|
Thursday, 19 September 2024
|
Hastings
District Council: Performance & Monitoring Committee Meeting
Te Rārangi Take
Report to Performance and Monitoring Committee
|
Nā:
From:
|
Jess Noiseux, Strategic
Financial Advisor
|
|
Te Take:
Subject:
|
Exemption of Council
Controlled Status for Council Controlled Organisations.
|
1.0 Executive Summary
– Te Kaupapa Me Te
Whakarāpopototanga
1.1 The purpose of this report
is to seek decisions in regard to exempting the following Council Controlled
Organisations (CCO) from being CCOs for reporting purposes under the Local
Government Act:
· Hastings
District Holdings Ltd (HDHL);
· Hastings
District Properties Ltd (HDPL);
· Hawke’s
Bay Opera House Limited (HBOH);
· Te
Mata Park Trust Board; and
· Hawke’s
Bay Local Authority Shared Services Limited (HBLASS).
1.2 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.
1.3 This report concludes by
recommending that all CCOs outlined above continue to have exemption from being
a CCO under the Local Government Act 2002 (LGA).
|
2.0 Recommendations -
Ngā Tūtohunga
A) That the Performance
and Monitoring Committee receive the report titled Exemption of Council
Controlled Status for Council Controlled Organisations. dated 19 September
2024.
B) That the
Committee approve pursuant to Section 6(4)(i) and Section 7 of the Local
Government Act 2002, that the following CCOs be exempted from being Council
Controlled Organisation for three years to 30 June 2026:
i. Hastings
District Holdings Ltd; and
ii. Hastings
District Properties Ltd.
C) That
the Committee approve pursuant to Section 6(4)(i) and Section 7 of the Local
Government Act 2002, that the following CCOs be exempted from being Council
Controlled Organisation for three years to 30 June 2027:
i. Te
Mata Park Trust Board;
ii. Hawke’s
Bay Local Authority Shared Services Limited; and
iii. Hawke’s
Bay Opera House.
D) That
the Committee approve pursuant to Section 6(4)(i) and Section 7 of the Local
Government Act 2002, that the Hawke’s Bay Opera House Limited be
exempted from being Council Controlled Organisation for three years period
ending 30 June 2024.
|
3.0 Background – Te Horopaki
3.1 The LGA allows a Local
Authority to exempt organisations from being CCOs to relieve unnecessary
statutory monitoring and reporting requirements for small organisations as
outlined in the LGA. 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.”
3.2 The LGA identifies
monitoring and reporting requirement for CCOs which includes half yearly and
annual reports plus an annual Statement of Intent.
3.3 The Te Mata Park Trust Board
is a charitable trust that owns and manages Te Mata Peak and is a CCO as the
trust deed enables Hastings District Council to appoint all the trustees. This
means that 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.
3.4 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.
3.5 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.
3.6 HDHL, HBOH and HDPL form
part of the Hastings District Council group as detailed below with all
companies currently inactive.
3.7 HDHL was exempted due to the
closure of the Hawke’s Bay Opera House for earthquake strengthening and
the decision to wind down the operations of HDPL due to insufficient activity
by the company. The Hawke’s Bay Opera House was exempted after it was
closed for earthquake strengthening. When HBOH reopened in 2023, its operations
were amalgamated within Council activity groups and Hawke’s Bay Opera
House Limited remains a dormant company.
4.0 Discussion – Te Matapakitanga
4.1 All entities were previously
exempted, with exemptions limited to just three years before Council is
required to reconsider these exemptions.
4.2 HBLASS, HBOH, HDHL and HDPL
are dormant companies with no activities in the last three years.
4.3 The Te Mata Trust Board is a
small entity with limited turnover. For the year ended 30 June 2024 the Trust
Board generated income of $121,954 before donations and other fundraising
income related to capital works. Income received included rental income, insurance
claims and interest income.
4.4 HDHL and HDPL were last
exempted in December 2020 for the three-year period ending 30 June 2023. These
entities are overdue for an exemption status review. This paper is prepared to
request that they continue to be exempted from being a CCO from 30 June 2023
for a further three years to 30 June 2026.
4.5 HBOH was last exempted in
May 2018, when it was closed to undergo seismic strengthening, for a period of
three years to 30 June 2021 and was not trading until being reopened last year.
It is overdue for an exemption status review. This paper is prepared to request
that HBOH be exempted from being a CCO from 30 June 2024 for a further three
years to 30 June 2027, and that HBOH be retrospectively approved as exempted
from being a CCO for the three-year period ending 30 June 2024.
4.6 The Te Mata Park Trust Board
and HBLASS were last exempted in 2021 for the three-year period ending 30 June
2024 and are now due for an exemption status review. This paper is prepared to
request that they continue to be exempted from being a CCO from 30 June 2024
for a further three years to 30 June 2027.
4.7 Should the current situation
change for any of these entities, Council can simply resolve to remove these
exemptions requiring the entities to report as required under the LGA.
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
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
NA
|
|
Māori
Impact Statement -
Te Tauākī Kaupapa Māori
NA
|
|
Sustainability
- Te
Toitūtanga
NA
|
|
Financial
considerations -
Ngā Whakaarohanga Ahumoni
NA
|
|
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
NA
|
|
Risks
Opportunity: NA
|
REWARD – Te Utu
|
RISK – Te Tūraru
|
|
N/A
|
N/A
|
|
|
Rural
Community Board –
Te Poari Tuawhenua-ā-Hapori
NA
|
|
Thursday, 19 September 2024
|
Hastings
District Council: Performance & Monitoring Committee Meeting
Te Rārangi Take
Report
to Performance and Monitoring
Committee
|
Nā:
From:
|
Aaron Wilson,
Financial Controller
|
|
Te Take:
Subject:
|
Unaudited
Financial Year End Results 30 June 2024
|
1.0 Executive
Summary – Te
Kaupapa Me Te Whakarāpopototanga
1.1 The purpose of this report is to inform the Performance and
Monitoring Committee of the unaudited accounting and rating result for the year
ended 30 June 2024 and for the Committee to approve the allocation of the
rating result. The Hastings District Rural Community Board will consider the
recommendations submitted to it on 16th September 2024 relating to
the year-end rating result for Rating Area 2 (RA2).
1.2 Council is provided with quarterly financial reports during
the year with the unaudited year-end result presented annually at the September
Performance and Monitoring Committee meeting.
1.3 Officer’s report on the operating financial result
(operating surplus/deficit) as well as the rating result. The operating
(accounting) financial result is reported quarterly during the year, and at
year end a report is prepared on the rating result in addition to the
accounting result.
1.4 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 reports on the variance
of rates collected and net total expenditure (including capital and reserve
transfers) for Council.
1.5 Given
the uncertainties that surrounded the impacts of the cyclone with the estimated
recovery costs and the related funding of the impacts of cyclone Gabrielle, the
2023/24 Annual Plan was prepared on the basis of the pre-cyclone draft budget.
This 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. As such, it was expected that there would be some significant
variances to budget.
1.6 With the inclusion of recovery costs and the financing
thereof, Council has incurred a significant deficit for the 2023/24 financial
year.
1.7 As was reported in the 3rd Quarter financial
update, 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 aligns the format of
reporting actuals to 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.
1.8 A
brief summary of the draft year end result is as follows:
· Council’s cash position on operations is $8.2m worse than
budget.
· The non-cash depreciation expense is $9.1m higher than budget from
the 2022/23 asset revaluation.
· The revenues to support capital projects are $17.2m 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 $37.6m,
(mainly subsidies on capital expenditure).
1.9 The
key variances in the year end 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 loan
funded. The demolition costs were approved by Council in the previous financial
year but did not make it into the 2023/24 budget.
· A
number of other operational impacts that have arisen in the current
inflationary and cyclone recovery environment, including insurance,
electricity, and contract costs.
· Higher
depreciation expense due to asset revaluations in 2022-23.
· A
reduction in Development Contribution and capital subsidies revenues.
1.10 The indicative overall Rating result for the 2023/24 year
is unfavourable to budget, the combined general rate and targeted rate deficits
is $10.95m. The result is unaudited and indicative at this stage and
consequently there may be some variation to the figures in the result.
1.11 This report concludes by recommending that, in line with
the financial strategy in the LTP 2024-34 the RA1 deficit be funded by debt,
with the RA2 Deficit being funded from RA2 reserves. Debt being the
accepted practice in dealing with deficits in the future. Where a surplus
should occur that, that surplus be used to repay debt.
1.12 The Financial Reports attached to supplement this report
include:
Attachment
1 – Interim Rating Result
for the year ended 30 June 2024
Attachment 2
– Dashboard Summary of Financial Performance
1.13 The financial reports contain summarised information. Please
feel free to contact the report writer or the CFO 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 Recommendations
- Ngā
Tūtohunga
A) That
the Performance and Monitoring Committee receive the report titled Unaudited Financial Year End Results 30
June 2024 dated 19 September 2024.
B) That
the Committee approve that the funds arising from the Rating Area 2 deficit
for the 2023/24 financial year, as considered by the Hastings District Rural
Community Board, align with the overall allocation resolved by the
Performance and Monitoring Committee.
(C) That in line with the
2024-34 Long Term Plan financial strategy, it is recommended that the Rating Area
1 deficits incurred from the general rate and the targeted rates be funded by
debt, with the Rating Area 2 deficit to be funded from Rating Area 2 reserves
as detailed in the table below:
|
RA1
|
RA2
|
Total
|
|
Total Surplus (Deficit) on
General Rate
|
($5,213,898)
|
($210,944)
|
($5,424,842)
|
|
|
|
|
|
Allocation of General Rate
Surplus/ (Deficit):
|
|
|
|
|
Debt funding required
|
$5,213,898
|
|
$5,213,898
|
|
Rural Flood & Emergency
Event Reserve
|
|
$57,181
|
$57,181
|
|
Transportation NZTA Fund
Reserve
|
|
$153,763
|
$153,763
|
|
|
|
|
|
|
Total Surplus/(Deficit) on
Targeted Rate
|
($5,531,271)
|
$6,109
|
($5,525,162)
|
|
|
|
|
|
|
Allocation of Targeted Rate
Surplus/ (Deficit)
|
|
|
|
|
Debt funding required/Offset
|
$5,531,271
|
$6,109
|
$5,525,162
|
|
|
|
|
|
a.
|
|
|
3.0 Discussion – Te Matapakitanga
The Rating Result
3.1 The split between the General and Targeted rating groups,
is shown in the following tables. The General Rate applies to rates
income collected from all properties and are allocated on a variety of basis,
including on land value or as a fixed charge. Targeted rates are generally
isolated to properties that receive or contribute to a particular service and
any funds collected for those activities are ring fenced for that purpose.
|
Description
|
Total
|
Rating Area One
|
Rating Area Two
|
|
General Rating Result
– surplus(deficit)
|
($5,424,842)
|
($5,213,898)
|
($210,944)
|
|
|
|
|
|
|
General Rate
Result for 2023/24
|
($5,424,842)
|
($5,213,898)
|
($210,944)
|
3.2 There have been deficits across a number of activities
within Council that have contributed to the overall general rate deficit with
the detail covered in Summary by Areas of Activity of Council.
3.3 There have also been significant cost pressures incurred on
the activities funded through targeted rates and in particular in the areas of
water supply and wastewater. For the year ended 30 June 2024 the targeted rate
areas incurred deficits totalling $5.5m.
|
Description
|
Total
|
Rating Area One
|
Rating Area Two
|
|
Targeted Rate Surplus
(Deficit)
|
($5,525,162)
|
($5,531,271)
|
$6,109
|
|
|
|
|
|
|
Targeted Rate
Result for 2023-24
|
($5,525,162)
|
($5,531,271)
|
$6,109
|
3.4 The combination of the two rating deficits is a total rates
deficit of $10.95m. Recommendations have been made to the Rural Community Board
on how to deal with the RA2 deficit which is to fund the deficit by way of
utilising existing RA2 Reserves.
|
Description
|
Total
|
Rating Area One
|
Rating Area Two
|
|
Total Overall
Rating Surplus (deficit) for 2023/24 against rating budgets
|
($10,950,004)
|
($10,745,169)
|
($204,835)
|
3.5 It should be noted that the rating
result is based on the actual results measured against the rating budgets that
were set, the rates funding expected to be received and the expenditure budgets
that were approved for the 2023/24 year.
3.6 The long-term Plan (LTP) 2024-2034, financial strategy that
was adopted by Council in July 2024, has a number of key changes in
Council’s approach to funding expenditure. The practice of setting aside
funds in reserves and using these “reserves” to fund projects is no
longer fit for purpose. Council is a net borrower of funds and does not
have any separate investments to support its reserves, so any utilisation of
reserves results in an increase in external borrowings.
3.7 A pillar of the Financial Strategy adopted in the LTP is
that Council will only create and hold reserve funds where:
- There is a legal requirement to do so (restricted reserves
such as trusts and bequests).
- There is a need to manage separate funds such as selected
targeted rates and reserves for the Joint Landfill committee.
- And no reserve balance shall be allowed to go into deficit.
3.8 As part of the introduction of this revised approach most
existing reserve accounts will be closed and any deficit balances with be
converted to debt with interest costs incorporated in budgets.
3.9 With these key changes being adopted through the LTP
process it is recommended that the RA1 deficits incurred from the general rate
and the targeted rates are funded by debt, with the RA2 deficit to be funded
from RA2 Reserves as detailed in the table below:
|
RA1
|
RA2
|
Total
|
|
Total Surplus (Deficit) on
General Rate
|
($5,213,898)
|
($210,944)
|
($5,424,842)
|
|
|
|
|
|
Allocation of General Rate
Surplus/ (Deficit):
|
|
|
|
|
Debt funding required
|
$5,213,898
|
|
$5,213,898
|
|
Rural Flood & Emergency
Event Reserve
|
|
$57,181
|
$57,181
|
|
Transportation NZTA Fund
Reserve
|
|
$153,763
|
$153,763
|
|
|
|
|
|
|
Total Surplus/(Deficit) on
Targeted Rate
|
($5,531,271)
|
$6,109
|
($5,525,162)
|
|
|
|
|
|
|
Allocation of Targeted Rate
Surplus/ (Deficit)
|
|
|
|
|
Debt funding required/offset
|
$5,531,271
|
$6,109
|
$5,525,162
|
|
|
|
|
|
The Unaudited Accounting Result
3.10 Set out below is a summary of the 2023/24 unaudited
accounting result as at 30 June 2024. Noting that this is not the same as the
rating result. The budget below is against the Annual Plan as required by the
accounting standards.
|
Unaudited Statement of Financial Performance
2023/24
|
Budget
Council
$'000
|
Actual
Council
$'000
|
Variance
|
|
Operating Revenue
|
210,492
|
310,705
|
100,213
|
|
Less: Operating
Expenditure
|
188,793
|
301,689
|
112,896
|
|
Net
Surplus/(Deficit)
|
21,699
|
9,016
|
(12,683)
|
|
Unrealised movement
on Interest Rate Swaps
|
-
|
(1,016)
|
(1,016)
|
|
Net
Surplus/(Deficit) after Swaps
|
21,699
|
8,000
|
(13,699)
|
|
Gain/(Loss)
Revaluations & Other Movements
|
75,235
|
288,136
|
212,901
|
|
|
|
|
|
|
Total Comprehensive
Revenue & Expense
|
96,934
|
296,136
|
199,202
|
|
|
|
|
|
3.11 It is quite common for Council to budget a net surplus
before gains and losses on revaluations as Council typically generates revenue
to fund its capital programme as well.
3.12 The draft unaudited financial result for the year ended 30
June 2024, before gains or losses on revaluations, is an accounting surplus of
$8m with an unfavourable variance to the budget of $13.5m. The accounts include
all funding received from government agencies relating to Cyclone Gabrielle,
and all cyclone related operating expenditure.
3.13 Revaluations:
3.14 There were three revaluations undertaken this year. These
were for Roading, Land & Buildings and Library assets. There has been a
significant uplift in terms of Roading assets of $274.8m along with an increase
in Land & Building assets of $13.5m.
3.15 In the current 2024 financial year there has been an
increase in the value of Roading assets of $274.8m with the primary causes of
this change being:
· Change in bridge valuation standard replacement
cost unit rate to reflect rates quoted to Council’s for their bridge
replacement programme.
· Progress made on remediation of damage resulting
from Cyclone Gabrielle.
· Increases in replacement cost unit rates based
on movements in the Waka Kotahi NZ Transport Agency Cost Adjustment Factors
(CAF)
· Changes in quantities and types of assets
3.16 Land & Building valuation as noted in paragraph 3.14
has seen a $13.5m uplift in value. The valuers have assessed all of
Councils Land & Building at fair value.
3.17 The unrealised loss on interest rate swaps of $1.016m.
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 Treasury Policy.
Revenue
3.18 The table below shows total revenue against the Annual Plan
Note: See separate section on
cyclone costs and revenues.
3.19 Full
year revenue, excluding revenues to support capital expenditure and cyclone
impact is $6.10m favourable in the context of total revenue budgeted. Fees and charges revenue across Council
are favourable by $1.6m with the main drivers being:
· Planning and Regulatory services are
unfavourable to budget by $553k driven by lower than budgeted building control
fees ($812k) along with lower environmental consents ($237k). The lower revenue
in building 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 to budget by $498k. A conservative budgeting
approach to Parking revenue was taken following the impacts over the Covid
years and the increase in parking activity has been greater than expected.
· Housing for the elderly revenue is $871k
favourable of which $417k is reflective of the adjustment of rents to 60% of
market value in the current financial year, with a further $469k of revenue
received from insurance reimbursement. Noting that the increased revenue was
required to meet increasing operational costs.
· Toitoi revenues are favourable to budget by
$962k, representing significantly higher levels of activity than budgeted. The
higher revenue in Toitoi is offset by higher than budgeted operational
expenditure of $1.9m; this is covered in expenditure commentary below.
· Higher than budgeted water connection fees of
$280k.
3.20 Operational subsidies and grants are favourable to budget
by $104k.
3.21 Subsidies and Grants to fund capital projects are $10.1m
unfavourable, with the infrastructure acceleration funding (IAF) budgeted but
not yet received due to delays in growth projects affected by logistical global
supply issues. IAF only reimburse Council once the expenditure is
incurred.
3.22 Changes in government funding decisions have also affected
the level of anticipated subsidies and grants received. The programmes that
were budgeted for included “Transport Choices, 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.
3.23 Development contributions are lower than budget by $7.1m
this year despite increases to the development contribution charges introduced
through the LTP amendment in 2023. This lower than budgeted revenue is
reflective of the overall market conditions with a significant reduction in
development activity occurring across the district.
3.24 Other revenue is higher than budget by $1.7m and includes
non-cash adjustments at year end for the unrealised loss on swaps of $1m and
higher than budgeted vested assets of $2.6m.
3.25 The cyclone revenue of $113m, is mainly driven by the
subsidies on local roading repairs and asset renewals of $80.4m, Government
funding for property compensation costs of $19.9m along with Cyclone Gabrielle
funding support from Red Cross, and other agencies. In addition, Council was
able to claim and attribute Better off Funding of $7.8m towards Cyclone
Gabrielle costs. See table in section 5 for breakdown.
Expenditure
3.26 The table below shows total expenditure against the against
the Annual Plan that was signed off by Council.
3.27 Overall cash expenditure for ongoing BAU activities is
unfavourable for the year end by $14.3m. The main drivers include:
3.28 Finance costs are higher than budget and reflects both the
increasing average cost of debt, greater than assumed in the budget and higher
than budgeted levels of debt. Through an effective hedging strategy
Council’s average cost of borrowing is 5.12%.
3.29 Finance costs exceed budget by $7.8m. When interest
revenue of $1.21m is offset against the interest expense, the net variance is
$6.6m. The $6.6m net variance is slightly higher than forecasted in the March
quarter of $6.56m. Interest costs have been exacerbated through delays
in receiving funding for roading recovery works, adding to Council’s
borrowings over that time. This was resolved late in the final quarter and was
partially offset by funding received in advance for the Voluntary Property
buyout scheme.
3.30 Operating costs were $5.4m unfavourable and with the areas
of spend being the Heretaunga House Demolition being $2.5m, noting that
the Heretaunga House demolition was approved by Council to be funded by
debt. Higher contracted costs in contracted services for waters services
for reactive and treatments costs of $1m along with transport maintenance of
$400k.
3.31 Other operating costs that had an impact was electricity
which were higher than budget by $474k along with higher material damage
insurance costs at $531k.
Summary by Areas of Activity of Council
General
It has been an
incredibly challenging period to manage costs to Annual Plan. The impact
of Cyclone Gabrielle created a situation where the normal robust budgeting
processes followed by council were set aside given the huge uncertainties that
followed. During 2023/24 the Council faced financial challenges taking into
account the inflationary environment, impacts of tightening fiscal policy with
elevated interest rates, increased insurance and electricity costs.
Community Facilities & Programmes
3.32 Splash
Planet: Splash Planet had a number of challenges during the season which
impacted on its bottom line. Splash Planet
was $1.1m over budget with staffing above budget by $779k, driven by a change
in employment contracts for seasonal staff, along with other operational costs
including maintenance which was overspent by $628k. Management looked to offset
the personnel budget overspend by finding budget capacity elsewhere in the
Community and Wellbeing Group which mitigated this overspend somewhat. This was
somewhat offset by higher revenue $248k over budget. A separate Council
workshop on Splash Planet has been held on 10th September.
3.33 Aquatics:
Revenue over the pools was down on budget by $246k, the majority of which
related to the impact of the new facility at the Regional Sports Park reducing
the “Learn to Swim & Swim Club Programs” by $144k. There
were higher operational costs in personnel with additional staffing needs due
to assisting in a temporary structure elsewhere in the aquatic, sport and
recreation facilities along with a new maintenance agreement that was approved
but not budgeted.
3.34 Toitoi
was $937k over budget – this is mainly driven by interest costs of $690k,
cleaning costs from external contractors $147k along with increased electricity
costs of $104k.
3.35 Cultural
Facilities - $231k over budget. $356k over budget in finance costs with some
offset in other operating lines.
3.36 Social
Development is $314k under budget. Savings mainly in vacancies in personnel
$235k and in the community plans budget $67k, due to Cyclone Gabrielle
secondments, alternate funding streams and the prioritisation of Cyclone
recovery work. Personnel budget savings in this activity were some of the
budget capacity assigned to Splash Planet as mentioned above.
Planning & Regulatory Services:
Building
Control
3.37 Lower
than budgeted revenues of $812k for 2023/24 were impacted by lower than
forecast consent numbers along with $200K of fees that were waived for cyclone
damaged buildings. Fees have been increased in the 2024/25 year and as in the
Environmental Consents area, the team will be closely monitoring the time
charges on each consent and ensuring that the hours per consent being charged
is reflecting the actual time being taken.
3.38 Personnel
costs were lower than budget mainly due to vacancies for building officers and
a commercial consents officer.
Parking
3.39 Revenue
was approx. $500K higher than budget. The budgets had been set using
conservative numbers based on the impacts of the cyclone and Covid to the
activity in prior years.
3.40 Whilst
capital expenditure was lower than budget, there were significant approved
unbudgeted costs approved during the year for the purchase of the Licence
Plater Recognition (LPR) system and the costs of the Eastbourne St car park
development/Giants Gym demolition works (Note some of this work is to be
completed in 2024/25 and reductions will need to be identified to offset).
3.41 Going
forward, the budgets have been set to reflect the proposed impacts of the LPR
car via increased infringement revenue received offset slightly by higher
contracted services and postage costs.
Environmental
Consents
3.42 Revenue
was lower than budget by $237k mainly due to a 10% reduction in the number of
consent applications from the prior year. For the 2024/25 year the team will be
closely monitoring the time charges on each consent and ensuring that the hours
per consent being charged is reflecting the actual time being taken in an ever
increasingly complex regulatory environment.
Animal Control
3.43 Dog
registration fee revenue was lower than budget with a decrease of 341 dogs
being registered than compared to 2022/23. For 2024/25 the registration fees
have been increased by 7% and the revenue has been calculated on the reduced
registration numbers. Capital expenditure was higher than budget
due to a requirement to improve safety equipment and hand-held radio devices.
Asset Management:
Transportation
3.44 The Transportation team have had an incredibly busy year due to the
ongoing response and recovery to
the cyclone event and responding to the widespread damage to roading and
bridges.
RA 1 Subsidised
Transportation
3.45 The
overall rating deficit of $166k is largely due to the increase in interest
charges. There has also been a reduction in revenue due to lower fees received
for road openings.
RA 1 Unsubsidised Transportation
3.46 This
has a surplus of $695k largely due to Unsubsidised New works and Renewal
projects such as Bus Shelters and streetlight renewals not occurring in
2023-24. There was also a reduction in Tree removal costs.
RA2 Transportation
3.47 Whilst there was a deficit of $104k in the RA2 Subsidised
Transport area, this was primarily driven by higher interest costs.
Offsetting this in unsubsidised transport is a surplus of $216k largely due to
a reduction in cycleway maintenance and other operating costs.
Water Services
3.48 There were much higher costs in the maintenance and service
contracting areas and is a mainly due to the escalation clause in the water
services maintenance contract with the contractor along with increased interest
costs. The maintenance contract was implemented in March 2021 and while
escalation clauses are common practice with contracts of this nature,
escalations at the time were budgeted at around 3%. Given market conditions of
the past two years, that forecast proved optimistic.
3.49 Water Services has debt levels of $220.6m as at 30 June
2024 and as a result bears the major portion of the increased interest costs.
3.50 Council continues to respond to the water change
programme with elevated expenditure activity through 2023/24 including both capital and operational
expenditure. This activity is funded by way of a targeted rate and accounted
for in a separate water supply rating account. Traditionally this has either
accumulated reserves or run in deficit. Looking forward, any surplus or deficit
will be used to reduce debt or in the case of a deficit be funded by debt as
was discussed in paragraphs 3.7 – 3.9 in line with Councils financial
strategy in the 2024-34 LTP.
Stormwater
3.51 The
deficit of $446k is largely due to an increase in the interest charges over
budget and an increase in operating costs from the contracted maintenance
contract, including the contract overhead charges. Stormwater also gets a share
of the increase in 3 waters staff costs. To mitigate some of the increase in
operating costs the consulting costs are well below budget.
Wastewater
3.52 Wastewater
has a budget deficit of $2.14m. This is due to an increase in interest costs of
$1m, plus an increase in the operating costs from the contracted maintenance
contract in reactive maintenance of $516k, along with contract overhead charges
of $218k.
Drinking water
3.53 Drinking
water has a budget deficit of $2.78m. The large share of this is due to the
increase of interest charges of $2.1m, plus an increase in the operating costs
from the contracted maintenance contract of $203k, along with contract overhead
charges $234k. There has also been a large increase in our insurance costs.
Drinking water also gets a share of the increase in 3 waters staff costs.
Effluent
Disposal
3.54 The
budget deficit of $950k is largely due to an increase in interest charges, and
an increase in operational costs, including an increase in electricity and
treatment costs. Effluent disposal also gets a share of the increase in 3
waters staff costs.
Corporate and Governance
3.55 This
wide-ranging group includes People & Capability, Finance, Leadership/Chief
Executive Office, Culture & Heritage, Procurement and Emergency Management.
Administration buildings and related facilities.
· Administration group were $508k above budget,
driven by approved but unbudgeted lease costs for Karamu Road of $327k along operational
costs relating to Insurance, electricity and interest.
· Leadership was $177k above budget and was driven
by a number lines of services, administration related costs along with
additional election costs within the year of $64k.
4.0 Additional
expenditure approved by Council
4.1 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 have asked for visibility of these additional
items in our quarterly financial reporting.
4.2 The
table below shows the additional approved spend by operational and capital
expenditure.
4.3 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.
4.4 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.
4.5 The increase in debt will mean additional financing costs
in servicing that debt. Some of that debt servicing cost will be offset from
delayed spending on other projects and from lease revenue derived from those
assets.
4.6 The table below highlights the unbudgeted projects that
have been approved by Council.
5.0 Cyclone
Gabrielle summary of funding received and spend committed
5.1 The
initial cyclone response and early recovery has focussed on restoring basic
services to the community and meeting critical needs.
5.2 As
has been reported previously, Council has now moved 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.
5.3 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.
5.4 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.
5.5 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 was received in advance of it being spent and at year end related
expenses were matched against revenue with any revenue received in advance
adjusted to match expenses in the 2024/25 year.
5.6 The
Cat 3 Buyout $24.5m is Council’s portion of the cost at the halfway stage
of the process and is funded by debt.
5.7 The
total of $22.955m as per the table below is the negative financial impact to
Council from Cyclone Gabrielle Recovery.
6.0 Capital
Spend
6.1 Council’s
total Annual Plan capital budget for 2023/24 is $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.
6.2 The
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.
6.3 As
noted in the table below actual capital spend against Annual Plan for BAU shows
a $116.8m spend against yearend budget of $149.9m. Renewals for BAU are
$11.6m behind expected spend, with infrastructure for transport and sewerage
the main contributors to the underspend.
6.4 New
Works BAU –Transport has a $8.4m underspend. $43.2m 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.
6.5 Projects by Activity within the three types of capital
spend are shown below:
7.0 External Debt
7.1 Total net borrowing as at the end of June 2024 is $393.7m,
an increase from last year ($292.7m). At year end, Council has cash on hand of
$12.7m, along with facilities of $45m.
7.2 The liquidity ratio (Effective Limit Maturity/Gross
Borrowings) is at 115% which is above the policy minimum of 110%.
|
30 June 2024
($000)
|
|
Borrowing at start of year
|
292,740
|
|
New Loans Drawn
|
130,000
|
|
Loan Repayments
|
(29,000)
|
|
Gross borrowings at end of period
|
393,740
|
|
Funds held on deposit
|
12,762
|
|
Facilities
|
45,000
|
|
Effective Limit Maturity
|
451,502
|
|
Liquidity Ratio
|
115%
|
|
Total Net borrowings
|
380,978
|
7.3 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.
8.0 Allocation of the Rating Deficit
8.1 This year, the total of the deficit is $10,950,004 across
both rating areas and across both general and targeted rate areas. It has been
recommended that the RA1 deficit be funded by debt, with the RA2 Targeted Rate
deficit being funded by RA2 Reserves.
8.2 For the allocation of the General Rate and Targeted rate
surplus/(deficit) the following is recommended:
|
RA1
|
RA2
|
Total
|
|
Total Surplus (Deficit) on
General Rate
|
($5,213,898)
|
($210,944)
|
($5,424,842)
|
|
|
|
|
|
Allocation of General Rate
Surplus/ (Deficit):
|
|
|
|
|
Debt funding required
|
$5,213,898
|
|
$5,213,898
|
|
Rural Flood & Emergency
Event Reserve
|
|
$57,181
|
$57,181
|
|
Transportation NZTA Fund
Reserve
|
|
$153,763
|
$153,763
|
|
|
|
|
|
|
Total Surplus/(Deficit) on
Targeted Rate
|
($5,531,271)
|
$6,109
|
($5,525,162)
|
|
|
|
|
|
|
Allocation of Targeted Rate
Surplus/ (Deficit)
|
|
|
|
|
Debt funding required/offset
|
$5,531,271
|
$6,109
|
$5,525,162
|
|
|
|
|
|
Attachments:
|
1⇩
|
Rating Result 2023 2024
|
FIN-09-01-24-222
|
|
|
2⇩
|
Full Year Dashboard 23/24
|
Fin-09-01-24-223
|
|
|
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
This proposal reports on the financial
wellbeing of communities in the present and for the future.
|
|
Māori Impact Statement - Te Tauākī Kaupapa
Māori
This is a report on the 23/24 Financial
Year.
|
|
Sustainability - Te Toitūtanga
N/A
|
|
Financial considerations - Ngā Whakaarohanga Ahumoni
This report covers the 2023/24
financial result.
|
|
Significance and Engagement - Te Hiranga me te Tūhonotanga
This decision/report has been assessed
under the Council's Significance and Engagement Policy as being of low significance.
|
|
Consultation – internal and/or external - Whakawhiti
Whakaaro-ā-roto / ā-waho
No consultation required or undertaken.
|
|
Risks
|
|
Rural Community Board – Te Poari
Tuawhenua-ā-Hapori
Have a specific report to RCB on the RA2
Financial Result
|
