Hastings
District Council: Performance & Monitoring Committee Meeting
Te Rārangi Take
Report to Performance and Monitoring Committee
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Nā:
From:
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John O'Shaughnessy,
Group Manager: Planning & Regulatory Services
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Te Take:
Subject:
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Building Unit Review,
April 2024
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1.0 Executive Summary
– Te Kaupapa Me Te
Whakarāpopototanga
1.1 The
purpose of this report is for the Committee to adopt the Building Unit Review
report, April 2024 prepared by Jim Palmer.
1.2 At the Performance
& Monitoring Committee on 11 May 2023 the Committee recommended an independent
review of the Building Consent unit. The Draft Terms of Reference were
subsequently approved at the Performance & Monitoring Committee on 20 July
2023.
1.3 Purpose & Scope of
the Review
The purpose of the review was to
investigate how to provide a continuous improvement plan and provide
independent assurance to Council regarding this activity.
The scope of this
review included the following:
• A
continuous improvement plan
• Independent
assurance to the Council (governance) regarding the Building Control services
of Council into the future
The Independent Reviewer considered
the following areas of services and processing for inclusion in the preparation
of this review:
• Core
roles and functions of Council’s BCA (Building Consent Authority)
• Performance
in relation to processing and inspection targets
• Funding
of the Activity / Resourcing
• Technical
Proficiency / Risk Management
• The
impacts of Cyclone Gabrielle, recovery period
• Engagement
with BCA customers by way of customer surveys and interviews
• Identification
of areas to improve the performance of the activity and any related resources
that would enhance the performance of the function
Note: The full Terms of Reference
are included in Jim Palmer’s Building Unit Review report, April 2024,
appended as Attachment 1.
1.4 Hastings District
Council requested an independent review of its Building Unit. The terms of
reference for the review were to provide independent assurance to the Council
regarding the activity and provide a continuous improvement plan.
For the purposes of this review, the term Building
Unit refers collectively to the two units that undertake Building functions of
the Council - the Building Consent Unit and the Building Recovery &
Compliance Unit that are each headed by a Manager.
The review was undertaken in February and March 2024,
with the grateful support of the Building Unit Managers from Selwyn and
Waimakariri District Councils, Vanessa Mitchell and Warren Taylor respectively,
who formed part of the three-day on-site review team, and they also reviewed Mr
Palmer’s draft report.
The review included
interviewing 24 customers of the Unit, attending a Council workshop, holding
discussions with three elected members, the Council’s Chief Executive,
Deputy Chief Executive, as well as the Group Manager Planning and Regulatory
and Managers and Team Leaders within the Building Unit. Mr Palmer also attended
the March Building Industry Advisory Group meeting and spoke separately to some
of its members. He greatly appreciated the generous way they all gave
their time.
1.5 The Chief Executive,
management and Council Staff within the Building activity fully accept the
Review findings as detailed in the attached report and are focused on the
implementation of the recommendations.
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2.0 Recommendations –
Ngā Tūtohunga
A) That
the Performance & Monitoring Committee Meeting adopt the report titled Building
Unit Review, April 2024 dated 9 May 2024 and the following
recommendations be implemented.
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Recommendation
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Priority
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Business Leadership and
Planning
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1 Develop a
business plan for the Unit that reflects the key objectives, priorities and
KPIs that will drive the business.
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High
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2 Review and amend
the Position Descriptions of Managers, Team Leaders, and staff to ensure
key objectives and KPIs direct their work.
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High
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3 Commit to
regular, meaningful performance discussions assessing performance against
individual’s KPIs.
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High
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4 Invest in the
leadership development of Managers and Team Leaders.
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Medium
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5 Hold regular
all-of-team meetings of the Unit and consider developing other methods of
keeping all team members abreast of team performance and relevant issues.
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Medium
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6 Adopt a more
risk-based and value-based approach when processing consents and considering
RFIs sent to customers/agents, supported by a framework that enables
officers to exercise their judgement within.
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High
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7 Develop a risk
register for the Unit that captures key risks and opportunities, and report
periodically to elected members on any actual or potential litigation.
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Medium
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Service Delivery and Customer Service
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8 Transfer
responsibility for booking inspections from the Customer Services Team to a
team within the Unit that is closely aligned to the Inspections Team
Leader.
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High
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9 Increase
monitoring of key service delivery targets and have performance exceptions
flagged in the processing phase ensuring all consents are processed as
quickly as possible – the Unit should seek to process at least 95% of
consents within statutory timeframes and, on average, in 11 working days.
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High
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10 Develop a digital dashboard that
captures key performance indicators and ensure this is visible to all
Managers and staff members.
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Medium
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11 Increase the Unit’s customer
focus with greater interaction, by telephone and meetings, with
customers/agents before and during the processing of consents.
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High
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12 Survey customers periodically,
along other initiatives such as regular meetings with key customers, to
gain insights regarding the Unit’s performance and opportunities for
improvement.
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Medium
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13 Review the frequency and content
of customer bulletins and advice notices
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Medium
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14 Review the customer complaints and
compliment process to define response timeframes and determine
‘learnings’ that follow any investigations and continuously
improve systems and procedures based on the learnings.
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Medium
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15 Review how well pre-application
processes are working for Council units and developers.
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Medium
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16 Explore, with other Councils, new
ways of working together, whether that is a regional building unit, or
forming a ‘cluster’ that develops consistent approaches to
working together and making it easier for customers who work across
district boundaries.
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Medium
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Financial Performance
and Management
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17 Develop a robust
financial model that underpins the Unit’s business plan to:
• better forecast levels
of activity,
• determine the
appropriate resourcing of the Unit and productivity of staff,
• set reasonable fees and
charges and determine whether overhead allocations are fair and reasonable,
and
• be a reliable basis to
monitor performance against.
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High
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18 Review the Revenue and Financing
Policy as it relates to the Unit, at a more granular level, to confirm the
appropriate consideration of public and private benefits related to the
Unit’s activities and the associated funding choices the Council has
regarding fees and charges and rates contributions.
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Medium
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19 Review staff charge-out rates and
Unit fees and charges.
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Medium
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20 Establish a Retained Earnings
account for the Unit, so that it is both accountable for the ongoing
financial performance of the Unit, as well as providing a buffer for the
Unit to operate within, especially in times of economic downturn.
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Medium
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21 Restructure the Unit’s
financial reporting so that controllable costs and revenues are
identifiable for each team and there is greater accountability for
financial performance.
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High
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22 Review the overhead allocation
methodology, especially as it relates to Customer Service activities.
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Medium
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Systems and Processes,
Technical Competence, and Resourcing
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23 Reduce the nature and extent of
peer reviews of consents to better reflect the risk profile of the
customers/applications and the competency of staff involved.
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High
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TLA Statutory Functions
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24 Review and develop processes and
procedures to support the Unit’s statutory functions.
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Medium
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25 Develop a Compliance Management
Framework, preferably in conjunction with neighbouring Councils.
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Medium
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26 Adopt a text push service, or
similar, for customer engagement around annual BWOFs reminders and follow
up, and other activities like booking inspections of pool barriers.
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Medium
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Responding to Cyclone
Gabrielle
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27 Develop localised flood modelling
that more accurately determines flood levels and flows to give greater
confidence to the location and finished floor levels of new buildings.
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Medium
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B) That
the Committee notes the Chief Executive and Council Staff accept the Review
findings in Recommendation A) and are focused on implementation of the
recommendations.
C) That the Chief Executive brings back, to the next
Performance and Monitoring Committee meeting, an Implementation
Plan for the recommendations in Recommendation A).
D) That
progress on the implementation plan is monitored by reporting through the
Performance and Monitoring Committee.
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Attachments:
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1⇨
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Final Report HDC Building Unit Review - April 2024
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CG-17-4-00104
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Under Separate Cover
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Te
Hui o Te Kaunihera ā-Rohe o Heretaunga
Hastings
District Council: Performance & Monitoring Committee Meeting
Te
Rārangi Take
Report to Performance and Monitoring Committee
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Nā:
From:
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Aaron Wilson, Financial
Controller
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Te Take:
Subject:
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Quarterly Financial
Report for the nine months ended 31st March 2024
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1.0 Purpose and summary - Te Kaupapa Me Te
Whakarāpopototanga
1.1 The purpose of this report is to inform the Performance and
Monitoring Committee of the financial result for the nine months ended 31st
March 2024.
1.2 Due to the uncertainties around the impacts of cyclone
Gabrielle at the time the 2023/24 Annual Plan was prepared Council chose to
adopt the pre-cyclone draft budget. Given the uncertainties that surrounded the
extent of the cyclone recovery costs associated with the cyclone were excluded
from the Annual Plan budgets. The reason for this approach was to allow
Council to take more time to plan for the cyclone recovery and to allow for a multi-year
approach to funding the costs of the cyclone recovery.
1.3 As was noted previously some initial modelling on the costs
of recovery post the annual plan adoption was undertaken whereby the 2023/24
Annual Plan budget was adjusted to allow for recovery costs where
possible. The modelling indicated that with the inclusion of recovery
costs and the financing thereof, Council was likely to incur a significant
deficit for the 2023/24 financial year. Also, given the rating deficit
incurred in 2022/23, there were no rates funded carry forwards available for
projects or programmes that had not been completed.
Forecast year-end result
1.4 An
initial 2023/24 year-end forecast was completed in February 2024. This was
included in the half yearly report presented in March.
1.5 In
April the forecast was reviewed to give an updated forecast year end
position.
1.6 The
presentation of the financial results has also been modified to separate out
performance on continuing operations from other one-off funding sources linked
to the capital programme. This is also moving the reporting format
towards a view that is aligned to monitoring the new modified balanced budget
ratio included in the financial strategy in the 2024-34 LTP. In addition,
as has been the case previously, Cyclone Gabrielle costs and revenues have been
reported on separately.
1.7 Note
this forecast year-end result is not the rating result normally presented to
Council in September as it includes the impacts of higher depreciation costs
and lower development contributions revenue for example.
1.8 The
key variances in the updated forecast result have been driven in particular by;
· Higher interest
costs driven by higher debt levels and higher interest rates than were forecast
in the Annual Plan budgets.
· Increased
operating costs due to the demolition costs of Heretaunga House which is to be
loan funded.
· A number of other
operational impacts that have arisen in the current inflationary and cyclone
recovery environment.
· Higher
depreciation expense due to asset revaluations in the 2022-23 Annual report.
· A reduction in
Development Contribution and capital Subsidies revenues.
1.9 A
brief summary of the YTD result to 31 March is as follows:
· Council’s
cash position on operations is $6.6m worse than budget
· The non-cash
depreciation expense is $5.3m higher than budget
· The revenues to
support capital projects are $20.4m lower than budget. This is due to the
changed timing of projects so the capital expenditure linked to these revenues
has not been incurred.
· Net unbudgeted
revenues for cyclone recovery expenditure are $51.8m, (mainly subsidies on
capital expenditure).
Third
Quarter Result – YTD
1.10 Overall, the revenue is $80.3m higher than the YTD budget
and expenditure is $60.8m higher than the YTD budget giving a net favourable
variance of $19.4m. The main driver for the size of the expenditure and
revenue variance is the unbudgeted cyclone recovery costs and revenue so these
have been reported separately.
1.11 Revenue on continuing operations are very close to budget
with all of the variance in revenue driven by capital and cyclone related
revenue.
1.12 Expenditures on continuing operations are $7m higher than
budget so far. The main driver of this is increased interest costs on Council
debt. In addition, the non-cash depreciation expense is $5.3m higher than
budget. Cyclone costs were not budgeted so these all appear as a variance
against budget.
1.13 The impact of Cyclone Gabrielle at both the regional and
Hastings District level cannot be understated, with Council moving fully into
the recovery phase. As well as direct recovery costs additional support
resources have been needed across the organisation to manage the impact of the
additional recovery work streams on the organisation. Much of this additional
cost incurred in supporting the organisation has not been recognised as a
Cyclone cost but absorbed into BAU.
1.14 In addition, Council’s Annual Plan includes a large
capital programme of $149m which will, on its own, significantly increase
Council debt and this new debt is now costing more than was forecast in the
Annual Plan. The size of this base capital programme will impact on
debt levels and the financing costs will impact directly on the LTP budgets
Council is currently considering. The local share of the roading recovery and
the category 3 property buyouts will add further to Councils debt position.
1.15 Due to the cyclone impacts and other decisions made by
Council, the opening debt as at 1 July 2023 was $23m higher than the Annual
Plan forecast ($292m compared to $269m) and interest rates have continued to
increase when there was an expectation that interest rates would start to
reduce earlier. This means that financing costs are increasing rapidly
with a combination of new debt taken out at higher rates, an increasing
proportion of debt affected by floating interest rates and historically low
fixed interest instruments coming off term. The extra costs of the
cyclone recovery will exacerbate this.
1.16 The 2023/24 Annual Plan forecast the debt as at June 2024
to be $322m. As at 31st March the Council debt is $353m. Whilst the
forecast shows Council capital programme not being fully completed, Council
will be funding its share of recovery costs, with officers estimating closing
debt to be approximately $396m. This forecast position aligns with the LTP
forecast starting debt position.
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2.0 Recommendations - Ngā
Tūtohunga
That Performance and Monitoring Committee receives the report titled
Quarterly Financial Report for the nine months ended 31st March 2024 dated 9
May 2024.
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3.0 Background – Te Horopaki
3.1 The financial
result is reported on quarterly during the year and at year end a report is
prepared on the financial as well as the rating result. The rating result
differs from the quarterly financial result in respect of non-cash items such
as depreciation, vested assets and development contributions are not included.
3.2 This financial report is governance focussed and allows
significant variances to be highlighted with explanations provided in a way
that is easy to read and understand through dashboard analytics and commentary.
3.3 A Financial Report is attached to supplement this report: Attachment
1 – Dashboard Summary of Financial Performance.
3.4 If Councillors require clarification on any points, please
contact the writer, Chief Financial Officer or Deputy Chief Executive prior to
the meeting to ensure complete answers can be given at the meeting on the
detail in these reports.
4.0 Discussion – Te Matapakitanga
4.1 Set out below is a summary of the operating financial
results for the 9 months to 31st March 2024. The financial results
detailed below do not reflect the potential rating result for 2023/24 as this
requires separate calculations that are completed at year-end. However,
based on the forecast just completed, it is likely that Council will record a
significant unfavourable forecast result when compared to Annual Plan for the
current 2023/24 financial year due to the factors referred to in the summary.
4.2 As explained previously the format has been changed to
separate out non-cash depreciation, capital revenues and cyclone costs.
The key area of focus is the result for cash ongoing operations where Council
has a YTD variance of $6.6m. This variance (shortfall) represents the
additional amount Council will have to borrow to support day to day operations.
Note:
The cyclone net result looks positive as it includes subsidies on substantial
road renewal and Category 3 buyout funding (Capital expenditure).
4.3 The year-to-date (YTD) result above is presented against
the revised budget. The full year Annual Plan budget is included for
comparison. The YTD revised budget includes changes and decisions made during
the year on Council budgets. The most significant change in the revised budget
comes from the inclusion of capital subsidies for the transport choices programme.
4.4 The impact of expenditures and revenues for cyclone
Gabrielle have been excluded to provide a view against Council’s BAU
activities.
Overall
YTD result including cyclone recovery
4.5 Council’s overall financial performance is $19.4m
favourable to YTD budget for the third quarter ended 31st March
2024. The overall results are impacted by Cyclone Gabrielle recovery costs and
revenues through to the end of the first half of the year. Revenues in
the Statement of Comprehensive Revenue also includes subsidies on capital
projects so the additional subsidies on recovery roading projects means that
there is more cyclone related revenues than costs in the above summary.
4.6 Overall
revenue is $80.3m favourable to the YTD budget and expenditure is $60.8m
unfavourable to YTD budget (including depreciation).
Excluding the cyclone, revenue is $19.9m unfavourable whilst expenditure is
$12.5m unfavourable.
Overall
YTD result ongoing operations:
4.7 The YTD variance against the revised budget for ongoing BAU
activities is $6.6m unfavourable. Specific commentary on variances is
included under the revenue and expenditure sections.
4.8 For clarity, revenues to support capital expenditure and
cyclone costs have been separated out and the revenue and expense tables in the
next section also have the cyclone impacts split out in a separate line to show
the cyclone impact which provides a clearer picture of how business as usual is
tracking.
Revenue
YTD
4.9 The third quarter year to date revenue excluding revenues
to support capital expenditure and cyclone impact is $.5m favourable in the
context of total revenue budgeted for the nine months to March.
Note:
See separate section on cyclone costs and revenues.
4.10 Fees & Charges are largely on track at $100k
unfavourable on a $30.9m YTD budget, with the main drivers being:
· Planning and Regulatory services are unfavourable to budget
by $386k ($559k last quarter) driven by lower than budgeted building consent
fees ($631k) along with lower environmental consents (262k). The lower revenue
in consent fees is driven by a lower number of consents received than
budgeted. Parking revenues offset some of this impact as fees and
infringements are favourable by $469k.
· Housing for the elderly is $197k favourable and is
reflective of the adjustment of rents to 80% of market value in the current
financial year.
4.11 Operational subsidies and grants are unfavourable against
budget by $676k.
4.12 Subsidies and Grants to fund capital projects are $14.8m
unfavourable through the nine months of the year, with Infrastructure acceleration
funding (IAF) budgeted but not yet received due to delays in growth projects
affected by logistical global supply issues. It is forecasted that by
year end, of the $18.5m funding in the annual plan Council will have been able
to claim $5m for capital spent in these projects. The remaining funding will be
reimbursed as the spend is incurred in the following year. There has also
been a change in the direction of funding driven by funding changes due to the
new government direction. The programmes that were budgeted for included
“Transport Choices, and streets for Schools and road to zero are not now
being funded. Offsetting the revenue shortfall is the reduced capital
spend that was budgeted for these projects.
4.13 Development contributions are lower than budget by $5.5m
and are tracking close to the same period last year, despite significant
increases to the development contribution charges introduced through the LTP
amendment in 2023. This is an area that is sensitive to changes in the overall
market conditions and we have seen a slowdown in building and subdivision
activity. The Reserve Bank’s current monetary policy settings are
intended to slow down spending activity and combined with the current cost of
construction, the residential market has got out of alignment with the cost of
land and construction costs for new builds significantly outstripping the
existing housing stock. As the development contributions are used to repay
growth related debt, Council will need to monitor and adjust where possible the
growth expenditure plans to match changes in the overall market.
4.14 The cyclone revenue is mainly driven by the subsidies on
local roading repairs and asset renewals $54.7m, Government funding for
property compensation costs $28.8m and other Gabrielle funding support from Red
Cross, and other agencies of $5.2m. See table in section 6 for breakdown.
4.15 Expenditure:
4.16 Overall cash expenditure for ongoing BAU activities is
unfavourable for the nine months ending March by $7.1m. The main drivers
include:
4.17 Personnel costs are favourable to budget by $1.2m due to a
number of vacancies across Council activities.
4.18 Finance costs are higher than budget and this is reflective
of both the increasing average cost of debt and higher than budgeted levels of
debt. The increase in the average cost of debt is due to the cyclical
raising of the OCR rate by the Reserve Bank Governor, however the average cost
of debt is being managed with approximately 60% of council’s current debt
held with fixed interest instruments at historical rates in line
Council’s Treasury Policy. Council’s average cost of borrowing has
increased to 5.12%.
4.19 Finance costs exceed budget by $6.1m. When interest
revenue of $1.12m is offset against the interest expense, the net variance is
$5m to 31st March. The $5m net variance is reflective of how the
balance of the year will pan out and the budget deficit on net financing costs
is forecast to be more than $6.56m by year end. Interest costs have been
exacerbated by borrowings incurred by Council with the roading recovery works
while finalising the crown funding agreement. Staff are currently working with
the Crown Infrastructure Partners (CIP) to find a solution to mitigate these
additional financing costs. These additional financing costs have however been
somewhat offset by
4.20 Other
operating costs excluding cyclone costs were unfavourable to budget by $2.2m
and were mainly driven by:
4.21 Contracted
Services costs were $2.8m unfavourable to budget for the third quarter YTD with
those areas of spend being the Heretaunga House Demolition as at end of March
being $2m, higher Wastewater costs of $671k relating to reactive maintenance
and overhead costs. Noting that the Heretaunga House demolition was
approved through Council to be funded by debt.
4.22 Areas of note:
4.23 Toitoi:
Excluding finance costs and depreciation, Toitoi is largely operating to budget
and is currently $58k behind budget. This includes higher costs for
electricity and gas of $103k.
4.24 It
is acknowledged that it has been 4 years since the Opera House and Functions on
Hastings were opened and over that time it has been hugely disruptive with the
impacts of COVID, the introduction of the Municipal Buildings to Toitoi and the
Cyclone last year. Despite that it is important that a review of this operation
is undertaken and staff are committed to undertaking that review. Given the
current state of operations as detailed above, a formal s.17a style review is
not deemed appropriate and a review tailored to Toitoi’s current state is
being prepared.
4.25 Building
Control: The reduction in consent numbers has followed on from the
last year with a 15% fall in consent numbers from the previous quarter and has
resulted in YTD revenue being $631k below budget.
4.26 Operational
costs excluding specific one-off legal costs are $206k favourable, with the
building control vacancies driving the favourable operational costs.
Overall, the operational result for the YTD is $425k unfavourable.
4.27 Splash
Planet: While Splash Planet has achieved its budgeted revenue, operating
costs have exceeded budget leaving a funding deficit against budget for the
year. A separate report is being prepared to review the Splash Planet
season, provide details on the financial result for the year and
recommendations to achieve improvements and refinement to operations.
4.28 Depreciation
costs are higher than budget by $5.3m and is driven by increases in asset
values for the water services and transport assets. The 2024-34 LTP and
Financial Strategy addresses how Council will close the increasing gap between
the value of the depreciation expense and the rates collected for renewals.
Noting that depreciation is a non-cash expense and is a general indication of
the level of renewal spend that Council should be incurring.
5.0 Forecast to 30
June 2024
5.1 Initial financial forecasts to year end were undertaken by
officers based off actuals to 31st December 2023 and projections for
the remaining 6 months. Prior to reporting the third quarter financial result
to the Performance & Monitoring Committee the forecast was reviewed and
updated in April based off actuals to 31st March 2024.
The overall forecast has weakened from the previous forecast.
5.2 Preparing year-end forecasts requires assumptions to be
made on the expected completion of capital projects, and how much associated
subsidy revenues can be expected to be received. Officers also project how
activities’ actuals are tracking in relation to operational spend at a
given point in time. The purpose of the forecast is to give an indication of
Council year-end financial position and provide Council with the ability to
adjust activities in response to what is being forecast if that is
achievable. There are still a number of year end adjustments that may
influence the final year-end result.
5.3 The following table shows the overall position with a
year-end forecast in the right-hand column.
Note: See statement of capital expenditure
for the forecast capital expenditure for the year.
5.3.1 There
are three main areas that are driving the weakened forecast result.
5.3.2 Interest
costs have also been increased in the last forecast update, with no downward
movement in the Official Cash Rate (OCR), meaning the average cost of funds
staying higher for longer.
5.3.3 Depreciation
is the second area where the forecast has been increased based on the actuals
at the end of the third quarter.
5.3.4 There
is continuing pressure on revenues from Development Contributions.
Considering the third quarters actuals, budget managers have reviewed downwards
the expectation of receiving DC revenues. The updated forecast has been
made in light of the continued slowdown in building and subdivision activity.
5.3.5 When
the non-cash item (depreciation) and revenues for capital projects is excluded
the cash shortfall on ongoing operations, this is the amount that will be
funded from additional Council borrowing, is projected to be $11.1m for the
year. This excludes cyclone recovery costs.
6.0 Cyclone Gabrielle
summary of funding received and spend committed:
6.1 As
at 31 March just over a year has passed since Cyclone Gabrielle hit the
Hawke’s Bay region on the 13-14 February 2023. The initial response and
early recovery have focussed on restoring basic services to the community and
meeting critical needs.
6.2 As
reported in the last quarter, Council is now able to move from the reactive
stages of recovery which focussed on restoration, to a more proactive,
strategic phase, where the council can properly plan, monitor, and report on
its recovery programme.
6.3 Coordination
of the recovery work will be achieved through the framework of the Recovery
Pou. Pou are workstreams where agencies with closely aligned work programmes
can achieve oversight and synchronisation of the work. Council has decided to
use the Pou in its reporting framework as much of the work needs to be achieved
in partnership with other agencies.
6.4 This
section is to give the committee an ongoing overview of the impact of the
cyclone in terms of the Council finances and shows the funding received and the
expenditure incurred or committed on a “to date” basis. It is
not designed to be a complete overview section of the operational activities
that Council are currently engaged in relating to the cyclone, as there is a
specific recovery project that will report to the Strategy and Recovery
Committee on a regular basis.
6.5 The
table below shows the costs that have been incurred for the current year along
with reimbursements or subsidies received to fund those costs. Note that in
some areas like the Category 3 buyouts and the Whanau Community Resilience Pou,
funding has been received in advance of it being spent and by year end related
expenses will match off against the revenue received.
6.6 The
following table shows the forecast cyclone recovery expenditure and revenues
updated:
6.7 The
forecast shows a net cyclone recovery cost of $32m ($41m Feb Forecast) for the
year that will be funded from additional Council borrowings. The main change
from the previous forecast has been the receipt of $7.8m through CIP for what
was tagged as Better off Funding and previously allocated through the previous
Government 3 Waters reform programme. Council requested and had approved a
funding reallocation for the Better Off Funding to support the Cyclone Recovery
efforts. These funds will be used to reduce operational deficits incurred
through the community recovery efforts and debt funding required for the local
share of the transport recovery programme.
6.8 The
main driver for the funding shortfall identified above is the estimated cost of
property compensation payments and Council’s share of that. Expenditure
for the first 9 months is now increasing and Council must fund 50% of the cost
of these transactions.
6.9 The
table in 6.6 shows the movement between the updated forecast completed in April
and the original forecast tabled at the last committee meeting. This
shows expected capital spend being reduced from $85.6m to $77m. As a
result the amount of subsidies revenue that would be claimed has also been
reduced.
7.0 Additional
expenditure approved by Council
7.1 There
are a number of additional expenditure items that have been approved across
Council activities, both in BAU (Business as usual) and also due to Cyclone
Gabrielle. Councillors has asked for visibility of these additional items
in our quarterly financial reporting.
7.2 The
table below shows the additional approved spend by operational and capital
expenditure
7.3 Cyclone
Gabrielle costs are being reported separately in the previous section.
The cyclone recovery costs and funding were not included in the 2023-24 Annual
Plan budgets.
7.4 The
following table shows additional expenditure approvals (excluding cyclone
costs) that were not included in the 2023-24 Annual Plan. These form part
of the variances against budget reflected in the result to date and in the
forecast end year result. This table remains unchanged from the last quarter.
8.0 Capital Spend
8.1 Council’s
total revised capital budget (including carry forwards, renewals, new works and
growth projects) for 2023/24 is $148m. This compares to the Annual Plan budget
of $149.9m. This level of expenditure is a significant increase on what
has been delivered previously by Council and there are risks associated with
Council’s ability to deliver on it.
8.2 While
to total size of the programme is similar to the annual plan, the mix and
funding has changed with the growth related spend dropping by $23m and new
works increasing by $21m. Part of the change in the revised budget is
linked to subsidies and grants received for capital projects that were not in
the original Annual
Plan.
8.3 As
noted in the table below actual capital spend against budget for BAU shows a
$75.6m spend against year-to-date budget of $108.9m. Renewals for BAU are
$12.5m behind expected spend YTD, with infrastructure for transport and
sewerage the main contributors to the underspend.
8.4 New
Works BAU – whilst water supply and building management are ahead of
budget, Transport has a $8.4m underspend. $28.9m of Transport capital
spend has occurred under for the Cyclone Gabrielle infrastructure
projects. In addition, as noted in the lower subsidies and grants revenue
comment some projects that were budgeted for and were to be subsidised by Waka
Kotahi are now not going to be completed due to the reduction in funding.
8.5 The
updated forecast Capital spend for BAU currently sits at $122.7m down from the
initial forecast of $136.7m which is $26m lower than the budget. This
compares to a $20m under-delivery currently being assumed in modelling for the
2024-34 LTP. Given the continuing challenges in delivering on the capital plan
it is quite likely that the actual capital spend as at June 2024 may still be
lower than that forecast.
8.6 Projects
by Activity within the three types of capital spend are shown below:
Treasury
8.7 Council’s
total gross debt position as at 31st March was $353m. Liquidity was 117%
as at the end of March. The forecast year end debt position is forecast to be
$396m.
8.8 Council
is currently compliant with its Treasury Management Policy limits. The Risk and
Assurance Committee reviews and monitors Council’s treasury performance
and policy on a quarterly basis with advice from Bancorp Treasury Services.
Attachments:
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1⇩
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Quarterly Dashboard 3rd Quarter March 2024
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FIN-09-01-24-220
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