structure and delegations 2019-2022.

Background

4 The (NPS – UDC was introduced in 2016 and requires Council to assess housing and business demand and capacity across the district. It also requires Council to undertake quarterly monitoring and reporting of a range of market indicators published by the Ministry of Housing and Urban Development (HUD).

5 The first quarterly report was completed in September 2017 with subsequent reports repeated each quarter (December, March and June). The first report in September 2017 provided context and commentary of the current and future make-up of the district and some of the challenges and pressures that presents, particularly the affordability of housing.

6 Subsequently, an annual update has been provided each September to provide more in depth analysis across the last year, with the other ‘interim’ quarterly reports, focussing more on changes to key indicators between quarters.

7 Previous monitoring reports are available on our ‘Urban development capacity’ webpage at https://www.kapiticoast.govt.nz/our-district/the-kapiti-coast/urban-development-capacity/.

8 The following monitoring report provides an update and analysis of changes across the housing and development market for the last quarter, from 1 June 2019 – 31 August 2019, as well as analysis and comparison across the last year. The report draws from data presented in the Ministry of Housing and Urban Development Urban Development Dashboard, Statistics New Zealand and building and resource consent data.

Points of Interest

9 Key points of interest from this report include:

· Average sales prices continue to rise – now at a high of $595,000 for Kāpiti, increasing $54,000 from June 2018 to June 2019.

· Latest affordability data sees a slight improvement for Kāpiti, but levels of affordability to buy and rent remain higher (worse) than regional and national levels.

· Applications for the social housing register continue to increase – up by 28 applicants from June 2018 to June 2019.

· A recent assessment by the Council has determined that Kāpiti currently requires housing needs for an additional 205 persons over and above the district’s current housing registrations.

· NPS-UDC monitoring has been used to inform the recently published Wellington Housing and Business Development Capacity Assessment (HBA). This has identified that the district has sufficient development capacity available to meet its short and medium term housing needs, but falls short of meeting long-term needs over the next 30 years. Sufficient development capacity does however exist to meet business needs across next 30 years.

Considerations

Policy considerations

10 The HBA is required to be completed every three years, with the next one due by the end of December 2021.

11 Both the NPS-UDC monitoring and the HBA will be used to inform the review of the Development Management Strategy. The Development Management Strategy establishes the development and settlement patterns for the Kāpiti Coast district and informs the approach to development management under the Proposed District Plan. The Strategy was last updated in 2007. Work is currently underway to scope the process to review the Development Management Strategy, which is currently expected to be undertaken across the next 12-18 months

12 Some early Census 2018 data has recently started to be released, but full datasets are not expected to be available until mid-2020. Key statistics will be included in monitoring reports as they become available, with next year’s annual update able to provide updated data and context across the full set of Census 2018 data.

Legal considerations

13 Appendix 1 to this report meets the NPS-UDC 2016 requirements to monitor and publish monitoring results.

Financial considerations

14 There are no financial considerations arising from this report.

Tāngata whenua considerations

15 We have not engaged directly with iwi on this report. Te Whakaminenga o Kāpiti will be provided an update on the findings at their next meeting in February 2020.

Strategic considerations

16 Toitū Kāpiti reflects aspirations for a vibrant and thriving Kāpiti, with strong and safe communities that are connected to our natural environment. Monitoring under the NPS-UDC supports Council to adapt and respond to evidence about urban development, market activity and the social, economic, cultural and environmental wellbeing of people and communities and future generations, in a timely way.

Significance and Engagement

Significance policy

17 This matter has a low level of significance under Council’s Significance and Engagement Policy.

Publicity

18 This monitoring report will be published on the Council’s ‘Urban Development’ webpage alongside previous reports and the recently completed HBA. An email will also be distributed to a list of stakeholders who have expressed an interest in the reports and to receive future updates.

Recommendations

19 Note the contents of the NPS-UDC quarterly monitoring report for the period 1 June to 31 August 2019, including the annual update from 1 July 2018 to 30 June 2019, as attached as Appendix 1 to this report.

Appendices

1. NPS-UDC Quarterly monitoring report including annual update September 2019 ⇩

Strategy and Operations Committee Meeting Agenda

5 December 2019

8.4 THE LOCAL GOVERNMENT FUNDING AGENCY 2018/19 ANNUAL REPORT

Author: Jacinta Straker, Chief Financial Officer

Authoriser: Mark de Haast, Group Manager

Purpose of Report

1 The purpose of this report is to update the Strategy and Operations Committee on the Local Government Funding Agency (LGFA) 2018/19 Annual Report.

Delegation

2 While noting that this report is for information, the Strategy and Operations Committee, with its broad role of financial management, including risk mitigation, has the delegation to consider this report.

Background

3 The LGFA was established in December 2011 to provide long-dated borrowing, certainty of access to markets and to reduce the borrowing costs for the local government sector. On 30 November 2012, the Council became a Principal Shareholding Local Authority in the LGFA.

4 The LGFA issues bonds to wholesale and retail investors and on-lends the funds raised to participating local authorities with borrowing needs. The quality of the LFGA’s credit rating, and the liquidity created by issuing homogenous local authority paper, ensures that participating councils can raise funds on better terms than if they were issuing in their own name.

5 The LGFA meets the Local Government Act (LGA) 2002 definition of a Council Controlled Organisation (CCO) as one or more local authorities have the right, directly or indirectly, to appoint 50% or more of the directors.

6 As a shareholder in a CCO, the Council must regularly undertake performance monitoring of that organisation to evaluate its contribution to the achievement of the Council’s desired outcomes.

Issues and Options

LGFA performance for the 2017/18 year

7 LGFA recorded a profit of $11.2 million for 2018/19. While this is significantly ahead of the budgeted $10.9 million profit it is less than the $11.8 million profit recorded in 2017/18. Total interest income in 2018/19 was 5.3% higher than in 2017/18 however total interest expense was 5.7% higher than 2017/18.

8 In addition, the 2018/19 issuance, on-lending and other operating expenses were 5.5% higher than the previous year. While the percentage variances between the two years are relatively minor, the overall impact is a profit that is $600,000 less than the previous year and derived from a higher total income.

9 The LGFA asserts that its lower profitability was due to the lower interest rates which resulted in lower income for its liquid assets portfolio, and councils refinancing previously higher margin loans and replacing them with lower margin loans.

10 The LGFA continues to grow, both in terms of its balance sheet with total loans to councils reaching $9.31 billion at 30 June 2019 (2018: $7.98 billion) and participating councils growing from 56 to 64 during the year.

11 Auckland Council is the LGFA’s largest borrower ($2.4 billion), followed by Christchurch City Council ($1.7 billion). As at 30 June 2019, Kāpiti Coast District Council ranked as the 7^th largest borrower with $210.8 million in gross borrowings. Net borrowings, taking account of cash, borrower notes and term deposits to prefund borrowings was $147.6 million as at 30 June 2019.

12 The LGFA has a number of primary objectives including making longer-term borrowings available, offering flexible lending and enhancing the certainty of access to debt markets. The table below shows the LGFA’s results against its key performance:

2018-19 performance targets	Target	Result for 12-month period to 30 June 2019	Outcome
The average margin above LGFA’s cost of funds charged to the highest rated Participating Local Authorities for the period	<= 0.10%	0.101% (0.10% for long-term and 0.106% for short-term)	r Due to increase in short-term lending where the margin includes LGFA cost of borrowing.
LGFA’s annual issuance and operating expenses (excluding AIL) for the period	<= $5.67 million	$5.85 million	r Due to additional NZX listing and legal fees associated with larger than forecast bond issuance and council lending.
Total lending to Participating Local Authorities	>= $8.105 billion	$9.262 billion	a
LGFA will demonstrate the savings to council borrowers on a relative basis to other sources of financing.	Improvement since prior year end relative to borrowing by councils directly.		r Due to a lack of single name issuance by councils and record issuance of LGFA bonds, these factors have created a supply-demand balance and reduced savings to councils.
	Council borrowing spreads as at June
	2018: 2019 maturity 11 bps 2021 maturity 19 bps 2025 maturity 10 bps	2019: 2019 maturity n/a 2021 maturity 9 bps 2025 maturity 7 bps

13 As can be seen, the LGFA has only achieved one of its four key performance targets. It’s likely that the most important performance measure for all the LGFA’s borrowers is providing annual interest costs to Participating Local Authorities (PALs) on a competitive basis compared to other sources of finance.

14 There was also a compliance breach during the year when one of the council borrowers exceeded the concentration risk control measure of its total borrowings from the LGFA not exceeding the greater of, $100 million or 33%, of its total borrowings in a 12-month period. The breach arose through the council using 100% short-term borrowings which was not picked up by the LGFA management processes which had been set up to manage long-term borrowings. The situation was quickly addressed and the LGFA processes updated to incorporate the increasing uptake of short-term borrowing by councils.

15 The LGFA undoubtedly provides savings to councils and seeks to incorporate comprehensive risk and financial management systems into its operations. The compliance breach and the lower than perhaps expected profit are not significant concerns but they do highlight the importance of the Council’s ongoing monitoring of the organisation.

16 The LGFA estimates that as at 30 June 2019, it was saving AA-rated councils between 7 and 9 basis points (bps) depending upon the term of the maturity. The Kāpiti Coast District Council has recently received an upgraded Standard and Poor’s credit rating of AA. Based on the Council’s LGFA loans of 210.8 million as at June 2019, a 7bps saving equates to around $147,000 per year.

17 From the perspective of the Kāpiti Coast District Council, the LGFA has provided borrowing with interest rates and lending terms that have enabled the Council to meet its financial objectives and to stay within its financial targets.

18 The full LGFA 2018/19 Annual Report is attached as Appendix 1.

Considerations

Policy considerations

19 In accordance with the LGA 2002, the Council must provide information on all of its CCOs in its Long Term Plan (LTP). Accordingly, the Council’s 2018-38 LTP contains information on the LGFA, including key performance targets and other performance metrics

Legal considerations

20 There are no legal considerations arising from the matters in this report.

Financial considerations

21 Council is one of 31 local authority shareholders of the LGFA and has an obligation in respect of uncalled capital of $100,000.

22 At 30 June 2019, the LGFA had borrowings totalling $9.612 billion (2018: $8.272 billion).

23 Council considers the risk of the LGFA defaulting on repayment of interest or capital to be very low on the basis that:

(a) The only circumstance where LGFA would default on its debt is the event where a council defaulted on a loan obligation that exceeded LGFA’s available liquidity assets. As at 30 June 2019, this would need to be a single council default event that exceeded the sum of:

· cash and deposits of $192.4 million,

· LGFA borrower notes of $154.2 million,

· LGFA credit facility of $700 million, and

· uncalled share capital of $20 million from LGFA shareholders.

(b) In the event of an LGFA default, the call on the guarantee is made on the Council’s proportion of their share of the underlying rate base.

24 In the event of a default exceeding the LGFA’s available liquid assets, the council would be called for 1.1% of the overall call (less than the council’s 2.2% of LGFA’s loan assets).

Tāngata whenua considerations

25 There are no Tāngata whenua considerations.

Strategic considerations

26 The prudent use of the LGFA for all the Council’s borrowing requirements contributes to the key 10-year outcome of improved financial position against financial constraints by allowing the Council to achieve lower interest rate costs.

Significance and Engagement

Significance policy

27 The prudent use of the LGFA for all the Council’s borrowing requirements contributes to the key 10-year outcome of improved financial position against financial constraints by allowing the Council to achieve lower interest rate costs

Consultation already undertaken

28 There is no need to consult on the matters discussed in this report.

Engagement planning

29 An engagement plan is not needed for this report to be considered.

Publicity

30 There are no publicity considerations.

Recommendations

31 That the Strategy and Operations Committee notes the performance of the Local Government Funding Agency as set out in its 2018/19 Annual Report, attached as Appendix 1 to this report.

Appendices

1. LGFA Annual Report ⇩

Strategy and Operations Committee Meeting Agenda

5 December 2019

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Strategy and Operations Committee Meeting Agenda

5 December 2019

8.5 CONFIRMATION OF THE COUNCIL'S VOTE AT THE LOCAL GOVERNMENT FUNDING AGENCY'S 2019 ANNUAL GENERAL MEETING

Author: Jacinta Straker, Chief Financial Officer

Authoriser: Mark de Haast, Group Manager

Purpose of Report

1 The purpose of this report is to provide the Strategy and Operations Committee with the Agenda for the recently held Annual General Meeting (AGM) of the Local Government Funding Agency (LGFA) and to confirm the Council’s vote for each agenda item.

Delegation

Background

3 On 30 November 2012, the Council became a Principal Shareholding Local Authority in the LGFA. The LGFA was incorporated on 1 December 2011 with the primary objective of optimising the debt funding terms and conditions for Participating Local Authorities. This includes providing savings in annual interest costs, making longer-term borrowings available and enhancing the certainty of access to debt markets.

5 The LGFA meets the Local Government Act 2002 (the Act) definition of a Council Controlled Organisation (CCO) as one or more local authorities have the right, directly or indirectly, to appoint 50% or more of the directors.

6 The LGFA recently held its AGM on 21 November 2019 in Wellington and the Agenda items included:

· election of directors to the LGFA Board;

· election of Nominating Local Authorities (NLA) to the Shareholders’ Council;

· approval of directors’ fees; and

· approval of proposed changes to the Foundation Policy and to the Shareholders Agreement to increase the Treasury Policy limits and to allow the LGFA to lend directly to CCOs.

Issues and Options

Election of directors

7 The LGFA Shareholders Agreement requires the Board to comprise five independent directors and one non-independent director. Currently, the five independent directors are John Avery, Philip Cory-Wright, Anthony Quirk, Linda Robertson and Craig Stobo and the non-independent director is Mike Timmer.

8 Independent directors are defined in the Shareholders’ Agreement as a director “who is not an employee of any shareholder, employee of a CCO owned (in whole or in part) by any shareholder or a councillor of any Local Authority which is a shareholder and was not such an employee or councillor at any time in the five years prior to the time that person’s appointment as a director. For the avoidance of doubt, a director (or former director) of a CCO shall not by virtue of this reason alone be precluded from being an independent director.”

9 The Shareholders’ Agreement sets out that one of the independent directors and the non-independent director must retire by rotation each year. If they wish, they can offer themselves for re-election.

10 Accordingly, this year Linda Robertson retires by rotation and offers herself for re-election as an independent director and Mike Timmer retires by rotation and offers himself for re-election as a non-independent director.

11 Both Linda Robertson and Mike Timmer have the support of the Shareholders’ Council and the LGFA Board to continue as directors of LGFA.

Officers’ Recommendation

12 Officers find no reason to vote against the candidates standing for re-election as directors on the LGFA Board, for the following reasons:

· the effective performance to date of the LGFA; and

· the skills and experience of the nominated directors.

Election of Nominating Local Authorities to the Shareholders’ Council

13 A Principal Shareholder may be appointed or removed as a nominator of membership to the Shareholders' Council. Each NLA may appoint or remove one member of the Shareholders' Council.

14 Each member appointed by a NLA must be an employee or councillor of that NLA. In addition, the New Zealand Government (for so long as it is a Shareholder) may appoint or remove one other member of the Shareholders' Council.

15 The Shareholders’ Council comprises between five and 10 members with the current members being the Crown and nine Council members. The current NLAs are:

· Auckland Council;

· Bay of Plenty Regional Council;

· Christchurch City Council;

· Hamilton City Council;

· Tasman District Council;

· Tauranga City Council;

· Wellington City Council;

· Western Bay of Plenty District Council, and

· Whangarei District Council.

16 The Shareholders Agreement requires two NLA members to retire by rotation each year. If they wish, they can offer themselves for re-election.

17 Accordingly, this year Auckland Council and Western Bay of Plenty District Council will retire and seek re-election.

18 Since the LGFA was established in 2011, the local authority membership of the Shareholders’ Council has come almost entirely from the ‘tight nine‘ group of councils that promoted and steered the establishment of the LGFA, plus the Bay of Plenty Regional Council, which was also a foundation member. These members also have the largest shareholdings in the LGFA.

19 At last year’s AGM, Council Officers recommended voting for the candidates standing for re-election however Officers also recommended that the matter of ‘refreshing’ the composition of the Shareholders’ Council also be raised with the LGFA and the Shareholders’ Council.

20 The reasons for seeking to refresh the Shareholders Council composition are:

· because all LGFA shareholders regularly transact with the LGFA and having a greater shareholding (as a result of being a foundation member) does not mean that a council is any better placed to assess the governance or operations of an organisation than other councils with smaller shareholdings;

· other councils, for example, those undertaking more business with the LGFA are as well if not better placed to be considered as NLA appointments. Using the value of loans held at 30 June 2019 as a proxy for the amount of business done with the LGFA, officer’s analysis suggests that the Greater Wellington Regional Council, Kāpiti Coast District Council, Rotorua District Council and Hutt City Council are worthy of consideration to become NLAs;

· to facilitate greater representation from the regions given that the majority of the current members of the Shareholders’ Council are large metropolitan councils, whose views may not reflect those of their more provincial counterparts; and

· the continued uninterrupted membership of the Shareholders’ Council might lead to ‘staleness’ of the existing membership. The introduction of a ‘fresh pair of eyes’ from outside can bring new ideas, greater inclusiveness and ultimately more assurance for all members

Officers’ Recommendation

21 Officers recommend the re-election of the retiring NLAs - Auckland Council and Western Bay of Plenty District Council - while continuing to engage with the LGFA, the Shareholders Council and other shareholders to consider refreshment of the Shareholder Council composition.

Approval of director fee increases

22 The LGFA has proposed the following increases with effect from 1 July 2019:

(a) increasing the board chair’s fees from $97,000 to $102,000 per year;

(b) increasing audit and risk committee members’ fees from $55,000 to $59,000 per year;

(d) increasing all other directors’ fees from $55,000 to $57,000.

23 A review of the fees from 2016 shows that approving the proposed increases would result in all four positions receiving an average 7-8% increase over each of the last three years.

24 While there are no specific concerns with the LGFA’s performance, further fees increases are difficult to agree with. The continued increase of the fees from the already very reasonable levels is at odds with the Council’s current context of fiscal restraint, an approach likely shared by many of the LGFA’s other borrowers.

Officers’ Recommendation

25 Officers recommend that none of the proposed fee increases be approved.

Changes to the LGFA Foundation Policy and Shareholders Agreement

26 All shareholder councils must comply with the ‘Foundation Policies’ outlined in the Shareholders Agreement. Any changes to the Foundation Policies and the Shareholders Agreement are effected by way of an Ordinary Resolution of the shareholders.

27 There are two proposed changes to the Foundation Policy requiring shareholder approval by Ordinary Resolution:

i. an increase in Treasury Policy limits due to the increased size of the LGFA’s balance sheet; and

ii. putting in place direct lending to CCOs.

28 There are some minor changes to the Shareholders Agreement to reflect the potential lending to CCOs, which also requires shareholder approval by Ordinary Resolution:

Increase in Treasury Policy limits

29 The LGFA’s business has both grown and changed over the last few years and since it was established in 2011. The total assets have grown from $3.92 billion in 2014 to $10.38 billion in 2019 and the liquid assets portfolio has grown from $101.7 million in 2014 to $448.1 million in 2019. The liquid assets portfolio was 4.3% of total assets in 2019, compared to 2.6% in 2014. This significant change reflects the increased bespoke and short-term lending that the LGFA is now providing for councils, and which subsequently requires some increases to the LGFA’s Treasury Policy limits.

30 The proposed changes are shown in the table below, along with the rationale for the changes.

Current	Proposed change	Rationale for change
Category 2 Assets Maximum individual counterparty limit of $200 million. Maximum of 80% of assets. Maximum term of 3 years.	Category 2 Assets Maximum individual counterparty limit of $300 million. Maximum 80% of assets. Maximum term of 3 years.	The increase in the LGFA balance sheet, the amount of bespoke lending outside of the regular tender schedule and increased short term lending requires a larger Liquid Asset Portfolio. Individual category volume limits need to be increased to reflect the increasing size of the Liquid Asset Portfolio.
Category 3 Assets Maximum individual counterparty limits of $125 million (AA-) and $150 million (AA and AA+). Maximum of 80% of assets rated “AA-" or better. Maximum term of 3 years.	Category 3 Assets Maximum individual counterparty limits increased to $200 million for AA-, AA and AA+. Maximum of 80% allocation to assets rated “AA-" or better. Maximum term of 3 years.	The increase in the LGFA balance sheet, the amount of bespoke lending outside of the regular tender schedule and increased short term lending requires a larger Liquid Asset Portfolio. Individual category volume limits need to be increased to reflect the increasing size of the Liquid Asset Portfolio. The four major NZ banks are rated AA- so counterparty limits need to be adjusted to reflect their relative size.
Category 4 Assets Maximum individual counterparty limit of $125 million for a NZ Registered Bank. Maximum individual counterparty limit of $30 million for other issuers. Minimum credit rating for assets of “A1" short term rating and "A" long term rating. Maximum term of 1 year.	Category 4 Assets NZ Registered Bank Maximum individual counterparty limit of $200 million for a NZ Registered Bank. Maximum of 60% allocation to NZ Registered Bank assets rated “A+ “. Maximum term of 3 years.	The addition of limits for NZ Registered Banks allows for the possibility that the credit ratings of the Australasian parents of the NZ Registered Banks could be downgraded. If this should occur, then the credit ratings of the NZ subsidiaries would also be downgraded. Given the systemic importance of the NZ Registered Banks and RBNZ supervision we are comfortable holding their assets in the Liquid Asset Portfolio. The maximum term is to be extended to 3 years to ensure consistency with the maximum term for NZ Registered Banks with a credit rating of AA- or better.
	Category 5 Assets Other Issuers Maximum individual counterparty limit of $50 million for other issuers. Maximum of 10% allocation to Non-NZ Registered Bank assets rated “A+ “. Maximum term of 1 year.	It is preferred to distinguish between NZ Registered Banks and non-bank issuers. Non-bank issuers are not supervised and therefore a lower individual counterparty limit, maximum allocation limit and shorter maximum term are preferred.
Derivative Policy The Company will only enter into derivative transactions with New Zealand Debt Management Office as counterparty.	Unless explicitly approved otherwise by the Board, all derivative transactions must be transacted with New Zealand Debt Management as counterparty.	LGFA has ISDAs in place with three NZ Registered Banks, in case New Zealand Debt Management cannot provide derivatives to LGFA. This is for BCP.
Market Risk The Company's total 12 month forecast portfolio PDH (Partial Differential Hedge) Limit is $40,000. The Company's total portfolio VAR (Value at Risk) daily limit is $400,000.	The Company's total 12 month forecast portfolio PDH (Partial Differential Hedge) Limit is $100,000. The Company's total portfolio VAR daily limit is $1,000,000.	The current size of LGFA's balance sheet exceeds the original forecast and is projected to grow further in the next three years. Hence the need for a larger PDH limit. The larger balance sheet impacts on the size of the 3-month bank bill rate sets. Market volatility has also increased, resulting in an increase in VAR, holding all other variables constant. The LGFA Board will manage the exposure by having a lower limit threshold in the Treasury Policy.

Current

Proposed change

Rationale for change

Category 2 Assets

Maximum individual counterparty limit of $200 million.

Maximum of 80% of assets.

Maximum term of 3 years.

Category 2 Assets

Maximum individual counterparty limit of $300 million.

Maximum 80% of assets.

Maximum term of 3 years.

The increase in the LGFA balance sheet, the amount of bespoke lending outside of the regular tender schedule and increased short term lending requires a larger Liquid Asset Portfolio. Individual category volume limits need to be increased to reflect the increasing size of the Liquid Asset Portfolio.

Category 3 Assets

Maximum individual counterparty limits of $125 million (AA-) and $150 million (AA and AA+).

Maximum of 80% of assets rated “AA-" or better.

Maximum term of 3 years.

Category 3 Assets

Maximum individual counterparty limits increased to $200 million for AA-, AA and AA+.

Maximum of 80% allocation to assets rated “AA-" or better.

Maximum term of 3 years.

Category 4 Assets

Maximum individual counterparty limit of $125 million for a NZ Registered Bank.

Maximum individual counterparty limit of $30 million for other issuers. Minimum credit rating for assets of “A1" short term rating and "A" long term rating.

Maximum term of 1 year.

Category 4 Assets

NZ Registered Bank

Maximum individual counterparty limit of $200 million for a NZ Registered Bank.

Maximum of 60% allocation to NZ Registered Bank assets rated “A+ “.

Maximum term of 3 years.

The addition of limits for NZ Registered Banks allows for the possibility that the credit ratings of the Australasian parents of the NZ Registered Banks could be downgraded. If this should occur, then the credit ratings of the NZ subsidiaries would also be downgraded. Given the systemic importance of the NZ Registered Banks and RBNZ supervision we are comfortable holding their assets in the Liquid Asset Portfolio. The maximum term is to be extended to 3 years to ensure consistency with the maximum term for NZ Registered Banks with a credit rating of AA- or better.

Category 5 Assets

Other Issuers

Maximum individual counterparty limit of $50 million for other issuers.

Maximum of 10% allocation to Non-NZ Registered Bank assets rated “A+ “.

Maximum term of 1 year.

It is preferred to distinguish between NZ Registered Banks and non-bank issuers. Non-bank issuers are not supervised and therefore a lower individual counterparty limit, maximum allocation limit and shorter maximum term are preferred.

Derivative Policy

The Company will only enter into derivative transactions with New Zealand Debt Management Office as counterparty.

Unless explicitly approved otherwise by the Board, all derivative transactions must be transacted with New Zealand Debt Management as counterparty.

LGFA has ISDAs in place with three NZ Registered Banks, in case New Zealand Debt Management cannot provide derivatives to LGFA. This is for BCP.

Market Risk

The Company's total 12 month forecast portfolio PDH (Partial Differential Hedge) Limit is $40,000.

The Company's total portfolio VAR (Value at Risk) daily limit is $400,000.

The Company's total 12 month forecast portfolio PDH (Partial Differential Hedge) Limit is $100,000.

The Company's total portfolio VAR daily limit is $1,000,000.

The current size of LGFA's balance sheet exceeds the original forecast and is projected to grow further in the next three years. Hence the need for a larger PDH limit. The larger balance sheet impacts on the size of the 3-month bank bill rate sets. Market volatility has also increased, resulting in an increase in VAR, holding all other variables constant.

The LGFA Board will manage the exposure by having a lower limit threshold in the Treasury Policy.

Officers’ Recommendation

31 Officers recommend that all of the above Treasury Policy limits be approved to help facilitate the LGFA’s increased use of short-term and bespoke lending, to the benefit of its borrowers.

Direct Lending to CCOs

32 Currently the LGFA only lends to the parent council and not to any other related entities. This is not ideal as:

· Several councils borrow funds directly and then on-lend to their CCOs, for example Auckland Council (on-lends to Watercare); Christchurch City Council (on-lends to Christchurch City Holdings Limited); New Plymouth District Council (on-lends to New Plymouth Airport); and Rotorua District Council (on-lends to Rotorua Regional Airport).

· The LGFA cannot currently lend to multiple owned CCOs. While there are currently very few of these entities which have borrowings, they may be established in the future.

· Dunedin City Council (DCC) borrows via its Council Controlled Trading Organisation subsidiary company, Dunedin City Treasury Limited. This is one reason why DCC cannot become a member of LGFA.

33 The LGFA received shareholder approval in November 2018 to proceed with establishing a framework and process for it to lend directly to CCOs; this Council voted in support of that process.

34 The documentation, structure and process for putting CCO lending in place has been influenced by the following:

· LGFA will only lend to CCOs or council-controlled trading organisations ("CCTOs") if:

- in the case of CCOs, its obligations are guaranteed by its council parent; or

- in the case of CCTOs, it is supported by uncalled capital within the CCTO;

· All parent council shareholders must be guarantors of LGFA;

· Any CCO/CCTO borrower must be wholly owned, directly or indirectly, by one or more councils and Central Government (if applicable);

· Council shareholder(s) must agree to their CCO/CCTO joining LGFA. All shareholders of the CCO/CCTO must countersign the relevant accession deeds to the Notes Subscription Agreement and the Multi-Issuer Deed;

· CCO/CCTO holds the Borrower Notes, but prior to conversion the Borrower Notes are transferred to the relevant council shareholder(s);

· LGFA Board to approve each CCO/CCTO to join. LGFA to undertake financial and credit analysis of each CCO /CCTO before its accession, with ongoing surveillance. The LGFA’s solicitors will review each CCO/CCTO's council shareholders' Debenture Trust Deed and CCO/CCTO security structure as part of the acceptance process by the LGFA Board;

· Bespoke covenants are to be negotiated between LGFA and each CCO/CCTO. LGFA may allow no covenants if LGFA is sufficiently comfortable with the guarantee/uncalled capital structure and the credit quality of the council shareholder(s);

· Annual testing of the CCO/CCTO compliance with financial covenants (if relevant) and reporting as per council membership;

· Credit analysis of the council shareholders and ongoing compliance with LGFA covenants will be undertaken on a parent basis and reported on a parent and consolidated group basis;

· Borrowing process to be as close as possible to the borrowing process for council lending;

· Pricing on CCO/CCTO loans in line with council shareholder borrowing, but set by LGFA;

· Lending to CCO/CCTO by LGFA is expected to be on the same (or better) security terms than their existing banking security;

· Redemption of LGFA loans to CCO/CCTO if the CCO ceases to be a CCO; and

· Reporting to LGFA shareholders on a quarterly basis as to breakdown of CCO/CCTO lending.

Officers’ Recommendation

35 Officers support the proposed changes to the Foundation Policy to facilitate lending to CCOs for the following reasons:

· There are some council members who currently borrow and on-lend to their CCO subsidiaries, so establishing lending to CCO will give them the option to streamline the borrowing process and provide more flexibility in how they restructure their borrowings.

· There is no increased risk to the LGFA - all councils must remain compliant with the LGFA covenants and the LGFA has recourse over rates revenue as security. Additionally, where a CCO borrows from the LGFA, the LGFA has the benefit of a parent council uncalled capital or guarantee.

· The LGFA do not feel that credit rating agencies or investors would be concerned with the introduction of lending to CCOs because all councils must remain compliant with the LGFA covenants and the underlying security remains unchanged. Lending to CCOs will also diversify the LGFA lending book and could bring in new council members to the LGFA.

· The proposed changes will not make it easier for councils to borrow more or to avoid a covenant breach because the Board approves testing of a council at the group or parent level.

Changes to the LGFA Foundation Policy and Shareholders Agreement

36 A number of minor amendments have been made to the Shareholders Agreement to reflect the LGFA’s proposed ability to be able to lend to CCOs.

37 Officers are supportive of all these changes

Considerations

Policy considerations

38 There are no policy considerations.

Legal considerations

39 The Council’s voting intentions were clearly set out on the Proxy Form delivered to the LGFA prior to the AGM and attached as Appendix 1.

40 The LGFA received notice from the Council, authorising the proxy to vote on its behalf not later than 48 hours before the start of the AGM, which was 2pm on Wednesday, 21 November 2019.

Financial considerations

41 There are no financial considerations in addition to those already discussed within this report.

Tāngata whenua considerations

42 There are no issues requiring specific consideration by Tāngata whenua.

Strategic considerations

43 The prudent use of the LGFA for all the Council’s borrowing requirements contributes to the key 10-year outcome of improved financial position against financial constraints by allowing the Council to achieve lower interest rate costs.

Significance and Engagement

Significance policy

44 This matter has a low level of significance under the Council’s Significance and Engagement Policy.

Consultation already undertaken

45 No consultation has been undertaken in the development of this report.

Engagement planning

46 An engagement plan is not needed for this report to be considered.

Publicity

47 There are no publicity considerations.

Recommendations

50 That the Strategy and Operations Committee:

i. receives the report, including the proposed changes to the Local Government Funding Agency Foundation Policy and Shareholders Agreement, attached as Appendices 2 and 3 to the report; and

ii. recommends that the Strategy and Operations Committee:

a) notes that the Chief Executive authorised Jacinta Straker (Chief Financial Officer) to vote on behalf of the Council, at the Local Government Funding Agency’s 2019 Annual General Meeting to be held on 21 November 2019, in accordance with the Council’s votes on recommendations (aa) to (jj) inclusive, noting Committee recommendations in bold;

or, if Council officers were unable to attend the Annual General Meeting:

b) notes that the Chief Executive authorised Mark Butcher (Chief Executive Officer, LGFA) as the Council’s proxy to vote on behalf of the Council, at the Local Government Funding Agency’s 2019 Annual General Meeting to be held on 21 November 2019, in accordance with the Council’s votes on recommendations (aa) to (jj) inclusive, noting Committee recommendations in bold:

(aa) re-elect Linda Robertson as an independent director of the LGFA - (For/Against); and

(bb) re-elect Michael Timmer as non-independent director of the LGFA - (For/Against); and

(cc) re-elect Auckland Council as a Nominating Local Authority - (For/Against); and

(dd) re-elect Western Bay of Plenty District Council as a Nominating Local Authority - (For/Against);

(ee) With effect from 1 July 2019, approve an increase in fees payable for the director acting as chairman of the board of directors of $5,000 per annum, from $97,000 per annum to $102,000 per annum - (For/Against);

(ff) With effect from 1 July 2019, approve an increase in fees payable for each of the other directors acting as members of the audit and risk committee, an increase of $4,000 per annum, from $55,000 per annum to $59,000 per annum - (For/Against);

(gg) With effect from 1 July 2019, approve an increase in fees payable for the director acting as chairman of the audit and risk committee of $3,000 per annum, from $60,000 per annum to $63,000 per annum - (For/Against);

(hh) With effect from 1 July 2019, approve an increase in fees payable for each of the other directors of $2,000 per annum, from $55,000 per annum to $57,000 per annum - (For/Against);

(ii) approve, the amendments to the Foundation Policy of the LGFA - (For/Against); and

(jj) approve, the amendments to the Shareholders Agreement of the LGFA - (For/Against).

iii authorises officers to continue to engage with the LGFA, the Shareholders’ Council and other shareholders on the matter of refreshing the composition of the Shareholders’ Council.

Appendices

1. AGM Proxy Form ⇩

2. Updated Foundation Policies ⇩

3. Updated Shareholders' Agreement ⇩

Strategy and Operations Committee Meeting Agenda

5 December 2019

8.6 Activity Report: 1 July to 30 September 2019

Author: Terry Creighton, Corporate Monitoring Officer

Authoriser: Mark de Haast, Group Manager

Purpose of Report

1 This report provides the Strategy and Operations Committee with a quarterly performance overview for the first quarter of the 2019/20 financial year for each activity published in the 2018-38 Long Term Plan.

Delegation

2 The Strategy and Operations Committee has delegated authority to consider this report under the responsibilities delegated in Section B.1 of Governance Structure and Delegations. In particular, the Committee’s key responsibilities include:

· Overviewing strategic programmes

· Financial management, including risk mitigation

Background

3 The dashboard graphic on the following page gives a snapshot of performance across all council activities and is intended to highlight at a glance where there might be issues that need attention.

4 Section 1 of this report gives an overview of progress on projects and results for key performance indicators (KPIs) across the council as a whole.

5 Section 2 reports on the ‘Across council work programmes’.

6 Sections 3 to 6 reports on the activity cluster groupings. These sections report on the status of projects (with a brief explanation where projects are not on target), present other key development highlights and provide more detail on KPI performance.

7 This report is a summary of work programme and activity reports. Further and more detailed information is included in the following appendices:

· Appendix A provides a status list of the significant projects. Table 1 shows the status of the major capital expenditure projects ($250,000 and above) while Table 2 shows the status of the additional significant projects^{^[1]}.

· Appendix B contains detailed activity chapters which present an overview of performance across a range of projects and work programmes, recent developments in those activities and performance against key performance measures published in the 2018–38 long term plan.

Activity overview dashboard for the first quarter 2019/20

Considerations

Section 1: Overview of KPIs and Projects

Summary of significant projects

8 There are 19 significant projects being undertaken by Council in the activities reported below (compared to 29 last year). Of these, 17 are Capital Expenditure Projects with a value of $250,000 and above and two are additional significant projects. Figure 1 below provides a performance summary of these projects. ^{^[2]}

Figure 1: Status summary of significant projects

as at 30 September 2019

9 Thirteen projects were on target as at 30 September 2019.

10 Six projects were not on target for a range of reasons. These are summarised in paras 27-28, 56-57 and 78 below, and reported on in the activity chapters in Appendix B.

Summary of key performance indicators

11 There are 93 KPIs which have targets this year. Figure 2 below reports on KPI results against their targets.

Figure 2: Key Performance Indicators

as at 30 September 2019

12 Two KPIs were achieved and fifty were on target at the end of the first quarter. Of the remainder, 34 were not yet due and seven were not on target. These are summarised in paragraphs 50-53, 74-76, 84-85 and 96-97 and reported in more detail in the activity chapters in Appendix B.

Section 2: Across Council Work Programmes

13 There are several programmes of work that carry across a number of activities. These are discussed briefly below, and in more detail in the ‘Across Council Work Programmes’ chapter in Appendix B.

Provincial Growth Fund

Key developments

14 Regional Economic Development Minister Shane Jones visited Ōtaki and announced four successful applications to the Provincial Growth Fund (PGF): Omeo Technologies, Waiorua Lodge, Māoriland Trust and a PGF Programme Manager role at Council.

15 Council’s Express Application to the Provincial Growth Fund for a PGF Programme manager role in Kāpiti was one of the four successful applications announced.

Housing work programme

Key developments

16 A draft report outlining the current state and options to consider for the housing work programme was consulted with SLT, Councillors and stakeholders in August and September 2019.

17 Following feedback, a final draft report, including a prioritisation schedule for the work to establish a housing programme, is planned to be submitted to Council by the end of 2019.

Coastal adaptation work programme

Key developments

18 A high-level coastal vulnerability assessment was approved and released by the Wellington Mayoral Forum in August 2019.

19 A Coastal Manager was appointed to support the Community-led coastal adaptation work programme. Planning of communication and engagement for Phase One of the programme is underway.

20 The Wellington Region Climate Change Working Group agreed to consider the future of the coastal adaptation sub-group after the election.

Corporate IT projects

Key developments

21 The IT Hardware renewals programme is well underway with the purchase of new desktops, laptops and mobile phones to replace old equipment, and the purchase of new radios for the digital radio network. The project is currently forecast to be a modest $12,000 over the budget of $399,277 by year end, and is classified as on target.

22 The IT Software upgrade programme is well underway with the completion of two projects – i) the installation of new microphones, camera and sound equipment in the Council chambers, and ii) the implementation of new software at the Coastlands Aquatic Centre. This project is currently forecast to be $45,000 over the budget of $322,258 by year end. It is classified as not on target for that reason.

Carbon and energy management

Key developments

23 In late 2018/19 the Infrastructure group manager, Sean Mallon, announced his intention to establish a new Sustainability and Resilience team to ensure Council had the resources to undertake work to further improve Council’s energy efficiency and further reduce CO2e emissions. This commitment was in response to Council’s adoption of the goal of seeking carbon neutrality by 2025.

24 The new position of Sustainability and Resilience Manager was advertised in late September 2019 and has since been filled. This role also picks up some Civil Defence Emergency leadership functions. Other positions in the team were planned to be filled over November/December 2019.

25 Preparation for the annual carbon emissions (CEMARS) audit for 2018/19 got underway in late September 2019 but won’t be completed until early December. The audit is planned for late January 2020 and it is expected the verified results will be reported to Council in February 2020.

Section 3: Place & Space

Significant projects

26 There are five Place and Space projects, all of which are capital expenditure over $250,000 projects.

Figure 3: Place & Space – significant projects

as at 30 September 2019

27 Three projects were on target as at 30 September 2019.

28 One Community facilities projects, the Older Person’s Housing Renewals project, was not on target. It is progressing well, but has already spent 45% of the annual budget in the first quarter. This is in large part due to the urgent remediation of the Wipata Flats in Paekākāriki that was unscheduled. The number of units that will fall vacant over the remainder of the year is unpredictable, but it is now expected the spend will exceed the initial budget again this year.

Other projects

29 Significant leaks in the Waterfront Bar & Restaurant in Raumati Beach, a Council-owned building, have required roof replacement and associated remediation. There are some window and doors replacements required which are scheduled for October 2019.

30 Work finished on the Paraparaumu Library to remediate the concrete panels on the western and eastern ends of the building. Water ingress occurred due to the panels not being fully grouted and sealed during construction resulting in leak issues in the basement. Rusted steel beams were replaced and damaged concrete remediated.

Other key developments - highlights

31 Stage 1 of the Maclean Park redevelopment was completed in August 2019. An opening event is planned for November 2019.

32 The 2019 restoration planting programme was completed. A total of 18,000 eco-sourced native plants were planted to restore bush, riparian margins, wetlands and dunes across the district.

33 The Garden Talks programme was launched at Ōtaki Library – as a tie-in with the newly planted community garden. Over 45 people attended the first session. This project was developed in partnership with the Parks and Recreation team.

34 We celebrated Te Wiki o te Reo with a series of exciting musical and theatre performances that attracted over 130 participants.

35 The first round of Creative Communities Scheme funding grants for 2019/20 was completed with $22,904.40 was awarded to nine recipients.

36 There were 64,901 pool visits in the first quarter, which is the highest first quarter since the opening of the Coastlands Aquatic Centre in August 2013.

37 Kāpiti Coast Aquatics won the National Lifeguard Championships.

38 The Economic Development Strategy drafting group continues to meet with the business community and key partners. The target remains to adopt and implement the strategy in February 2020.

39 Council approved funding of $175,000 on 8 August 2019 for five major events (one of the events, Ffflair, has since withdrawn).

40 Council officers have been working to assist the owners of the Paraparaumu Beach Market to move from its current location. All necessary approvals have been granted and the market was scheduled to move on 5 October 2019 (this went ahead as planned).

41 Moisture testing at the Community Centre in August 2019 did not identify elevated mould readings and noted that the levels of mould found would be unlikely to result in health issues.

42 The Mahara Gallery Trust submitted a funding application to the Lotteries Environment and Heritage Fund. A decision is expected in November 2019. They are targeting three other funding opportunities.

43 Miyamoto International NZ Ltd are undertaking condition surveys across the Housing for Older Persons portfolio and four community facility buildings. That work was due to be completed in October 2019.

44 In July 2019, Council hosted a funders forum. This provided a ‘speed dating’ opportunity for community not for profits to sit down and talk with funders.

45 Contract holders for Council’s Social Investment programme presented their Year One achievements to elected members in September 2019.

46 Council has been working with the Capital and Coast DHB as part of a new suicide prevention initiative

47 The Council was awarded the Enviro-Mark Solutions award for ‘Excellence in Climate Action (medium organisation)’ in August 2019.

48 Just over 300 participants attended No. 8 Wire week events. The programme of events and activities aims to build community resilience, resourcefulness and environmental responsibility.

Key performance indicators

49 In this cluster there are 38 KPIs.

Figure 4: Place and Space KPIs

as at 30 June 2019

50 Two KPIs were achieved at the end of the first quarter of 2019/20.

51 Thirteen KPIs were on target.

52 Twenty KPIs were not yet due, largely because their results are determined by surveys not undertaken until the third and fourth quarters of the year.

53 Three KPIs Recreation and leisure KPIs were not on target. These were all Recreation and Leisure KPIs and all in the library services area. They are attributable to the smaller scale and storage capacity of the current Waikanae library:

i). Total visits to libraries is below target with 65,831 visits in the first quarter. To achieve the annual target of 300,000 visits we need to average around 75,000 visits per quarter.

ii). Number of items borrowed is also below target with 146,538 in the first quarter. To achieve the annual target of 650,000 items borrowed we need to average around 162,500 items borrowed per quarter.

iii). We added 1,888 new items to the library’s collection in the first quarter, which equates to 35 new items per 1,000 of population. With the reduction in the collections budget for 2019/20 the expected level of new items added to the collection is approximately 180 items per 1000 of population - so although we’re on track to achieve that we won’t be meeting the target set in the long term plan.

Section 4: Infrastructure

Significant projects

54 There are 13 Infrastructure projects, 12 of which are capital expenditure over $250,000 projects. The other is an additional significant project (it is a capex project less than $250,000).

55 Figure 5 below summarises the status of these infrastructure projects.

Figure 5: Infrastructure Projects

as at 30 September 2019

56 Nine projects were on target as at 30 September 2019.

57 Four projects were not on target:

i). One Access and transport project was not on target. The SH1 Revocation project has been behind schedule for some time and has taken longer than expected this year for NZTA to start the physical works this year. Work is expected to start in December 2019.

ii). Two Wastewater projects were not on target:

a) The Paraparaumu wastewater treatment plant (WWTP) renewals project has critical works programmed for this year that exceed the available budget. Options to defer or offset this expenditure are being investigated.

b) The Ōtaki WWTP land discharge and treatment area upgrade project is currently forecast to run over budget this year.

iii). One water management project was not on target. The Drinking Water Safety and Resilience Programme was delayed last year which has had flow on effects. The design of the works is progressing in 2019/20 but construction is now planned for 2020/21. We will be seeking approval for construction budgets to be carried forward to 2020/21.

Other key developments - highlights

58 Physical works continue on PP2O and Fletcher Construction is liaising with Council and residents to enable the works.

59 Council and the revocation team from NZTA are reviewing NZTA’s asset data and working through the agreement on the future take-over of these assets.

60 Paekākāriki seawall Building Consent application has been lodged with Council.

61 The Wharemauku block wall Long Term Solution Options report is completed.

62 A submission is being prepared on the proposed priority products and priority product stewardship scheme guidelines.

63 A new worm farm was Installed to manage organic waste from the Maple and Civic Buildings and Novella Café.

64 The Waste Minimisation Taskforce is currently meeting fortnightly and will report to Council on 12 December 2019.

65 Five more projects have been added to the active list in the Stormwater major works programme for 2019/20 – there are now 16 projects currently underway.

66 Asset condition investigations were completed in three more Paraparaumu catchments this quarter. A total of six out of 34 have been completed to date.

67 Ongoing efforts are being made to meaningfully engage tāngata whenua in the re-consenting of the Paraparaumu WWTP. The project is now however on a critical path to develop a resource consent application to GWRC.

68 The detailed wastewater works programme for 2019/20 has been developed. This work will be used to identify any improvements needed and better inform future long term planning of renewals, upgrades and resilience projects.

69 Consultants have been engaged to investigate containment standards for our wastewater network that will inform investment planning for the 2021 long term plan.

70 The annual reporting process on the operation of the river recharge scheme was completed and the annual reports lodged with Greater Wellington Regional Council. The final administrative amendments to the consent to remove the requirements during the baseline monitoring period have been complete. This will streamline the ongoing operation of this scheme.

71 The river recharge scheme has successfully proven it is operable to the four approved ongoing mitigation plans (OMPs). It is now under adaptive management for the remainder of the fifteen-year period, to the full extent of it’s stage one capacity.

72 The detailed water management works programme for 2019/20 has been substantially scoped and Consultant Service Orders (CSOs) approved. Work is underway in the inspections of reservoirs, pipelines and water treatment plants and in master planning for the growth projected in the Ōtaki water supply network and for coming legislative changes.

Key performance indicators

73 In this cluster there are 40 KPIs with assigned targets to report against this year.

Figure 6: Infrastructure KPIs

as at 30 September 2019

74 Twenty-nine KPIs were on target at the end of the first quarter.

75 Nine KPIs have results which are not yet due, typically because they’re only measured at the end of the year.

76 Two KPIs were not on target:

i). One Access and transport KPI was not on target:

’Residents (%) who are satisfied with street lighting’ reported a provisional result from the first quarter Resident Opinion Survey of 83% satisfied against a target of 85% (the result for 2018/19 year was 85%). This result may well improve as further quarterly surveys are completed and the number of respondents increases. The results for the past two years show considerable volatility in the quarterly results.

ii). One Solid Waste KPI was not on target:

‘Residents who are satisfied with the waste minimisation education, information and advice available’ reported a provisional satisfaction result of 63% in the first quarter’s Resident Opinion Survey, against a target of 75% for the year. This measure has reported below target results since Envirowaste discontinued its plastic rubbish bag collection service in early 2018. That service provided a very low cost option for those who actively minimised their household waste.

Section 5: Regulatory Services

Significant projects

77 There are two significant projects in Regulatory Services this year, the District Plan Review project and the Animal Management Centre Renewals project. The latter is now a capital expenditure over $250,000 project, while the former is an ‘additional significant’ project as it is an operational expenditure project.

78 One project is on target and the other is not as explained below:

i). The District Plan Review project is progressing well with resolving appeals and is on target. There has been an increase in increase in expected costs for hearing commissioners to complete variations, however this is offset from saving elsewhere in that budget.

ii). The Animal Management Centre Renewal project is not on target. Detailed investigation and design work on the centre has been completed and, due to the hidden poor condition of the building, has resulted in an increase in the scope of works. The cost of the required work is now forecast to exceed the initial budget.

Other key developments - highlights

79 In this first quarter, one Proposed District Plan appeal was resolved (five altogether) and two further appeals were withdrawn (six altogether). This leaves seven of the 18 appeals live (including three that are partially resolved).

80 Regulatory Services received a total of 2,512 service requests in the first quarter (2,972 in the same period last year).

81 The building consents team processed and issued 325 building consents in the first quarter (279 last year), all except one were issued within 20 days and the average processing time was 12 days. In addition, 196 code compliance certificates were issued (256 last year)) and 1,526 building inspections undertaken (1,647 last year).

82 The resource consents team issued 80 consents in the first quarter (73 last year). The team also processed 12 permitted boundary activities (17 last year) and 20 certifications for subdivision (18 last year), relating to a total of 30 new allotments (48 last year).

Key performance indicators

83 In this cluster there are nine KPIs.

Figure 7: Regulatory Services KPIs

as at 30 September 2019

84 Five KPIs were on target at the end of the first quarter and two were not yet due.

85 Two KPIs were not on target, but at least one should improve in coming quarters:

i). The percentage of service requests responded to within corporate standards was 94.4%, against a target of 95%.

ii). The ratio of compliments to complaints was 2:1 in the first quarter against a target of greater than 3:1.

Section 6: Governance and tāngata whenua

Significant projects

86 There are no significant projects in this activity in 2019/20.

Other key developments - highlights

87 The Council adopted the Annual Report for the 2018/19 financial year on
26 September 2019.

88 Council approved the Subcommittee’s draft terms of reference for the independent organisational review.

89 Council adopted the Elected Member Remuneration Expenses and Allowances Policy with the inclusion of a Childcare Allowance for Elected Members.

90 The Council received 51 official information requests in the first quarter, compared to 62 in the same quarter last year.

91 There was one citizenship ceremony, on 28 August 2019, which conferred citizenship upon 44 applicants.

92 Council approved seven submissions in the quarter on a range of issues.

93 Te Whakaminenga o Kāpiti met twice in this quarter.

94 Over 120 people attended the 2019/20 Maramataka launch at Whakarongotai Marae on 2 August 2019. The theme of the calendar was a ‘celebration of the interconnectedness of the Ātiawa, Raukawa, Toa (ART) confederation’.

Key performance indicators

95 There are six KPIs in this stand-alone activity.

Figure 8: Governance & Tāngata Whenua KPIs

as at 30 June 2019

96 Three KPIs were on target at the end of the first quarter.

97 Three KPIs were not yet due.

Policy considerations

98 There are no policy issues to consider.

Legal considerations

99 Under the Local Government Act 2002, the Council has a legislative responsibility to monitor and report on the Council’s organisational performance).

Financial considerations

100 A summary of budget details for each activity (as at 30 September 2019) is provided in the activity chapters attached as Appendix B to this report.

Tāngata whenua considerations

101 There are no iwi or tāngata whenua issues to consider in regard to this report.

102 There is reporting on issues of interest to iwi and tāngata whenua throughout this report, not limited to the Governance and tāngata whenua section of this report or the activity chapter contained in Appendix B. However, this report is for information about recent developments only and is not calling for any decision.

Strategic considerations

103 There are no specific strategic considerations in this report. The developments outlined in this report and the attached Appendix B contribute in various ways to Council’s ten-year outcomes. However, it is not the aim of this report to explore those contributions.

Significance and Engagement

Significance policy

104 This matter has a low level of significance under Council’s Significance and Engagement Policy.

Consultation already undertaken

105 This is a report for information only – no consultation is required.

Publicity

106 Many of the developments referred to in this report have already been communicated through the council’s regular communications channels.

107 Performance outcomes for the year will be published in the Annual Report 2019/20.

Conclusion

108 The Council has performed well in the first quarter. In particular:

i). There has been the usual degree of variability in financial results relative to budget across activities for the first quarter, however these balance out overall as total operating expenditure, total operating income and total capital expenditure are all showing only modest variance compared to budget.

ii). There are 19 significant projects reported on this year, of which six are not on target. However, of those six there are three that are due to events outside our control and two which are due to flow on effects from delays last year.

iii). There are 93 KPIs reported on, of which seven (8%) are not on target, and three of these are the result of the Waikanae Library closure last year.

Recommendations

109 That the Strategy and Operations Committee notes the content of this Activity Report for the first quarter of 2019/20, the status of the projects in the Summary List of Projects (Appendix A), and the further work programme and project performance, other key developments and KPI results contained in the activity chapters attached as Appendix B to this report.

Appendices

1. Appendix A: Project Status List (as at 30 September 2019) ⇩

2. Appendix B: Across Council work programme and activity chapters (1 July to 30 September 2019) ⇩

Strategy and Operations Committee Meeting Agenda

5 December 2019

8.7 Finance Report as at 30 September 2019

Author: Jacinta Straker, Chief Financial Officer

Authoriser: Mark de Haast, Group Manager

Purpose of Report

1 This report sets out Kāpiti Coast District Council’s (Council) financial performance and financial position for the quarter ended 30 September 2019 – the first quarter of the 2019/20 year - with explanations of key results and variances.

Delegation

2 The Strategy and Operations Committee (Committee) has delegated authority to consider this report under the 2019-2022 Triennium Governance Structure and Delegations in Section B.2. - Monitoring and decision-making on all broader financial management matters. Key responsibilities will include financial management, including risk mitigation.

Background

3 The Committee is provided with information on nine broad areas of financial performance each quarter.

Part A: Statement of Comprehensive Revenue and Expense

Part B: Statement of Financial Position

Part C: Statement of Cash Flows

Part D: Summary of Rates Funding

Part E: Water Account Statement

Part F: Capital Spending Programme

Part G: Outstanding Rates Debt

Part H: Treasury Management

Part I: Asset Revaluation

Executive Summary

4 Operational spending: While our operational spending was lower than projected for the first quarter, we expect the full budget to be spent by the end of the financial year.

5 Ongoing prioritisation: We will continue to prioritise the work programme and funding that is needed across different activities to move the organisation forward, and will provide the committee with updates and more detailed plans over the next three quarters.

6 Decisions regarding reprioritisation of existing funding for both capital and operational spending may be required in the coming quarters for a number of areas. These include: responses to the organisational review and our property asset management improvement programme.

7 Capital spending: During 2018/19, we committed to reviewing our 2019/20 capital spending programme and we are now currently forecasting to spend $7 million less in 2019/20 than originally planned. The majority of this is due to the intention to carry forward $6.2 million of the funding for the drinking water safety and resilience project to 2020/21. Delays in the establishment of the Water Professional Services Panel in 2018/19 to enable a strategic procurement review delayed the awarding of the contract for the project and although the design work is progressing well, construction is now planned to start in 2020/21.

Part A: Statement of Comprehensive Revenue and Expense

8 The statement of comprehensive revenue and expense covers all of the Council's revenue and expenditure for the reporting period.

9 The net position of revenue less expenditure provides the operating surplus or deficit for the reporting period.

10 Table 1 below outlines the Council’s actual revenue and expenses for the first quarter ended 30 September 2019, including our full year budget and forecast for 2019/20.

Financial performance summary

11 The Council’s September year to date net operating surplus is $494,000 favourable to budget. This is mainly due to Council spending less in the first quarter in areas such as personnel, maintenance and general expenses. While our spending was lower than projected for the first quarter, we expect the full budget to have been spent by the end of the financial year.

12 The unrealised loss on revaluation of financial derivatives of $4.05 million reflects continued softening of market interest rates since 30 June 2019, compared to Council’s committed financial derivatives. This revaluation needs to be shown in our financial statements but it is not a real loss as there is no intention to prematurely terminate these commitments.

13 Council’s across New Zealand use financial derivatives to “fix” their interest rates rather than relying on floating interest rates, so as to provide more certainty over cash flows and protection against adverse movements in market rates.

Revenue performance - commentary

14 Rates

Description

Rates include all rates earned by the Council, including water rates. Rates remissions and rates billed to Council-owned properties are excluded.

Variance Analysis

Minor variance, on track for year end.

Rates revenue for the first quarter is $10,000 more than budget. We expect the full year result to be in line with the budget.

15 Fees and charges

Description

Fees and charges includes all non-rates revenue earned by the Council for providing services to the community. This also includes fines and penalties charged.

Variance Analysis

Minor variance, on track for year end.

The higher revenue of $29,000 was mainly driven by higher regulatory income.

16 Grants and subsidies

Description

Includes grants received by the Council for operating and capital spending. The majority of grants revenue is received from NZ Transport Agency (NZTA) for their share of our roading maintenance and capital investment.

Variance Analysis

Very small variance, expecting additional income for year end.

M2PP have agreed to pay the Council $100,000 in lieu of undertaking lining works on several stormwater pipes they installed as part of the overall project. This is not included in the 2019/20 Annual Plan.

In the previous term, the Council authorised the Chief Executive to reassign this unbudgeted revenue of $100,000 to help fund the costs of the unbudgeted independent organisational review.

The Council is currently negotiating with NZTA to secure additional unbudgeted funding for the Ratanui roundabout and Kapiti Road. The full year forecast will be revised and included in the next Finance report to the Committee.

17 Development and financial contributions

Description

Development contributions are levied under the Local Government Act 2002 and cover all key activities except reserves and are also levied on developers at the time of subdivision. Developers’ contributions to Council works are treated as revenue.

Financial contributions are levied under the Resource Management Act and cover reserves contributions levied on developers at the time of subdivision.

Variance Analysis

Significant variance for this quarter, but on track for year end.

The lower revenue of $506,000 in this quarter is mostly due to a decision by the Council to accept the proposal for the Ngarara Waimeha Development in Waikanae to develop and provide a pocket park as part of their development, instead of paying the reserve contributions as originally planned.

18 Other operating revenue

Description

Includes assets vested to the Council, local government petrol tax, donations and/or sponsorship and realised gains on asset disposals. Note, also, that the value of land vested to the Council as part of subdivision activity in any year is recorded as revenue in that year.

Variance Analysis

Moderate variance for this quarter, on track for year end.

The additional $116,000 of income received is mainly due to the Council successfully obtaining unbudgeted funding of $90,000 from MBIE to assist the Council in continuing to encourage responsible camping in the district.

19 Interest income

Description	Interest income represents the Council’s earnings on its term deposits, overnight cash deposits and borrower notes held by the Local Government Funding Agency.
Variance Analysis	Very small variance, on track for year end.

Expenditure performance - commentary

20 Personnel, maintenance and operations

Description

Includes personnel expenses, maintenance, business-as-usual Council operating expenses, internal recoveries, grants and other sundry expenses.

Variance Analysis

Significant variance for this quarter, but on track for year end.

Although Council spending in this category is tracking below budget by $884,000 for the first quarter, the expectation is that we will spend an additional $100,000 by year end due to the unbudgeted independent organisational review. This is fully offset by additional unbudgeted revenue from the M2PP projects as discussed above.

21 Depreciation and amortisation

Description

Depreciation reflects the use of our property, plant and equipment and intangible assets currently owned by the Council.

Variance Analysis

Moderate variance for this quarter, on track for year end.

$146,000 of additional depreciation is mainly due to the following:

· NZTA connector roads such as Hadfield Road planned for 2021/22 was vested from NZTA during 2018/19.

· The final revaluation of roading assets as at 30 June 2019 was higher than planned, resulting in higher depreciation.

22 Finance expense

Description	Interest is incurred on borrowings.
Variance Analysis	The lower finance expense of $118,000 is due to the Council finishing the year last year with lower net borrowings.

Items reported below the line - commentary

23 Unrealised gain / (loss) on revaluation of derivatives

Description:

1. The Council recognises its interest rate swaps at fair value on a monthly basis.

2. The change in fair value between 30 June 2019 and 30 September 2019 is treated as either an unrealised gain (fair value has decreased) or an unrealised loss (fair value has increased).

Variance Analysis

Major variance but no impact on rates funding required.

The unrealised loss on revaluation of financial derivatives of $4.05 million reflects the softening of market interest rates compared to Council’s committed financial derivatives. This revaluation needs to be shown in our financial statements but it is not a real loss as there is no intention to prematurely terminate these commitments.

(See Part H: Treasury Management for further information).

Part B: Statement of Financial Position

24 The Council’s financial position as at 30 September 2019 and full year forecast and budget are set out in Table 2, followed by a summary of the key variances.

Major movements since 1 July 2019

25 Our net borrowings have increased by $3.1 million since the start of the financial year to pay for the Council’s capital works programme.

Full year forecast summary

26 We have reviewed our capital works programme and we now plan to spend $6.2 million less on renewing and upgrading our assets (See part F: Capital Spending Programme for further information). Net borrowings are forecast to be on budget at year end, being $161.4 million.

27 Derivative financial instruments are currently forecast to be $12.45 million less than budget. This is mainly due to the fall in fixed interest rate swap rates since the Annual Plan budget was set in March 2019.

Part C: Statement of Cash Flows

28 The Council’s cash flow for the quarter ended 30 September 2019 and full year forecast and budget are set out in Table 3, followed by a summary of key variances.

Year to Date Summary

29 The Council’s material changes to its cash flow management for the quarter ended 30 September 2019 were:

· $20 million of long term debt matured during September 2019.

· $25 million of term deposits matured ($20 million was prefunded for the repayment of the September 2019 debt maturity and $5 million of surplus cash that was placed on fixed deposit for final payment of the 2018/19 capital works programme)

· $4.2 million was paid towards the Council’s capital expenditure programme.

Part D: Summary of Rates Funding

30 The summary of rates funding covers the Council’s revenue and expenses that are funded by rates. It is a sub-set of the statement of comprehensive revenue and expense on page 2 which covers all of the Council’s operating revenue and expenses.

31 Table 4 below details the actual rates funding surplus/(deficit) for the quarter ending 30 September 2019.

32 Operational spending: While our operational spending was lower than projected for the first quarter, we expect the full budget to be spent by the end of the financial year.

33 Decisions regarding reprioritisation of existing funding for both capital and operational spending may be required in the coming quarters for a number of areas. These include: responses to the organisational review and our property asset management improvement programme.

Part E: Water Account Statement

34 Since water meters were introduced in 2014, the total operational cost of supplying potable water, which includes reticulation and treatment, and the rates we have received, has been tracked as part of the water account. The water account is a closed account. This means that any surpluses will be held within the account to fund future costs of providing water. Conversely, any deficits need to be recovered from future water charges.

35 Water usage has taken a number of years to normalise since districtwide water meter charging for all residential properties commenced from July 2014. Therefore, the Council has carefully monitored usage trends to best determine what charges are necessary to fully recover the total costs of providing a treated water supply over a rolling 5-year period.

36 The Council’s water revenue year to date is tracking to budget.

37 The table below outlines the water account position. As shown, we are planning to reduce the overall water account deficit from $0.5 million to $0.3 million by the end of the financial year. Further work will be done during the development of the 2021/21 Annual Plan and the following 2021-41 LTP to assess when the water account is likely to be fully funded.

Part F: Capital Spending Programme

38 A summary of our capital spending programme for 2019/20 is shown by activity against the full year forecast and full year budget in Table 6 below.

39 We have completed $4.96 million of work renewing and upgrading the Council’s assets so far this year.

40 During 2018/19 we committed to reviewing the capital programme to ensure it was deliverable and we are now currently forecasting to spend $28.3 million for the year, which is $7 million less than originally planned.

41 The majority of this reduction is due to the intention to move $6.2 million of the funding for the drinking water safety and resilience project (DWSRP) to next year. This was due to delays in the establishment of the Water Professional Services Panel in 2018/19 to allow for a strategic procurement review. Those delays held back the awarding of the contract for the DWSRP and although the design work is progressing well the construction work is now planned to start in 2020/21.

42 In the economic development activity, the majority of the additional spending relates to work on Kapiti Road for the completion of the shared path and widening of the road which has received additional funding from NZTA.

43 Detailed information about spending variations at the activity level are included in the Activity Reports 1 July – 30 September 2019 that is also part of the agenda for the Strategy and Operations Committee meeting on 5 December 2019.

Part G: Outstanding Rates Debt as at 30 September 2019

44 As part of the wider strategy of continuing to reduce the Council’s debt, we need to ensure that everyone is paying their property and water rates.

45 Like a number of other councils around the country, we are now using the services of a local government shared services agency, Debt Management Central (DMC), to assist our team with collecting outstanding rates debts.

46 This framework for recovery of unpaid rates is set out in the Local Government (Rating) Act 2002. DMC is working within the provisions of our rating policy and following our internal debt collection processes.

Improved collection of outstanding property rates

47 The total property rates outstanding as at 30 September 2019 was $2.12 million, which was a reduction of almost 16% from this time last year (30 September 2018: $2.52 million).

48 DMC and Council’s debt collection staff have worked with ratepayers to set up workable payment arrangements. Where a payment arrangement has not been agreed, and provided the property is subject to a mortgage, Council has issued mortgagee notifications where appropriate.

49 DMC will continue to work with our debt collection team during the 2019/20 year to collect outstanding rates, enabling the Council to reduce its borrowing levels.

50 The graph below shows a comparison of the $1.14 million of rate arrears outstanding as at 30 September 2019 and for the previous three years.

51 The graph below details the rates arrears of $1.14 million by property use/type. The majority of the total rate arrears are from residential and lifestyle properties.

52 The rates arrears from Māori freehold land are rates owed to the Greater Wellington Regional Council.

53 There are a small number of properties with significant outstanding arrears over a number of years. We will follow the process prescribed in the legislation for collection of this long outstanding debt. Updates will be provided to the Committee over the coming months.

Improved collection of outstanding water rates

54 A total of $383,000 of water rates is overdue as at 30 September 2019, which is a 41% reduction from the same time last year ($659,000 as at 30 September 2018). This significant reduction is due to the focus on collection by Council over the last year in partnership with DMC.

55 Water rates payments received are first applied to water rate arrears. The chart below reflects the overdue and not-yet-due water rates as at 30 September 2019, 30 June 2019 and 30 September 2018.

56 The graph below details the total water rates outstanding by property use/type. The majority of the outstanding water rates are from residential properties.

57 $210,000 or 55% of outstanding water rates relate to individual debtor balances of less than $500.

58 Table 7 below details the total rate remissions approved to 30 September 2019 against the year to date budget. Applications for rates assistance will be posted to eligible property owners in December 2019, and we will begin processing applications from February 2020.

59 Rates assistance grants are funded by rates and are a unique level of additional support provided by our Council to assist households in need. Further detail on the eligibility criteria can be found in the Council’s rates remission policy.

60 Year to date, central government rates rebates have been granted for 1,181 Kāpiti properties totalling of $718,000. The Council provides the approved rates rebate (up to $640 per rateable property) to the successful applicants and recovers the costs directly from the Department of Internal Affairs (DIA).

61 The Council actively promotes the Government rates rebate and remissions on radio, Facebook and through advertisements in the local papers and has worked with Grey Power and the Older Persons’ Council to promote remissions and rebates more widely.

62 Kāpiti was one of three councils invited to take part in an online rates rebate trial during June 2019 with the DIA. The other councils involved in the trial were Tauranga and Hutt City. The online application was being trialled as an alternative to the current paper form, allowing customers to complete and submit an application at home without the need to provide supporting income information.

Part H: Treasury Management

Summary

63 We talk about our borrowings as gross and net. Gross is the total and net is what we owe less our financial assets – essentially the cash and term deposits we hold to repay borrowings. To make sure we can always cover repayments when they are due, we start to build up funds in advance of the due date and put those funds into term deposits. Our net borrowings therefore reflect the true position of what we owe.

64 The graph below shows how our total borrowings break down into gross and net. It also shows our strategy to keep below 200% of operating income – represented by the green line. Currently our borrowings are forecast to be 191% of our operating income at the end of June. Looking at borrowing against income shows how well an organisation (or even an individual) is placed to handle and repay borrowings in the future.

65 It is one of the key measures used by Standard & Poor’s when they assess our credit rating. While we could borrow more (up to 240% as outlined in our treasury management policy and shown by the orange dotted line), we are choosing to limit our borrowings to 200% of operating income and that becomes our ‘green line’. This approach is so we can afford to replace significant water and wastewater infrastructure in the future.

66 The table below shows the Council’s net borrowings as at 30 September 2019 against full year budget and the prior year.

67 During the first quarter the Council repaid $20 million of borrowings which matured. This was repaid using a term deposit that had been built up over the last 18 months in advance of the maturity. This ensures there is adequate funding available when borrowings mature. We call this prefunding and it is a key tool used by the Council to manage our liquidity risk or risk that we may not have access to funding when we need it.

68 As at 30 September 2019, the Council had $39.35 million of cash, term deposits and borrower notes on hand. This is broken down as follows:

69 The Reserve Bank of New Zealand cut the official cash rate (OCR) by 0.25% to 1.0% in August 2019, with no change to the rate in the following two announcements in September and November 2019.

70 The Council’s weighted average cost of borrowing for the quarter ended 30 September 2019 was 4.32% compared to the budget of 4.8%.

Treasury policy limits

71 The treasury management policy (Policy) contains three financial ratios with either a maximum or minimum policy limit.

72 The Policy sets the maximum limit for the ratio of net interest expense to total operating revenue of 20%. The following chart shows actual limits achieved for each quarter.

73 The Policy sets the minimum limit for the liquidity ratio of 110%. This is a measure of the Council's available financial facilities compared to its current debt levels. The chart below shows actual limits achieved for each quarter.

74 The policy sets the maximum limit for net debt to operating income of 240%. This is a measure of the Council’s ability to repay its debt from the operating revenue it receives during a given financial year.

Part I: Asset Revaluation

75 The Council’s asset valuations are performed with sufficient regularity to ensure the carrying amounts are maintained at fair value. All valuations are performed by independent qualified valuers.

76 By maintaining asset values at fair value, the Council ensures that it best achieves intergenerational equity whereby ratepayers pay their fair share, and only their fair share, of the assets they use and benefit from.

77 From 1 July 2015, Council transitioned to an annual rolling asset revaluation programme as set out below. We have previously completed asset revaluations as at 30 June each year. Officers have reviewed this process and asset revaluations will now be completed as at 31 March each year, to ensure that there is more certainty about the impact of the revaluation on future years’ depreciation charges and rates revenue requirements.

Asset classification	Revaluation date	Subsequent revaluation
Land and buildings (including land under roads revaluations)	31 Mar 2020	Every three years thereafter
Parks and reserves structures	31 Mar 2020	Every three years thereafter
Water, wastewater and stormwater (including seawalls and river control	31 Mar 2020	Every two years thereafter
Roading and bridges, (excluding land under roads)	31 Mar 2021	Every two years thereafter

78 For the 2019/20 revaluation programme we have engaged WSP New Zealand Ltd (formerly Opus) to complete the 3 waters revaluation. Aon NZ Ltd have also been engaged for the revaluation of Council’s land, buildings, park and land under road assets.

79 Both valuers will provide Council with a draft revaluation in November 2019 to start the due diligence on the changes in unit rates and asset data analysis. The final revaluation will be completed for the third quarter finance update to the Committee.

Considerations

Policy considerations

80 There are no policy implications arising from this report.

Legal considerations

81 There are no legal considerations arising from this report.

Financial considerations

82 The financial information as detailed in Parts A to I of this report is unaudited. Best endeavours have been made by all Council officers to ensure the accuracy, completeness and robustness of the financial information contained herein as at the time of issuance of this report.

Tāngata whenua considerations

83 There are no tāngata whenua considerations arising from this report.

Significance and Engagement

Significance policy

84 This matter has a low level of significance under the Council Policy.

Publicity

85 There are no publicity considerations arising from this report

Recommendations

86 That the Strategy and Operations Committee notes the actual financial performance and position of the Council for the quarter ended 30 September 2019.

Appendices

Nil

Strategy and Operations Committee Meeting Agenda

5 December 2019

8.8 Recent submissions to Ministry for the Environment, Department of Internal Affairs, and Parliament's Social Services and Community Committee

Author: Brandy Griffin, Senior Policy Advisor

Authoriser: Mark de Haast, Group Manager

Purpose of Report

1 This noting report provides the Committee with an update on three submissions that were made over the recent election period.

Delegation

2 Section B1 of the Governance Structure and Delegations for the 2019-2022 Triennium states that the Strategy and Operations Committee is responsible for signing off any submission to an external agency or body.

Background

3 Central Government is currently in a ‘delivery’ phase, prior to the next elections. This brings numerous demands on Council to provide submissions. Often, these submissions are resource hungry and the submission timeframes are very tight.

4 Normally, draft submissions will be submitted to the Committee for adoption; however, the recent local government election period meant that the submission timeframes did not allow for this preferred approach.

5 Three submissions were completed during this period. This noting report is provided to ensure that the Elected Members are made aware that these submissions were made.

Issues and Options

Ministry for the Environment’s Action for Healthy Waterways

6 On 5 September 2019, the Ministry for the Environment (MfE) released a consultation document entitled Action for healthy waterways: A discussion document on national direction for our essential freshwater. Submissions were due on 31 October 2019.

7 The Action for Healthy Waterways programme seeks to improve the current management of freshwater. The discussion document proposed new requirements that would:

7.1 strengthen Te Mana o Te Wai as the framework for freshwater management

7.2 better provide for ecosystem health (water, fish and plant life)

7.3 better protect wetlands and estuaries

7.4 better manage stormwater and wastewater, and protect sources of drinking water

7.5 control high-risk farming activities and limit agricultural intensification

7.6 improve farm management practices.

8 The full discussion document is available on the MfE website at https://www.mfe.govt.nz/consultation/action-for-healthy-waterways.

9 Council made a submission on 31 October 2019, which is attached as Appendix 1 to this report.

Department of Internal Affairs’ Infrastructure Funding and Financing

10 On 18 September 2019, the Department of Internal Affairs (DIA) released a consultation document entitled Infrastructure Funding and Financing: Development contributions and targeted rates (Appendix 2). Submissions were originally due on 23 October 2019, but DIA later changed the due date to 8 November 2019.

11 The consultation document summarised feedback from initial discussions that DIA held with some key stakeholders, provided further information, and invited feedback from a wider group of stakeholders on:

11.1 how existing funding tools could be utilised more effectively to better recover the cost of infrastructure; and

11.2 how better cost recovery would help with enabling a more responsive supply of infrastructure and appropriate cost allocation.

12 Council made a submission on 8 November 2019, which is attached as Appendix 3 to this report.

Rates Rebate (Statutory Declarations) Amendment Bill

13 On 24 September 2019, the Rates Rebate (Statutory Declarations) Amendment Bill had its first reading in Parliament and was then directed to the Social Services and Community Select Committee. The Committee called for submissions on the Bill, which were due on 27 November 2019.

14 The objectives of the Bill are to make it easier for eligible applicants to apply for a rates rebate, to replace the requirement to make a statutory declaration with a requirement to verify the application, and to allow authorities to design application forms for the purposes of the Rates Rebate Act 1973. Further information on the Bill can be found online at https://www.parliament.nz/en/pb/bills-and-laws/bills-proposed-laws/document/BILL_91293/rates-rebate-statutory-declarations-amendment-bill.

15 Council made a submission on 27 November 2019, which is attached as Appendix 4 to this report.

Considerations

Policy considerations

16 There are no policy considerations arising from this report.

Legal considerations

17 There are no legal considerations arising from this report.

Financial considerations

18 There are no financial considerations arising from this report.

Tāngata whenua considerations

19 Iwi have not been consulted on the development of this paper.

20 It was understood that tāngata whenua would likely have a strong interest in the Action for Healthy Waterways programme so the Iwi Relationships Team provided information on the consultation to Counci’ls iwi partners.

Strategic considerations

21 The Toitū Kāpiti vision is that of a thriving environment, a vibrant economy, and strong communities. An important role of Council is to advocate on behalf of the District to encourage the development and implementation of Central Government programmes that help to achieve the Toitū Kāpiti vision.

Significance and Engagement

Significance policy

22 This noting paper on these three submissions has a low level of significance under Council’s Significance and Engagement Policy.

Consultation already undertaken

23 No consultation was undertaking in the development of this report.

Engagement planning

24 An engagement plan is not required for this report.

Publicity

25 The three completed submissions have all been posted on the ‘Submissions we have made’ section of the Council’s website.

Recommendations

26 Note that three submissions were made to the Ministry for the Environment, Department of Internal Affairs, and the Social Services and Community Select Committee during the recent local government election period.

Appendices

1. Submission to MfE on health waterways _ 31 October 2019 ⇩

2. DIA consultation document on infrastructure funding and financing ⇩

3. Submission to DIA on infrastructure funding and financing _ 8 November 2019 ⇩

4. Submission to Select Committee on Rates Rebate Bill _ 27 November 2019 ⇩

[1] An additional significant project is a project that has a significant impact on community interests or has significant interest from a governance perspective, but has a capital expenditure budget of less than $250,000 (although it may have a higher operational expenditure budget).

[2] Note that there are other work programmes and projects reported in the ‘Across Council Work Programmes’ section of this report (and in that chapter in Appendix B) that are not included in Figure 1 or in Appendix A.


AGENDA Strategy and Operations Committee Meeting
I hereby give notice that a Meeting of the Strategy and Operations Committee will be held on:
Date:	Thursday, 5 December 2019
Time:	9.30am
Location:	Council Chamber Ground Floor, 175 Rimu Road Paraparaumu
James Jefferson Group Manager Place and Space

Mayor K Gurunathan	Member
Cr James Cootes	Chair
Deputy Mayor Janet Holborow	Member
Cr Angela Buswell	Member
Cr Gwynn Compton	Deputy
Cr Jackie Elliott	Member
Cr Martin Halliday	Member
Cr Sophie Handford	Member
Cr Jocelyn Prvanov	Member
Cr Robert McCann	Member
Cr Bernie Randall	Member