Agenda of Operations & Monitoring Committee Meeting

Thursday, 30 September 2021

Te Hui o Te Kaunihera ā-Rohe o Heretaunga

Hastings District Council: Operations & Monitoring Committee Meeting

Te Rārangi Take
Report to Operations and Monitoring Committee

Nā:

From:

Louise Stettner, Manager, Democracy & Governance Services

Te Take:

Subject:

Requests Received under the Local Government Official Information and Meetings Act (LGOIMA) Update

1.0 Executive Summary – Te Kaupapa Me Te Whakarāpopototanga

1.1 The purpose of this report is to inform the Committee of the number of requests under the Local Government Official Information Act (LGOIMA) 1987 received in July and August 2021.

1.2 This issue arises from the provision of accurate reporting information to enable effective governance.

1.3 This is an administrative report to ensure that the Council is aware of the number and types of information requests received and to provide assurance the Council is meeting its legislative obligations in relation to the (LGOIMA).

1.4 This report concludes by recommending that the LGOIMA requests be noted.

2.0 Recommendations – Ngā Tūtohunga

A) That the Operations and Monitoring Committee receive the report titled Requests Received under the Local Government Official Information and Meetings Act (LGOIMA) Update dated 13 May 2021.

B) That the LGOIMA requests received in July and August 2021, as set out in Attachment 1 (CG-16-4-00146) of the report be noted.

3.0 Background – Te Horopaki

3.1 The LGOIMA allows people to request official information held by local government agencies. It contains rules for how such requests should be handled, and provides a right to complain to the Ombudsman in certain situations. The LGOIMA also has provisions governing the conduct of meetings.

Principle of Availability

3.2 The principle of whether any official information is to be made available shall be determined, except where this Act otherwise expressly requires, in accordance with the purposes of this Act and the principle that the information shall be made available unless there is good reason for withholding it.

3.3 Purpose of the Act

3.4 The key purposes of the LGOIMA are to:

· Progressively increase the availability of official information held by agencies, and promote the open and public transaction of business at meetings, in order to:

· enable more effective public participation in decision making;

· promote the accountability of members and officials;

· enhance respect for the law and promote good local government;

· protect official information and the deliberations of local authorities to the extent consistent with the public interest and the preservation of personal privacy.

3.5 City, district and regional councils, council controlled organisations and community boards are subject to LGOIMA and official information means any information held by an agency subject to the LGOIMA.

3.6 It is not limited to documentary material, and includes material held in any format such as:

· written documents, reports, memoranda, letters, notes, emails and draft documents;

· non-written documentary information, such as material stored on or generated by computers, including databases, video or tape recordings;

· information which is known to an agency, but which has not yet been recorded in writing or otherwise (including knowledge of a particular matter held by an officer, employee or member of an agency in their official capacity);

· documents and manuals which set out the policies, principles, rules or guidelines for decision making by an agency; and

· the reasons for any decisions that have been made about a person.

3.7 It does not matter where the information originated, or where it is currently located, as long as it is held by the agency. For example, the information could have been created by a third party and sent to the agency. The information could be held in the memory of an employee of the agency.

What does a LGOIMA request look like?

3.8 There is no set way in which a request must be made. A LGOIMA request is made in any case when a person asks an agency for access to specified official information. In particular:

· a request can be made in any form and communicated by any means, including orally;

· the requester does not need to refer to the LGOIMA; and

· the request can be made to any person in the agency.

3.9 The Council deals with in excess of 14,000 service requests on average each month from written requests, telephone calls and face to face contact. The LGOIMA requests dealt with in this report are specific requests for information logged under formal LGOIMA procedures, which sometimes require collation of information from different sources and/or assessment about the release of the information requested.

Key Timeframes

3.10 An agency must make a decision and communicate it to the requester ‘as soon as reasonably practicable’ and no later than 20 working days after the day on which the request was received.

3.11 The agency’s primary legal obligation is to notify the requester of the decision on the request ‘as soon as reasonably practicable’ and without undue delay. The reference to 20 working days is not the de facto goal but the maximum unless it is extended appropriately in accordance with the Act. Failure to comply with time limit may be the subject of a complaint to the ombudsman.

3.12 The Act provides for timeframes and extensions as there is a recognition that organisations have their own work programmes and that official information requests should not unduly interfere with that programme.

4.0 Discussion – Te Matapakitanga

Current Situation

4.1 Council has requested that official information requests be notified via a monthly report.

5.0 Options – Ngā Kōwhiringa

Not applicable.

Attachments:

1 ⇩

LGOIMA Report July and August 2021 to Operations and Monitoring Committee 14 September 2021

CG-16-4-00146

Summary of Considerations - He Whakarāpopoto Whakaarohanga

Fit with purpose of Local Government - E noho hāngai pū ai ki te Rangatōpū-ā-Rohe

The Council is required to give effect to the purpose of local government as set out in section 10 of the Local Government Act 2002. That purpose is to enable democratic local decision-making and action by (and on behalf of) communities, and to promote the social, economic, environmental, and cultural wellbeing of communities in the present and for the future.

Link to the Council’s Community Outcomes – Ngā Hononga ki Ngā Putanga ā-Hapori

N/A

Māori Impact Statement - Te Tauākī Kaupapa Māori

N/A

Sustainability - Te Toitūtanga

N/A

Financial considerations - Ngā Whakaarohanga Ahumoni

N/A

Significance and Engagement - Te Hiranga me te Tūhonotanga

N/A

Consultation – internal and/or external - Whakawhiti Whakaaro-ā-roto / ā-waho

N/A

Risks: Legal - Ngā Tūraru: Ngā Ture

N/A

Rural Community Board – Te Poari Tuawhenua-ā-Hapori

N/A

Thursday, 30 September 2021

Te Hui o Te Kaunihera ā-Rohe o Heretaunga

Hastings District Council: Operations & Monitoring Committee Meeting

Te Rārangi Take
Report to Operations and Monitoring Committee

Nā:

From:

Jess Noiseux, Financial Improvement Analyst

Te Take:

Subject:

Exemption of Council Controlled Status for Hawke's Bay Local Authority Shared Services Limited and the Te Mata Park Trust Board

1.0 Purpose and Summary – Te Kaupapa Me Te Whakarāpopototanga

1.1 The purpose of this report is to seek decisions in regards to exempting Hawke’s Bay Local Authority Shared Services Limited (HBLASS) and the Te Mata Park Trust Board from being a Council Controlled Organisation (CCO) under the Local Government Act.

1.2 The exemption will continue to allow a reduced reporting requirement for both the Te Mata Park Trust Board and HBLASS.

1.3 The Council is required to give effect to the purpose of local government as set out in section 10 of the Local Government Act 2002. That purpose is to enable democratic local decision-making and action by (and on behalf of) communities, and to promote the social, economic, environmental, and cultural wellbeing of communities in the present and the future.

1.4 This report concludes by recommending that both the Te Mata Park Trust Board and HBLASS continue to have exemption from being a CCO under the Local Government Act 2002.

2.0 Background

2.1 Te Mata Park Trust Board has been granted exemption since May 2018, and HBLASS since March 2018, from the requirements imposed on CCOs under section 7 of the Local Government Act (LGA). Section 7(6) (a) of the LGA stipulates that Council must review any exemptions granted under section 7 within 3 years after it was first granted.

2.2 The LGA allows a Local Authority to exempt organisations from being CCOs. The following are the relevant sections of the LGA:

“7 Exempted organisations

(3) A local authority may, after having taken account of the matters specified in subsection (5), exempt a small organisation that is not a council-controlled trading organisation, for the purposes of section 6 (4)(i).

(4) An exemption must be granted by resolution of the local authority.

(5) The matters are –

(a) the nature and scope of the activities provided by the organisation; and

(b) the costs and benefits, if an exemption is granted, to the local authority, the council-controlled organisation, and the community.”

2.3 The LGA identifies monitoring and requirements for CCOs which include half yearly and annual reports plus an annual Statement of Intent.

2.4 The Te Mata Park Trust Board is a charitable trust that owns and manages Te Mata Peak.

2.5 The Trust Board is a CCO due to the fact that under the trust deed the Hastings District Council appoints all the trustees. This means that the Council has effective control of the Trust Board and its assets, however in practical terms the Trust Board is allowed to get on with the maintenance and development of Te Mata Park.

2.6 HBLASS is a dormant company whose shareholders are the five Hawke’s Bay Councils. It was first incorporated in 2012 with a purpose of identifying functions and analysing opportunities for shared services and joint procurements across the Hawke’s Bay Councils.

2.7 In 2018 the five Councils proposed an alternative structure to save time and resources, the Chief Executive Forum. The purpose of which continues to be to work together on improving Service and Value for the Hawke’s Bay region through collaboration. Subsequently HBLASS was made a dormant company in 2018 and exempted from the requirements imposed on CCOs under section 7 of the LGA.

3.0 Current Situation

3.1 The Te Mata Trust Board is a small entity with limited turnover. For the year ended 30 June 2020 the Trust Board generated income of $169,339 before donations and other fundraising income related to capital projects. Income received included rental income, grants and interest.

3.2 HBLASS is a dormant company with no plans to reactivate it at this stage.

4.0 Options

4.1 Council can resolve to continue the exemption for both the Te Mata Park Trust Board and HBLASS or it can revoke the exemption, requiring the entities to report as required under the LGA.

5.0 Recommendations - Ngā Tūtohunga

A) That the Operations and Monitoring Committee receive the report titled Exemption of Council Controlled Status for Hawke's Bay Local Authority Shared Services Limited and the Te Mata Park Trust Board dated 30 September 2021.

B) That the Committee approve pursuant to Section 6(4)(i) and Section 7 of the Local Government Act 2002, the Te Mata Park Trust Board be exempted from being a Council Controlled Organisation for three years to 30 June 2024.

C) That the Committee approve pursuant to Section 6(4)(i) and Section 7 of the Local Government Act 2002, the Hawke’s Bay Local Authority Shared Services be exempted from being a Council Controlled Organisation for three years to 30 June 2024.

Attachments:

There are no attachments for this report.

Summary of Considerations - He Whakarāpopoto Whakaarohanga

Fit with purpose of Local Government - E noho hāngai pū ai ki te Rangatōpū-ā-Rohe

Link to the Council’s Community Outcomes – Ngā Hononga ki Ngā Putanga ā-Hapori

N/A

Māori Impact Statement - Te Tauākī Kaupapa Māori

N/A

Sustainability - Te Toitūtanga

N/A

Financial considerations - Ngā Whakaarohanga Ahumoni

N/A

Significance and Engagement - Te Hiranga me te Tūhonotanga

This decision/report has been assessed under the Council's Significance and Engagement Policy as being not of significance.

Consultation – internal and/or external - Whakawhiti Whakaaro-ā-roto / ā-waho

N/A

Risks

Opportunity: N/A

REWARD – Te Utu

RISK – Te Tūraru

[State the benefit, opportunity, innovation of the outcome & whether it benefits; Safety (public/ staff/ contractors), Finances, Service Delivery, Legal compliance, Reputation.]

[State the significant risks or threats (4 or 5 max) to the objective & whether they affect; Safety (public/ staff/ contractors), Finances, Service Delivery, Legal compliance, Reputation.]

Rural Community Board – Te Poari Tuawhenua-ā-Hapori

N/A

Thursday, 30 September 2021

Te Hui o Te Kaunihera ā-Rohe o Heretaunga

Hastings District Council: Operations & Monitoring Committee Meeting

Te Rārangi Take
Report to Operations and Monitoring Committee

Nā:

From:

Aaron Wilson, Financial Controller

Te Take:

Subject:

Draft Financial Year End Results - 30 June 2021

1.0 PURPOSE AND SUMMARY - TE KAUPAPA ME TE WHAKARĀPOPOTOTANGA

1.1 The purpose of this report is to inform the Committee of the unaudited accounting and rating result for the year ended 30 June 2021 and for the Council to approve the allocation of the rating result. It also seeks the approval from Committee to carry forward project budgets. The Hastings District Rural Community Board has approved the recommendations submitted to it on 6th September 2021 relating to the year-end rating result for Rating Area 2 (RA 2)

1.2 The rating result is a surplus to budget. The result in RA1 is a consequence of higher than budgeted revenue and interest rate savings and offset by increasing cost pressures within areas of Council along with a number of approved but unbudgeted spends in the financial year. RA2 has benefited in addition from favourable budgeted rates remissions, penalties and rates revenues.

1.3 The unaudited rating result for the 2020/21 year is as follows:

Rating Area 1	$443,366	Surplus
Rating Area 2	$422,655	Surplus
Total for the District	$866,021	*Surplus*

1.4 In addition to the Rating Result, Council also generated a surplus from the Landfill operation, the report recommends that these surpluses be allocated as follows:

1.5 The report also recommends that budget allocations proposed to be carried forward from 2020/21 to 2021/22 to enable project completion be approved.

1.6 Council is provided with quarterly financial reports during the year with the unaudited year-end result presented annually at the September Finance and Risk Committee meeting.

1.7 Officers report on the operating financial result (operating surplus/deficit) as well as the rating result. The operating (accounting) financial result is reported on quarterly during the year and, at year end, a report is prepared on the rating result in addition to the accounting result.

1.8 The rating result differs from the accounting result in respect of non-cash items such as depreciation, gains or losses on interest rate swaps, vested assets, impairment of assets and investments and development contributions income which have no impact on setting rates and are therefore excluded from the rates calculations. The rating result is also affected by the extent of rates-funded carry forwards that are approved. The rating result reports on the variance of rates collected and net total expenditure (including capital and reserve transfers) for Council.

1.9 The Financial Reports attached to supplement this report include:

Attachment 1 – Interim Rating Result for the year ended 30 June 2021

Attachment 2 – Dash Board Summary of Financial Performance

Attachment 3 – Draft Unaudited Financial Statements

Attachment 4 – Carry Forwards 2020/21

1.10 The financial reports contain summarised information. Please feel free to contact the report writer or the Group Manager: Corporate directly on any specific questions from the reports before the meeting. This will ensure that complete answers can be given at the meeting on the detail that forms the basis for these reports.

2.0 CURRENT SITUATION

2.1 The start of the 2020/21 financial year saw a continuation of a strong Hawke’s Bay economy, with a number of Council areas that experienced operational cost pressures in responding to those strong economic conditions.

2.2 This financial year saw a strong bounce back from the first COVID 19 lockdown in April/May 2020. This has been shown by favourable revenues to budget lines, in particular in Fees & Charges along with Subsidies and Grants. Some areas due to the strength of the Hawke’s Bay economy still continue to be under pressure, with adequate resourcing to meet demand still a challenge.

2.3 The net effect was revenues were higher to budget, somewhat offset by higher expenditure due to the strong demand for services along with some approved but unbudgeted spend. In light of the environment and challenges faced the rating result $866k was a good outcome.

3.0 THE RATING AND LANDFILL RESULT

3.1 Council adopts strong financial management practices and prepares a balanced budget to deliver Council’s desired programme, including high levels of fiscal tensioning and stretch targets.

3.2 This year the overall general rating result for 2020/21 is a surplus to budget as shown below by rating area.

Rating Area 1	$443,366	Surplus
Rating Area 2	$422,655	Surplus
Total for the District	$866,021	Surplus

3.3 In addition to the general rating result, the Council’s share of the available surplus from the Landfill operations is $1.997m.

3.4 It should be noted that the Landfill operates on a “whole of life” cost recovery model, that is based on recovering all costs associated with the landfill from development to operations being recovered over the landfills life which includes care after it has been fully utilised. The cost recovery model utilises assumptions to inform gate rates to reach that full cost recovery. The higher volumes and changes to the composition of waste including special waste types means that in some years a surplus is made and development of new valleys may come on earlier than anticipated.

3.5 Council resolved last year to apply the 2019/20 landfill surplus of $1.64m to the repayment of the Landfill Gas Plant debt ($646k), with the balance allocated to the General Purpose reserve in RA1 ($869k). In RA 2 the balance was allocated to the Capital reserve ($125k). This now leaves the Council with a decision on how to allocate the 2020/21 Landfill surplus.

3.6 In addition to the above, which is after all necessary reserve transfers have been made, there are a number of significant activities where surpluses or deficits are ring fenced and/or transferred to reserves and include water supply, waste water and refuse & recycling.

3.7 In allocating surpluses and reserves, Council’s prudent financial policy approach has traditionally focused on debt repayment or borrowing reduction. In Rating Area 2, priority has been given to replenishing the Rural Flood and Emergency Event Reserve.

3.8 The total of the 2020/21 Landfill Surplus is recommended to be put to the Landfill Development Reserve, with significant capital spend about to start with resource consent hearings and development of the next valley to follow. Carry forwards of $6m along with $30m budgeted spend in the LTP for the development of Valley B is expected to total $36m over the next 10 years.

3.9 It should however be noted and considered, Council has embarked on an ambitious programme of delivery in 2021/22 and the impacts of Covid-19 are creating many uncertainties for the delivery of that programme and on the operations of the organisation. It is recommended that whilst allocating the Landfill surplus to the Landfill Development Reserve is the right thing to do, it would be prudent to allow for Council to access these funds for operational matters should Council require additional funding to deliver the 2021/22 programme and meet any unforeseen operational impacts from the Covid-19 alert level lockdowns.

3.10 In determining priorities for the Rating Area 2 general rate surplus and Council’s share of the Landfill surplus, the Rural Community Board have recommended the following allocations:

2020/21 RA2 Rating Surplus

Surplus

RA2 Surplus on General Rate

- Contingency Reserve

- Allocation to Rural Flood & Emergency Event Reserve

$422,655

$110,841

$311,814

2020/21 Landfill Operating Surplus

Surplus

RA2 Surplus on Landfill Operations

- Allocation to Landfill Development Reserve

$251,465

4.0 THE UNAUDITED ACCOUNTING RESULT

4.1 Draft Unaudited Operating Accounting Result compared to Annual Plan

4.2 Set out below is a summary of the 2020/21 financial year. Please note that this is not the same as the rating result.

Unaudited Operating Accounting Result	Budget Council $'000	Actual Council $'000	Variance
Operating Revenue	151,190	168,857	17,667
Less: Operating Expenditure	136,330	142,040	5,710
Net Surplus/(Deficit)	14,860	26,817	11,957
Unrealised movement on Swaps	-	(8,010)	(8,010)
Net Surplus/(Deficit) after Swaps	14,860	34,827	19,967
Gain/(Loss) on Revaluations	49,224	101,345	52,121
Net Surplus after accounting gains and losses	64,084	136,172	72,088

4.3 The draft unaudited financial result for the year ended 30 June 2021 before gains or losses on revaluations and losses on interest rate swaps is a surplus of $26.8m with a favourable variance to the budget of $11.9m.

4.4 It is important to note that budget variances noted in the table above, refer to variances against the Annual Plan excluding carry forwards or any other budget adjustments as this is what Council is required to report against in the Annual Report. By comparison, the attached dashboard reports include budgeted information that includes all budget adjustments including carry forwards from previous year.

4.5 The unrealised gain on interest rate swaps of $8m is an accounting entry and reflects the potential cost to Council of replacing all of its interest rate swaps at the prevailing swap interest rates on 30 June 2021. Council is, however, extremely unlikely to do this and the gain is therefore recognised as an ‘unrealised gain’.

4.6 Council has interest rate swaps in place to hedge against interest rate exposure by reducing uncertainty of future cashflows. This is in line with Council’s prudent financial approach and meets the requirements of Council’s treasury policy. Market conditions have changed from several years ago when many of these swaps were taken out.

4.7 In addition to this there were three main revaluations this year. These were roading, land and buildings, and parks. The total increase in asset value for these three classes was $101m.

5.0 REVENUE

5.1 Revenue has a favourable variance to revised budget of $11.2m, prior to the non-realised gain on interest rate swap movements of $8m. The large favourable variance in revenue has driven by three main areas, additional funding received in terms of Grants and Subsidies, Fee and charges, along with higher than budgeted vested assets and assets sold.

5.2 Fees and Charges finished the year above budget by $2.3m. The main drivers for this increase in revenue have been:

o Splash Planet Revenue is $944k favourable with significantly higher volumes of people through the gate along with higher than budgeted revenue in sales of food and gifts.

o Council’s share of Landfill revenue is $1.563m favourable to budget due to higher volumes.

o Higher than budgeted connection fees revenue in wastewater $357k along with higher than budgeted water meter charges of $284k.

o Planning and Regulatory services are unfavourable to budget by $608k driven by lower than budgeted building control consent fees ($753k) offset by higher LIM fees ($60k) along with higher infringement revenue of $128k in parking. It should be noted that whilst the revenue is lower than budget in building control, the expenditure was also lower than budget.

o Heretaunga House is $398k unfavourable to budget due to its earthquake prone closure and ensuing loss of lease revenue.

5.3 Subsidies and grants are $4.9m favourable to revised budget with the main drivers being unbudgeted government funding received for 3 Waters infrastructure of $7.7m, offset by lower than budgeted capital grants for the Municipal project ($3m).

5.4 Development contributions are unfavourable to YTD budget by $841k. Phasing of budgets in relation to when contributions occur is difficult, and creates timing differences as it is not always known in advance in what month a developer will make payments and when it will occur when the budget is being set

5.5 Interest revenue earned is favourable to budget by $519k due to investment of funding held for capital projects and prefunding of maturing debt.

5.6 Infrastructure vested assets are above budget by $1.6m. Vested assets are infrastructure assets that have been constructed by developers and then vested to Council at the completion of the development.

5.7 Summary of additional revenues received:

Additional revenue received from the government sources is as follows:

PGF Funded Projects	Govt Funding per agreements	Funding Received as at 30 June 2021
Tarbet Street	$2m*^{up to}	$1.847m
Jobs for Heretaunga	$9.3m	$9.3m
3 Waters projects	$15.3m	$7.681m

6.0 EXPENDITURE

6.1 Overall operational expenditure is tracking higher than budget by $3.2m. Note that Council have received additional revenues along with releasing contingencies where approved, offsetting these higher levels of expenditure. Key drivers are:

6.2 Finance costs are favourable by $1.5m which is a reflection of lower levels of debt than phased in the budget and lower actual interest rates compared with those assumed in the budget. Additional funding received from the Government for water infrastructure in advance of it being required has delayed the requirement for additional debt funding.

6.3 Plant maintenance and asset costs are $511k above budget driven by higher than budgeted plant hire costs ($265k), along with vehicle R&M costs ($208k). Both of these costs are HDC’s share of Landfill expenditure and relate to major maintenance costs relating to the Compactor.

6.4 Contracted, expert and consultancy advice services are $1.5m above budget. This is primarily in the areas of infrastructure where there have been and are large capital projects underway, along with operational impacts from approved but unbudgeted projects such as the move from Heretaunga House, security contract increase, and new lease costs (Warren Street). It should be noted that there have been a number of contingencies released to offset some of the impact of unbudgeted but approved expenditure. This is summarised in the section below.

6.5 The negative variance to budget for non-cash entries in terms of depreciation ($2.5m) are driven by higher asset values due to prior year revaluations in 3 Waters, along with increased spend in infrastructure projects in water, roading, and with buildings.

Summary of areas of unbudgeted but approved spend in the current financial year:

6.6 In the 2020/21 financial year, it is important to be aware of what unbudgeted expenditure has already been approved by Council.

Municipal Building:

6.7 Council has approved an additional $5.5m spend in order to complete the Municipal building project. A significant portion of this unbudgeted expenditure will be incurred in the 2021/22 financial year.

Heretaunga House

6.8 Due to the unexpected earthquake prone status of Heretaunga House, Council has been faced with unbudgeted expenditure to quantify the cost involved to strengthening the building, and provide alternative accommodation for staff displaced from the building. In addition to these extra costs, there has been a loss of revenue from tenants that there were leasing space in Heretaunga House.

6.9 In order to understand the work required to strengthen Heretaunga House, Officers have commissioned consultant reports through The Building Intelligence Group who are providing project management support. The approach has been to spend sufficient to achieve the necessary level of confidence on the estimated works and costs to make sound future decisions. As a result the total estimate cost of approximately $50k. This work has been peer reviewed in the 2021/22 financial year.

6.10 Revenue for the full year is below budget by $383k due to the loss of tenants that were leasing space. Operational expenditure excluding depreciation is $346k above budget due to the additional unbudgeted but approved costs associated with moving to 100 Warren Street. These costs include the setup and establishment costs including partitioning, data and electrical work.

6.11 As can be seen in the general contingency summary below, $250k contingency was released for Heretaunga House in addition to $150k for the lease of Warren Street.

Summary of Contingencies

6.12 As was noted in paragraph 6.4 there were a number of contingencies approved and released to offset the impact of decisions taken during the financial year.

6.13 The following table is a summary of the three contingency funds, their closing balances and any commitments currently held against them. At the start of the financial year there is contingency balances of $482,870 which are exclusive of those allocations or commitments in place. The most significant of those commitments is the remaining funding of $364,556 for the Hastings Spatial Plan which was allocated from the Covid-19 Recovery Contingency.

6.14 The following table details those three contingencies and how allocations have been made from them during the year to fund activities and unforeseen events and opportunities and where those future commitments lie.

6.15 Those remaining contingency balances may be required during the 2021/22 financial year with the current risks being presented through the Covid-19 Alert Level restrictions and the need to resource up and respond to an ambitious programme of delivery this year and going forward.

7.0 SUMMARY BY AREAS OF ACTIVITY OF COUNCIL

Strategy and Development

7.1 The Strategy and Development Group had an overall rating requirement group result of $148k unfavourable to budget. The key drivers were in a number of projects that were unbudgeted but approved and were then offset by contingency reserve funding. In addition, the unbudgeted initial capital contribution of $200k in Food East was approved by Council.

Corporate Services

7.2 Corporate services had a deficit in terms of rate requirement of $268k. In terms of cost, this is driven by the impact of moving out of Heretaunga house along with the move into the Warren street offices. In addition, there was a cessation of lease revenue from Heretaunga house.

Community Facilities & Programmes

7.3 This group of activities has a favourable rating requirement of $1.26m primarily driven by very strong revenue in Splash Planet of $944k. Operational costs for the group overall were higher personnel costs particularly in Splash Planet ($180K), however, this is a reflection of the “busyness” and high traffic volumes over the summer period.

Planning & Regulatory Services

7.4 Planning and Regulatory Services had an overall rating result of ($283k) favourable to budget. Revenue was $611k unfavourable to budget. Building control consent fees were $753k unfavourable offset by higher LIMs ($60k) and infringements ($121k).

7.5 Revenues from consents have not reached budgeted levels partly due to vacancies within the building team unable to be filled. This has meant a corresponding drop in operational expenses related to the processing of consents. In addition, this area has absorbed additional unbudgeted costs of $122k related to compliance and investigation costs. With continued high demand and pressure on limited resources challenges remain in this area for the medium term.

Asset Management

7.6 Landfill revenue was favourable to budget by $1.569m, with higher volumes contributing to the favourable revenue variance. This increased revenue has translated into a HDC share of the surplus of $1.97m.

7.7 The surpluses generated from the Landfill are released to the shareholding Councils and it is up to the two Councils as to what they decide to do with those funds. In previous years, HDC has previously repaid landfill debt with those surpluses, however, with all landfill debt now repaid Council can decide how it wishes to allocate those funds. It is recommended that with the Valley development imminent, that surplus funds are set aside in a Landfill Development Reserve as a contribution to those significant development costs.

7.8 Parks revenue was favourable to budget by $462k, this is mainly due to a capital grant from Waka Kotahi in relation to the CBD. Operational expenditure was $69k unfavourable across a wide range of expense lines. Overall, Parks have a favourable rating requirement of $923k, with carry forwards applied for.

7.9 Water Services: Council continues to respond to the water change programme with elevated expenditure supply activity through 2020/21 including both capital and operational expenditure. This activity is funded by way of a targeted rate and accounted for in a separate water account which is designed to either accumulate reserves or run in deficit depending on expenditure needs and Council decision making. This allows Council to spread the impact of “lumpy” expenditure in this activity.

8.0 CAPITAL EXPENDITURE

8.1 Council’s total capital revised budget (including carry forwards, renewals, new works, and growth projects) for 2020/21 was $146m. This level of expenditure is a significant increase on what had been delivered previously by Council and there was risk associated with the ability of Council to deliver on this programme.

8.2 The large capital budget was made up of :

· Annual Plan $102m

· PGF funding for Jobs for Heretaunga $9m (added into Annual Plan )

· Carry forwards from 2020 $30m

· Tarbet Street Project $2m

· HB Museum Storage $3m

8.3 Additionally there will be further government funding received through 2020/21 and 2021/22 totalling $29m for housing infrastructure and three waters that is not currently included in the Annual plan.

8.4 Of the 3 Waters $15.3m government funding, Council has already received $7.3m in the first tranche with the remaining funds to be received as expenditure is incurred and claimed back. It is likely that projects relating to this funding will start in the 2021/22 financial year.

8.5 Capital spend for the year to date is $94.8m, against year to date budget of $146m. Capital spend was forecasted to be $93.9m by year end and represents the largest ever delivery of capital works by Council. Whilst there are a large number of projects out to tender a significant number of those projects were not completed by year end.

8.6 It needs to be noted that there have been a significant number of factors impacting on Council’s ability to complete what is in the plan. The Government’s need to provide stimulus to support the COVID-19 recovery has led to significant funding for Council to embark on projects outside of the original Annual Plan. The PGF funding for Jobs for Heretaunga was for $9m and was added to the Annual Plan at a very late stage, giving officers no time to consider delaying other projects and adjusting the budgets accordingly.

8.7 Whilst the Jobs for Heretaunga project was be completed in May, like some of the other government funded projects, this has placed pressure on resources where other projects had already been budgeted within the programme.

Capital Year End Report 2020/2021
Capital Year End Report 2020/2021
	YTD Actuals	YTD Budgets	YTD variance
COUNCIL CAPITAL
Renewals	37,066,995	54,786,584	17,719,589
New Works	53,356,025	78,125,342	24,769,316
Growth	4,385,161	14,021,383	9,636,223
	94,808,181	146,933,309	52,125,128
SUMMARY
RENEWALS
Stormwater Services	773,982	1,425,000	651,018
Wastewater Services	4,765,080	10,177,000	5,411,920
Water Services	3,549,057	4,288,329	739,272
Transportation RA 1	13,575,231	15,421,500	1,846,269
Parks	1,338,949	1,293,653	(45,296)
Building services	3,045,037	5,049,295	2,004,258
Rest of Council	10,019,658	17,131,807	7,112,149
	37,066,995	54,786,584	17,719,589
NEW WORKS
Stormwater Services	1,110,706	7,127,000	6,016,294
Wastewater Services	709,988	1,552,000	842,012
Water Services	22,936,260	26,887,125	3,950,865
Transportation	16,362,575	15,991,130	(371,445)
Parks	3,994,249	7,462,666	3,468,417
Building services	200,785	1,551,000	1,350,215
Rest of Council	8,041,462	17,554,421	9,512,959
	53,356,025	78,125,342	24,769,316
GROWTH
Stormwater Services	244,085	3,339,000	3,094,915
Wastewater Services	233,786	2,477,000	2,243,214
Water Services	1,504,365	3,430,000	1,925,635
Transportation RA 1	2,378,814	4,068,000	1,689,186
Parks	24,110	707,383	683,273
	4,385,161	14,021,383	9,636,223
Total Capital	94,808,181	146,933,309	52,125,128

9.0 CARRY FORWARD SCHEDULE

9.1 Included in Attachment 4 is a Schedule of Projects and budget amounts that officers have requested to be carried forward to the 2020/21 year

9.2 As noted in the previous section on capital, total Capital spend was $94.8m against the revised budget of $146.9m. This leaves a balance of budget not spent of $52m. Officers have reviewed the 2020/21 unspent capital of $52m and also compared them to project budgets in the 20/21 year to ensure that the appropriate amount is being carried forward.

9.3 The budget for the 2021/22 year is set at $127.9m and is a challenging budget in itself without adding the 2020/21 capital underspend of $52m. Particularly in the current environment with supply chain and workforce issues.

9.4 It must be remembered that Council are working in an extremely “tight” market where resources are concerned in terms of personnel and contractors along with the challenges of the current supply chain constraints. Level four lockdown within the Auckland region has already made access to materials an additional factor.

9.5 However, the carrying forward of budget is the accepted mechanism to allow those capital projects to be delivered and reported on, in the following year or to enable re-budgeting in future years.

9.6 Of the 2020/21 carry forward of $52m officers believe that $31m will go ahead in the 2021/22 as many of these projects are either underway or about to start. This leaves the remaining carry forwards of $20m to be re-budgeted into the 2022/23 Annual Plan.

9.7 The level of carry forwards from rates funding is $1.69m ($1.31m last year). While the table provides a summary of the major carry forward items, the $213k of rates carry forwards classified as other is made up of a number of smaller carry forward projects across Council groups.

9.8 Included in the Loan Funded carry forwards is $3.1m for the major drinking water project. In addition, there is a range of carry forwards across a number of Council activities, from the Municipal Strengthen ($4.3m) through to the CBD redevelopments of $619k.

9.9 Below is a table of the analysis split out by capital type:

10.0 EXTERNAL DEBT

10.1 Total net borrowing as at the end of June 2021 is $165.7m, an increase from last year ($150.2m). This is in line with projected debt in the 2018-28 Long Term Plan (LTP) which had forecast debt levels of $162.5m at this time. Committed borrowing facilities in place are $220.7m, along with $38m in term deposits, providing headroom of $53.7m. The liquidity ratio is at 126% in line with the policy minimum of 110%.

	30 June 2021 ($000)
Borrowing at start of year	150,740
New Loans Drawn	75,000
Loan Repayments	(20,000)
Gross borrowings at end of period	205,740
Plus unutilised facilities	15,000
Total borrowing facilities available	220,740
Funds held on deposit	38,000
Total Net borrowings	165,740
Liquidity Ratio	126%

11.0 ALLOCATION OF RATING SURPLUS

11.1 Council’s Treasury Policy states the following on the allocation of surpluses:

“The funds from all asset sales and operating surpluses will be applied to the reduction of debt and/or a reduction in borrowing requirements, unless the Council specifically directs that the funds will be put to another use.”

11.2 There is still a great deal of uncertainty with regards the ongoing impact on Council by COVID-19 and there is considerable pressure on Council to deliver an ambitious programme of works and programmes. It is therefore recommended that in both Rating Area 1 (RA 1) and Rating Area 2 (RA 2) the surplus be transferred to the Contingency reserve, while maintaining the appropriate rating splits for this activity. Officers believe this is in keeping with a prudent financial management approach.

11.3 The total recommended transfer to the Contingency Reserve is $554,204, being all of the RA 1 surplus of $443,366 and $110,814 from RA 2 representing 20% of that transfer in line with the rating split for that activity.

11.4 Whilst RA 2 currently has debt of $2.453m, incurred for capital works, the recommendation of the Rural Community Board and supported by a resolution of Council to build the Rural Flood and Emergency Event Reserve up to a level of $2m is considered a prudent one.

11.5 In determining priorities for the RA 2 general rate surplus, the Rural Community Board recommends to Council that the RA 2 Rating Surplus of $422,655 be allocated as follows:

2020/21 RA 2 Rating

Surplus

RA2 Surplus on General Rate

- Allocation to the Council General Contingency Reserve

- Allocation to Rural Flood & Emergency Event Reserve

$422,655

$110,841

$311,814

Landfill additional surplus allocation

11.6 Last year the Landfill surplus was in the first instance applied to repaying debt associated with the Landfill Gas to Energy Plant with the balance of RA 2 share of the Landfill surplus put towards the RA 2 Capital Reserve ($125,259) with the RA 1 share put towards the Council Contingency Reserve ($869,652).

11.7 The allocation of both the RA 1 and RA 2 share of the 2020/21 Landfill Surplus of $1.997m is recommended to be put to the Landfill Development Reserve, with significant capital spend about to start with resource consent hearings and development of the next valley to follow. Carry forwards of $6m along with $30m budgeted spend in the LTP for the development of Valley B is expected to total $36m over the next 10 years.

11.8 As mentioned earlier in the report, Council has embarked on an ambitious programme of delivery in 2021/22 and the impacts of Covid-19 are creating many uncertainties for the delivery of that programme and on the operations of the organisation. It is recommended that whilst allocating the Landfill surplus to the Landfill Development Reserve is the right thing to do, it would be prudent to allow for Council to access these funds for operational matters should Council require additional funding to deliver the 2021/22 programme and meet any unforeseen operational impacts from the COVID-19 alert level lockdowns.

11.9 The recommendation of this report, taking into consideration the recommendations to the Hastings District Rural Community Board, is to allocate the rating surplus/deficit as per the table below:

12.0 RECOMMENDATIONS - NGĀ TŪTOHUNGA

A) That the Operations and Monitoring Committee receives the report titled Draft Financial Year End Results - 30 June 2021.

B) That the funds arising from the Rating Area 2 surplus for the 2020/21 financial year, as recommended by the Hastings Rural Community Board, be allocated as follows:

2020/21 RA2 Rating Surplus

Surplus

RA2 Surplus on General Rate

- Contingency Reserve

- Allocation to Rural Flood & Emergency Event Reserve

$422,655

$110,841

$311,814

2020/21 Landfill Operating Surplus

Surplus

RA2 Surplus on Landfill Operations

- Allocation to Landfill Reserve

$251,465

C) That the rating allocation be allocated as per the following table:

D) Noting that while the Landfill surplus is allocated to the Landfill Development Reserve, it is acknowledged that for the balance of the 2021/22 financial year this landfill surplus is available for Council to meet any requirements to meet the delivery of the 2021/22 budget and any unforeseen Covid-19 related impacts.

E) That the budgets as per the schedule of Carry Forwards funded by rates and loans be approved to be carried forward to the 2021/22 financial year.

Attachments:

1 ⇩	Rating Surplus 2021 RA1 & RA2	FIN-09-01-21-198
2 ⇨	Quarterly Dashboard June 2021	FIN-09-01-21-200	Under Separate Cover
3 ⇩	Draft Unaudited Financial Statements	FIN-09-01-21-199
4 ⇨	Carry Forwards 2021	FIN-09-01-21-201	Under Separate Cover

Te Rā Hui: Meeting date:	Thursday, 30 September 2021
Te Wā: Time:	11.00am
Te Wāhi: Venue:	Council Chamber Ground Floor Civic Administration Building Lyndon Road East Hastings
Te Hoapā: Contact:	Democracy and Governance Services P: 06 871 5000 \| E: democracy@hdc.govt.nz
Te Āpiha Matua: Responsible Officer:	Group Manager: Corporate - Bruce Allan

Mematanga: Membership:	Koromatua Chair: Councillor Geraldine Travers Ngā KaiKaunihera Mayor Sandra Hazlehurst Councillors: Councillors Bayden Barber, Alwyn Corban, Malcolm Dixon, Damon Harvey, Tania Kerr (Deputy Chair), Eileen Lawson, Simon Nixon, Henare O’Keefe, Peleti Oli, Ann Redstone, Wendy Schollum, Sophie Siers and Kevin Watkins Mike Paku - Heretaunga Takoto Noa Māori Standing Committee appointee
Tokamatua: Quorum:	8 members
Apiha Matua Officer Responsible:	Group Manager: Corporate – Bruce Allan (Lead) Group Manager: Asset Management - Craig Thew Group Manager: Strategy & Development – Craig Cameron Financial Controller – Aaron Wilson Chief Information Officer – Andrew Smith
Te Rōpū Manapori me te Kāwanatanga Democracy & Governance Services:	Christine Hilton (Extn 5633)

1 ⇨	HOY (HB) Ltd Financial Statement and Overview for year ended 31 May 2021	EXT-10-20-21-111	Under Separate Cover
2 ⇨	HOY (HB) Ltd - 2021 Show Report	EXT-10-20-21-110	Under Separate Cover
3 ⇨	Statement of Intent 2021/22 - HOY	EXT-10-20-21-119	Under Separate Cover

1.0	Opening Prayer – Karakia Whakatūwheratanga
2.0	Apologies & Leave of Absence – Ngā Whakapāhatanga me te Wehenga ā-Hui At the close of the agenda no apologies had been received. At the close of the agenda no requests for leave of absence had been received.
3.0	Conflict of Interest – He Ngākau Kōnatunatu Members need to be vigilant to stand aside from decision-making when a conflict arises between their role as a Member of the Council and any private or other external interest they might have. This note is provided as a reminder to Members to scan the agenda and assess their own private interests and identify where they may have a pecuniary or other conflict of interest, or where there may be perceptions of conflict of interest. If a Member feels they do have a conflict of interest, they should publicly declare that at the start of the relevant item of business and withdraw from participating in the meeting. If a Member thinks they may have a conflict of interest, they can seek advice from the General Counsel or the Manager: Democracy and Governance (preferably before the meeting). It is noted that while Members can seek advice and discuss these matters, the final decision as to whether a conflict exists rests with the member.
4.0	Confirmation of Minutes – Te Whakamana i Ngā Miniti Minutes of the Operations & Monitoring Committee Meeting held Tuesday 27 July 2021. (Previously circulated)
5.0	Requests Received under the Local Government Official Information and Meetings Act (LGOIMA) Update	7
6.0	Horse of the Year (HB) Ltd Draft Financial Statements for year ended 31 May 2021	13
7.0	Exemption of Council Controlled Status for Hawke's Bay Local Authority Shared Services Limited and the Te Mata Park Trust Board	15
8.0	Draft Financial Year End Results - 30 June 2021	19
9.0	Update on Building Consent Processing	41
10.0	Non-Financial Performance Report for the Year Ended 30 June 2021	47
11.0	Minor Items – Ngā Take Iti
12.0	Urgent Items – Ngā Take Whakahihiri
13.0	Recommendation to Exclude the Public from Items 14, 15 and 16	49
14.0	Foodeast Directors' Fees
15.0	Horse of the Year (Hawke's Bay) Limited Director Appointment
16.0	Update on Building Consent Processing

Item 5 Requests Received under the Local Government Official Information and Meetings Act (LGOIMA) Update
LGOIMA Report July and August 2021 to Operations and Monitoring Committee 14 September 2021	Attachment 1

Item 8 Draft Financial Year End Results - 30 June 2021
Rating Surplus 2021 RA1 & RA2	Attachment 1

Item 8 Draft Financial Year End Results - 30 June 2021
Draft Unaudited Financial Statements	Attachment 3

Operations and Monitoring Committee – Terms of Reference