1                                              30 August 2022

HUTT CITY COUNCIL

 

Komiti Iti Ahumoni I Tūraru |Audit and Risk Subcommittee

 

Minutes of a meeting held in the via audio visual link (Zoom) on

 Tuesday 30 August 2022 commencing at 2.00pm

 

 

PRESENT:

 S Tindal (Independent Chair)

Mayor C Barry (Deputy Chair) (from 2.06pm)

 

Cr J Briggs

Cr S Edwards

 

Cr A Mitchell

 

 

APOLOGIES:                  Cr N Shaw

 

IN ATTENDANCE:        J Miller, Chief Executive

A Blackshaw, Director Neighbourhoods and Communities

J Griffiths, Director of Strategy and Engagement

A Geddes, Acting Director Environment and Sustainability

K Puketapu-Dentice, Director Economy and Development 

J Livschitz, Group Chief Financial Officer

C Meads, Head of the Mayor’s Office (part meeting)

A Leong, Finance Project Manager

L Allott, Chief Digital Officer (part meeting)

D Newth, Financial Accounting Manager (part meeting)

J Kingsbury, Head of Transport (part meeting)

T Biggin, Project Manager Riverlink (part meeting)

K Crandle, Head of Parks and Reserves  (part meeting)

A Quinn, Project Manager (Naenae) (part meeting)

B Hodgins, Strategic Advisor (part meeting)

N Reddy, Risk and Assurance Manager

K Glanville, Senior Democracy Advisor

K Davey, Democracy Advisor

V Gilmour, Democracy Administrator

 

 

PUBLIC BUSINESS

 

 

1.       APOLOGIES

Resolved: (Cr Briggs/Cr Mitchell)                                              Minute No. ARSC 22401

“That the apology received from Cr Shaw be accepted and leave of absence be granted.”

Mayor Campbell arrived at the meeting at 2.06pm.

2.       PUBLIC COMMENT

There was no public comment.

3.       Presentations

Hutt City Council, Three Waters Growth Study 2022

The Chief Executive provided a verbal update on the Three Waters Growth Study attached as pages 11-12 to the minutes.

The Chair asked that officers report to the next Subcommittee on 28 September 2022 outlining the following risks: environmental, climate change, funding and finance, community impact and service levels, and communications and stakeholders.

In response to questions from members, the Chief Executive advised that the same modelling was used for all population growth projections. She said this ensured data consistency applied across Council planning.

MINOR ITEMS NOT ON THE AGENDA

The Chief Executive provided a verbal update on the Standard and Poor’s credit rating, attached as page 13 to the minutes.

The Chief Executive provided a verbal update on the International Accreditation New Zealand (IANZ) audit, attached as page 14 to the minutes.  She advised an updated IANZ risk register would be considered by the next Subcommittee meeting on 28 September 2022.

4.       CONFLICT OF INTEREST DECLARATIONS   

          There was no conflict of interest declarations.

5.

Holidays Act Compliance (22/1855)

Report No. ARSC2022/4/161 by the Finance Project Manager

 

The Finance Project Manager elaborated on the report.

The Group Chief Financial Officer advised that the project team was pleased with the progress and that the project was tracking well.

In response to questions from members, the Group Chief Financial Officer advised the $900,000 was for the full amount of payments to be paid out. She said the project was currently under budget, but there were risks relating to the delay of the new HR and Payroll system. She added the potential underspend was being kept as part of the contingency for possible future payments.

The Chief Digital Officer advised that Council was currently working with the vendor of the HRIS system to ensure the system was compliant with the Holidays Act.

 

Resolved: (S Tindal/Cr Mitchell)                                         Minute No. ARSC 22402

“That the Subcommittee notes and receives the report being the sixth update on the Holidays Act Remediation Project, and notes the following:

a)    the remediation calculations were completed by a payroll calculation specialist in
mid-July 2022, with the results providing a high level of confidence that the calculations are correct;

b)    the first tranche of payments to current staff owed remediation were made on 27 July 2022 covering the period March 2015 to March 2022;

c)    contact at the last known address of former staff entitled to remediation payments commenced late July 2022, with an advertisement placed in the local newspaper on 11 August 2022;

d)    the new HRIS and Payroll system to be implemented as part of the Go Digital Programme was to go live in mid-2022, however it is now expected to go live in late 2023 to ensure Council is fully compliant with the Act; and

e)    a further tranche of payments to impacted current staff will be required to cover the period from April 2022 until the date the Council achieves full compliance in 2023 (following the implementation of the new HRIS and Payroll system) and it is anticipated that this will be met by the contingency within the original provision made in the financial statements to
30 June 2021.

 

6.

Insurance renewal update (22/1898)

Report No. ARSC2022/4/162 by the Treasury Officer

 

Ani Te Whaiti, Executive Director, AON Insurance was in attendance for the item.

The Financial Accounting Manager elaborated on the report. He noted there were significant challenges during the renewal process with the impact of the global environment, and inflationary pressures on premiums. He said this would continue to create challenges going forward.

In response to questions from members, the Financial Accounting Manager advised that point 15 included cost increases due to inflation and Council’s portfolio growth. He anticipated increased cost pressures would continue to occur.

The Executive Director, AON noted that the graph on page 15 did not show the full picture, as it did not include the growth in Council’s asset portfolio. She said that during the 2021/22 period there had been a 9.5% increase in Council’s asset value and the increase in premiums reflected this.

 

Resolved: (S Tindal/Cr Edwards)                                        Minute No. ARSC 22403

“That the Subcommittee:

(1)   notes that Council has successfully renewed its Property and Infrastructure insurance programme for policies commencing 1 May 2022 for a 12-month term;

(2)   notes the remaining policies, renewed on 1 November 2021, for a 12-month term;

(3)   notes the insurance renewal challenges as outlined in paragraphs 10 to 12 contained in the officer’s report; and

(4)   notes that the insurance costs for 2022/23 are expected to be $260,000 higher than budgeted and that officers will look to find savings and offsets within the approved Annual Plan 2022/23.”

 

7.

External audit update, including update on the Hutt City Council Group Annual Report 2021/22 (22/1958)

Report No. ARSC2022/4/163 by the Financial Accounting Manager

 

The Group Chief Financial Officer elaborated on the report. She noted that the full Group Annual Report (unaudited draft report) would be considered by the Subcommittee at its next meeting on 28 September 2022.

 

Resolved: (S Tindal/Cr Mitchell)                                         Minute No. ARSC 22404

“That the Subcommittee:

(1)   notes and receives the update on the Group Annual Report 2021/22;

(2)   notes that the interim audit was completed successfully and that there is no interim management report issued by Audit NZ;

(3)   notes that the final audited Group Annual Report 2021/22 is expected to be available for Council adoption in late November 2022;

(4)   notes that the statutory deadline for the adoption of the Group Annual Report 2021/22 is
31 December 2022;

(5)   notes that officers plan to present the draft unaudited Group Annual Report 2021/22 to the Audit and Risk Subcommittee on 28 September 2022;

(6)   notes that the new incoming Council, post the October 2022 elections, will determine the approach and timing of the adoption of the Group Annual Report 2021/22; and

(7)   notes the key financial accounting adjustments to be recorded in the 2021/22 financial statements as detailed in paragraph 10 contained in the officer’s report.”

 

8.

Tupua Horo Nuku Project Update (22/2023)

Report No. ARSC2022/4/164 by the Head of Transport

 

The Head of Transport elaborated on the report.  He noted the following:

·           the opening ceremony of the project held last week;

·           service relocations had been analysed to allow for construction to begin at Windy Point and Sunshine Bay. Locations for the other four bays were being identified ahead of schedule;

·           the precast block moulds were completed and the actual blocks were now in construction. The installation of the blocks would start in approximately four weeks.

·           the Alliance was working on updated costs for the remaining four bays. The cost report was due in approximately eight weeks and would be reported to Council in December 2022. The report might not include Lowry Bay as more costs for a potential design change in Lowry Bay were possible. The potential design changes would take into account the resilience of the bay and seawall and expected rising sea levels. This might have an impact on the costing and resilience of the project.

In response to questions from members, the Head of Transport confirmed that a redesign for Lowry Bay required changes in the resource consent. He said the changes would trigger the need for either a new consent or variation to the current consent and go through the usual consenting process. He advised he would look into the costing in the Revenue/Funding sources relating to the Crown Infrastructure Partners funding and confirm the numbers. He stated that the possible design changes to Lowry Bay were the result of feedback from the community, observations of the damage which occurred during the last major storm and projected climate and environmental changes.  He added the current approved sea wall might not have the full effect desired in this location.

 

Resolved: (S Tindal/Cr Briggs)                                            Minute No. ARSC 22405

“That the Subcommittee:

(1)   notes the key risks and updates on the Tupua Horo Nuku (Eastern Bays Shared Path) Project;

(2)   notes the increasing construction costs to deliver the overall Tupua Horo Nuku (Eastern Bays Shared Path) Project and that discussions are on-going with Crown Infrastructure Partners (CIP) and Waka Kotahi to seek additional funding and that the costs for the remaining four bays will go to Council for approval in November or December 2022;

(3)   notes the Tupua Horo Nuku (Eastern Bays Shared Path) Project budgets (both capital expenditure and revenue) approved by Council in the Long-Term Plan 2021-2031 following public consultation and updated for Council decisions made in the preparation of the Annual Plan 2022-23, as detailed in the “Financial Considerations” section of the report; and

(4)   notes that Council will be required to approve any increase in funding requirements which exceeds Council’s approved budgeted position and that the impact of the significance of increases on requirements for Council to consult on changes will be considered alongside the outcome of discussions with funding partners.”

 

9.

RiverLink Update (22/2036)

Report No. ARSC2022/4/165 by the Project Manager Riverlink

 

The Project Manager Riverlink elaborated on the report. He advised the Environment Court’s intention to grant the resource consent had been received. He said that Council had until 30 September 2022 to liaise with the Environment Court on any matters.

In response to questions from members, the Project Manager Riverlink advised the change in procurement to an alliance was the right direction for Council. He said the decision from the Environment Court was being reviewed and full details were not yet available. He added that advisors would be looking at the cost and technical implications raised by the court. He noted an update would be reported to the Major Projects Board, and the Subcommittee when available.

 

Resolved: (S Tindal/Cr Briggs)                                            Minute No. ARSC 22406

“That the Subcommittee receives the report and notes the following:

a)         the Project Risk Register is attached as Appendix 1 to the report;

 

b)        that the resource consent was lodged in July 2021 and a decision is expected in mid-August 2022;

 

c)         a Project Design Liaison Group is being established;

 

d)        GHD has been working as Principal’s Technical Advisor and preparing documentation needed for the procurement process; and

 

e)         the procurement route has changed from a Hybrid Alliance to a Pure Alliance.”

 

10.

Update on Petone Wharf Project (22/2048)

Report No. ARSC2022/4/166 by the Head of Parks and Reserves

 

The Head of Parks and Reserves elaborated on the report. She highlighted the uncertainty around the condition of Petone’s wharf existing piles. She said the piles might need replacing.  She highlighted that cost estimates covered the wrapping and splicing of piles, not the removal and replacement of piles. She stated this presented a risk and the team was working with Calibre to work through the condition of the piles, cost implications and timeframes. She added this would not be known until the condition of the piles could be seen. She said the predominant damage to the piles could be caused by marine worms. She confirmed officers would report back to the Subcommittee once they had more information.

In response to questions from members, the Head of Parks and Reserves advised that the investigation into the piles at Petone wharf could cost hundreds of thousands of dollars.  She said officers were still getting a clear understanding of the extent of damage made by marine worms. She noted that the project had a cap of $21M in the Long Term Plan (LTP).

In response to further questions from members, the Head of Parks and Reserves advised officers were working with Greater Wellington Regional Council to assess the implications of pile replacement.  She said the project was achievable within the current budget but there was the risk that not all information was available. She confirmed that previous photographs of piles affected by marine worms were of a sample taken from the previous Days Bay wharf which was older than the Petone wharf.

The Head of Parks and Reserves advised further information was due in September 2022 and October 2022 from technical experts. She said a report, including the advice provided by Calibre, would be reported to the new Council in February 2023.

Members asked that officers report back to the Subcommittee’s meeting on
28 September 2022 with information on the piles. Members noted a report on the full design would be considered in February 2023.

A member requested that the Petone wharf project be included in the induction pack for the incoming Council.

 

Resolved: (S Tindal/Cr Edwards)                                        Minute No. ARSC 22407

“That the Subcommittee:

(1)   notes and receives the information in this report;

(2)   notes that three options for Petone Wharf have been progressed to the stage of detail design and costing and that Council will be asked to identify a preferred option in early 2023;

(3)   notes that Calibre Consulting Ltd’s most recent report confirms a substantial amount of work is required in the rebuild and that the extent of this will not be known until the structure is taken apart; and that due to this the overall residual risk rating remains high; and

(4)   notes a communication plan has been developed for the project which includes signboards on site that will provide background information, key dates and updates as work progresses.

 

11.     Information Items

a)

Naenae projects - progress update (22/2019)

Memorandum dated 10 August 2022 by the Project Manager (Naenae)

 

The Project Manager (Naenae) elaborated on the report.

In response to questions from members, the Project Manager Naenae advised that the ground and stability risks remained on the risk register because of soil quality. He noted that parts of the area were industrial and heavy metals may be present in the soil. He said these risks would be monitored and tracked until they had been reduced to a safe level or eliminated. He added that as the project progresses, the risk register would continue to be updated.

 

Resolved: (S Tindal/Cr Mitchell)                                Minute No. ARSC 22408

“That the Subcommittee receives the memorandum and notes the following progress that has been made on the Naenae projects:

 

a)    approval of the resource consent application for the Naenae Pool and Fitness Centre;

b)    off-site procurement, design activity and building consent processing is proceeding in line with the programme agreed with co-funder Crown Infrastructure Partners;

c)     commencement of the groundworks in July 2022 and the completion of the first stage of ground remediation;

d)    procurement of the major components for the building are progressing to plan and local suppliers are involved in the tendering process;

e)     design activity for the refurbishment of the old Naenae Post Office continues and an application for a change of use to a community centre is being processed by Council planners;  

f)     tenders for the refurbishment of the Old Naenae Post Office will be sought in September 2022;

g)    the cost for the Naenae Pool and Fitness Centre continues to be reviewed at regular intervals and remains within the $68M budget cap; and

h)    Council has been successful in its application to the Local Government Funding Agency’s Green, Social and Sustainability Lending Programme for the Naenae pool and fitness centre project.

 

b)

Audit and Risk Subcommittee Forward Programme 2022 (22/2002)

Report No. ARSC2022/4/149 by the Democracy Advisor

 

Members asked that reports on the Hutt City Council Growth Study and the Petone wharf be added to the forward programme.

 

Resolved: (S Tindal/Cr Briggs)                                   Minute No. ARSC 22409

“That the Subcommittee receives and notes the Forward Programme for 2022 attached as Appendix 1 to the memorandum.”

12.     QUESTIONS

There were no questions.

 

 

There being no further business the Chair declared the meeting closed at 3.14 pm.

 

 

 

 

 

 

 

 

S Tindal

CHAIR

 

 

 

 

 

 

CONFIRMED as a true and correct record

Dated this 4th day of October 2022


 

30 August 2022

Update from the Chief Executive on Hutt City Three Waters Growth Study to the Audit and Risk Subcommittee 30 August 2022

Introduction

The purpose of this update is to provide early notice to the Audit and Risk Subcommittee of a recently completed growth study by Wellington Water. The study highlights a significant shortfall in the level of investment currently planned and budgeted for three waters infrastructure in our city, particularly stormwater, based on the latest forecast growth information.

Wellington Water will present its findings to Council at a briefing tomorrow afternoon.

Officers are preparing more comprehensive advice which the Subcommittee may wish to receive and consider at its next meeting.

Background

Wellington Water has recently completed the Three Waters Growth Study for Lower Hutt which has been compiled over the past 2 years.

Wellington Water advises it has completed growth studies for all the councils in the region, though they do vary in their level of detail and how comprehensive they are depending on the funding provided (both historically and for the financial year). Wellington Water plans to publish a summary report covering all the councils (to provide the complete regional view) but have had to hold off on that while everyone gets briefed individually in advance.

The Study has been undertaken to identify three-water infrastructure improvements to accommodate predicted population growth over the next 30-years.

The study includes:

·         An assessment of three waters network constraints and opportunities to enable growth,

·         Three-waters infrastructure options development,

·          Level 1 cost estimates for each identified concept option,

·          A strategic environmental assessment that identifies contributing factors for where growth impacts the environment via the three waters networks.

Findings

The study has found that there is a significant programme of investigative, design, and physical works needed to meet the demands of future growth and bring existing networks to target levels of service.

The proposed improvements that have been identified for Hutt City Council in this study have an associated cost estimate of approximately $1.27B over 30-years of which only $0.23B (18%) is currently funded in the Long-Term Plan 2021-2031.

On a straight-line basis this equates to an additional $35M investment in infrastructure per year for the next 30 years just to meet the demand for growth. 

This is on top of the increased investment required for renewing an ageing network, a significant proportion of which is in poor condition.  In comparison this past year we spent in total $29M in capital investment (including both replacement and new works).

Due to the relatively flat nature of the Hutt Valley floor, servicing for water supply is relatively straightforward, however, the topography brings significant challenges for wastewater and more particularly for stormwater.

Servicing Wainuiomata and Stokes Valley are the most challenging and expensive due to existing topographical constraints.

Stormwater improvements make up 64% of the estimated investment for growth. ($810M)

The significant investment in stormwater is attributed to existing stormwater flooding issues and meeting targeted levels of service assumed for this study (habitable floor levels protected for 1 in 100yr + climate change).

The prioritisation of investment for new stormwater infrastructure will need further input to factor in affordability criteria, emerging environmental standards, and community expectations for levels of service.

Breakdown of Investment

The proposed capacity upgrades for city-level network infrastructure incudes:

·         Drinking water reservoir storage in Stokes Valley, Naenae, Wainuiomata and Eastbourne.

·         Wastewater pump stations and rising mains in Hutt CBD (included in the IAF bid), Boulcott, and Wainuiomata.

·         Wastewater storage at Engineered Overflow Points (EOPs) in Wainuiomata.

·         Wastewater improvements including regrading/upgrading pipes, increasing pump station capacity, and providing storage to address existing network constraints in Stokes Valley, Alicetown, Maungaraki, Seaview, Waterloo and Waiwhetu.

·         Stormwater network capacity improvements and/or flood management in Stokes Valley, Alicetown, Taita, Naenae, Melling, Woburn and Wainuiomata.

·         Stormwater management improvements for Black Creek channel and Parkway Drive; and a proposed wetland in Upper Fitzherbert in Wainuiomata.

Exclusions from this study include:

• Bulk water source, treatment and distribution (GW responsibility)

• Wastewater Joint Venture Trunk Network and Seaview WWTP

• Water quality improvements (covered by Stormwater Management Strategy/Stormwater Management Plans consent)

• Local upgrades to facilitate development


 

Update from the Chief Executive on Standard & Poor’s Credit Rating and IANZ Visit to the Audit and Risk Subcommittee 30 August 2022 

Standard & Poor’s Credit Rating

International credit-rating agency Standard & Poor’s annually review council’s credit rating. The most recent review was completed in early August 2021.

Yesterday Standard and Poor’s affirmed council’s credit rating as AA long term with “stable” outlook, and A-1+ short term. This is unchanged from last year.

Standard & Poor’s report says: 

·         Council has a supportive institutional framework, experienced management team, and strong economic profile which underpin creditworthiness. 

·         Council adopts budgets and long-term plans without delay, and it remains focused on being financially disciplined in its approach to borrowing and insurance policies. Standard and Poor’s considers Council’s debt and liquidity policies to be prudent.  

·         Council’s large capital programme reflects its decision to address previous backlogs and underspending on essential infrastructure.  

·         The large capital programme will lead to rising debt levels. Decisions to increase property rates and contributions from developers support financial sustainability and indicates the Council is aware of the financial pressures its large capital programme will bring. 

A full report will be presented to the Policy, Finance and Strategy Committee on 6 September with the agenda published today.

I would like to acknowledge the Corporate Leadership Team, our Group Chief Financial Officer Jenny Livschitz and the finance team for their work to maintain our AA rating.


 

 

International Accreditation New Zealand (IANZ)

The Subcommittee received a report on 28 June 2022 providing an update on Building Consent Authority Accreditation. There have also been regular updates to the Infrastructure and Regulatory Committee. I wanted to provide a further update to you today.

IANZ audits technical functions/procedure carried out by the Building Consents Team against building regulations and regulates ability of Building Consent Authorities (councils) to issue consents and other functions, i.e. holds approval of accreditation of BCA regulations.

The IANZ audit team was on site last week for 3 days assessing us on specific elements of compliance with building regulations. The visit involved the entire building team supported by me, the Interim Director of Environment & Sustainability Alison Geddes and other teams including IT and People & Capability.

The outcome of the audit is that our building consent authority is viewed as being low risk. The next audit will be in February 2024 which means we have moved to a two-year review cycle. IANZ will provide their initial report in the next couple of weeks. This will be fully reported through to the Infrastructure and Regulatory Committee.

Thank you to the building team for the work you have done to ensure we are operating within the regulations and to meet external audit criteria.