HuttCity_TeAwaKairangi_BLACK_AGENDA_COVER

 

 

Policy, Finance and Strategy Committee

 

 

25 February 2020

 

 

 

Order Paper for the meeting to be held in the

Council Chambers, 2nd Floor, 30 Laings Road, Lower Hutt,

on:

 

 

Tuesday 3 March 2020 commencing at 2.00pm

 

 

 

Membership

 

 

Cr S Edwards (Chair)

Mayor C Barry (ex-officio)

Cr D Bassett

Cr J Briggs

Cr K Brown (Deputy Chair)

Cr B Dyer

Cr D Hislop

Deputy Mayor T Lewis

Cr C Milne

Cr A Mitchell

Cr S Rasheed

Cr N Shaw

Cr L Sutton

 

 

 

 

For the dates and times of Council Meetings please visit www.huttcity.govt.nz

 

Have your say

You can speak under public comment to items on the agenda to the Mayor and Councillors at this meeting. Please let us know by noon the working day before the meeting. You can do this by emailing DemocraticServicesTeam@huttcity.govt.nz or calling the Democratic Services Team on 04 570 6666 | 0800 HUTT CITY


HuttCity_TeAwaKairangi_SCREEN_MEDRES

POLICY, FINANCE AND STRATEGY COMMITTEE
Membership:	13
Meeting Cycle:	Meets on an eight weekly basis, as required or at the requisition of the Chair
Quorum:	Half of the members
Reports to:	Council

PURPOSE:

To assist the Council in setting the broad vision and direction of the city in order to promote the social, economic, environmental and cultural wellbeing of the city’s communities in the present and for the future. This involves determining specific outcomes that need to be met to deliver on the vision for the city, and taking a holistic approach to establishing strategies, policies, bylaws, regulations and work programmes to achieve those goals. This committee is also responsible for assisting Council to execute its financial and performance monitoring obligations.

 

Policy, Strategy and Bylaws:

        Develop and agree draft strategies and policies for the growth and development of the city, including economic, transport and infrastructure development, for engagement/public consultation, excluding those strategies and policies that will subsequently be required to follow a statutory process and will be dealt with by the Regulatory Committee.

        Recommend strategies and policies to Council for adoption, including those required as part of the Long Term Plan, and any other policies required by legislation.

        Monitor and review implemented strategies and policies.

        Undertake a full review of the City of Lower Hutt District Plan, including receiving direction from the Community and Environment Committee, establishing a District Plan work programme and monitoring its implementation.

        Develop and agree the Statement of Proposal for new or amended bylaws for consultation.

        Recommend to Council new or amended bylaws for adoption.

Financial, Project and Performance Reporting:

        Recommend to Council the budgetary parameters for preparation of the Council’s Long Term Plans (LTP) and Annual Plans.

        Monitor progress towards achievement of the Council’s budgets and objectives as set out in the LTP and Annual Plans, including associated matters around the scope, funding, prioritising and timing of projects.

        Monitoring and oversight of significant projects including operational contracts, agreements, grants and funding.

        Monitor progress towards achievement of the Council’s outcomes as set out in the Leisure & Wellbeing, Urban Growth, Infrastructure and Environmental Sustainability Strategies and their associated plans.

        Monitor the integrity of reported performance information, both financial and non-financial, at the completion of Council’s Annual Report, and external accountability reporting requirements.

       Review and recommend to Council the adoption of the Annual Report.

       Recommend to Council the approval of annual Statements of Corporate Intent for Council Controlled Organisations and Council Controlled Trading Organisations and granting shareholder approval of major transactions.

       Monitor progress against the CCO and CCTO Statements of Intent and make recommendations to Council in the exercising of Council powers, as the shareholder, in relation to Council Controlled Organisations/Council Controlled Trading Organisations under sections 65 to 72 of the Local Government Act.

       Oversee compliance with Council’s Treasury Risk Management Policy.

       Consider and determine requests for rates remissions.

       Consider and determine requests for loan guarantees from qualifying community organisations where the applications are within the approved guidelines and policy limits.

       Approve and oversee monitoring around Community Funding Strategy grants.

General:

        Maintain an overview of work programmes carried out by the Council’s organisational activities.

        Conduct any consultation processes required on issues before the Committee.

        Approval and forwarding of submissions on matters related to the Committee’s area of responsibility.

        Any other matters delegated to the Committee by Council in accordance with approved policies and bylaws.

 

    


HUTT CITY COUNCIL

 

Policy, Finance and Strategy Committee

 

Meeting to be held in the Council Chambers, 2nd Floor, 30 Laings Road, Lower Hutt on

 Tuesday 3 March 2020 commencing at 2.00pm.

 

ORDER PAPER

 

Public Business

 

1.       APOLOGIES 

2.       PUBLIC COMMENT

Generally up to 30 minutes is set aside for public comment (three minutes per speaker on items appearing on the agenda). Speakers may be asked questions on the matters they raise.

3.       CONFLICT OF INTEREST DECLARATIONS

Members are reminded of the need to be vigilant to stand aside from decision making when a conflict arises between their role as a member and any private or other external interest they might have

POLICY, STRATEGY AND BYLAWS:

4.       Recommendations to Council – 24 March 2020

i)       Hutt City Community Facilities Trust Draft Statement of Intent 2020/21 to 2022/23 (20/10)

Report No. PFSC2020/2/39 by the Senior Management Accountant       9

Chair’s Recommendation:

That the recommendations contained within the report be endorsed.

 

ii)      Seaview Marina Limited Draft Statement of Intent 2020/21 to 2022/23 (20/11)

Report No. PFSC2020/2/40 by the Senior Management Accountant     28

Chair’s Recommendation:

That the recommendations contained within the report be endorsed.

 

 

 

iii)     Urban Plus Group Draft Statement of Intent 2020/21 to 2022/23 (20/12)

Report No. PFSC2020/2/41 by the Senior Accountant                            52

Chair’s Recommendation:

That recommendation parts (i), (ii) and (iii) be endorsed and

 

a new part (iv) to read as follow:

(iv)  Requests officers to arrange a workshop for councillors outlining options for potential changes to the UPL statement of intent, with a view to bringing back to the next meeting of the Policy, Finance and Strategy Committee draft changes to discuss with the UPL board.

 

iv)     Council performance report for the half year ended 31 December 2019 (20/60)

Report No. PFSC2020/2/42 by the Budgeting and Reporting Manager  84

Chair’s Recommendation:

That the recommendations contained within the report be endorsed.

 

v)      Three Waters Half Year Performance (20/161)

Report No. PFSC2020/2/67 by the Strategic Advisor, City and Community Services         170

Chair’s Recommendation:

That the recommendation contained within the report be endorsed.

5.       Three Waters Early Investment Signals for 2021/31 Long Term Plan (20/58)

Report No. PFSC2020/2/47 by the Strategic Advisor, City and Community Services      181

Chair’s Recommendation:

That the recommendations contained within the report be endorsed.

 

6.       Urban Plus Group Six Month Report to 31 December 2019 (20/15)

Report No. PFSC2020/2/45 by the Senior Accountant                                    200

Chair’s Recommendation:

That the recommendation contained within the report be endorsed.

 

7.       Full District Plan Review - Process, Timing and Resourcing (20/16)

Report No. PFSC2020/2/46 by the Head of District Plan Policy                     219

Chair’s Recommendation:

That the recommendations contained within the report be endorsed.

 

8.       Submission on Proposed National Policy Statement for Indigenous Biodiversity (20/103)

Report No. PFSC2020/2/49 by the Head of District Plan Policy                     227

Chair’s Recommendation:

That the recommendations contained within the report be endorsed.

 

9.       The Hutt City Community Facilities Trust Six Month Report to 31 December 2019 (20/13)

Report No. PFSC2020/2/43 by the Senior Management Accountant             235

Chair’s Recommendation:

That the recommendation contained within the report be endorsed.

 

10.     Seaview Marina Limited Six Month Report to 31 December 2019 (20/14)

Report No. PFSC2020/2/44 by the Senior Management Accountant             250

Chair’s Recommendation:

That the recommendation contained within the report be endorsed.

 

11.     Strategic Property Portfolio - Update (20/82)

Report No. PFSC2020/2/48 by the Head of City Growth                                261

Chair’s Recommendation:

That the recommendation contained within the report be endorsed.

 

 

 

12.     Draft Waste Management and Minimisation Bylaw template (20/147)

Report No. PFSC2020/2/68 by the Manager, Sustainability and Resilience    265

Chair’s Recommendation:

That the recommendation contained within the report be endorsed.

 

13.     QUESTIONS

With reference to section 32 of Standing Orders, before putting a question a member shall endeavour to obtain the information. Questions shall be concise and in writing and handed to the Chair prior to the commencement of the meeting.   

 

 

Toi Lealofi

COMMITTEE ADVISOR

            


                                                                                      12                                                         03 March 2020

Policy, Finance and Strategy Committee

10 January 2020

 

 

 

File: (20/10)

 

 

 

 

Report no: PFSC2020/2/39

 

Hutt City Community Facilities Trust Draft Statement of Intent 2020/21 to 2022/23

 

Purpose of Report

1.    The purpose of the report is to provide a review of the draft Statement of Intent (SOI) for the Hutt City Community Facilities Trust (CFT) as delivered to Council for Council’s consideration.

Recommendations

That the Committee recommends that Council:

(i)    notes that the Hutt City Community Facilities Trust (CFT) Board has submitted a draft Statement of Intent (SOI) 2020/21 - 2022/23, attached as Appendix 1 to the report, in accordance with the Local Government Act 2002;

(ii)   notes that officers have reviewed the draft SOI for compliance with the Local Government Act 2002 and provided their analysis;

(iii)  receives the draft SOI;

(iv) reviews the draft SOI and considers if any modifications should be made; and

(v)  provides comment for the CFT Board to consider in finalising its SOI (including any modifications suggested by the Committee arising under recommendation (iv) above).

 

Background

2.    The Local Government Act 2002 (LGA) requires the board of a Council Controlled Organisation (CCO) to deliver to its shareholders a draft SOI on or before 1 March of each year.

Discussion

3.    The Hutt City Community Facilities Trust (CFT) Board has submitted a draft SOI to Council.  This is attached as Appendix 1 to the report.

4.    The board of a CCO must provide information prescribed by the LGA for the SOI, to the extent is appropriate given the organisation form of the CCO.  The information is required to be provided for the 2020/21 financial year and the two years following that (section 9, Schedule 8 of the LGA). 

5.    The compliance of the company with the legislative requirements for the SOI and a summary of the amendments proposed by the Board for their 2020/2023 SOI are detailed below:

Required Content

Draft SOI Content

(a) the objectives of the Trust

The objectives of CFT are stated.

(b) a statement of the board’s approach to governance of the group

A statement is included.

(c) the nature and scope of the activities undertaken by the group

The nature and scope of activities are outlined.

(d) the ratio of consolidated shareholders’ funds to total assets, and the definition of those terms

The terms are defined.  No shareholder funds are distributed to CFT.

(e) the accounting policies of the group

Accounting policies are outlined.

(f) the performance targets and other measures by which performance of the group may be judged in relation to its objectives

Performance targets are included.

(g) an estimate of the amount or proportion of accumulated profits and capital reserves that is intended to be distributed to the shareholders

There is no intention to pay a dividend to the shareholder.

(h) the kind of information to be provided to the shareholders by the group during the course of those financial years, including the information to be included in each half yearly report

The kind of information to be provided is outlined. The Trust will provide annual and six-monthly reports.

(i) the procedures to be followed before any member or the group subscribes for, purchases, or otherwise acquires shares in any company or other organisation

Information included. Express approval from Council is required.

(j) any activities for which the board seeks compensation from any local authority (whether or not the local authority has agreed to provide the compensation)

No compensation anticipated.

(k) the boards estimate of the commercial value of the shareholders’ investment in the group and the manner in which and the times at which that value is to be reassessed

A statement as to the net value of shareholders investment is provided.

(l) any other matters that are agreed by the shareholders and the board

There is a section added on environmental objectives.

 

6.    With the Naenae Community Hub project put on hold by Council, CFT does not currently have any new development projects assigned to it.  As such CFT will over the next three years focus its activities in the following areas:

·    Completing the bedding in of the recently constructed RICOH Sports Centre at Fraser Park. The new building is a complex structure and the CFT will work with the tenant, Fraser Park Sportsville (FPS), to best optimise the use and to capture the benefits of the technologies and infrastructure imbedded in the complex.

·    Working with FPS and the community to maximise the use of the new facility.

·    Putting in place maintenance plans and regimes for the RICOH Sports Centre that will ensure the new centre is maintained to a high and safe standard.

·    Working with the Naenae Bowls Club and the community to maximise the use of the facility and to improve its ability to fully fund all operational costs, including insurance, rates and long-term maintenance.

·    Putting in place maintenance plans and regimes for the Naenae Bowls Centre that will ensure the centre is maintained to a high standard.

·    Continue to manage, in partnership with the tenant (FPS), the artificial turfs at Fraser Park.

·    Continue to manage in partnership with the tenant (Council), the Walter Nash Centre at Taita.

·    Prepare and implement in partnership with the tenant (Council), maintenance plans for the Koraunui Stokes Valley Community Hub.

·    In partnership with the tenant (Council), make modest improvements to the old Walter Nash Centre to bring that building up to modern standards.

 

7.    CFT will also assist with the development of any other community or sporting buildings which the Council has funding for and requests CFT to project manage.

Options / Legal Considerations

8.    Council may suggest changes which the Board must consider in finalising its SOI.  The Board must consider within two months of 1 March any comments on the draft SOI that are made by the shareholders.  The Board must deliver a completed SOI to Council on or before 30 June 2019.

9.    Outside of this current process, the Council may, by resolution, require the Board to modify the SOI and the Board must comply (section 5, Schedule 8 LGA), provided that Council first consults the Board.

Financial Considerations

10.  The draft SOI contains the financial forecasts for CFT for the three year period commencing 1 July 2020.

11.  The Total Equity of CFT is estimated to be $38.9M at 30 June 2021.

Appendices

No.

Title

Page

1

Appendix 1 CFT SOI 2020-2023 DRAFT

13

 

 

Author: Sharon Page

Senior Management Accountant

 

 

Author: Darrin Newth

Financial Accounting Manager

 

 

 

Approved By: Brent Kibblewhite

General Manager Corporate Services

 


Attachment 1

Appendix 1 CFT SOI 2020-2023 DRAFT

 

 

  

 

 


Statement of Intent

 

Hutt City Community Facilities Trust

 

2020/21 – 2022/23

D R A F T


 

 

Contents

 

Introduction. 3

Objectives. 3

Activities. 4

Governance. 5

Ratio of Consolidated Shareholders’ Funds to Total Assets. 6

Accounting Policies of the CFT. 6

Performance Targets. 8

Prospective Statement of Financial Performance. 9

Prospective Statement of Movements in Equity. 10

Prospective Statement of Financial Position. 11

Prospective Statement of Cash Flows. 12

The CFT Depreciation Policy. 13

Information to be provided to Shareholders. 13

Procedures to be followed before members acquire shares in other groups etc. 14

Activities for which the Board seeks compensation from a local authority. 14

Board estimate of the commercial value of the shareholder’s investment in the group. 14

Other Management Issues. 15

 


 

Introduction

This Statement of Intent has been prepared by the Hutt City Community Facilities Trust (CFT), as required under Section 64(1) of the Local Government Act 2002 for a Council Controlled Organisation (CCO).  It gives an overview of the CFT, the objectives we will work to achieve, the activities we will undertake, and how we will measure our performance.  It covers the three year period to 30 June 2023.

The CFT was established by the Hutt City Council (Council) in August 2012 as a CCO to promote, develop, own, operate, and maintain recreational, leisure, and community facilities in Lower Hutt.  Over the next 30 years a number of facilities in Lower Hutt will have to be upgraded or replaced.  Changing preferences in the community for the way recreation, leisure, and community services are delivered led HCC to adopt an integrated facilities approach to new developments, which will allow for a range of services to be accessed in one place.  The Walter Nash Centre completed by the CFT in late 2015 is a good example of an integrated community facility. The Walter Mildenhall Park Redevelopment completed in 2017 at Naenae, the Koraunui Stokes Valley Community Hub also completed in 2017 and the Ricoh Sports Centre at Fraser Park, completed in 2019, are examples of projects that also follow the integrated facilities model.

The main role of the CFT has been to develop and then maintain a range of fit-for-purpose, leisure, recreation and community facilities that are attractive to the residents and visitors of Lower Hutt.

In 2019 the trustees conducted a strategic review of the CFT’s future direction and concluded that while it will remain a landlord of its existing facilities, most day to day work to provide ongoing management for these is best conducted by Council staff as is future project management of new builds. The board concluded that CFT’s main focus will be to provide leadership in the identification, promotion and fundraising for new projects which support Council’s overall strategic objectives.

Where appropriate, the CFT will assist with fundraising work to attract donations for these developments from philanthropic organisations, the corporate sector and the community.  The Trust will do this by acting as a voice for community facilities in Lower Hutt, using the skills and expertise its trustees bring from valuable experience in business, asset management, and community affiliation.

The CFT will strive to have a positive and productive working relationship with Council. The Trust will contribute to Council’s community outcomes of a city that is actively engaged in community activities, and a city that promotes strong and inclusive communities.  Accordingly, the CFT Board looks forward to working with Council to optimise the overall social, cultural, health and economic wellbeing of Lower Hutt.

Objectives

The objectives of the CFT will follow section 59 of the Local Government Act 2002, which outlines the principal objectives for a Council Controlled Organisation as follows:

 (a)          Achieve the objectives of its shareholders, both commercial and non-commercial, as specified in the Statement of Intent;

(b)          Be a good employer; and

(c)           Exhibit a sense of social and environmental responsibility by having regard to the interests of the community in which it operates and by endeavouring to accommodate or encourage these when able to do so.

 

In addition to the statutory objectives, the CFT Deed of Trust has a range of charitable objectives designed to promote the health and wellbeing of Lower Hutt’s communities. These objectives are to:

·    Promote, operate, develop, and maintain community facilities in Lower Hutt through the management of the interests and rights relating to these facilities.

·    Assist with attracting fundraising from the community and philanthropic organisations for the development of high quality community facilities.

·    Provide strategic planning, in partnership with HCC, in relation to the ongoing development and administration of community facilities in Lower Hutt.

·    Provide high quality amenities which attract and engage, promoting the health and well-being of residents of and visitors to Lower Hutt.

·    Practise prudent commercial administration of high quality community, recreation, and leisure facilities, with a view that they will be financially sustainable.

 

Environmental objectives

 

The Board will be considering during the year what we can do effectively to support the Council’s environmental objectives. In particular we will give consideration to the potential impacts of climate change and ‘carbon zero’ initiatives, and what contribution the trust can make to this. We will work with and hold discussions with Council staff to ensure we are working on a co-ordinated basis.

 

Health and Safety

 

The Board sees the health and safety of its staff, contractors, the public and all users of its facilities as a top priority. Enhanced reporting to the Board to ensure that there is the best possible health and safety practices and culture in all its facilities is a top priority for the year.

Activities

This draft Statement of Intent has been provided at a busy time for Council after the recent election and restructuring of its management team. It has also been busy with its consideration of the future for the Naenae Pool. As a consequence of its initial plans to rebuild that in some form, it has signalled the suspension of various other funding allocations for gym sports and the proposed Wainuiomata Sports and Community Hub, both of which were part of CFT’s longer term work plan. The Board has not received from Council the usual letter of expectation to guide it in the completion of this SOI thus the plan for the year is limited to managing the existing facilities of the Trust until Council makes its broader decisions on funding priorities for any new project and what role it would like to see CFT play in them.

In the next three years the CFT will focus its activities in the following areas:

·    Completing the bedding in of the recently constructed Ricoh Sports Centre at Fraser Park. The new building is a complex structure and the CFT will work with the tenant, Fraser Park Sportsville (FPS), to best optimise the use and to capture the benefits of the technologies and infrastructure imbedded in the complex.

·    Working with FPS and the community to maximise the use of the new facility.

·    Putting in place maintenance plans and regimes for the Ricoh Sports Centre that will ensure the new centre is maintained to a high and safe standard.

·    Working with the Naenae Bowls Club and the community to maximise the use of the facility and to improve its ability to fully fund all operational costs, including insurance, rates and long-term maintenance.

·    Putting in place maintenance plans and regimes for the Naenae Bowls Centre that will ensure the centre is maintained to a high standard.

·    Continue to manage, in partnership with the tenant (FPS), the artificial turfs at Fraser Park

·    Continue to manage in partnership with the tenant (Council), the Walter Nash Centre at Taita.

·    Prepare and implement in partnership with the tenant (Council), maintenance plans for the Koraunui Stokes Valley Community Hub.

·    In partnership with the tenant (Council), make modest improvements to the old Walter Nash Centre to bring that building up to modern standards

·    The development of any other community or sporting buildings which the Council has funding for and requests the CFT to project manage.

Governance

The CFT board of trustees comprises five members, one of whom is a Councillor appointed by Council.  All other trustees are appointed by Council in line with its Appointment and Remuneration of Directors Policy.

The Chairperson is appointed by the trustees. 

The trust board meets six weekly.

The CFT adopts an approach to governance that is in accordance with the best practice statements produced by the Institute of Directors New Zealand (Incorporated).  This will include an annual evaluation of the effectiveness of the Trust board through whole of board and individual self-assessments.

The Trustees of the CFT must act in accordance first and foremost with the charitable purposes of the Trust.

The CFT will give effect to the Hutt City Council Long Term Plan and act consistently with other Council plans, strategies and policies.

The CFT will adopt in its relationship with Council ways of working that reflect Council and CCOs as partners in the delivery of shared outcomes. This includes a commitment to the agreed Memorandum of Understanding between the Trust and Council that was signed in the 2012/13 period.   This includes:

·    A commitment to collaboration.

·    A commitment to openness and transparency.

·    Adherence to a ‘no surprises’ policy  - where it is appropriate the CFT trust board will bring to Council’s attention immediately all new and significant projects, initiatives, and/or issues.

·    A commitment by the CFT to the aims and objectives of the Council Long Term Integrated Community Facilities Plan.

·    A commitment by Council where it sells recreation or similar land or any other identified community facility, that the profits arising from that sale shall be vested in a reserve for future investment in reserve development, which may include the development of associated community facilities by the CFT and Council. The use of the reserve will be negotiated between Council and the CFT.

 

The CFT Deed of Trust allows the CFT the ability to raise a loan to part fund approved CFT projects.  The CFT will not however raise any significant loans without consulting the shareholder.

 

Office space, office equipment, IT and administrative support is provided to the CFT by Council. This is expected to continue.

Ratio of Consolidated Shareholders’ Funds to Total Assets

Definition of Terms

Shareholders’ Funds:  Represent the net equity the shareholder has contributed to the Trust since its incorporation. This amount includes issued share capital, revaluation reserves, and retained earnings. There are currently no shareholder funds distributed to the CFT.

Total Assets:  Represent the total assets both intangible and tangible of the CFT, disclosed in accordance with applicable financial reporting standards. For completeness it is noted that any tax liabilities in respect of GST and deferred tax are classified as liabilities irrespective of them being a debit or credit balance.

Accounting Policies of the CFT

Financial Statements

The Financial Statements will comply with generally accepted accounting practice in New Zealand (NZ GAAP). They will comply with NZ IFRS and other applicable Financial Reporting Standards. Financial statements will also comply with the Local Government Act 2002.

General Accounting Policies

Accounting policies adopted will be consistent with the New Zealand equivalent of International Financial Reporting Standards (NZ IFRS) issued by the XRB (External Reporting Board).

Particular Accounting Policies

Recognition of Income – Revenue will be recognised when an invoice is raised after service is provided. Other transactions that comply with the definition of "Revenue" in the Statement of Concepts issued by the XRB (External Reporting Board) will also be recognised as revenue.

Goods and Services Tax

Financial statements will be prepared on a GST exclusive basis.

Cash and Cash Equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short term highly liquid investments with original maturities of three months or less and bank overdrafts.

Accounts Receivable

Accounts receivable will be stated at net realisable value.

Investments

Investments will be stated at fair value.

Property Plant and Equipment

Property plant and equipment is shown at cost, less accumulated depreciation and impairment losses.

Consolidation

The purchase method will be applied to prepare the Consolidated Financial Statements (if required).

Leases

Cost of operating leases (if any) will be recognised as expenditure over the term of the lease.

Borrowing

Borrowing is recognised in the balance sheet on a fair value basis.

Taxation

As the CFT has been established as a charitable trust, it should not be liable for income tax. If the Trust does engage in any activity making it liable for income tax, the income tax expense will be calculated after allowance for permanent differences and any group loss offsets.

Funding Commitments

Funding commitments are recognised as a liability and asset until such time that the community facility development is undertaken.  At this time it will be recognised as revenue.


 

Performance Targets

Performance indicators for the CFT are as follows:

 

Indicator and measure

Target 2020/2023

Operational Management

·   Operational expenditure is within budget

·   All reporting requirements set by Council and the Board of CFT are met in accordance with the Local Government Act 2002, the CFT Statement of Intent and the CFT Deed of Trust

 

 

100%

 

Annual Report by 30/9/20, 30/9/21 and 30/9/22

SOI and six monthly report by 1/3/21, 1/3/22 and 1/3/23

Facilities Management

·   All facilities maintain legal compliance, WOFs and/or certification

 

·   All facilities have in place an agreement to lease within three months of completion

 

 

·   All facilities have detailed maintenance plans in place within 12 months of completion

 

 

100% Building safety upheld

 

 

100% Legal partnerships covering leases and maintenance are agreed with the principal tenants 

 

100% Maintenance programmes instituted to ensure facilities’ amenity values are retained and are safe for users

 

Environmental Objectives

 

·   Consider how the board can effectively support the Council’s environmental objectives.  In particular give consideration to potential impacts of climate change and ‘carbon zero’ initiatives, and what contribution the Trust can make to this.

 

 

 

Potential impact assessment and action plan report completed by 30 June 2021

Health and Safety

 

·   Enhanced reporting to the Board to ensure best possible health and safety practices and culture are in all CFT facilities.

·   All CFT construction projects have Health and Safety plans and monitoring in place.

 

 

 

Monitoring is in place and reporting to the Board by 30 June 2021

 

 

100% compliance


Attachment 1

Appendix 1 CFT SOI 2020-2023 DRAFT

 

Prospective Statement of Financial Performance

 

 


 

Prospective Statement of Movements in Equity

 


 

Prospective Statement of Financial Position

 


 

Prospective Statement of Cash Flows

 


Proportion of Accumulated Profits/Capital Reserves Distributed to Shareholder

The CFT is a non-profit entity, and any accumulated profits and/or capital reserves are to be used to fulfil the Trust’s charitable objectives. There is no current requirement to distribute a proportion of these funds to Council.

The CFT Depreciation Policy

The CFT is still evolving policy with respect to the establishment of cost sharing arrangements between itself and sporting bodies and individuals who will use its facilities, buildings and artificial turfs. Wherever possible the CFT will seek to deliver to the users, debt free buildings and facilities at a price which will encourage and stimulate sporting and community participation.

The accounts published above assume that CFT will strike a facilities/building and turf rental that is designed to raise sufficient funds to maintain the asset over the next 25 years.

The CFT is however mindful that some of its assets will have a life well beyond 25 years and could still be in use in 75 years’ time. Predicting what sporting facilities a community might need in 75 years is fraught and the CFT will not attempt to do this. It has therefore resolved to not build into its rental or long-term maintenance strategy an allowance to fund the replacement of an asset older than 25 years. The financial accounts above reflect this policy. Maintenance costs for an asset life of up to 25 years are generally funded out of user charges. Major assets like roofs, lifts and turf carpets which require replacement at the end of their predictable known life, will be funded by a specific arrangement with Council, or Council, the CFT and the tenant combined.

Because the CFT is still evolving its rental and depreciation charges, negotiations to fix agreed rentals with Council and its other tenants are ongoing. Further research, designed to more accurately determine the actual depreciation and maintenance costs on the CFT’s assets and the ability of its tenants to meet those costs, may lead to a change in the above policy and associated CFT budgets for the years beyond 2019/20.

Information to be provided to Shareholders

In each year the CFT shall comply with the reporting requirements specified for Council Controlled Organisations under the Local Government Act 2002, the Companies Act 1993 and other relevant regulations.

In particular, it shall provide the following:

·    Statement of Intent

                A draft Statement of Intent by 1 March detailing all matters required under the Local Government Act 2002.

 

 

·    Annual Report

                Within three months  after the end of each financial year, the CFT will provide an annual report which provides a comparison of its performance with the Statement of Intent, with an explanation of any material variances, audited consolidated financial statements for the financial year, and an auditor’s report (in accordance with sections 67, 68 and 69 of the LGA 2002).

·    Half-Yearly Report

                Within two months after the end of the first half of each financial year the CFT shall provide a  report on the operations of the Trust to enable an informed assessment of its performance, including financial statements, and progress on activities and projects (in accordance with section 66 of the LGA 2002).

Procedures to be followed before members acquire shares in other groups etc.

Subscription for shares in any other Company or interest in any other organisation will only take place with express prior approval from Council.

Activities for which the Board seeks compensation from a local authority

It is not anticipated that the Trust will seek compensation from any local authority otherwise than in the context of the normal contractual relationship with Hutt City Council.

If the Trust has undertaken to obtain or has obtained compensation from its shareholders in respect of any activity, this undertaking or the amount of compensation obtained will be recorded in:

·    The annual report of the CFT; and

·    The annual report of the Hutt City Council.

Board estimate of the commercial value of the shareholder’s investment in the group

The Board will conduct an assessment of the value of Council’s investment in the Trust.  The assessment will be based on the net asset value shown in the Trust’s six-monthly report.

Following completion of the RICOH Sports Centre at Fraser Park, the estimated replacement value of the Trust’s assets is now $41 million.

Other Management Issues

Health and Safety in Employment

CFT will maintain best industry practice and ensure 100% compliance with legislated obligations for its sites and buildings.

Community Outcomes

For the past five years CFT has been in building and development mode, it will now commit more resources and work with Council officers to monitor and report on the outcomes of the new CFT facilities. The CFT facilities have had a significant positive impact on the communities that surround them; however this has not been well researched or documented.

Long Term Facility Planning

The CFT has prepared 20 year maintenance plans for all of its buildings and other sporting assets and will now work with Council officers to prepare funding plans for that work. While some of the costs will be met from tenant rentals, more significant expenditure, for example on the cost of reroofing a major building like the Walter Nash, will need to be determined and agreed with Council.

Business Continuity

CFT is refining management practices and back up plans which will become operational in the event of unforeseen circumstances and natural disasters so that any events will have a minimal impact on the future operation of its facilities and assets.

Insurances

CFT will maintain appropriate insurances and/or require its tenants to have appropriate insurances, to mitigate risk of portfolio damage, business interruption and professional indemnity. This will include Directors and Office Bearers’ cover where appropriate.

Emergency Preparedness

CFT will continue to develop and maintain systems and procedures to best position itself and its facilities to deal with emergency situations.

Environmental Objectives

CFT staff are working with Council staff and consultants to formulate an environmental strategy for CFT that could change the way CFT builds and manages its sporting infrastructure and buildings. It is probable that CFT will not in future use gas heating in its buildings and will consider changing existing gas units at the end of their working life. CFT is already working to include solar power units on its buildings and will make provision for such units on future buildings. CFT will also investigate designing future buildings under the Green Star rating system if such an approach is affordable.

 

 


                                                                                      31                                                         03 March 2020

Policy, Finance and Strategy Committee

10 January 2020

 

 

 

File: (20/11)

 

 

 

 

Report no: PFSC2020/2/40

 

Seaview Marina Limited Draft Statement of Intent 2020/21 to 2022/23

 

Purpose of Report

1.    The purpose of the report is to provide a review of the draft 2020-2023 Statement of Intent for (SOI) Seaview Marina Limited (SML) as delivered to Council for Council’s consideration.

Recommendations

That the Committee recommends that Council:

(i)    notes that the Board of Seaview Marina Limited (SML) has submitted a draft Statement of Intent (SOI) 2020-2023, attached as Appendix 1, in accordance with the Local Government Act 2002;

(ii)   notes that officers have reviewed the draft SOI for compliance with the Local Government Act 2002 and provided their analysis;

(iii)  receives the draft SOI;

(iv) reviews the draft SOI and considers if any modifications should be made; and

(v)  provides comment for the Board of SML to consider in finalising its SOI (including any modifications suggested by the Committee arising under part (iv) above).

 

Background

2.    The Local Government Act 2002 (LGA) requires the Board of a Council Controlled Organisation (CCO) to deliver to its shareholders a draft SOI on or before 1 March of each year.

Discussion

3.    The Board of SML has submitted a draft SOI to Council.  This is attached as Appendix 1 to the report.

4.    The board of a CCO must provide information prescribed by the LGA for the SOI, to the extent is appropriate given the organisation form of the CCO.  They must do this for the ‘the group’ – which comprises the CCO and its subsidiaries.  The information is required to be provided for the 2019/20 financial year and the two years following that (section 9, Schedule 8 of the LGA).

5.    The compliance of the company with the legislative requirements for the SOI and a summary of the amendments proposed by the Board for their 2019-2022 SOI are detailed below:

Required Content

SML Draft SOI Content

(a) the objectives of the company

The objectives of SML are stated.

(b) a statement of the board’s approach to governance of the group

A comprehensive statement is included.

(c) the nature and scope of the activities undertaken by the group

The nature and scope of activities are outlined.

(d) the ratio of consolidated shareholders’ funds to total assets, and the definition of those terms

This is provided.

(e) the accounting policies of the group

These are provided.

(f) the performance targets and other measures by which performance of the group may be judged in relation to its objectives

Performance measures are included.

(g) an estimate of the amount or proportion of accumulated profits and capital reserves that it is intended to be distributed to the shareholders

This is provided.

The SOI notes that there is an expectation of financial returns to Council in the medium term by way of dividends.

A dividend of $200,000 has been provisional provided for in year 3 of the SOI.  However a dividend policy has not yet been developed and submitted by the board for shareholder consideration.

(h) the kind of information to be provided to the shareholders by the group during the course of those financial years, including the information to be included in each half yearly report

The kind of information to be provided is outlined, and includes half yearly reports and annual reports.  Financial projections are included in the SOI.

(i) the procedures to be followed before any member or the group subscribes for, purchases, or otherwise acquires shares in any company or other organisation

Information included. This includes the requirement to obtain the express approval of Council. 

(j) any activities for which the board seeks compensation from any local authority (whether or not the local authority has agreed to provide the compensation)

No compensation anticipated.

(k) the boards estimate of the commercial value of the shareholders’ investment in the group and the manner in which and the times at which that value is to be reassessed

A statement as to the net value of shareholders investment is provided.

(l) any other matters that are agreed by the shareholders and the board

Environmental targets may need to be suggested by Council, as per their “zero carbon” resolution.

 

6.    With the exception of climate change and Council’s carbon zero target, officers believe the draft SOI adequately addresses the focus and direction and other priority areas requested in the Letter of Expectation sent by Council on 11 December 2018. 

Specifically, the draft SOI has considered:

(a)   focusing on completing the remaining in-water developments (as market demands and operating cash flows permit);

(b)   financial returns to the shareholder by way of breakwater lease payments and in the medium term, dividends;

(c)   continued support of non-profit ventures connected with the Company’s business;

(d)   the potential impacts of climate change and “carbon zero” initiatives, and how SML can best respond; and

(e)   Health and Safety.

7.    Council has passed a “carbon zero” resolution which included its CCOs.  At this stage, the draft SOI makes reference to this but no specific targets or objectives have been included.  A new objective should be added and included in the final SOI following further discussions with officers and direction from members.  Officers recommend working towards more specific performance measures in this area.

8.    A provisional dividend of $200,000 has been provided for in 2022/23 (year 3) of the draft SOI, following completion of the in-water capital development programme in 2021/22 (year 2).  However a formal dividend policy has not yet been developed and submitted by the Board for Council consideration.  Officers will work with the SML Board to develop a dividend policy for Council consideration that can then be incorporated into the final SOI.

Options / Legal Considerations

9.    Council may suggest changes which the Board must consider in finalising its SOI.  The Board must consider within two months of 1 March, any comments on the draft SOI that are made by the shareholders.  The Board must deliver a completed SOI to Council on or before 30 June 2020.

10.  Outside of this current process, the Council may, by resolution, require the Board to modify the SOI and the Board must comply (section 5, Schedule 8 LGA), provided that Council first consults the Board.

Financial Considerations

11.  The draft SOI contains the financial forecasts for SML for the three year period commencing 1 July 2020.

12.  The net shareholder’s investment in SML is estimated to be valued at $9.4M as at 20 June 2021.

13.  SML’s planned activities for the period covered by its draft SOI, are funded via retained earnings, operating cash flows, and an approved $3.5M ($2.7M drawn down), loan agreement with Council.  Council loan(s) to SML are funded by Council through borrowings resulting in nil impact to Council net debt.

14.  The draft SOI is forecasting a loan funding requirement of $3.9M in 2021/22 (year 2) to complete the in-water development and other planned capital projects, with $0.9M being repaid in 2022/23 (year 3) resulting in borrowings of $3.0M (22.0% gearing) at the end of the three year period covered by the SOI.  As the forecasted loan funding requirement exceeds the existing loan facility maximum amount, the later will need to be increased or Council agrees to an additional short term funding facility.  Given SML’s strong operating cash flows and very low gearing, SML can easily accommodate the required increase in debt funding.  Should Council not agree to an increase in funding, completion of the in-water development, and the associated incremental revenue, will need to be pushed out a year.

15.  Consideration should also be given to increasing SML’s gearing which would allow for a higher level of dividend to be returned to Council in the short to medium term.

Appendices

No.

Title

Page

1

Appendix 1 SML DRAFT Statement of Intent 2021-2023

32

 

Author: Sharon Page

Senior Management Accountant

 

Approved By: Brent Kibblewhite

General Manager Corporate Services


Attachment 1

Appendix 1 SML DRAFT Statement of Intent 2021-2023

 

 

 

 

 

 

 

 

SEAVIEW MARINA LIMITED

DRAFT STATEMENT OF INTENT

2020/21 to 2022/23


 

 

 

Contents

1.           Mission. 3

2.           Nature and Scope of Activities. 3

3.           Corporate Governance Statement. 3

4.           Corporate Goals. 3

5.           Specific Objectives for the Year Ending 30 June 2019. 4

6.           Performance Measures. 6

7.           Financial Projections. 7

8.           Accumulated Profits and Capital Reserves. 15

9.           Share Acquisition. 15

10.         Information to be Provided to Shareholders. 15

11.         Pricing Policy. 15

12.         Transactions with Related Parties. 16

13.         Directory. 17

14.         Accounting Policies. 18

 


 

1.        Mission

Seaview Marina Limited’s mission is to be the centre for recreational marine activities and services in the Wellington Region.

2.        Nature and Scope of Activities

Seaview Marina Limited (the Company) is responsible for the operation of the boating facilities and services, the maintenance of infrastructural assets and the development of additional facilities and services as demand dictates.

3.        Corporate Governance Statement

The Company is 100% owned by Hutt City Council and accordingly is a Council Controlled Trading Organisation (CCTO) as defined by the Local Government Act 2002 (LGA). The Directors’ role is defined in Section 58 of the LGA which requires that all decisions relating to the operation of a CCTO shall be made pursuant to the authority of the directorate of the CCTO and its Statement of Intent (SOI). In addition to the obligations of the LGA, the Company is also covered by the Companies Act 1993 which places other obligations on the Directors.

The Directors are responsible for the preparation of the SOI which, along with the three-year financial plan, is provided to the Company’s Shareholder, Hutt City Council.  Six monthly and Annual reports of financial and operational performance are provided to the Shareholder.  Financial and operational /management reports are prepared monthly for the Directors.

The Directors of the Company are responsible for the overall control of the Company but no cost-effective internal control system will permanently preclude all errors or irregularities.  The control systems operating within the Company reflect the specific risks associated with the business of the company.

4.        Corporate Goals

The principle goal of the Company is to operate as a successful business, achieving the objectives of its shareholder as specified in this Statement of Intent. The specific corporate goals of the Company are as follows:

General

4.1       To ensure that the Statement of Intent and operating policies for the Company are consistent with the operating policies of Hutt City Council.

4.2       To ensure that the Statement of Intent and operating strategies are adhered to.

4.3       To keep the Shareholder informed of matters of substance affecting the Company.

4.4       To perform continual reviews of the operating strategies, financial performance and service delivery of the Company.

4.5       To develop the Company into one of New Zealand’s premier marina businesses.

4.6       To further expand and diversify the Company’s marina facilities.

Economic

4.7       To maximise the financial returns achieved and the value added by the Company.

4.8       To return a minimum of 5% return on equity (ROE) per annum.

4.9       To maintain the Company’s financial strength through sound and innovative financial management.

Social and Environmental

4.10     To support recreational boating activities in the Wellington Region.

4.11     To promote safe work practices.

4.12     To act as a socially responsible and environmentally aware corporate citizen and to contribute to, or assist where possible, with Hutt City Council’s community outcomes (as listed in the HCC Annual or Long Term Plan).

5.        Specific Objectives for the Year Ending 30 June 2021

In pursuit of its corporate goals, the Company has the following objectives for the next 12 months:

General

5.1       To review the Statements of Intent and Strategic Plans for consistency with the objectives of Hutt City Council.

5.2       To review the operating activities of the Company for compliance with the goals and objectives stated in the Statement of Intent and Strategic Plan.

5.3       To report all matters of substance to the Shareholder.

Economic

5.4       To achieve all financial projections.

5.5       To achieve or exceed a 5% Return on Equity (ROE).

5.6       To ensure that the reporting requirements of the Company and the Shareholder are met.

Social and Environmental

5.7       To maintain good employer status by:

(a)        complying with all employment legislation;

(b)        operating open and non-discriminatory employment practices.

5.8       To ensure no transgression of environmental and resource laws.

5.9       To review the activities undertaken by the Company for the purposes of being a good socially and environmentally responsible corporate citizen.

 

6.        Shareholder Expectations

The Shareholder has provided the Company with its expectations for the business over the next three years. These expectations are laid out under the following four categories: development, return to shareholder, social and environmental and lastly health and safety. The details are outlined below:

Continue with development plans

Focus on completing the remaining in-water development as the market demands and operating cash flows permit. Any substantial variations will require engagement with the Shareholder.

Returns to Shareholder

In the medium term the Shareholder expects financial returns by way of dividends and breakwater lease payments. Breakwater lease payments commenced in 2019/20.  The timing of dividend payments is dependent on completion of the in-water development programme.  The Board will develop a Dividend Policy for consideration and approval of the shareholder.

Social and environmental

Support of charitable non-profit ventures connected with the Company’s business will continue to be a focus.

The Company will take steps to respond to the potential impacts of climate change and align itself with the Council’s ‘carbon zero’ initiatives.

Health and safety

Health and safety will continue to be a top priority and embedded within all activities of the marina.

 

 

7.        Performance Measures

 

Key Performance Indicator

2020/21

2021/22

2022/23

 

Reporting Frequency

 

Financial

 

 

1

Deliver annual budgeted incomes for each of the four business entities

·      Boat storage

·      Hardstand

·      Marine Centre

·      Launching ramp

 

Achieve 100% of budgeted incomes

Achieve 100% of budgeted incomes

Achieve 100% of budgeted incomes

Six monthly

2

Control operational expenses (1)

Operational expenses within budget

Operational expenses within budget

Operational expenses within budget

Annually

3

Achieve prescribed return on investment (2)

4.8%

4.9%

5.3%

Annually

4

Manage Capital Expenditure (3)

Complete within capital budget and on time

Complete within capital budget and on time

Complete within capital budget and on time

Annually

 

Relationship & Communication

 

 

5

Client Service

88% satisfaction in the bi-annual survey

88% satisfaction

for the exit/entry survey

88% satisfaction

 in the bi-annual survey

Annually

6

Newsletter communications

Complete four newsletters per annum

Complete four newsletters per annum

Complete four newsletters per annum

Quarterly

7

Meet all shareholder reporting deadlines

See Section 9

See Section 9

See Section 9

Schedule in Section 9

 

Risk Management and Human Resources

 

 

8

Notifiable health and safety incidents

None

None

None

Monthly to board

9

Business Continuity Plan

Run one test scenario and review

Run one test scenario and review

Run one test scenario and review

Annually

10

Staff Satisfaction

Achieve 85% staff satisfaction

Achieve 85% staff satisfaction

Achieve 85% staff satisfaction

Six Monthly

 

Marketing

 

 

11

Implement marketing strategy to improve occupancy rates (additional berth development initially impacts negatively on berth occupancy rates)

Berth occupancy to 85%

Berth occupancy to 88%

Berth occupancy to 90%

Monthly

12

Media and Public Relations

20 enquiries per month from website

25 enquiries per month from website

30 enquiries per month from website

Monthly

Notes to Financial Measures

(1)      Operational expenses are defined as all expenses controllable by Seaview Management.  Excludes depreciation and finance charges

(2)      Return on equity is defined as net Surplus / (Deficit) divided by the opening balance of equity at the start of the year

(3)      Excludes carry forward of expenses on projects from prior years, unless specifically budgeted for (e.g. where project spans two or more fiscal periods)


 

8.        Financial Projections

The projections have been prepared using a number of assumptions about the future as well as business trends over the previous five years.  In determining these projections the Board and Management have applied their judgement to the future commercial environment in which the Company operates.

Capital Expenditure Projections

Note 1:  Ownership of infrastructural assets is retained by the Shareholder (or other clients). 

Note 2:  Seaview Marina has to date returned all financial benefits to its Shareholder through increasing the capital value of the marina with trading profits being retained and invested in the strategic development programme.  Dividends are expected to be returned to the Shareholder after completion of the marina in-water capital development programme.


 

Prospective Statement of Comprehensive Revenue and Expenses

Note:  The breakwater lease of $100,000 a year is a new charge introduced in the 2019/20 financial year. 


 

Prospective Statement of Movements in Equity


 

Prospective Statement of Financial Position


 

Prospective Statement of Cash Flows


Equity Value of the Shareholders’ Investment

The estimated net value of the shareholders’ investment in the company at 30 June 2020 will be $9.4M and $9.8M on 30 June 21.

Ratio of Shareholders Funds to Total Assets

The target ratio for consolidated shareholders' funds to total assets is at least 50%.  Consolidated shareholders' funds comprise share capital and accumulated reserves.  Total assets comprise all tangible assets of the Company, the main component being the marina berths, infrastructure and the Wellington Marine Centre building.


 

 

9.        Accumulated Profits and Capital Reserves

The intention is to pay a dividend to the Shareholder commencing in 2022/23.  The Company will develop a Dividend Policy during 2019/20.

10.      Share Acquisition

There is no intention to subscribe for shares in any other company or invest in any other organisation during the period covered by this Statement of Intent.  Not with standing this, the purchase of any shares requires shareholder approval.

11.      Information to be Provided to Shareholders

In each year the Company shall comply with the reporting requirements under the Local Government Act 2002, the Companies Act 1993, and other relevant regulations.  In particular the Company will provide:

11.1     Statement of Intent

A draft Statement of Intent by 1 March of the year preceding the financial year to which it relates detailing all matters required under the Local Government Act 2002, including financial information for the next three years.

A final Statement of Intent before the commencement of the financial year to which it relates.

11.2     Half-Yearly Report

Within two months after the end of the first half of each financial year, the Company shall provide a report on the operation of SML to enable an informed assessment of its performance, including financial statements, and progress on activities and projects (in accordance with section 66 of the LGA 2002).

11.3     Annual Report

Within three months after the end of each financial year, the Company will provide an annual report which provides a comparison of its performance with the Statement of Intent, with an explanation of any material variances, audited consolidated Financial Statements for that financial year, and an Auditor’s Report (in accordance with section 67, 68 and 69 of the LGA 2002).

12.      Pricing Policy

The Company operates in a competitive market competing with four other marinas within the Wellington Region and to a lesser extent with the Marlborough marinas. All marina charges, apart from the Wellington Marine Centre Leases, are reviewed on an annual basis. The review is based on a number of criteria which are listed below:

11.1     Market Trends

The Company positions it charges at the lower end of the Wellington marina market but will adjust charges according to movements in other marinas of a similar standard.

11.2     Operating Costs

Increases in operating costs related to the marina activities compared with the previous year (not CPI).

11.3     Achievement of Return on Equity (ROE)

Hutt City Council has set a 5% ROE which the Company is expected to achieve in the medium term and rental charges are set accordingly to achieve this.

13.      Transactions with Related Parties

Transactions between the Company, Lower Hutt City Council and other Hutt City Council controlled enterprises will be conducted on a wholly commercial basis. Charges from Hutt City Council and its other companies will be made for services provided as part of the normal trading activities of the Company.

Related Party

Transaction

Hutt City Council Finance Department

Provision of accounting services and the consolidation of the Company’s financial accounts into the Hutt City Council’s accounts.

Hutt City Council IT Department

Provision of technical support for the Company’s computer hardware and systems.

 

14.      Directory

Directors

Brian Walshe (Chairman)

Chris Milne

Peter Steel

Chief Executive

Alan McLellan

Registered Office

100 Port Road

Seaview

Lower Hutt

New Zealand

Postal Address

Private Bag 33 230

Petone 5012

Telephone

+64 (4) 568 3736

Website

www.seaviewmairna.co.nz

Auditor

Audit New Zealand on behalf of the Auditor General

Bankers

Westpac Banking Corporation of New Zealand Limited

Lower Hutt

New Zealand

Solicitors

Thomas Dewar Sziranyi Letts

Level 2, Corner Queens Drive & Margaret Street

Lower Hutt

New Zealand


 

15.      Accounting Policies

REPORTING ENTITY

Seaview Marina Limited (SML) is a Council Controlled Trading Organisation (CCTO), 100 per cent owned by Hutt City Council.  The primary objective of SML is the operation of a marina which benefits the community of Hutt City.  SML is designated a public benefit entity for financial reporting purposes.

BASIS OF PREPARATION

The financial statements have been prepared on the going concern basis, and the accounting policies have been applied consistently throughout the period.

Statement of compliance

These financial statements have been prepared in accordance with the requirements of the Local Government Act 2002, which includes the requirement to comply with generally accepted accounting practice in New Zealand (NZ GAAP).  They comply with IPSAS and other applicable Financial Reporting Standards, as appropriate for public benefit entities (PBE) that apply Tier 2 PBE accounting standards.  As SML’s total expenses are under $30,000,000, it has elected to apply Tier 2 PBE accounting standards.

Measurement base

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

The financial statements have been prepared on a historical cost basis.

Functional and presentation currency

The financial statements are presented in New Zealand dollars and all values have been rounded to the nearest dollar.  The functional currency of SML is New Zealand dollars. 

SUMMARY OF SIGNIFICANT ACCOUNTING POLICES

Revenue

SML derives revenue from its licensees and casual clients.  The income is generated from a range of rentals for boat storage and building tenancies as well as services available through the facilities provided by SML.

Revenue is measured at the fair value of consideration received. THE FINANCIAL STATEMENTS

Revenue from the rendering of services is recognised by reference to the stage of completion of the transaction at balance date, based on the actual service provided as a percentage of the total services to be provided.

Sales of goods are recognised when a product is sold to the customer.  The recorded revenue is the gross amount of the sale, including credit card fees payable for the transaction. Such fees are included in other expenses.

Interest revenue is recognised using the effective interest method.

Expenses

Expenses are recognised when the goods or services have been received on an accrual basis.

Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts.

Trade debtors and other receivables

Trade debtors and other receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment.

Inventory

Inventory is recorded at cost on a first in – first out basis.

Property, plant and equipment

All asset classes are measured at cost less accumulated depreciation and impairment losses.

Additions

Expenditure of a capital nature of $500 or more is capitalised.  Expenditure of less than $500 is charged to operating expenditure.  The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits or service potential associated with the item will flow to SML and the cost of the item can be measured reliably.

Labour costs relating to self-constructed assets are capitalised if, and only if, it is probable that future economic benefits or service potential associated with the item will flow to SML and the cost of the item can be measured reliably.

Work in progress is recognised at cost less impairment and is not depreciated.

Disposals

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses on disposals are recognised in the Statement of Comprehensive revenue and expense.

Subsequent costs

Costs incurred subsequent to initial acquisition are capitalised only when it is probable that future economic benefits or service potential associated with the item will flow to SML and the cost of the item can be measured reliably.

All assets are valued at historical cost, adjusted for accumulated depreciation. 

Depreciation

Depreciation is provided on a straight-line basis on all property, plant and equipment at rates that will write off the cost of the assets to their estimated residual values over their useful lives.  The straight-line depreciation rates are as follows:

Property, plant and equipment consist of the following asset classes: land, buildings, leasehold improvements, furniture and office equipment and motor vehicles.

Estimated economic lives

Years

Rate

Buildings

Service Centre, hardstand, travel lift

5 - 33

2 - 77

3% - 20%

1.3% - 50%

Site improvements

3 - 60

1.7% - 33.3%

Piers and marina berths

4 - 30

3.3% - 25%

Plant and equipment

1.5 - 66

1.5% - 67%

Vehicles

5

20%

The residual value and useful life of an asset is reviewed and adjusted if applicable at each financial year end.

Intangible assets

Software acquisition and development

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software.  Costs associated with maintaining computer software are recognised as an expense when incurred.  Costs that are directly associated with the development of software for internal use by SML, are recognised as an intangible asset.

Amortisation

The carrying value of an intangible asset with a finite life is amortised on a straight-line basis over its useful life.  Amortisation begins when the asset is available for use and ceases at the date that the asset is derecognised.  The amortisation charge for each period is recognised in the Statement of Comprehensive revenue and expense.

The useful lives and associated amortisation rates of major classes of intangible assets have been estimated as follows:

Estimated economic lives

Years

Rate

Computer software

2.5 - 33

3% - 40%

Impairment of non-financial assets

Assets with a finite useful life are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. If an asset’s carrying amount exceeds its recoverable amount, the asset is impaired and the carrying amount is written down to the recoverable amount.   The recoverable amount is the higher of the asset’s fair value less costs to sell and value in use.  The total impairment loss is recognised in the Statement of Comprehensive revenue and expense.

Goods and services Tax

All items in the financial statements are stated exclusive of GST, except for receivables and payables, which are presented on a GST inclusive basis.  Where GST is not recoverable as input tax then it is recognised as part of the related asset or expense.

Employee entitlements

Short-term entitlements

Employee benefits that SML expects to be settled within 12 months of balance date are measured at nominal values based on accrued entitlements at current rates of pay.  These include salaries and wages accrued up to balance date, annual leave earned to, but not yet taken at balance date, retiring and long service leave entitlements expected to be settled within 12 months, and sick leave.

SML recognises a liability for sick leave to the extent that absences in the coming year are expected to be greater than the sick leave entitlements earned in the coming year.  The amount is calculated based on the unused sick leave entitlement that can be carried forward at balance date, to the extent that SML anticipates it will be used by staff to cover those future absences. 

SML recognises a liability and an expense for bonuses where contractually obliged or where there is a past practice that has created a constructive obligation.

Payables

Short term creditors and other payables are recorded at their face value.

Provisions

SML recognises a provision for future expenditure of uncertain amount or timing when there is a present obligation (either legal or constructive) as a result of a past event, it is probable that expenditures will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

Provisions are not recognised for future operating losses.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as an interest expense.

Borrowings

Borrowings are initially recognised at their fair value plus transaction costs. After initial recognition, all borrowings are measured at amortised cost using the effective interest method.  Borrowings are classified as current liabilities unless SML has an unconditional right to defer settlement of the liability for at least 12 months after balance date.

Borrowing costs

Borrowing costs are recognised as an expense in the period in which they are incurred.

Income tax

Income tax expense includes components relating to both current tax and deferred tax.

Current tax is the amount of income tax payable based on the taxable profit for the current year, and any adjustments to income tax payable in respect of prior years.  Current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted at balance date

Deferred tax is the amount of income tax payable or recoverable in future periods in respect of temporary differences and unused tax losses.  Temporary differences are differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit.

Deferred tax is measured at tax rates that are expected to apply when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at balance date.  The measurement of deferred tax reflects the tax consequences that would follow from the manner in which the entity expects to recover or settle the carrying amount of its assets and liabilities.

Deferred tax liabilities are generally recognised for all taxable temporary differences.  Deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which the deductible temporary differences or tax losses can be utilised.

Deferred tax is not recognised if the temporary difference arises from the initial recognition of goodwill or from the initial recognition of an asset or liability in a transaction that is not a business combination, and at the time of the transaction, affects neither accounting profit nor taxable profit.

Current and deferred tax is recognised against the surplus or deficit for the period, except to the extent that it relates to a business combination, or to transactions recognised in other comprehensive revenue and expense or directly in equity.

Leases

Operating leases

An operating lease is a lease that does not transfer substantially all the risks and rewards incidental to ownership of an asset.  Lease payments under an operating lease are recognised as an expense on a straight-line basis over the lease term.

Finance leases

SML has not entered into any material finance leases.

Financial instruments

The Company is party to financial instrument arrangements as part of its normal operation.  Revenue and expenses in relation to all financial instruments are recognised in the Statement of Comprehensive Revenue and Expenses.

All financial instruments are recognised in the Statement of Financial Position on the basis of the Company’s accounting policies.  All financial instruments disclosed on the Statement of Financial Position are recorded at fair value.

Budget figures

The budget figures are those approved by the Board at the beginning of the year.  The budget figures have been prepared in accordance with generally accepted accounting practice (GAAP), using accounting policies that are consistent with those adopted by the Board for the preparation of the financial statements.

Critical accounting estimates and assumptions

In preparing these financial statements SML has made estimates and assumptions concerning the future.  These estimates and assumptions may differ from the subsequent actual results.  Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The estimates and underlying assumptions are reviewed on an on-going basis. Revisions to accounting estimates are recognised in the reporting period in which the revision is made and in any future periods that will be affected by those provisions. 

Assumptions have been made for the useful lives of property, plant and equipment and intangible assets as noted above.

 


                                                                                      55                                                         03 March 2020

Policy, Finance and Strategy Committee

10 January 2020

 

 

 

File: (20/12)

 

 

 

 

Report no: PFSC2020/2/41

 

Urban Plus Group Draft Statement of Intent 2020/21 to 2022/23

 

Purpose of Report

1.    The purpose of the report is to provide a review of the draft 2020-2023 Statement of Intent (SOI) for Urban Plus Group (UPL) as delivered to Council for Council’s consideration.

Recommendations

That the Committee recommends that Council:

(i)    notes that the Urban Plus Group (UPL) Board has submitted a draft Statement of Intent (SOI) 2020/21 - 2022/23, attached as Appendix 1 to the report, in accordance with the Local Government Act 2002;

(ii)   notes that officers have reviewed the draft SOI for compliance with the Local Government Act 2002 and provided their analysis;

(iii)  receives the draft SOI;

(iv) reviews the draft SOI and considers if any modifications should be made; and

(v)  provides comment for the UPL Board to consider in finalising its SOI (including any modifications suggested by the Committee arising under recommendation (iv) above).

 

Background

2.    The Local Government Act 2002 (LGA) requires the board of a Council Controlled Organisation (CCO) to deliver to its shareholders a draft SOI on or before 1 March of each year.

Discussion

3.    The Board of UPL has submitted a draft SOI to Council.  This is attached as Appendix 1 to the report.

4.    The board of a CCO must provide information prescribed by the LGA for the SOI, to the extent is appropriate given the organisation form of the CCO.  They must do this for the ‘the group’ – which comprises the CCO and its subsidiaries.  The information is required to be provided for the 2020/21 financial year and the two years following that (section 9, Schedule 8 of the LGA). 

5.    The compliance of the company with the legislative requirements for the SOI and a summary of the amendments proposed by the Board for their 2020-2023 SOI are detailed below:

Required Content

UPL Draft SOI Content

(a) the objectives of the company

The objectives of UPL are stated.

(b) a statement of the board’s approach to governance of the group

A statement is included.

(c) the nature and scope of the activities undertaken by the group

The nature and scope of activities are outlined – no significant changes.

(d) the ratio of consolidated shareholders’ funds to total assets, and the definition of those terms

Ratio provided.

(e) the accounting policies of the group

Accounting policies are outlined.

(f) the performance targets and other measures by which performance of the group may be judged in relation to its objectives

Performance targets are included. 

(g) an estimate of the amount or proportion of accumulated profits and capital reserves that is intended to be distributed to the shareholders

Information provided. 

(h) the kind of information to be provided to the shareholders by the group during the course of those financial years, including the information to be included in each half yearly report (and, in particular, what prospective financial information is required and how it is to be presented)

The kind of information to be provided is outlined.   

(i) the procedures to be followed before any member or the group subscribes for, purchases, or otherwise acquires shares in any company or other organisation

Information on procedures is not provided but it is noted that there is no intention to subscribe or invest in any other organisation.  A further note states UPL has established a subsidiary.  Established procedures are in place which require approval from the CEO of Council, who can grant authority to UPL on certain conditions.

(j) any activities for which the board seeks compensation from any local authority (whether or not the local authority has agreed to provide the compensation)

No compensation requested.

(k) the boards estimate of the commercial value of the shareholders’ investment in the group and the manner in which and the times at which that value is to be reassessed

A statement as to the net value of shareholder’s investment is provided.

(l) any other matters that are agreed by the shareholders and the board

Some additional information is provided.

 

6.    The draft SOI has been prepared to address the priorities included in the Letter of Expectation it received from Council on 11 December 2018, ie., it is consistent with the 2019-2021 SOI, however the UPL Board is aware that potential changes in UPL’s strategic direction continue to be considered by Council which may require significant changes to the draft SOI.

7.    Officers advised last year that the long held target date for UPL to achieve 220 rental units would not be achieved.  The original target date was 30 June 2020, but the target date was reset in the 2019-2021 SOI to 31 December 2021.  This target remains unchanged in the draft 2020-2022 SOI and is based on UPL’s current four year development programme.

8.    It should be noted that from the time the current UPL strategy and target was set in 2018, through to when the target is now expected to be met, UPL will have developed and sold to the private market, 105 houses, the profits from which will have funded the growth in UPL’s rental portfolio without requiring ratepayer assistance.  UPL will have contributed 139 houses net (rentals, and developed then sold), to Councils Urban Growth Strategy target.

9.    The financial forecasts in the draft SOI, the projected number of rental units, and the number of houses developed and sold to the market over the period covered by the SOI, are based on UPL’s current four year development programme.

Specifically, over the term covered by the SOI, UPL will complete the following “sold out” commercial developments:

(a)   Central Park on Copeland – 34 x two and three bedroom town houses

(b)   The Lane, Waterloo (Bauchop Road) – 27 x two and three bedroom town houses.

To grow the rental portfolio, UPL plans to complete the following developments:

(c)   Molesworth Street – 18 x single bedroom units

(d)   17 Britannia Street – 10 x single bedsits

(e)   Unknown future development – 20 x one and two bedroom units.

10.  Until a decision has been made by the UPL Board on its Jackson Street site to either develop apartments to sell to the market or to a Community Housing Provider (CHP), or to build further units to be added to UPL’s rental portfolio, or to sell the site as is where is, this development opportunity has been excluded from UPL’s financial forecasts (other than the land and current site improvements remaining part of UPL’s asset base).

11.  Officer’s note, the 20 x rental units noted in 9(e) above, could be part of an apartment development on the Jackson Street site, or an as yet unknown site that is purchased by UPL.

Legal Considerations

12.  Council may suggest changes which the Board must consider in finalising its SOI.  The Board must consider within two months of 1 March any comments on the draft SOI that are made by the shareholders.  The Board must deliver a completed SOI to Council on or before 30 June 2020.

13.  Outside of this current process, the Council may, by resolution, require the Board to modify the SOI and the Board must comply (section 5, Schedule 8 LGA), provided that Council first consults the Board.

Financial Considerations

14.  The draft SOI contains the financial forecasts for UPL for the three year period commencing 1 July 2020.

15.  The Total Equity of UPL is estimated to be $43.1M at 30 June 2021.

Appendices

No.

Title

Page

1

Appendix 1 UPL Group Draft Statement of Intent 2019-2022

56

2

Appendix 2 2018 UPL Letter of Expectation

81

 

Author: Simon George

Senior Accountant

 

Author: Darrin Newth

Financial Accounting Manager

 

Reviewed By: Jenny Livschitz

Chief Financial Officer

 

Approved By: Brent Kibblewhite

General Manager Corporate Services


Attachment 1

Appendix 1 UPL Group Draft Statement of Intent 2019-2022

 

 

 

 

 

 

URBAN PLUS GROUP

 

STATEMENT OF INTENT

2020/21 – 2022/23

 

 

 

 


Contents

 

Contents. 2

Purpose. 3

Introduction. 3

Urban Plus Contributions to Council and Community Outcomes. 3

Our Business Objectives. 4

Nature and Scope of Activities to be undertaken by the Company. 6

Increasing Housing Supply. 7

Funding. 7

Homelessness. 7

UPL Residential Portfolio Growth. 8

Initiatives and Considerations. 9

The Performance Measures. 10

Risk Management 12

The Board of Directors. 12

Financial Forecasts. 15

Statement of Accounting Policies. 20

Urban Plus Registered Office and Contact Details for Key Officers. 25

 

 

 

 

 

                                                                                                                                       

 


Purpose

The purpose of this statement of intent is to:

a.       State publicly the activities and intentions of this council-controlled organisation for the year and the objectives to which those activities will contribute;

b.       Provide an opportunity for shareholders to influence the direction of the organisation; and

c.       Provide a basis for the accountability of the directors to their shareholders for the performance of the organisation.

This Statement of Intent covers the year 1 July 2020 to 30 June 2021 and forecasts for the following two financial years.  It has been prepared in accordance with Section 64 (1) of the Local Government Act 2002.

Introduction

Urban Plus Limited (UPL) is wholly owned by Hutt City Council (HCC) and operates as a Council Controlled Organisation (CCO) under the Local Government Act 2002.  UPL was established effective 1 May 2007 with principle objectives as stated below under ‘Our Business Objectives’. 

UPL is a company registered under the Companies Act 1993 and is governed by the requirements of that Act and Section 6 of the Local Government Act 2002, and is covered by law and best practice.  It also has responsibilities under the general law including the Resource Management Act 1991.

The Urban Plus Group comprises Urban Plus Limited (UPL), UPL Limited Partnership (UPLLP) and UPL Developments Limited (UPLDL).

Urban Plus Contributions to Council and Community Outcomes

Desirable outcomes expressed by Hutt City Council are numbered below with UPL’s comments included:

 

1.         A safe community

             The UPL portfolio of residential housing is predominantly occupied by those considered to be the ‘low-income elderly’.  We feel that an elderly presence in any community contributes to a safer community by having people present in residential areas during the working day.  This passive security presence provides ‘stability’ and value to a community by having people in the area while those of younger age may be at work or school. 

 

2.         A strong and diverse economy

             Providing appropriate accommodation for our elderly where they can retain independent living with dignity contributes significantly to community diversity by retaining the elderly in that community.

 

3.         An accessible and connected city.

             The elderly can contribute significantly to the community and families by being actively involved in the community.  This connectivity with the community spans generations and encourages understanding and tolerance between young and old.

 

4.         Healthy people

             UPL has a significant role in providing warmer, drier, healthier homes to the low-income elderly who may not be in a position to self-fund independent accommodation.  This role, and the company’s influence is expanding as increasing numbers of ‘baby-boomers’ retire.  The forecast is for steadily growing numbers of the over 65’s entering this sector as the population ages.  The changing Lower Hutt demographic will put increased pressure on UPL to provide an increased number of housing units in the future.  UPL has a significant role to play in appropriately housing this growing and aging demographic.

 

5.         A healthy natural environment

             UPL aims to be a good community citizen in the widest sense taking responsibility for project management, material selection and disposal in a way that minimises harm and impact on the environment.  We endeavour to apply best practise in terms of passive design (insulation, double glazing and where possible, positioning for solar gain) to minimise energy consumption promoting the concept of warmer, drier healthier homes at minimal ongoing cost to the occupier.

 

6.         Actively engaged in community activities

             The provision of residential housing aimed at the low-income elderly is a community activity where we are using our skills, expertise and professionalism to assist those elderly that are in need of assistance in finding appropriate accommodation.

 

7.         Strong and inclusive communities

             Prior to embarking on any development, UPL considers the overall amenity value of the community including proximity to public transport, retail, medical centres, land contour etc. so our residents can live safely and in an engaged manner within the community retaining mobility and independence.

 

8.         A healthy built environment

             Our developments and management of the existing portfolio contribute to a healthy built environment by best practice property maintenance, developments that are sympathetic to community values, and are complimentary to desirable urban planning aspirations and planning rules.  New properties are insulated, double glazed, warm, dry homes with accessibility issues minimised by passive design.  It is recognised that those occupying warmer drier homes are naturally healthier, consume less energy in keeping those homes warm, and enjoy reduced doctors / hospital visits with increased longevity.

 

9.         A well-governed city

             UPL contributes to good governance by adopting best industry practice in terms of design, project management, property maintenance, fiscal controls, and being a ‘good corporate citizen’.  We strive to ‘do-the-right-thing’ in all or dealings and contractual matters.

 

10.       Urban Growth Strategy

             UPL will assist HCC in the Urban Growth Strategy by applying knowledge, experience, expertise and skill from within UPL as and when called upon to assist the shareholder wherever possible to invigorate growth, development, and property related assistance.  

 

Our Business Objectives

Section 59 of the Local Government Act 2002 provides:

 

Principal objective of council-controlled organisation

(1)        The principal objective of a council-controlled organisation is to:

(a)     Achieve the objectives of its shareholders, both commercial and non-commercial, as specified in the statement of intent;

(b)    Be a good employer;

(c)     Exhibit a sense of social and environmental responsibility by having regard to the interests of the community in which it operates, and by endeavouring to accommodate or encourage these when able to do so; and

(d)    If the Council-controlled organisation is a council-controlled trading organisation, conduct its affairs in accordance with sound business practice.

(2)        In subsection 1.b, good employer has the same meaning as in clause 36 of Schedule 7 of the Local Government Act 2002.

In addition to the statutory objective, the objectives of the Company are to:

1.1       provide for the long term a growing portfolio of rental housing for the low-income elderly[1] consistent with, and to give effect to, Council’s housing policy;

1.2       develop the housing portfolio in a manner which increases its property values;

1.3       ensure that the housing portfolio for the low-income elderly is appropriate for the changing needs of the community in terms of the objectives outlined in Council’s housing policy;

1.4       operate as a successful and profitable undertaking;

1.5       purchase, develop, lease or sell the development property portfolio in a manner which maximises its value at a level of risk appropriate for the investment of funds;

1.6       comply with all legislative and regulatory provisions relating to its operations and performance;

1.7       ensure all assets owned by it are maintained to the best applicable standards;

1.8       maintain an effective business continuance plan;

1.9       maintain a register of current Council policies relevant to its business and operations; and

1.10     assist Council when asked to do so in its endeavours in terms of the Urban Growth Strategy.

These objectives will be monitored and where in conflict, these objectives will be pursued giving greater weight to the interests of maximising value to the Shareholders provided that in relation to the provision of social housing, value to the shareholders will include the consideration of social value.

                                  


 

Nature and Scope of Activities to be undertaken by the Company

The principal objective of the Company is to:

1.         Operate as a successful business, returning benefits to the shareholder;

2.         Own, operate and maintain a portfolio of rental housing to provide community housing for the low-income elderly in accordance with normal commercial guidelines and the housing policy of  Council;

3.         Ensure that the housing portfolio for the low-income elderly is appropriate for the changing needs of the community in terms of the objectives outlined in Council’s housing policy;

4.         Develop property in preparation for sale or lease, which are declared surplus to the needs of Hutt City Council and which provide an appropriate return for the costs and risks of development;

5.         Purchase, develop, lease or sell the development property portfolio in a manner which maximises its value at a level of risk appropriate for the investment of funds; and

6.         Otherwise become involved in property-related transactions and property-technical advisory services on a commercial basis that support the Shareholders' vision for the future development of the city.  This specifically includes assisting with progressing the Urban Growth Strategic Objectives.

 

Section 59 of the Local Government Act 2002 also provides that the principal objectives of a council-controlled trading organisation include the objectives of its Shareholders.

 

In order to meet our objectives we focus our work activity on asset planning and development, capital project management, operations management, risk management, staff development and corporate governance.

Other

UPL will continue to be involved in property-related transactions on a commercial basis that support the Shareholders' vision for the future development of the city.

 

UPL will continue to provide a wide range of strategic property advice and property consultancy when required to the Shareholder.  Work has included:

1.         Advice and general direction for Making Places projects;

2.         Commercial leasing management advice for HCC property and subsidiaries;

3.         Specific property advice (example – Community Facilities Trust – long-term maintenance planning);

4.         Assist with strategic property acquisition as directed by the Shareholder.

 

5.      

Increasing Housing Supply

Housing Shortage: Greater Demand for Housing than Supply

 

The past two years has seen a significant increase in housing development in Lower Hutt.  The remissions scheme provided by Council to promote infill housing and multi-unit developments has been one reason. Such growth however has resulted in a scarcity of available land for future housing developments on the valley floor.  However, it is widely acknowledged that demand still continues to grow faster than supply.  Accordingly, there is an expectation that the Shareholder will release land to meet increasing demand levels in all housing typologies in Lower Hutt. 

 

UPL now has the opportunity to focus on areas in the market where demand is not being met with supply by other developers.

 

Release of Council-Owned Land for Development

 

UPL will work closely with the Shareholder throughout the 2020-21 financial year to assist in reviewing and identifying parcels of land that could enable further growth to achieve its Urban Growth targets and address the housing shortage currently being experienced in Lower Hutt.

Funding

The completion of recent market release developments has positioned the company to put funds towards its upcoming social housing projects. Whilst the funds will assist towards progressing these upcoming planned projects, the company’s aspirations to grow the portfolio may require further funding.  As such, UPL may seek alternative funding options such as strategic sell down of some of its existing stock, partnering with third party housing providers such as Community Housing Providers in a variety of structures or debt / equity financing. 

 

As a general guide, expected current costs to deliver a single level, one-bedroom unit are approximately $320,000 incl GST.  Two-bedroom townhouses suitable for medium density developments are expected to cost approximately $450,000 incl GST. These figures include assumed costs for land and all fees associated with delivering the projects.

Homelessness

Supporting Shareholder Objectives

 

The Shareholder is developing both its Homelessness Strategy and its Housing Strategy.  UPL remains open and responsive to the outcomes of these strategies, and will support the Shareholder to achieve its objectives and planned outcomes.

 

Housing typologies for the Urban Plus Residential Portfolio

 

Historically, UPL’s model was to intensify sites, both within its own existing portfolio and on land acquired via the market, with single bedroom unit developments.  These generally were c. 40-48m2 in total dwelling size, and catered for the majority of our tenant base.

Future-looking, UPL is looking at providing both one and two bedroom units where amenity value is high, and it is financially viable to do so.  This may be either single or two storey layouts.

As our core tenant is the low income elderly, there is little need to produce a wider variety of housing or greater number of bedrooms per dwelling at this stage – however, if the Shareholder provides a wider mandate, UPL will amend its design and specification accordingly.

 

Housing typologies for UPL Limited Partnership Developments

Previously, UPL’s development entity provided a mix of housing typologies at its Fairfield Waters development by providing a mix of two and three bedroom 2-storey townhouses as well as three and four bedroom standalone homes.  This variety appealed to a wide range of purchasers – from retirees and downsizers, to young professionals and families.

UPLLP’s second major development, Parkview, provided a more generic product of twenty four single level townhouses with single (internally accessed) garages.  The reasoning was to release a more traditionally accepted product to the market in Avalon rather than the multi-unit 2-storey townhouse design.

The next developments that are currently under construction are ‘Central Park on Copeland’ in Epuni and ‘The Lane’ in Waterloo.  The developments are similar in that there are two and three bedroom townhouses, all with car-pads, being offered to the market at both developments.  Central Park has an alternative three bedroom option with a single, internally accessed garage.

As the housing market changes UPLLP will remain agile, and be flexible with what type of housing product it releases into the market and for its own residential portfolio.  We will continue to align with the Shareholder’s Urban Growth Strategy (UGS) and its focus on meeting the UGS targets by 2032, as well as greater intensification on the valley floor via medium density developments.

 

UPL Residential Portfolio Growth

 

Molesworth Street Development

 

Earlier this financial year, UPL acquired the Molesworth Street reserve from the Shareholder.  Additionally, UPL strategically purchased an adjacent residential property in Molesworth Street (Taita) to amalgamate with the reserve land, for greater utilisation of land and better yield of social housing units.

 

Whilst still in the planning stages, this project could provide approx. eighteen additional units for low income elderly or wider social housing purposes.  It is anticipated these units will be completed in the 2021-22 financial year.

 

Infill of Existing Portfolio Properties

 

Plans are underway to infill underutilised areas of one of UPL’s existing rental properties in Petone. The current designs are for twelve (multi-level) one bedroom units to be added to the existing twenty seven units at 17 Britannia Street.  The additional units are viewed as a prudent intensification of an existing property and positive outcome for all tenants due to the high amenity value the property enjoys due to its close proximity to Jackson Street’s commercial precinct. Completion of this infill project is planned to occur within the 2021-22 financial year.

 

 

 


 

Initiatives and Considerations

Affordable Housing

To enable a chance for first home buyers to enter onto the property ladder, UPL released to the market ten of its thirty four Central Park on Copeland townhouses at $550,000 each, and five of the twenty seven The Lane – Waterloo townhouses at between $535-000 and $550,000 each.  Purchasers had a set of requirements to qualify prior to contracts being deemed unconditional which targeted owner occupiers rather than investors.  The company saw these as affordable price points, which resulted in several sales and achieved its purpose for assisting first home buyers to attain home ownership in Lower Hutt.  UPL will continue to release housing at affordable levels where it is prudently viable.

Lowering Carbon Emissions

The Shareholder has set a carbon zero objective, and as such UPL aims to align with this direction where possible.  UPL has, and will continue to, incorporate features into its dwelling design and development site layouts that lower carbon emissions.  Examples include using electricity or renewable sources of energy for space and water heating, minimising building waste, and making buildings ready for charging electric vehicles.

 

HomeStar 6 Rating

 

UPL will seek to incorporate design and environmental considerations into future projects, and align these with the HomeStar rating assessment to achieve no less than 6 stars in future housing development projects.

 

Central Government Initiatives

When sought by the Shareholder, UPL will look to support central government initiatives where it is financially, socially and environmentally prudent, and is to the overall betterment to Lower Hutt City.  Further, UPL will seek to work with any form of social or community housing providers which promote the growth of housing in Lower Hutt.

 

Local Environmental Considerations

 

When undertaking future developments requiring significant decisions on land and water, UPL will take into consideration the relationship of Maori and their culture, traditions and their relationship to land and water.

 


 

The Performance Measures

The Company will meet the following measures for the next three years:

Rental Housing

1.1    Capital expenditure within budget.

1.2    Operational expenditure within budget.

1.3    An appropriate return on investment measure is currently being developed and will be included in the final SOI.

1.4    Tenant satisfaction with the provision of the company’s rental housing greater than or equal to 90%.

1.5    Percentage of total housing units occupied by low-income elderly[2] greater than or equal to 85%.

1.6    Rentals charged shall not be less than 80% of ‘market’ rent.*

1.7    Increasing the portfolio size to 220 units by December 2021.

1.8    By 30 June 2021, assess the performance of the rental housing portfolio against the HomeFit® standard.

1.9    Any rental housing units purchased and not already utilising electricity or renewable sources of energy for space heating, water heating, and cooking facilities, shall be converted to utilise only electricity or renewable sources of energy within five years of acquisition.

1.10  New rental housing units constructed by UPL to utilise only electricity or renewable sources of energy for space heating, water heating and cooking facilities.

* With market rents rising at greater than inflation, the current 2019/20 FY 85% target is becoming increasingly harder for our tenants to afford.  Subject to significant lifts on market rental income levels, the Board reserves to right to decide on the level of rentals charged per unit, on a case by case basis.

 

 Property Development

1.11  Capital expenditure within budget.

1.12  Operational expenditure within budget.

1.13  A return of not less than 10.0% after interest and tax on each project.

1.14  From 1 July 2019, any new developments not already resource consented as at 30 June 2019, shall only utilise electricity or renewable sources of energy for space heating, water heating and cooking facilities.

1.15  By the year ending 30 June 2021, at least one housing unit (standalone house or townhouse) shall achieve a certified HomeStarTM rating of at least six stars.

Professional Property Advice

1.16  Achieve a market return on additional services provided to the Shareholder.

UPL Developments Limited

1.17  Undertake, negotiate and execute tender processes for and on behalf of the Partnership and ‘parent’ company as required.

1.18  Facilitate civil and construction contracts for and on behalf of the Partnership and ‘parent’ company as required.

1.19  Facilitate payment of contract progress claims for Board approved contracts as well as payments to other suppliers engaged to provide services or goods to defined development projects.

1.20  Should UPLDL be used for future developments, the same performance measures apply as for Property Development (refer above).

1.21  Act as General Partner when a Limited Partnership structure is utilised for development projects.

UPL Limited Partnership

1.22  Develop land in a manner which maximises its value at a level of risk appropriate for the investment of funds.

1.23  To perform business undertakings in common with Urban Plus Limited with a view to profit from development projects for the purposes of funding for the elderly housing portfolio.

1.24  Should UPLLP be used for future developments, the same performance measures apply as for Property Development (refer above).


Risk Management

Health and Safety in Employment

UPL will maintain best industry practice with ongoing reviews of its Health and Safety policies to ensure they remain current and ‘leading edge’ in terms of compliance.

 

Business Continuity

UPL will maintain a Business Continuity Plan for unforeseen circumstances so any event will have minimal impact on the day-to-day operation of the business.

 

Insurances

UPL will maintain appropriate insurances to mitigate risk of portfolio damage, business interruption and professional indemnity.  This will include Directors and Office Bearers cover where appropriate.

 

Emergency preparedness

UPL will rehearse and maintain systems and procedures to best position itself to deal with emergency situations.

 

Commercial Risk

UPL will manage its affairs in a manner that minimises commercial risk recognising that some risk will need to be taken to achieve targets.

The Board of Directors

The Board of Directors consists of three members, with the Shareholder appointing council representation as Director(s) and Independent Directors.  Directors serve three-year terms. 

 

The Board is responsible for the proper direction, governance and control of UPL.

 

Unanimous approval of the Board is required for:

1.1       Employment of staff and creation of new positions outside of resolved budget limits;

1.2       Extraordinary transactions (entering into any contract or transaction except in the ordinary course of business);

1.3       Delegation of Directors’ powers to any person;

1.4       Major transactions (entering into any major transaction);

1.5       Disputes (commencing or settling any litigation, arbitration or other proceedings which are significant or material to the Company’s business);

1.6       Borrowings in a manner that materially alters the Company’s banking arrangements, advancing of credit (other than normal trade credit) exceeding $5,000 to any person except for making deposits with bankers, or giving of guarantees or indemnities to secure any person’s liabilities or obligations;

1.7       Sale of assets (sell or dispose of fixed assets for a total price per transaction exceeding $100,000 or a series of transactions aggregated exceeds $300,000); and

1.8       Capital expenditure (other than in the ordinary course of doing business) at a total cost to the Company, per transaction, exceeding $100,000 or a series of transactions aggregated exceeds $300,000.

The Board will require the agreement of the Shareholder for:

1.1       Any changes to the constitution;

1.2       Any increases in capital and the issue of further securities, share buybacks and financial assistance;

1.3       Any alteration of rights attaching to shares;

1.4       Any arrangement, dissolution, reorganisation, liquidation, merger or amalgamation of the Company; and

1.5       Any ‘major transactions’ as that term is defined in the Companies Act 1993.

Ratio of consolidated Shareholders’ funds to total assets

The target ratio for consolidated Shareholders' funds to total assets is at least 50%.  Consolidated Shareholders' funds comprise share capital and accumulated reserves.  Total assets comprise all tangible assets of the Company, the main component being housing and undeveloped land.  The forecast consolidated Shareholders funds as at June 2020 is 70%.  The share capital of $15.3 million consists of 27 million ordinary shares on issue, of which all are fully paid.

Accumulated profits and capital reserves

There is no intention to pay a dividend in the 2020/21 financial year or succeeding years.

Information to be provided to Shareholders

In each year UPL shall comply with the reporting requirements specified for CCO’s under the Local Government Act 2002 and the Companies Act 1993 and regulations.

In particular, it shall provide:

Annually

1.         Annually report, within two months after the end of each financial year, which will include:

2.         A Statement of Intent detailing all matters required under the Local Government Act 2002;

3.         An annual budget for the coming financial year, broken out by the two major areas of operation; Rental Housing and Land Development, including the assets employed and debt attributable to each area;

4.         A written report on the financial operations of the Company to enable an informed assessment of its performance including a comparison against budget and the Statement of Intent and the Return on Equity and Return on Assets for the Period;

5.         Financial statements comprising the Statement of Financial Position, Statement of Comprehensive Revenue and Expenses and Statement of Cash Flows;

6.         A business plan indicating the nature of property development it proposes to undertake and the range of investment and estimated return it proposes to achieve;

7.         An assessment of the current market for rental housings and the appropriateness of the current housing portfolio to meet the needs of the low-income elderly.

Half Yearly

8.         Six-monthly, within two-months of the end of the six month reporting period.

9.         A written report on the operations of the Company by the two major areas of operation to enable an informed assessment of its performance including a financial comparison against budget and the Statement of Intent and the Return on Equity and Return on Assets for the Period.

10.       Financial statements comprising the Statement of Financial Position, Statement of Comprehensive Revenue and Expenses and Statement of Cash Flows.

11.       Progress on activities outlined in the agreed business plan.

Share acquisition

There is no intention to subscribe for shares in any other company or invest in any other organisation. 

(NOTE: UPL has a subsidiary company UPL Developments Limited).

Compensation from local authority

It is not anticipated that the company will seek compensation from any local authority other than in the context of normal commercial contractual relationships.

NB: if a CCO has undertaken to obtain or has obtained compensation from its Shareholders in respect of any activity, this undertaking or the amount of compensation obtained will be recorded in:

1.         The annual report of the council-controlled organisation; and

2.         The annual report of the local authority.

Equity value of the shareholders’ investment

For the year ended 30 June 2021, the estimated net value of the Shareholder’s investment in Urban Plus Group will be $43.144 million. 


 

Financial Forecasts

Planning and programming for development projects will be based on exceeding the agreed minimum financial performance thresholds of greater than [target to be confirmed once measure is finalised] in terms of residential portfolio returns (see Performance Measure 1.3 above), and 10.0% after interest and tax (see 1.15 above) for commercial developments.  Each development project will require the approval of the Board to ensure strategic fit and achievement of the minimum rate of return.

 

The current volatility of the property market and anticipated future interest rate increases has resulted in considerable uncertainty in terms of what projects will come available, and what sales might result from those projects.  The financial statements within this Statement of Intent therefore exclude potential development projects.  Details of potential development projects will be included in the regular reporting to the Board and Shareholder.

 

The most recent residential development project was Parkview, in Avalon.  The project consisted of the construction and sale of twenty four stand-alone townhouses. The project was completed towards the end of the second quarter of the 2019/20 financial year, and cost $10.8M, and realised a pre-tax net gain of $4.5M.     This commercial development project was managed by UPL Developments Limited  – a wholly owned subsidiary of UPL providing property development management services – through UPL Limited Partnership  – a partnership between UPL Limited Partnership (as General Partner) and UPL (as Limited Partner).

 

The success of the Parkview development will enable UPL to not only strengthen its financial position, but also to reinvest the profits of the development in to its residential housing portfolio in order to achieve the company goal of 220 residential units by December 2021.

 

The company’s current development projects which are both in the construction phase are Central Park on Copeland and The Lane, Waterloo.  The first mentioned is a thirty-four townhouse development on part of the former Copeland Street Reserve land in Epuni which is forecast to have a pre-tax net gain of $7.4m.  The latter is a twenty-seven townhouse development in Waterloo – on land owned by UPL which is forecast to have a pre-tax net gain of $3.3m. All sixty-one townhouses are now sold, and are programmed to be completed within the 2020-21 financial year.

 

The planned Jackson Street apartments remain on hold.  UPL is reviewing construction costs, as well as seeking opportunities in the market for joint venture options with other social / community housing providers where ownership could be transferred; but end-result social housing options are still attained. Such an outcome will provide the planned outcome, but frees UPL to progress other opportunities to continue growth in other areas of Lower Hutt.

 

The original target date for UPL to achieve 220 rental units was 30 June 2020.  This target date will not be achieved based on the current development programme with only 199 units projected as at 30 June 2020.  The target of 220 units is now expected to be achieved by December 2021.  However during this time frame UPL will have developed and sold to the private market, 105 houses, the profits from which will fund the growth in UPL’s rental portfolio without requiring ratepayer assistance.

The financial forecasts, the projected number of rental units, and the numbers of houses developed and sold to the market over the period covered by this SOI is based on the following 4 year development programme:

 

 

The original 220 rental units target could be achieved earlier but this would require additional funding from the Shareholder either through an equity injection or approving increases to UPL’s available credit lines, i.e., loans.

 

Until there is more certainty on what the Shareholder wants to do with the current library site in Petone, this development opportunity has been excluded from UPL’s financial forecasts.  Similarly, until a decision has been made on UPL’s Jackson Street site, this development opportunity has also been excluded from UPL’s financial forecasts.

 

No provision has been made in the financial forecasts for possible gains from property revaluations.  Any gains would not have any impact on cash/debt but would result in deferred tax liabilities which would remain until the underlying properties are sold by UPL.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


 

 

Consolidated Statement of Financial Performance

 

 

 

Consolidated Statement of Changes in Equity

 

 


 

Consolidated Statement of Financial Position

 

 


 

Consolidated Statement of Cash Flows

 


 

Statement of Accounting Policies

 

UPL will apply the following accounting policies consistently during the year and apply these policies to the statement of intent. In accordance with the New Zealand Institute of Chartered Accountants Financial Reporting Standard 42 (FRS 42), the following information is provided in respect of the statement of intent.

Cautionary note

The statement of intent’s forecast financial information is prospective. Actual results are likely to vary from the information presented, and the variations may be material.

Nature of prospective information

The financial information presented consists of forecasts that have been prepared on the basis of best estimates and assumptions on future events that Urban Plus Limited expects to take place.

Statement of compliance with International Financial Reporting Standard

The financial statements have been prepared in accordance with New Zealand generally accepted accounting practice. They comply with New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) and other applicable financial reporting standards, as appropriate for public benefit entities.

Reporting entity

UPL is a company registered under the Companies Act 1993 and a council-controlled trading organisation as defined by Section 6 of the Local Government Act 2002. Hutt City Council is the only shareholder. The company was incorporated in New Zealand in 13 December 1996 as De Luien Developments Limited, changed its name to Centre City Plaza Limited on 27 June 1997, changed its name to Hutt Holdings Limited on 20 January 2003 and finally changed its name to Urban Plus Limited on 25 May 2007.

 

The financial statements have been prepared in accordance with the requirements of the Companies Act 1993, the Financial Reporting Act 1993 and the Local Government Act 2002.

 

For purposes of financial reporting, UPL is a public benefit entity.

Reporting period

The reporting period covers the 12 months from 1 July 2020 to 30 June 2021.  Comparative projected figures for the year ended 30 June 2022 and 30 June 2023 are provided.

Specific accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

 

The measurement basis applied is historical cost.

 

The accrual basis of accounting has been used unless otherwise stated.  These financial statements are presented in New Zealand dollars rounded to the nearest thousand, unless otherwise stated.

Judgements and estimations

Preparing financial statements in conformity with NZ IFRS requires judgements, estimates and assumptions that affect the application of policies and reported amounts of assets, liabilities, income and expenses.  Where material, information on the major assumptions is provided in the relevant accounting policy or will be provided in the relevant note to the financial statements.

 

The estimates and underlying assumptions are reviewed on an ongoing basis.  Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

 

Judgements that have a significant effect on the financial statements and estimates with a significant risk of material adjustment in the next year are discussed in the relevant notes.

Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with banks, other short term highly liquid investments with original maturities of three months or less, and bank overdrafts.

Debtors and other receivables

Debtors and other receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method, less any provision for impairment.

Revenue

Revenue is measured at the fair value of consideration received.

Revenue from the rendering of services is recognised by reference to the stage of completion of the transaction at balance date, based on the actual service provided as a percentage of the total services to be provided.

Sales of goods are recognised when a product is sold to the customer.  The recorded revenue is the gross amount of the sale, including credit card fees payable for the transaction.  Such fees are included in other expenses.

Property sales are recognised on settlement date, along with the related expenses

Interest income is recognised using the effective interest method.

Property, plant and equipment

On transition to NZ IFRS assets were recorded at cost less accumulated depreciation and impairment losses.

 

Revaluation

Land and buildings are revalued with sufficient regularity to ensure that their carrying amount does not differ materially from fair value and at least every three years.  All other asset classes are carried at depreciated historical cost.  The carrying values of revalued assets are assessed annually to ensure that they do not differ materially from the assets’ fair values.  If there is a material difference, then the off-cycle asset classes are revalued.

Revaluations of property, plant, and equipment are accounted for on a class-of-asset basis.

The net revaluation results are credited or debited to other comprehensive income and are accumulated to an asset revaluation reserve in equity for that class of asset.  Where this would result in a debit balance in the asset revaluation reserve, this balance is not recognised in other comprehensive income but is recognised in the surplus or deficit.  Any subsequent increase on revaluation that reverses a previous decrease in value recognised in the surplus or deficit will be recognised first in the surplus or deficit up to the amount previously expensed, and then recognised in other comprehensive income.

Additions

Expenditure of a capital nature of $500 or more has been capitalised.  Expenditure of less than $500 has been charged to operating expenditure. The cost of an item of property, plant and equipment is recognised as an asset if, and only if, it is probable that future economic benefits or service potential associated with the item will flow to UPL and the cost of the item can be measured reliably.


 

Disposals

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset.  Gains and losses on disposals are recognised in the Statement of Comprehensive Income.

Subsequent costs

Costs incurred subsequent to initial acquisition are capitalised only when it is probable that future economic benefits or service potential associated with the item will flow to UPL and the cost of the item can be measured reliably.

Depreciation

Depreciation is provided on a straight line basis on all property, plant and equipment at rates that will write off the cost (valuation) of the assets to their estimated residual values over their useful lives.  The straight line depreciation rates are as follows:

 

Estimated economic lives

Years

Rate

Buildings

5 - 65

1.54% - 20.00%

Plant and equipment

8 - 11

9.09% - 12.50%

Leasehold improvements

4 - 5

20.00% - 25.00%

 

The residual value and useful life of an asset is reviewed and adjusted if applicable at each financial year end.

Intangible assets

Software acquisition and development

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software.  Costs associated with maintaining computer software are recognised as an expense when incurred.  Costs that are directly associated with the development of software for internal use by UPL, are recognised as an intangible asset.

Amortisation

The carrying value of an intangible asset with a finite life is amortised on a straight-line basis over its useful life.  Amortisation begins when the asset is available for use and ceases at the date that the asset is derecognised.  The amortisation charge for each period is recognised in the Statement of Comprehensive Income.

The useful lives and associated amortisation rates of major classes of intangible assets have been estimated as follows:

 

Estimated economic lives

Years

Rate

Computer software

2.8         

36%

 

Impairment of non-financial assets

Assets with a finite useful life are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  If an asset’s carrying amount exceeds its recoverable amount, the asset is impaired and the carrying amount is written down to the recoverable amount.  The total impairment loss is recognised in the Statement of Comprehensive Income.


 

Goods and services tax

All items in the financial statements are stated exclusive of GST, except for receivables and payables.  Where GST is not recoverable as input tax then it is recognised as part of the related asset or expense.

The net amount of GST recoverable from, or payable to, the Inland Revenue Department (IRD) is included as part of receivables or payables in the Statement of Financial Position.

Commitments and contingencies are disclosed exclusive of GST.

Employee entitlements

Short-term entitlements

Employee benefits that UPL expects to be settled within 12 months of balance date are measured at nominal values based on accrued entitlements at current rates of pay.  These include salaries and wages accrued up to balance date, annual leave earned to, but not yet taken at balance date, retiring and long service leave entitlements expected to be settled within 12 months, and sick leave.

UPL recognises a liability for sick leave to the extent that absences in the coming year are expected to be greater than the sick leave entitlements earned in the coming year.  The amount is calculated based on the unused sick leave entitlement that can be carried forward at balance date, to the extent that UPL anticipates it will be used by staff to cover those future absences.

UPL recognises a liability and an expense for bonuses where contractually obliged or where there is a past practice that has created a constructive obligation.

Borrowings

Borrowings are initially recognised at their fair value.  After initial recognition, all borrowings are measured at amortised cost using the effective interest method.

Borrowing costs

Borrowing costs are recognised as an expense in the period in which they are incurred.

Creditors and other payables

Creditors and other payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method.

Income tax

Income tax for the period is calculated by reference to the amount of income taxes payable or recoverable in respect of the taxable profit or tax loss for the period.  It is calculated using tax rates and tax laws that have been enacted or substantively enacted by the reporting date.  Current tax for current and prior periods is recognised as a liability (or asset) to the extent that it is unpaid (or refundable).

Property intended for sale

Property previously held but now being sold as it is no longer required is classified as a property held for sale.

This classification is used where the carrying amount of the property will be recovered through sale, the property is available for immediate sale in its present condition and sale is highly probable.

Property held for sale is recorded at the lower of the carrying amount and fair value less costs to sell.  From the time a property is classified as held for sale, depreciation is no longer charged on the improvements.

Where property is held for sale or for development for sale, in the ordinary course of business, it is classified as inventory.  Such property is recorded at the lower of cost and net realisable value (selling price less costs to complete and sale costs).  Any write-downs to net realisable value are expensed in the net surplus/(deficit) for the year.


 

Leased assets

Operating Leases

Leases where the lessor effectively retains substantially all the risks and rewards of ownership of the leased items are classified as operating leases.  Payments made under these leases are expensed in the Statement of Comprehensive Income on a straight-line basis over the term of the lease.  Lease incentives received are recognised in the Statement of Comprehensive Income as an integral part of the total lease payment.

Finance Leases

The Company has not entered into any material finance leases.

Financial instruments

The Company is party to financial instrument arrangements as part of its normal operation.  Revenue and expenses in relation to all financial instruments are recognised in the Statement of Comprehensive Income.

All financial instruments are recognised in the Statement of Financial Position on the basis of the Company’s accounting policies.  All financial instruments disclosed on the Statement of Financial Position are recorded at fair value other than those specifically identified in the Notes to the financial statements.

 


 

Urban Plus Registered Office and Contact Details for Key Officers

 

Registered office

30 Laings Road, Lower Hutt 5010

Contact details for Chairman and Chief Executive

Private Bag 31912, Lower Hutt 5040

Telephone

04 569 1000

 

 

 

 

 


Attachment 2

Appendix 2 2018 UPL Letter of Expectation

 


 


 


                                                                                      96                                                         03 March 2020

Policy, Finance and Strategy Committee

20 January 2020

 

 

 

File: (20/60)

 

 

 

 

Report no: PFSC2020/2/42

 

Council performance report for the half year ended 31 December 2019

 

Purpose of Report

1.    The report provides an overview of the Hutt City Council performance results for the period 1 July 2019 to 31 December 2019.

2.    In light of the latest financial information available, approval is sought for a range of budget changes.  

Recommendations

That the Committee:

(i)    notes Council’s performance results for the period 1 July 2019 to 31 December 2019;

(ii)   notes the highlights and achievements as detailed in paragraph 5; and

(iii)  recommends that Council:

(a)   agrees to amend the operating expenditure budgets in 2019/20 as detailed in Table 1, for the funding transfers for the Emergency management Office $0.15M and the Voice of Naenae $0.06M;

(b)   does not agree to amend the operating expenditure budgets in 2019/20 as detailed in table 1 for the Community Facilities Trust $0.3M and the Events Centre budgets $0.33M and directs officers to reprioritise funding within the Annual Plan 2019/20 budgets to offset these costs;

(c)   agrees to amend the capital expenditure budgets in 2019/20 as detailed in Table 1, which will result in increased costs of $0.9M, with the exception of Dowse Museum Entrance project;

(d)   agrees to defer the Dowse Museum Entrance Project budget of $190k to 2022/23 for the reasons explained in Appendix 7; 

(e)   agrees to defer the operating expenditure budgets in 2019/20 as detailed in Table 2, which will result in reduced costs in 2019/20 of $0.94M;

(f)    agrees to defer the capital expenditure budgets in 2019/20 as detailed in Table 2, which will result in reduced costs in 2019/20 of $9.88M.

(g)   agrees to bring forward funding of $0.3M into 2019/20 from the seismic strengthening funding set aside in the draft Annual Plan 2020/21 to enable work at Walter Nash Centre to be progressed as detailed in table 3.

 

Background

3.       The performance results presented in this report are for Hutt City Council the parent entity and not the consolidated group. These are unaudited results for the half year ended 31 December 2019. An external audit by Audit New Zealand (Audit NZ) will be completed at the end of the financial year.

4.       The half year performance reports for the Council Controlled Organisations (CCOs) are covered under separate reports of the Committee. The Annual Report for the parent entity and consolidated group will be prepared at the end of the financial year.

Highlights and Achievements

5.       There have been a wide range of highlights and achievements in areas that are important to achieving our organisational objectives. A selection of the key highlights and achievements are summarised here:

a)         The Homelessness Strategy was put into action with the first 25 whānau housed.

b)         The Lower Hutt suburban centres went Smokefree.

c)         Hutt City Council provided a one-off grant to help Wellington City Mission set-up transitional housing in Lower Hutt for homeless people.

d)         The decision was made to move the Council vehicle fleet to zero emissions, and the roll out of the new fleet has started.

e)         The triennial property revaluation was completed by Quotable Value.

f)          District Plan Change 43 was signed off by Council.

g)         Community engagement progressed in Naenae and the ‘Voice of the community report’ was completed.

h)         Riddiford gardens received an architecture award.

i)          Funding was introduced for community-led events for Naenae town centre.

j)          Te Whiti Riser Night Walk was recognised at national awards.

k)         A new beach access mat was installed at Days Bay beach for disabled users.

l)          Cleaners contracted by Council receiving the living wage.

m)        A waste review survey was completed.

n)         Completion of stage 1 of the Emergency Response Centre 105 Western Hutt Road.

o)         The Highlight event was held and was well patronised.

p)         The alcohol fees bylaw was approved, introducing more user pays in this area of business.

q)         Melling interchange was granted funding by the Government, with a proposed completion date of 2026.

 

Performance Measure Results

6.    The half year performance measure results included in this report include key performance indicator (KPI) results (Appendix 1) and residents satisfaction survey results (Appendix 2), together with brief commentary about the latest results.

7.    Summary of key results and insights

·          Increased capacity in the Resource and Environmental Consent Teams have seen nearly all their KPIs improve in quarter two when compared to quarter one. Whilst building consents are achieving the target levels to complete the processing of consents, the resource consents are significantly below the target (year to date result of 17% of resource consents are issued within the target 18 working days set in the Long Term Plan LTP).

·          Residents’ satisfaction with public engagement and consultation receives one of the lowest, if not the lowest, satisfaction score quarter on quarter. Not only do we need to think about different methods and ways of engaging with our community but also relevant ways of measuring the level of engagement and what is working and what not. Facebook status have been included as an example of measuring Council’s level of engagement.

·          The amount of recycling collected by our kerbside collection service is lower than at the same time last year with many residents citing the crate system combined with our weather patterns as their reason for not using the service.

·          At the end of quarter two visitor numbers and resident satisfaction with services and facilities are on track to reach their respective year end targets. The Walter Nash Centre may be the one exception as the corridor’s closure means two courts can only be accessed from the back door where there is no door counter.

·          Increased access to the internet and in particular Wi-Fi by our residents is positive, but it has had a negative impact on the Libraries KPI data as it is only possible to track usage of Connect Sessions from wired desktop computers. Different ways of measuring and future proofing measures will need to be thought about when setting KPI’s alongside the next LTP.

·                     At the beginning of the financial year a new contractor was employed to respond to noise complaints. Monitoring KPI data showed the contractor was performing poorly and they have subsequently been replaced. However, this will impact on the year end result.

Background - Annual Plan versus Revised Budget

8.       The 2019/20 Annual Plan (AP) was approved on 27 June 2019. The budgets included in the plan were based on latest financial information and estimates available at the time of the preparation of the plan.

9.       Through the review of the year-end financial results for 2018/19 there were a few budget issues identified which had flow on impacts for 2019/20. For example the estimated timing of project expenditure assumed in the AP changed for a range of reasons and the value of expenditure actually incurred in 2018/19 was different to that forecasted previously. From a project/budget manager perspective the budget in 2019/20 was requested to be updated to reflect the timing difference so that there is clarity of the correct budget for the project/budget manager. There were also issues identified where the classification of projects between capital and operating expenditure which were required to be corrected.

10.     In September 2019 Council approved a ‘Revised Budget’ for 2019/20 to reflect the budget issues and updates required to improve the accuracy of budgets and the associated reporting of variances. It was noted that the focus of performance monitoring would be on financial results compared to the ‘Revised Budget’ as this would be the most meaningful from a performance perspective.[Refer Finance and Performance Committee (F&P) report 4 September 2019 ‘Budget update 2019/20’]

11.     It was noted that it was possible that there could be further changes to the ‘Revised Budget’ during the year. For example, Council may make a decision during the year to progress a new priority initiative and reprioritise funding. This would be included as a ‘Revised Budget’ change which would provide officers with the authority to progress the initiative.  Some examples of Council decisions that have been progressed subsequently include changes to the vehicle fleet budgets (ownership model and move to Electric Vehicles) and Silverstream Landfill safety works. 

12.     As part of the quarterly performance reporting to the Policy, Finance and Strategy Committee there will be ongoing updates on the ‘Revised Budget’. Council approval will also be sought for any revised budget changes as part of this process.   

13.     Table 1, 2 and 3 provide details of the proposed budgets included in this quarterly report. 

14.     The Financial Delegations Policy is attached to this report as background information – refer Appendix 3. The policy includes section 4.3 “Overspending Budgets” which includes the rule “live within the budget”.  


 

Table 1: Proposed changes to budgets for which approval is sought

$Million

 

$M

 

Operational expenditure

 

 

Events Centre unbudgeted costs for which there are contractual commitments

-Promotion $150k

-Underwrite – budget $250k, however forecast cost is $430k (ie, additional $180k). This is the final year of the underwrite exposure.

Note that the 2018/19 cost of underwrite was $745k.

Higher costs

(0.33)

Additional unbudgeted Community Facilities Trust grant – relates to Fraser Park Sportsville settlement of disputed building costs. This amount was paid to the supplier in December 2019.

Higher costs

(0.3)

Emergency Management Office Hutt Road building costs moved to capital expenditure

Transfer

0.15

Budget transfers to fund Voice of Naenae

Transfer

(0.06)

Total operational expenditure budget changes

 

(0.54)

 

Capital expenditure

 

 

Dowse Museum Entrance- refer Appendix 7, Section A for further information

Higher costs

(0.025)

Avalon Park Toilets

- Additional funding to complete work on toilets

Higher costs

(0.03)

Akatarawa Cemetery Toilet block

- For urgent work to provide toilets as a joint project with Upper Hutt City Council

 

Higher costs

(0.1)

Hall Crescent land purchase (offset by asset sales)

Nil impact

(0.59)

Shopping Centre improvements – transfer to opex to fund Voice of Naenae community engagement

Transfer

0.06

Emergency management Office Hutt Road building costs moved to capital expenditure

Transfer

(0.15)

Admin building renovations

-includes mail sorting and storage in admin building

Higher costs

(0.05)

Total capital expenditure budget changes

 

(0.9)


 

Table 2: Proposed carry forward of operational and capital expenditure budgets

$Million

$M

 

Operational revenue and expenditure:

 

Hutt Valley Tennis

- Note budget of $1.35M reduced to $0.5M in line with Draft Annual Plan 2020/21 decision 11 February 2019

1.35

Development stimulus Package

- due to delays in development progressing

2.00

Mahia Atu Partnership Fund $7k and Mahia Atu Partnership fund $163k

- funds not fully allocated due to applicants not meeting criteria and did not align with strategy

0.17

NZTA capital subsidies associated with capital delays

(2.60)

Net operational expenditure proposed to be carried forward to 2020/21 and beyond

0.94

 

Capital expenditure

 

Urban Growth Strategy Improvements

1.45

Naenae Pool major refurbishment

- balance of the $9M budget

0.8

Naenae Hub ground works

- transfers into funding to be held pending Naenae spatial plan

0.4

Toilets upgrade

- work behind schedule

0.04

Manor Park Cycle Trail

- agreement not reached with golf park and Greater Wellington Regional Council

0.05

Te Whiti Park Building extension

- work is behind schedule and is expected to be completed in 2020/21 

0.05

River Link - Promenade and Urban Improvements

- delays in Strategic land purchases related to Riverlink

1.43

Cross Valley Link – Investigation/design

- delays in progressing this work

0.62

Cycleway/Shared Path

- Beltway $180k and Eastern bays $4.1M

4.28

Sub-standard roads upgrade

-relates to Hill Road upgrade work

0.76

Total capital expenditure proposed to be carried forward  to 2020/21 and beyond

9.88

 

15.   Appendix 2 includes further details related to table 1 and 2, in particular paragraphs 31, 32 and 33.


 

Table 3: Proposed bring forward of funding for seismic strengthening work

$Million

$M

 

Capital expenditure

 

Walter Nash Centre Seismic strengthening works- Refer Appendix 7, Section B for further information.

Proposes $0.3M of the Seismic strengthening set aside in the draft Annual Plan 2020/21 is brought forward to 2019/20

0.3

Total capital expenditure proposed change

0.3

 

16.   The table that follows provides a summary of the financial impact if all the proposed budget changes are approved by Council.

Table 4: Financial impact summary

$Million

Net deficit 2019/20

Capital investment  2019/20

Annual Plan 2019/20

13.3

Deficit

67.9

Net changes approved F&P 4 September 2019

(4.77) 

(2.46)

Vehicle fleet changes approved F&P 26 September 2019

(0.06)

0.88

Silverstream landfill – safety works approved by Council 10 December 2019

-

0.65

Sub-total – revised budget after previous approvals

8.47

66.97

Proposed budget changes, refer Table 1 for further information

0.5

0.9

Further proposed budget changes to reflect carry forward of budgets to 2020/21 and beyond, refer Table 2 for further information

(0.9)

(9.9)

Walter Nash Centre seismic strengthening, budget brought forward as per Table 3 and Appendix 7

 

0.3

Revised Budgets 2019/20

(pending Council decisions)

8.1

58.0

 

17.   Note that not all the detail budget changes are reflected here; there will be further items presented at the next quarterly report.

Financial Performance Results

18.   This section provides an overview of the financial performance results for the half year ended 31 December 2019. Further detailed analysis and commentary is available in Appendix 5 and 6.

19.   The financial performance results provide an indication on how Council performed against the revised budget1, and the associated financial risks. The year- to date (YTD) net operating financial result is $0.7M (1.5%) favourable compared to budget. The full year (FY) forecast is $0.8M or 4.3% favourable to the revised budget mainly due to higher operating revenue, and $6.2M favourable to the Annual Plan.

20.       Table 5: Operating Results

$Millions

YTD Actual

YTD Revised Budget1

Variance

FY Forecast

FY Revised Budget1

Variance

FY Annual Plan

Operating revenue

27.5

27.8

(0.3)

1.1%

54.9

54.1

 

0.8

1.5%

54.7

Operating expenditure

90.0

90.7

0.7

0.8%

181.1

180.8

(0.3)

0.2%

186.8

Net operating deficit before rates income

(62.5)

(62.9)

0.4

0.6%

(126.2)

(126.7)

0.5

0.4%

(132.1)

Rates income

108.6

108.3

0.3

0.3%

108.4

108.1

0.3

0.3%

108.1

Net operating surplus/(deficit)

46.1

45.4

0.7

1.5%

(17.8)

(18.6)

0.8

4.3%

(24.0)

Capital contributions

1.7

4.1

(2.4)

8.2

10.9

(2.7)

10.7

Net surplus/(deficit) before adjustments

47.8

49.5

(1.7)

(9.6)

(7.7)

(1.9)

(13.3)

Other non-operating adjustments

3.1

0.3

2.8

79.5

-

79.5

-

Net surplus/(deficit)

50.9

49.8

1.1

69.9

(7.7)

77.6

(13.3)

Note 1: The revised budget presented here assumes that the changes proposed in tables 1, 2 and 3 will be approved by Council.

 

21.   Operating revenue: The overall result is forecast to be 0.8M favourable (1.5 per cent) to budget. This is largely due to unbudgeted Healthy Families funding $0.4M and a one-off unbudgeted dividend of $0.4M from Civic Assurance following the sale of a building.  

22.   Operating expenditure:  The year end result is forecast to be $0.3M (0.2 per cent) unfavourable to budget. Whilst there have been savings in interest costs of borrowings of $1.2M there have been offsets mainly from increased refuse and recycling collection costs and Integrated Community Services together with increased depreciation.

23.   Three Waters financial risks – in mid-February 2020 Wellington Water advised Officers that the most recent financial forecasts are showing higher costs of $0.4M than included in the results presented here (includes addressing the backlog of water leaks). Officers are working through this recent information and the next quarterly forecast is likely to reflect this.        

24.   Rates income: is $0.3M (0.3 per cent) above budget for the year mainly due to slightly higher growth than expected together with adjustments related to internal rates. 

25.   Net operating deficit: Overall deficit forecast of $17.8M which is $0.8M favourable (4.3 per cent) to the revised budget mainly due to improved revenue results.

This forecast net operating deficit of $17.8M is $6.2M better/favourable compared to the budgets set in the Annual Plan 2019/20. This is largely due key projects/initiatives not proceeding in the current year as planned and being deferred to future years totalling $8.1M (includes Community Facilities Trust Wainuiomata artificial playing turf $2.6M, Gym Sports $1.9M, Development Stimulus package $2.3M and Hutt Valley Tennis $1.35M).  Some of these projects deferred have subsequently had budgets reduced.

26.   Capital contributions are lower than budgeted by $2.7M largely due to delays in capital expenditure impacting the timing of New Zealand Transport Agency funding.

27.       Non-operating adjustments:

Gains on the fair value of derivatives was $1.1M at 31 December 2019 – these are accounting (non-cash) adjustments related to fair value of the treasury derivatives portfolio. The year end result will be dependent on financial markets at the time.

An asset revaluation is required ahead of this financial year end. The estimated increase in value of assets is expected to be about $78M. 

28.   Hutt City Community Facilities Trust (CFT) capital projects - included in the financial results are capital grants paid to CFT for Fraser Park Sportsville which is an asset owned within the Council Group. In the group consolidated results, the net impact for the group of this expenditure is capital expenditure.

29.   Net operating performance result - Table 6 that follows provides a revised view of the year end underlying net operating results after adjusting for the capital grants for CFT where the asset will remain within the council group, development stimulus package costs and NZTA funding for renewals works.

Table 6: Revised net operating results after adjusting for CFT capital grants, development stimulus package and NZTA renewals funding 

$Millions

FY Forecast

FY Revised Budget

Variance

FY Annual Plan

Net operating deficit (refer table 5)

(17.8)

(18.6)

0.8

(24.0)

Less: CFT capital grants

0.6

0.6

-

0.3

Sub-total

(17.2)

(18.0)

0.8

(23.7)

Less: development stimulus package*

3.9

3.9

-

6.3

Revised net operating deficit

(13.3)

(14.1)

0.8

(17.4)

NZTA funding for capital renewals or replacement works

3.1

3.1

-

3.2

Revised net operating deficit

(10.2)

(11.0)

0.8

(14.2)

 

The Development Stimulus Package can be viewed as an investment in growing the city's rating base at a faster rate than it would otherwise have grown. The rapid rise in the number of Resource Management Act and Building Act consents is evidence of a significant increase in the rate of growth of capital investment which will generate an increase in the city's rating base in the medium term. It has been adjusted out in table 6 to give a clearer view of the underlying net operational performance.


 

Capital investment

 

30.       Table 7: Capital expenditure results

$Millions

YTD Actual

YTD Revised Budget1

Variance

FY Forecast

FY Revised Budget1

Variance

FY Annual Plan

Replacements

6.5

9.9

3.4

19.5

20.1

0.6

21.5

Improvements

8.6

16.7

8.1

37.2

44.5

7.3

46.4

Net deficit

15.1

26.6

11.5

56.7

64.6

7.9

67.9

Note 1: The revised budget presented here does not include all the budget changes proposed in tables 1, 2 and 3.

 

31.   Capital expenditure delivery performance is expected to be significantly underspent for 2019/20 with delays in a large number of projects. Year-to-date expenditure is $15.1M or 26 per cent of the full year forecast of $56.7M. Appendix 6 includes a list of projects and activities where there are significant underspends (refer paragraph 29); this includes Riverlink, Cycleways/Shared Path projects and Three Waters.


 

Treasury Compliance, Appendix 4

32.   Council has been fully compliant with Financial Strategy borrowing limits:

Measures

Policy

Actual

 30 June 2019

Compliance

Net external debt/total revenue

Maximum 150%

108%

Yes

Net interest on external debt/total revenue

Maximum 10%

2.4%

Yes

Liquidity ratio

Minimum 110%

120%

Yes

 

33.       The average cost of funds at the end of December was 3.3 per cent, which was 0.7 per cent below the budgeted level. Interest cost savings of $1.2M are forecast for the year mainly due to the lower interest rate environment. This is partially offset by reduced interest revenue of $0.2M from cash holdings.

34.       Net debt has increased from $172M at 30 June 2019 to $177M at the end of December 2019. The year-end forecast is for net debt to increase to approximately $195M which aligns with the Annual Plan.        

35.       Further detailed information is available in the appendices to this report.

Consultation

36.       There are no consultation requirements arising from this report.

Legal Considerations

37.       There are no legal considerations arising from this report.

Financial Considerations

38.  There are no financial considerations in addition to those already noted in this report.

Appendices

No.

Title

Page

1

Appendix 1 Key performance metric results

97

2

Appendix 2 Residents satisfaction survey results summary

101

3

Appendix 3 Financial Delegation Policy

105

4

Appendix 4 Treasury Report for the period ended 31 December 2019

114

5

Appendix 5 Detailed financial results and commentary on variance analysis

117

6

Appendix 6 Detailed financial results includes breakdown by Activity

130

7

Appendix 7 Further details  (A) Dowse Museum Entrance additional $25k and (B) Walter Nash Centre Seismic Upgrade - bring forward of $300k of funding

166

 

 

Author: Philip Benseman

Budgeting and Reporting Manager

 

 

Author: Catherine Taylor

Senior Research and Evaluation Advisor

 

 

Reviewed By: Jenny Livschitz

Chief Financial Officer

 

 

Reviewed By: Brent Kibblewhite

General Manager Corporate Services

 

 

Reviewed By: Helen Oram

Acting General Manager, City Transformation

 

 

Approved By: Jo Miller

Chief Executive

 


Attachment 1

Appendix 1 Key performance metric results

 

Non-Financial KPIs - Quarter 2 – 2019/20

Measures

Q1

Jul-Sep 2019

Q2

Oct-Dec 2019

On track / concern

Year to date

Year end - previous year

Commentary

High Level Residents Perceptions

Performance

86%

90%

88%

86%

All are currently on track or above level reached last year

Value

77%

86%

82%

78%

Services and facilities

91%

93%

92%

88%

Reputation

79%

91%

85%

85%

See Residents Satisfaction Survey summary results for all KPI’s measured quarterly

Water management (residents satisfaction)

84%

85%

84%

89%

See half yearly Wellington Water dashboard for full list of non-financial KPIs

 

 

 

 

 

 

 

Waste disposal services

(residents satisfaction)

86%

90%

88%

92%

Engagement around new rubbish and recycling options as well as other rubbish and recycling related topics of interest will hopefully see recycling tonnage and resident satisfaction increase

Total kerbside recycling (less contamination)

1,122 tonnes

1,229 tonnes

 

2,351 tonnes

5,275 tonnes

% contaminated

2%

2%

 

2%

2%

 

 

 

 

 

 

 

Roads, cycle ways etc.

(residents satisfaction)

91%

89%

90%

90%

All the non-financial KPI’s for roading are measured annually by external providers

 

 

 

 

 

 

 

Parks and reserves (residents satisfaction)

95%

99%

97%

96%

Facilities (residents satisfaction)

97%

98%

98%

96%

Community Hubs

 

 

 

 

 

 

Koraunui Stokes Valley

60,771

55,597

 

116,368

254,235

 

Wainuiomata Hub

102,957

111,597

 

214,554

292,745

 

Walter Nash Centre

213,395

152,685

 

366,080

848,834

The closure of the hallway at Walter Nash has had an impact on the visitor numbers and may impact on residents’ satisfaction in quarters 3 and 4.

Libraries

 

 

 

 

 

 

Number of physical visits per year

385,350

338,772

 

724,122

1,303,639

 

Libraries Online visits

121,557

112,087

 

233,644

453,170

Customers are now finding key information about Libraries, such as events and opening hours, from a range of engagement platforms, and are accessing an increasingly diverse range of Libraries content that does not require them to visit our main website.

Sessions on Connect

35,916

31,647

 

67,563

146,038

Customers have been steadily shifting from wired desktop computers to Wi-Fi, either via BYOD or with Council-provided devices, where we cannot track usage.

Library programmes and events delivered to participants (number of participants)

31,710

 

31,710

62,868

 

Pools

 

 

 

 

 

 

Number of pool visits per annum

436,151

 

436,151

957,325

Naenae Pool previously attracted over 400,000 visitors which we have not been able to fully cater for at other facilities.

Ratepayer cost per visit to pools

$6.11

 

$6.11

$5.44

Higher cost per use due to significant loss of visitors and revenue from Naenae Pool.

 

 

 

 

 

 

 

Public engagement and consultation

(residents satisfaction)

60%

75%

68%

72%

Facebook is one tool being used to increase our engagement with our community. Residents’ satisfaction with engagement and consultation is low compared to other measures. We need to assess and measure the impact and reach of the different methods and tools we use for engagement.

Facebook users following Hutt City Council page (at quarter end)

15,690

16,216

 

 

 

Facebook users who engaged with posts (av. monthly engagements)

16,456

23,265

 

 

 

 

 

 

 

 

 

 

Building Consents

Number issued

414

427

 

841

1305

Due to the high number of consents / certificates / licences being applied for, work load has exceeded capacity. Contractors have been used to fill gaps and recently more staff have been permanently employed.

80% completed in 18 working days (LTP target)

91%

97%

 

94%

96%

Code of compliance certificates

Number issued

265

331

 

596

1255

80% completed in 18 working days (LTP target)

98%

94%

 

96%

99%

LIMs

Residential issued

213

251

 

464

1097

95% issued in 9 working days (LTP target)

100%

100%

 

100%

98%

Commercial issued

22

15

 

37

73

95% issued in 9 working days (LTP target)

100%

93%

 

97%

97%

Resource consents

Non notified issued

111

69

 

180

352

See comment above

80% issued in 18 working days (LTP target)

23%

7%

 

17%

55%

Pre start resource consents

8

4

 

12

46

90% monitored within 5 working days (LTP target)

100%

75%

 

92%

100%

RMA complaints received

75

88

 

163

404

 

100% acknowledged within 24 hours of receipt (LTP target)

100%

100%

 

100%

100%

 

New food premises

New food premises licenced or registered

10

16

 

26

61

See comment above

95% within six weeks of registration (LTP target)

30%

63%

 

50%

0%

Existing food premises

Number due for verification

127

120

 

247

443

See comment above

95% verified within agreed timeframe (LTP target)

75%

82%

 

78%

6%

Sale & Supply of Liquor (high risk premises)

Number of premises due

26/107

61/107

 

107

104

 

95% completed per annum (LTP target – cumulative %)

26%

57%

 

57%

98%

 

Noise complaints

Noise complaints received

297

578

 

875

2293

At the beginning of the financial year a new contractor was employed to respond to noise complaints. Due to poor performance this contractor has recently been replaced.

85% responded to within 45 minutes (LTP target)

32%

57%

 

48%

86%

 

 

 

 

 

 

 

 

               


Attachment 2

Appendix 2 Residents satisfaction survey results summary

 

 

Residents Satisfaction Survey Results – Quarter 2 Year 2019-2020

 

Figure 1: Key performance measures

Figure 2: High level measures

 

Priorities for the next 10 years

 

Figure 4: Council priorities for the next 10 years – Q2 2019-20

Figure 5: Council priorities for the next 10 years – trend data


Table of detailed measures


Table of detailed measures continued…


 


Attachment 3

Appendix 3 Financial Delegation Policy

 


 


 


 


 


 


 


 


 


Attachment 4

Appendix 4 Treasury Report for the period ended 31 December 2019

 

Treasury Report for the period ended 31 December 2019

 

This treasury report provides a summary of how Hutt City Council is complying with Treasury Management Policy limits and the performance of treasury activities against plans.

 

The focus of treasury management activity has been on

-     managing interest rate risk and minimising funding costs,

-     monitoring cashflow and liquidity,

-     managing debt requirements and the maturity profile.

 

Key highlights for the half year include:

Ø Average cost of funds of 3.3% achieved, which was 0.7% lower than budgeted.

Ø Interest cost savings of $1.2M are forecast for the year mainly due to lower interest rate environment, together with action taken to “blend and extend” some interest rate swaps. This is partially offset by reduced interest earned on cash holdings of $0.2M.

 

Debt portfolio performance

 

Net debt is forecast to increase to $195.3M by 30 June 2020. Net debt (which excludes cash holdings and CCO investment) increased during the year from $172M to $177M at 31 December, whilst gross debt has remained constant at $204M. A revolving credit facility of $35M remained undrawn at year end.

 

 

Actual YTD

FY Forecast

FY Budget

Variance

Average cost of funds

3.3%

3.3%

4.0%

0.7%

Interest expense – borrowings

$3.7M

$7.5M

$8.8M

$1.2M

Interest earned

$0.6M

0.8M

$1.0M

($0.2M)

Fair value gain on derivatives

$1.1M

-

-

-

 

The Council has a range of interest rate swap agreements in place to manage interest rate risk and to provide some certainty of future interest costs. Due to fluctuations in the interest rate market the overall mark-to-mark value of these agreements is constantly changing.

 

The fair value gain in the swap portfolio was $1.1M for the six month period ended 31 December 2019. This is an accounting adjustment required to be recorded and there is no cash flow implications.

 


 

Policy compliance

 

Measures

Policy

Actual

 30 June 2019

Compliance

Net external debt/total revenue

Maximum 150%

108%

Yes

Net interest on external debt/total revenue

Maximum 10%

2.4%

Yes

Liquidity ratio

Minimum 110%

120%

Yes

 

 

 

Funding risk control limits

 

Period

Minimum %

Maximum %

Actual gross debt

Actual %

31 December 2019

Compliance

0 to 3 years

15%

60%

$98M

48%

Yes

3 to 5 years

15%

60%

$39M

19%

Yes

5 years plus

10%

60%

$67M

33%

Yes

 

 

Total

$204M

100%

 

 

Debt maturity profile

 


Interest rate risk control limits

Interest rate risk is managed through the risk control limits. The graph that follows shows the level of fixed rate cover in place within the minimum and maximum limits of the treasury risk management policy.

After overlaying interest rate swaps, the split between fixed and floating debt is as follows:


Attachment 5

Appendix 5 Detailed financial results and commentary on variance analysis

 

 

Detailed financial Information

1.   The information contained in the section excludes all of Council’s Council Controlled Organisations (CCOs). Best endeavours have been made by all Council officers to ensure the accuracy and completeness of the financial information contained within this report.

2.   We are halfway through 2019/20 financial year and Council’s financial performance and position is subject to change in light of any new information.

3.   Note: for the variances columns in all the tables in this report, a positive reflects a favourable impact and a negative (in brackets and red) reflects an unfavourable impact. For carryovers, in terms of the impact on next year, revenue carried over is positive and expenditure carried over is negative.

4.   The Statement of Comprehensive Revenue and Expenses below covers all of Council’s revenue and operating expenditure and provides the operating surplus or deficit for the six months to 31 December 2019 and the expected full year forecast compared to budget. The layout below is similar to how this information is presented in the 2019/2020 Annual Plan. 

5.    The table that follows is a revised Statement of Comprehensive Revenue and Expenses that separates the budgets and costs related to (a) grants paid to the Hutt City Community Facilities Trust (CFT) and (b) the Development Stimulus Package. Some of CFT grants are capital in nature as they are to fund new assets developed by the CFT on behalf of Council. Development Stimulus Package costs are operating expenditure for Council which are expected to stimulate capital growth in the City in the medium term.

Financial Performance Summary

Year to Date

6.    Excluding Gains/(Losses) on Revaluations of Financial Instruments and Property Revaluations/Sales/Disposals, Council’s financial performance to 31 December 2019 was $1.8M unfavourable to budget. This was mainly due to reduced capital subsidies from delays in the capital programme, delayed development contributions, UHCC operating subsidy for wastewater, and an unbudgeted capital grant payment to the CFT. This is partially offset by an unbudgeted dividend and reduced operating costs resulting from underspends in a few areas.

7.    To date Council has an unrealised gain of $1.1M on its financial derivatives which is due to fair value of derivatives rising since 30 June 2019. There is no intention to realise these fair value changes (whether gains or losses). This is recognised for accounting purposes only and does not represent a cash loss. To date Council also has realised gains of $2.0M on assets sales/disposals.

8.    Including all of the Gains/(Losses), Council’s financial performance to 31 December 2019 was $1.1M unfavourable to budget.

Year End Forecast

9.    Excluding Gains/(Losses) on Revaluations of Financial Instruments and Property Revaluations/Sales/Disposals, Council is currently forecast to be $1.9M unfavourable to budget at year end.

 

 


 

Significant Year End Forecast Variances

Operating Revenue

·   Rates: $0.3M favourable at year end. Half of this relates to higher than expected growth and the other half due to the adjustment for internal rates.

·   Dividends: $0.4M favourable due to receipt of one-off unbudgeted dividend.

·   Capital Subsidies: $2.7M unfavourable delays in roading capital especially the Eastern Bays Shared Path project.

·   Interest Earned: $0.2M unfavourable due to less on call deposits and lower interest rates.

·   Other revenue: $0.8M favourable mainly due to extra unbudgeted revenue from Healthy Families programmes.

 

Operating Expenditure

·   Employee Costs : $0.4M favourable mainly due to vacancies particular in Regulatory and Consents.

·    Operating Costs: $1.4M unfavourable mainly due to $0.6M for higher contractor costs for processing consents, $0.6M for extra costs for recycling and refuse collection costs, $0.8M extra costs in Integrated Community Services related to Managing Fraser Park Sportsville and operating costs in Libraries and Museums, $0.5M for extra IT costs offset by savings in capital, plus $0.3M removal of savings, $0.2M adjustment for internal rates, and $0.5M for higher legal, consulting  and valuation costs. These are offset by $1.4M deferral of grant to Hutt Valley Tennis (HVT) and $0.7M underspend in Urban Design work related to Riverlink. (Note HVT grant reduced to $0.5M in draft annual plan 2020/21).

·   Interest Expense: $1.2M due to reduced borrowing costs

·   Depreciation: $0.2M mainly due to result of the 3 yearly revaluation of assets brought forward with effect from May 2020.

 

Gains/(Losses)

·    Property Revaluations/Sales/Disposals: by year end Council will have completed a revaluation of its assets with an expected net gain of approximately $78M.

·    Revaluations of Financial Instruments: whilst a forecast gain on interest swaps of $1.1M is reported here, the year end result will be dependent on financial markets.

 

Explanation of Key Revenue Variances

10.  Rates

Brief Description

Rates include all rates earned by Council. Rates refunds, rates remissions and rates billed to Council owned properties are excluded.

Year to date variance:

$0.3M favourable to budget due to slightly higher growth and changes relating to internal rates charges.

Full Year Forecast Variance:

Forecast to be favourable by $0.3M similar to year to date variance.

11.  User Charges

Brief Description

All non-rates revenue (including metered water charges), for providing services to the community. This also includes fines and penalties charged.

Year to date Variance:

$0.3M unfavourable to budget, mainly due to consent income from Reserves tracking below budget.

Full Year Forecast Variance:

$0.7M unfavourable variance mainly due to the expected loss of Kāinga Ora – Homes and Communities consent revenue of about $0.9M offset by an increase of about $0.6M in other consents revenue plus a reduction in reserve contributions of  $0.4M.

 

12.  Operating Subsidies (Including Upper Hutt City Council (UHCC)) and Grants

Brief Description

Includes mainly subsidies received from the New Zealand Transport Agency (NZTA) for its share of Council’s Roading operating maintenance costs and UHCC’s share of wastewater costs.

Year to date Variance:

Close to budget.

Full Year Forecast Variance:

The full year forecast is favourable by $0.5M mainly due to the expected completion of footpath and roading maintenance previously unbudgeted.

13.  Capital Subsidies

Brief Description

Includes subsidies received for capital works. The majority of subsidies are received from the New Zealand Transport Agency (NZTA) for their share of Council’s spend on Roading projects, plus the spend on the Cycleways/Shared Paths projects.

Year to date Variance:

$1.7M unfavourable to budget is mainly due to project delays, particularly on the Cycleways/Shared Paths projects. This is timing related with a corresponding underspend to date in capital.

Full Year Forecast Variance:

$2.8M unfavourable to budget is mainly due to delays in the Eastern Bays Shared Path and the decision to delay the Hill Road Upgrade Project. This is timing related and there is a corresponding under spend in capital which will be carried over to next financial year. The difference between the forecast and the carryovers is due to the receipt of additional unbudgeted subsidies for some projects especially footpaths renewals.

14.  Development Contributions

Brief Description

Development Contribution fees go towards the capital costs of providing growth-related infrastructure such as Roading, Water Supply, Wastewater and Stormwater assets required to serve new developments.

Year to date Variance:

All budgeted Development Contributions for the year to date ($0.8M) are yet to be received, but expected by year end.

Full Year Forecast Variance:

Expected to be on budget.

15.  Interest Earned

Brief Description

This is revenue received from financial investments.

Year to date Variance:

Minor unfavourable variance due to less cash held on deposit and lower interest rates.

Full Year Forecast Variance:

$0.2M unfavourable to budget mainly due to less cash held on deposit for the first half of the year and lower interest rates.

16.  Vested Assets

Brief Description

This relates to assets created by external parties that are vested to Council. These are non-cash. Council has no control on the timing or value of assets vested to Council.

Year to date Variance:

Minor favourable variance.

Full Year Forecast Variance:

Expected to be on budget.

17.  Other Revenue

Brief Description

This includes petrol tax, sale of goods, animal shelter fees and central government subsidies for Ministry of Health initiatives, Kiwi Sport and Waste Minimisation levies.

Year to date Variance:

$0.1M unfavourable to budget due to a delay in elections revenue ($0.2M) offset by unexpected contact management fees.

Full Year Forecast Variance:

$0.8M favourable to budget due to government funding of Healthy Families programmes (offset by additional staff costs)..

Explanation of Key Expenditure Variances

18.  Employee Costs

Brief Description

Includes total costs of salary and wages for all employees and fixed term contractors, including PAYE, Kiwi Saver contributions, annual leave entitlements, allowances, and staff training and development.

Year to date Variance:

Minor favourable to budget mainly due to Council-wide staff vacancies.

Full Year Forecast Variance:

Minor favourable to budget mainly due to staff vacancies  particularly in the Environmental Consents team.

 

 

19.  Operating Costs (Excluding Community Facilities Trust & Development Stimulus)

Brief Description

Includes direct operating costs, excluding internal rates, employee costs, grants paid to the CFT, development stimulus payments, finance charges, support costs and depreciation.

Year to date Variance:

$0.7M favourable to budget mainly due to project delays and temporary timing differences between planned and actual spend across a number of activities. 

Full Year Forecast Variance:

$1.4M unfavourable to budget mainly due to:

·    $1.4M favourable variance in Parks & Reserves due the Hutt Valley Tennis grant being carried forward to next year (note reduced to $0.5M in 2020/21 draft annual plan).

·    $0.7M favourable in City Environment mainly due to an underspend on Urban Design work.

·    $0.8M unfavourable variance in Integrated Community Services due to the cost of managing Fraser Park Sportsville and additional operating costs in Libraries and Museums.                        

·    $0.8M Consents & Regulatory unfavourable variance due to the increased use of contractors to cover higher than anticipated consent applications against a shortage of staff. This is a recoverable expense, although the timing of recovery is highly variable.

·    $0.6M unfavourable due to additional contract costs for recycling and refuse collection.

·    $1.3M City Leadership unfavourable due to Information Systems costs $0.5M partly offset by a reduction in capital spend, removal of $0.3M savings credit, additional specialist costs (valuation fees, legal and audit) and unfavourable adjustment for internal rates $0.2M.                                

 

 

 

 

 

 

20.  Hutt City Community Facilities Trust (CFT) Operating Grants

Brief Description

CFT is a Council Controlled Organisation that constructs (and manages) community facilities for and on behalf of Council. Payments made by Council to CFT for CFT capital projects are required to be treated by Council as operating expenditure for accounting purposes.

Year to date Variance:

$0.2M unfavourable variance to budget is mainly due to additional funding for Fraser Park Sportsville.

Full Year Forecast Variance:

Includes extra $0.3M for Fraser Park Sportsville. This is to cover settlement of disputed building costs.

 

 

21.  Development Stimulus Package

Brief Description

The Development Stimulus Package also referred to as the Development Charges and Rates Remissions Policy, was set up to encourage development in the city. This policy was suspended at 31 December 2018.

Year to date Variance:

On budget as at 31 December 2019.

Full Year Forecast Variance:

The revised budget has been adjusted and has been reduced by $2.0M which is being deferred to 2020/21 due to applications being progressed slower than anticipated.

 

 

22.  Interest Expense

Brief Description

This is the interest cost for borrowing to fund Council’s capital projects not covered by depreciation and any operating deficits.

Year to date Variance:

$0.2M favourable variance to budget.

Full Year Forecast Variance:

$1.2M favourable variance to budget mainly due to a lower weighted average cost of borrowing (interest rates), compared to budget.

 

23.  Depreciation

Brief Description

Includes Depreciation for Councils Infrastructural and Operational assets.

Year to date Variance:

Minor unfavourable variance as we are now progressing adding assets to the infrastructure network

Full Year Forecast Variance:

$0.2M unfavourable variance expected due to the revaluation of assets being pulled forward to May 2020, which was budgeted for 2020/21, as well as the progressing of adding assets to the infrastructure network.

 

24.  Gains/Losses on Revaluation of Financial Instruments

Brief Description

Council recognises its interest rate swaps at fair value each month. The change in fair value between reporting date and 30 June 2019 is treated either as an unrealised gain (fair value has decreased) or an unrealised loss (fair value has increased).

Year to date Variance:

$1.1M favourable because swap rates are higher when compared to 30 June 2019.

Full Year Variance:

Given the volatility of the financial markets, the full year forecast will always be aligned to the year-to-date fair value of Council’s committed swap portfolio. 

 

25.  Gains/Losses on Revaluation of Assets

Brief Description

Council revalues its property, plant and equipment every three years with the most recent revaluation completed on 31 December 2017. The 2020 revaluation has been pulled forward to May, which brings it into the current financial year, unbudgeted. In addition, Council recognises either gains/losses on sale/disposal of its assets.

Year to date Variance:

$2.0M favourable due to realised gains made on recent asset sales/disposals. One significant sale (Copeland Street) is within the Council Group i.e. between UPL and Council.

Full Year Variance:

$78M favourable due to the realised gains year to date and the anticipated early revaluation of assets estimated at $76M.

 


 

Capital Expenditure

26.  A summary of the 2019/20 capital works programme is shown below.

27.  The actual capital expenditure for the year to date is $15.1M compared to the budgeted capital expenditure for the year to date of $26.6M.

 

28.  The forecasted capital expenditure for the year is $56.7M against the budgeted capital expenditure for the year of $64.7M.

 

29.  The year to date underspend in capital is due to a significant number of projects being delayed plus costs for some projects being transferred to operating expenditure. The main variances are itemised below.

 

 

The following are comments on the above forecast variances for year end. The variances for a number of projects are due to the timing of work between years rather than a variance in the project’s total costs compared to the total budgets.

·      Naenae Pool Major Refurbishment ($0.8M underspend) carried forward until a firm decision is made on how the allocated funds should be spent.

·      Museums, Libraries, Halls, Other Pools (minor underspend) the planned projects are expected to be completed for the year end. At year to date there is $1.2M underspend due to project timing.  

·      Avalon Park (minor underspend) the toilets project is expected to be over budget by $0.1M – close to the same amount that the development project is expected to be underspent.

·      Naenae Hub Ground Works ($0.4M underspend) to be carried forward to be completed in the next financial year.

·      Wharves Refurbishment (on budget) although the project has been delayed it is expected to be completed by the end of the financial year.

·      Other Parks Projects (minor underspend) mainly due to delays, with a number of projects (Manor Park Cycle Trail, Te Whiti Park Building Extension, Toilets Upgrade) carrying over to the next financial year ($0.1M).

·      RiverLink – Promenade & Urban Improvements ($1.4M underspend) the overall timeline of the RiverLink project involves a number of dependencies on other projects and other agencies, and has resulted in the budgeted Promenade and  Urban Improvement work being carried forward to the next financial year.

·      Strategic Property Purchases (on budget) although the timing of the purchase of these properties is yet uncertain but may happen in the current financial year, and if not will be carried forward.

·      Suburban Shopping Centres Improvements (on budget) project delays have resulted in little being spend year to date, but the expectation is the remainder will be completed by year end.

·      Urban Growth Strategy Improvements ($1.5M underspend) project delays have meant activity planned for the current financial year have had to be move to the next financial year, alongside agreed additional operating costs for the Development Stimulus Package.

·      City Resilience ($0.1M overspend) the building of a shed for the Emergency Management funded from operational budget.

·      Cross Valley Link – Investigation/Design ($0.9M underspend) project delays have pushed this project out to next financial year with a $0.6M expected carryover.

·      Cycleways /Shared Path Projects ($4.6M underspend) – mainly due to expected delays on the Eastern Bays project ($4.3M), with the Beltway and Wainuiomata Hill sections contributing $0.3M to the underspend. $4.3M is expected to be carried over to future years.

·      Substandard Roads Upgrade ($0.8M) project delays mean the expected underspend will be carried forward to the next financial year.

·      Other Roading Projects (on budget) the $1.6M underspend for the year to date, mainly due to pavement surfacing ($0.9M) and area wide pavement treatment ($0.7M), is expected to meet budget by year end.

·      Three Waters (on budget) the $2.0M underspend for the year to date, across a number of projects, is expected to reach budget by the year end with various projects being completed over- and under budget.

·      Silverstream Landfill Building Improvements ($0.2M overspend) the building project is expected to require additional spend although there has been no budget allocation in the current financial year.

·      Silverstream Landfill Stage 2 Design & Consent ($0.3M overspend) the project is under budget $0.4M year to date but is expected to be over budget at year end.

·      System Upgrade & Other It Projects ($0.2M underspend) the underspend is expected to be offset by operating expenditure as the move to Technology as a Service continues. 

·      Admin & Pavilion Buildings Improvements (on budget) various projects for minor improvements are expected to be completed by the financial year end close to budget.

·      Vehicle Purchase (on budget) the year to date overspend of $0.2M will even out to be on budget by the financial year end.

 

 

 

            Revised Budgets

30.  Refer to main report “Background – Annual Plan versus Revised Budget”ective.

 

31.  Following on from revised budget changes approved by Council in September 2019, there are a number of further budget changes for 2019/20 for which additional information has come to light and it is proposed the budget is revised. The following tables provide information on 2019/20 budget changes where budgets need to be updated and approval to revise these budgets is now being requested.

32.  As this is a new process for revised budget there have been reconciliation issues which are yet to be resolved. This is not a complete list and at the next quarterly report the balance of the items will be presented. 


 

33.  Below are explanations for each of the proposed revised budgets.

 


 

 

34. There are also some projects that have been delayed for a variety of reasons that will require the project to be deferred and the budgets to be carried over. The following table provides information on 2019/20 budget changes where projects need to be deferred and budgets need to be carried over to 2020/21. Approval to revise these budgets is now being request.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35.  Below are explanations on each of the proposed budget deferrals.

 

36.  The impact of the carry-forwards is only on the timing of borrowings between years. Reductions in operating have a direct impact on our debt where-as for capital our debt forecasts have an allowance that 25% of new capital will not be spent.


Attachment 6

Appendix 6 Detailed financial results includes breakdown by Activity

 

Detail financial Tables for the period ended 31 December 2019


 


 

 


 


 


Attachment 7

Appendix 7 Further details  (A) Dowse Museum Entrance additional $25k and (B) Walter Nash Centre Seismic Upgrade - bring forward of $300k of funding

 

Section A- Dowse Entrance Upgrade

1.

Project/initiative

Dowse Entrance Upgrade

2.

LTP Activity

Integrated Community Services (Leisure and Wellbeing) 

3.

Business lead

Karl Chitham – Head HCC Museums Division

4.

Brief project description

(problem/opportunity statement)

A CAPEX allocation for a Dowse Art Museum Entrance Upgrade was first approved for the 2016/17 year. In 2015 Athfield Architects undertook site visits and workshops to define the scope of the project and to consult with users, staff and the wider community. Due to the prioritisation of the overall Civic Centre rejuvenation and other Museums Division projects the Entrance Upgrade was rescheduled to 2019/20 financial year.  

 

The Museums Division has worked alongside the Facilities Management team to procure an Architect (Architecture +) based primarily on making access to the Dowse Art Museum as easy and seamless as possible. Through consultation with key stakeholder groups (Friends of the Dowse and the Dowse Foundation), the previous Mayor and the current CEO the final design was chosen as it addressed the issues of access while blending the new entrance with the current building.   

 

Rationale

Upon completion of the NEW Dowse redevelopment in 2007 it was quickly identified that the Entrance alignment was incorrect leading visitors to be confused, frustrated and unsure about how to enter the building. The subsequent Civic Centre redevelopment has exacerbated this response.

 

Visitor and peer feedback identifies the current entrance to The Dowse Art Museum as an issue for the building’s accessibility – physical and metaphorical:

 

·      The front of the building does not have a clear call to action (‘Visit us’)

·      There are two doors (for The Dowse and for the café) neither of which is clearly the dominant door

·      The Dowse’s door is located closer to Stephens Grove, but Laings Road is the place where most visitors come from

·      Once entering through either door, visitors are not immediately connected with a front of house staff member diluting the customer experience from the outset

·      It is not clear on entering The Dowse’s door whether you should turn right or left

·    As one visitor has told us “You feel stupid trying to get into the building”.

 

5.

Strategic alignment and desired outcomes sought

Strategic Alignment:

·      Actively engaged in community activities

·      Strong and inclusive communities

·      A healthy and attractive built environment

 

The desired outcomes would be:

·      Visible and easy access to the Dowse Art Museum

·      Improvement in visitor experience

·      Reduction in negative comments from visitors

6.

Community engagement

Refer above

7.

Overview of project costs and funding source (refer tables below)

In October 2019 the project was at procurement phase for contractors and suppliers and was estimated to cost between $250,000 and $300,000 (not including replacing the decking along the length of the Dowse Square frontage) to be funded from the Museums Division CAPEX allocation. 

 

Completion of the project was at that time scheduled for June/July 2020.  Following the election outcome this project was put on hold due to a HCC financial review and is now awaiting approval to continue.

 

In the 2019/20 financial year approx. $9k has been spent on quantity surveying and approx. $50k has been committed to the Architectural work already completed. This leaves approx. $190k of the current $250k CAPEX allocation.

 

 

In light of Council’s recent conversations on financial constraints, officers have identified this project as one that could be put on hold and reconsidered at a later date.  As such, officers suggest delaying this project and moving the remaining $190k CAPEX allocation shifted to 22/23.

 

 

 

8.

Risks and mitigation plans

Risks:

·      Continuing stakeholder dissatisfaction through building access issues leading to negative community feedback

·      Delay in project leads to increase in costs and CAPEX allocation no longer being adequate to cover the eventual project

·     

Mitigation:

·      Consider any other low-cost improvements to way-finding in the short term, from existing budgets. Develop interim communication strategy to address feedback from community around the reprioritisation of the project.  

 

9.

Annual Plan/LTP key assumptions

$190k CAPEX allocation in 2019/20 shifted to 22/23.

 

 

Further budget information

Table 2: Capital budgets

 

2019/20

Per Annual Plan 2019/20

$250k

Proposed revised budget 2019/20

$275k

Variance

($25k)

Additional funding

 

 

 

 

 

 

 

 


 

Section B: Walter Nash Centre Seismic Upgrade

1.

Project/initiative

Walter Nash Centre Seismic Upgrade

2.

LTP Activity

Integrated Community Services (Leisure and Wellbeing) 

3.

Business lead

Mike Mercer – Head of Community Hubs

4.

Brief project description

(problem/opportunity statement)

The corridor at Walter Nash Centre (old side) has been closed to the public due to seismic concerns. Officers have been progressing with engineers a design solution to bring the corridor to 34% NBS and reopen to the public.

 

In the interim the stadium is being managed as two facilities, which has a small increase in operational costs and significant public nuisance to users.

 

Original scope of works was estimated at $120k to complete and was going to be absorbed within existing budgets.

 

During the design Engineers have identified further strengthening work which will be required. This work will exceed the budget available. While no estimates are available at this time it proposed that $300k is set aside from the $2.5M seismic fund Council has allocated in the draft Annual plan. This funding would be required to be brought forward to this financial year to begin works as soon as practical.

 

Final costs will be available in March once design is completed.

 

There is no alternative solution to reopen the corridor. 

5.

Strategic alignment and desired outcomes sought

Strategic Alignment:

·      Actively engaged in community activities

·      Strong and inclusive communities

·      A healthy and attractive built environment

 

The desired outcomes would be:

·      Reopening of corridor and community facility back fully operational

·      Reduce operational costs of running facility as two parts

·      Remove nuisance to users

6.

Community engagement

N/A

7.

Overview of project costs and funding source (refer tables below)

As above.

 

Officers are seeking approval of a revised budget change of $0.3m in 2019/20 year.

 

8.

Risks and mitigation plans

Risks:

·      Stakeholder dissatisfaction through building access issues leading to negative community feedback and nuisance for users. Long term risk regarding discontinued use

·      Interim operational costs have increased to man both sides of stadium

·      Delay in project leads to increase in costs and CAPEX allocation no longer being adequate to cover project

 

Mitigation:

·      Progress works as soon as practical

 

9.

Annual Plan/LTP key assumptions

Project scheduled to be completed in 2019/2020.

 

 

 

 

 

Further budget information

Table 1: Operational budgets for seismic strengthening – no proposed change

$M

2019/20

2020/21

2021/22

2022/23

Total

Per draft Annual Plan  2020/21

-

0.15

0.15

0.1

0.4

No Proposed change

-

0.15

0.15

0.1

0.4

Variance

-

-

-

-

-

 

Table 2: Capital budgets for seismic strengthening – bring forward of funding into 2019/20

$M

2019/20

2020/21

2021/22

2022/23

Total

Per draft Annual Plan 2020/21

 

1.25

0.75

0.1

2.10

Proposed change

0.3

0.95

0.75

0.1

2.10

Variance

(0.3)

0.3

-

-

-

 

 


                                                                                     172                                                       03 March 2020

Policy, Finance and Strategy Committee

18 February 2020

 

 

 

File: (20/161)

 

 

 

 

Report no: PFSC2020/2/67

 

Three Waters Half Year Performance

 

Purpose of Report

1.    The purpose of this report is to summarise Wellington Water’s performance over the first half of the financial year in respect of the three waters’ activities, with emphasis on key performance indicators. 

Recommendations

That the Committee notes the information in the report.

 

Background

2.    This report provides information from Wellington Water Limited (WWL) on how Council is tracking with the key performance indicators for the Water, Wastewater and Stormwater activities and provides some commentary on aspects of that performance.

3.    Attached as Appendix One is a report from Colin Crampton, Chief Executive which provides commentary on Wellington Water’s performance while Appendices 2 and 3 set out the key performance indicators and notes to them.

4.    Of the 27 key performance indicators measured, eight are recorded as being off track or not achieved. These are summarised as follows:

·   water consumption per resident per day continues to exceed target;

·   water quality of some streams and waterways is less than desirable;

·   one dry-weather sewerage overflow occurred during the period due to a pump blockage (the target is zero);

·   the number of wastewater blockages occurring in the network (note that WWL has low confidence in the way this measure is being recorded and is reviewing this, so has flagged as off track even though showing within target);

·   there was one flooding event in Stokes Valley with six habitable floors impacted. (the target is zero);

·   median response times for non-urgent callouts exceed target.

5.    Customer satisfaction undertaken by Hutt City Council on a quarterly basis is summarised in the table below. Storm water drainage appears to be the area that is of main concern to residents.

Discussion

6.    In undertaking a performance system review, Wellington Water found some gaps in the way information is captured and analysed and is taking steps to overcome that situation.  This is particularly around service requests.  WWL expects to overcome with the introduction of its “Maximo” tool in May/June this year.

7.    Across the region WWL has experienced a significant increase in service requests relating to breaks in the network.  It is keeping up with urgent work but targets for non-urgent work have not been able to be met.  There are issues with sufficient resources (both financial and staffing) to address the issue. WWL has put in place a plan to try and address the staffing resource issue while Council has included additional funding in next year’s budget and future years to respond to this issue.

Consultation

8.    There are no consultation considerations arising from this report.

Legal Considerations

9.    There are no legal considerations arising from this report.

Financial Considerations

10.  In early February 2020 Wellington Water advised Council officers that the most recent forecast information was showing higher costs of $.4 M than forecast in the half year result; this includes additional costs for addressing the backlog of water leaks. Officers are working through reviewing this recent information. The next quarterly forecast will reflect the latest information.

Appendices

No.

Title

Page

1

Appendix 1 WWL Performance Report Summary

173

2

Appendix 2 KPI Dashboard

179

3

Appendix 3 KPI Dashboard Commentary

180

 

 

Author: Bruce Hodgins

Strategic Advisor, City and Community Services

 

 

Approved By: Andrea Blackshaw

Acting General Manager City and Community Services

 


Attachment 1

Appendix 1 WWL Performance Report Summary

 

 

 

MEMO                                                                                                                                                   

 

TO                       Bruce Hodgins, HCC

FROM                  Colin Crampton

DATE                    3 February 2020 

FOR YOUR INFORMATION

Q2 Performance Report Summary

Purpose

1.    To report to you on the performance of Wellington Water over Q2 of the 19/20 financial year.

Context

2.    Wellington Water is a CCO tasked with delivering services to customers, looking after water assets and ensuring our activities do not impact on the environment on behalf of council.

 

3.    Council, as asset owner, retains the functions of setting macro levels of service, investment levels and policy positions.

 

4.    Wellington Water describes how it measures its performance in its SOI. In addition, it is required to report on the DIA performance measures selected by individual councils.

 

Performance Management System

5.    Our promise to councils is to be honest, open and transparent on our performance. To ensure we can meet this expectation, we are carrying out a full review of our performance management system.

 

6.    Audit NZ has signalled it will look more closely at our performance management system as part of the 20/21 year end audit.

 

7.    The purpose of the review is to ensure best practice is followed in measuring performance. Best practice means:

 

a.    Performance measures are clear, unambiguous, and the right measures;

b.    There are established procedures for collecting data and these are periodically audited; and

c.     A system is established to measure the performance and it is audited.

 

8.    Our review to date has revealed a number of gaps in both our SOI and DIA measures. We are working to close these gaps by the end of the 19/20 financial year. Where these gaps have affected our reporting we have said so.

 

9.    We have also been carrying out audit of the datasets supporting WWL and councils. There is an issue between the datasets which leads to council data under reporting closed jobs. We are looking into the cause of this.

Q2 Performance

10.  In our SOI, we report our performance at a regional level. Our performance can be summarised as follows:

 

Ø We provided safe and reliable drinking water to all customers across the metropolitan area of Wellington. The SWDC water treatment system is currently non-compliant;

Ø Our wastewater network is blocking at a greater extent than our target. Blocks can lead to overflows which can present health hazards to our customers;

Ø Customers accessing safe swimming beaches over the summer will not be within target because of the Dixon Street overflow;

Ø We achieved 83% (HCC 91%) customer satisfaction with our service offering across Q2 compared to 66% in Q1. Complaints were dealt with within required timeframes and have reduced from 167 in Q1 to 56 in Q2 (80% of Q2 complaints were within Wellington City);

Ø We are on track to complete all our hydraulic models across the region. These are a key input into advising councils of the infrastructure needs to support growth;

Ø We are not meeting target technical levels of service for responding to water leak faults (see below);

Ø Our capital delivery is progressing satisfactorily but overall has been affected by increases in costs and emergency works; and

Ø We achieved a 92% customer satisfaction rating against our target of 90% after follow up with customers affected by the flooding event of 8 December 2019.

 

11.  Our performance on the DIA measures selected by HCC are included in Attachment A. Our councils have had a focus on the performance of urgent and non-urgent response times to repair defects in our drinking water networks. Our performance is highlighted in the table below:

 

 

Target

Achieved

 

Urgent

Respond to call

60 mins

55  + 15 mins

Resolve

4 hours

2.5 + 0.5 hours

 

Non-urgent

Respond to call

36 hours

12 + 1 day

Resolve

15 days

13 + 1 day

 

12.  You can see we are green against the urgent targets and resolution of non-urgent work and red against the non-urgent targets for attendance on site. This implies that the majority of both urgent and non-urgent jobs are fixed the first time the site is visited.


 

Are we satisfied with our performance on Service Requests?

13.  We were disappointed with our performance in Q1. However, after a huge effort by the team, we have significantly improved the performance during Q2. We believe we are on track to meet council expectations. We just need some more time to improve our offering and get more efficient in the field.

 

14.  We have met our customer service target which in our minds is the key metric. Our customer panel have reinforced to us that while measuring technical levels of service is useful, the focus should be on overall satisfaction (Customer panel meeting of 8 October 2019).

We are improving but an increase in service requests are still to be overcome

15.  We have completed our Q2 DIA performance measurement as detailed above. We are not 100% confident in the results because our performance system review found a number of gaps in how we manage these measures. We can say they are representative of what is going on out there in the network.

 

16.  Our performance is reasonable on urgent work but unsatisfactory on non-urgent work. The performance on non-urgent work revealed itself at the end of 2018/19 when we couldn’t complete all non-urgent work within council budgets. We carried over about $1M of work into 2019/20.

 

17.  The reason for this drop in performance is an increase in leaks since 2016. At a regional level, we have seen an increase in leaks of about 40% over the last 5 years with a 10% increase compared with last financial year. The HCC figure is a 5% increase since last year.

 

18.  We are confident we can improve this situation because the Alliance has not yet reached full production. This is because we have some staff shortages and our procedures are yet to be fully worked through. When we launched the Alliance, our promise to councils was that, long run, we would deliver more output for the same cost. We are on track to do this.

Why have service requests suddenly increased?

19.  Historically, our system has not collected good data across the network so it is difficult to assess exactly why this increase has occurred.

 

20.  The trend upward coincided with the Kaikoura Earthquake which would have shaken the ground. The other possibility is that with a lot of the region’s network is needing to be renewed over the next 30 years, we could be seeing an increase in defects as pipes start to get older.

 

21.  The real problem with these increases in service requests is that our approach has become nearly 100% reactive. What this means is that we fix things when they break. This is acceptable for the extremities of our networks but not for trunk mains and critical assets such as wastewater rising mains, pumps and complex valving.