OPEN A G E N D A FINANCE AND MONITORING COMMITTEE MEETING. Meeting Date: Tuesday, 12 September 2017

Transcription

1 Hastings District Council Civic Administration Building Lyndon Road East, Hastings Phone: (06) Fax: (06) OPEN A G E N D A FINANCE AND MONITORING COMMITTEE MEETING Meeting Date: Tuesday, 12 September 2017 Time: Venue: 1.00pm Council Chamber Ground Floor Civic Administration Building Lyndon Road East Hastings Committee Members Officer Responsible Chair: Councillor Kerr Acting Mayor Hazlehurst Councillors Barber, Dixon, Harvey, Heaps, Nixon, Lyons, O Keefe, Poulain, Redstone, Travers (Deputy Chair) and Watkins (Quorum = 8) Chief Financial Officer Bruce Allan Committee Secretary Christine Hilton (Ext 5633)

2

3 Finance and Monitoring Committee Fields of Activity Oversight of all the Council s financial management policy and operations (including assets, cash, investment and debt management) including (but not limited to): Monitoring compliance with the Long Term Plan/Annual Plan and budget implementation. Finance and Ownership Audit and other accountability requirements; Business units/cco/ccto ownership overview; Rating matters including rating sale proceedings; Taxation. Establishing the strategic direction of Council s business units (if any), Council Controlled Organisations (CCOs) and Council Controlled Trading Organisations Other matters including: - Performance Management - Other matters not otherwise within the scope of other Committees Monitoring compliance with the Long Term Plan/Annual Plan and budget implementation. Membership Chairman appointed by Council Deputy Chairman appointed by Council The Mayor All Councillors Quorum 8 members Delegated Powers General Delegations 1. Authority to exercise all of Council powers, functions and authorities (except where prohibited by law or otherwise delegated to another committee in relation to all matters detailed in the Fields of Activity. 2. Authority to re-allocate funding already approved by the Council as part of the Long Term Plan/Annual Plan process, for matters within the Fields of Activity provided that the re-allocation of funds does not increase the overall amount of money committed to the Fields of Activity in the Long Term Plan/Annual Plan. 3. Responsibility to develop policies, and provide financial oversight, for matters within the Fields of Activity to provide assurance that funds are managed efficiently, effectively and with due regard to risk. Fees and Charges 4. Except where otherwise provided by law, or where delegated to another Committee, the authority to fix fees and charges in respect of Council activities or services.

4 HASTINGS DISTRICT COUNCIL FINANCE AND MONITORING COMMITTEE MEETING TUESDAY, 12 SEPTEMBER 2017 VENUE: TIME: Council Chamber Ground Floor Civic Administration Building Lyndon Road East Hastings 1.00pm A G E N D A 1. Apologies At the close of the agenda no apologies had been received. Leave of Absence had previously been granted to Councillor Watkins 2. Conflict of Interest Members need to be vigilant to stand aside from decision-making when a conflict arises between their role as a Member of the Council and any private or other external interest they might have. This note is provided as a reminder to Members to scan the agenda and assess their own private interests and identify where they may have a pecuniary or other conflict of interest, or where there may be perceptions of conflict of interest. If a Member feels they do have a conflict of interest, they should publicly declare that at the start of the relevant item of business and withdraw from participating in the meeting. If a Member thinks they may have a conflict of interest, they can seek advice from the Chief Executive or Executive Advisor/Manager: Office of the Chief Executive (preferably before the meeting). It is noted that while Members can seek advice and discuss these matters, the final decision as to whether a conflict exists rests with the member. 3. Confirmation of Minutes Minutes of the Finance and Monitoring Committee Meeting held Tuesday 23 May (Previously circulated)

5 4. Horse of the Year (Hawke's Bay) Limited Annual Report for the year ended 31 May 2017 and 2017/18 Statement of Intent 7 5. Non Financial Performance Report for Year Ended 30 June Draft Financial Year End Result - 30 June Omarunui Landfill Gas Generation Partnership 2018 Annual Report Additional Business Items 9. Extraordinary Business Items 10. Recommendation to Exclude the Public from Item Potential Sale of Civic Assurance House

6

7 File Ref: 17/755 REPORT TO: FINANCE AND MONITORING COMMITTEE MEETING DATE: TUESDAY 12 SEPTEMBER 2017 Item 4 FROM: SUBJECT: CHIEF FINANCIAL OFFICER BRUCE ALLAN HORSE OF THE YEAR (HAWKE'S BAY) LIMITED ANNUAL REPORT FOR THE YEAR ENDED 31 MAY 2017 AND 2017/18 STATEMENT OF INTENT 1.0 SUMMARY 1.1 The purpose of this report is present the Horse of the Year (Hawke s Bay) Limited (HOYHB) annual report for the year ended 31 May 2017 and provide Council with an opportunity to provide feedback to Council on the Horse of the Year s Draft Statement of Intent (SOI). 1.2 This issue arises from a requirement under the Shareholders Agreement that requires HOYHB to submit an Annual Report within 3 months after the end of the financial year and Statement of Intent (SOI) 3 months prior to the start of the financial year. The HOYHB financial year commences 1 June. 1.3 The Council is required to give effect to the purpose of local government as prescribed by Section 10 of the Local Government Act That purpose is to meet the current and future needs of communities for good quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost effective for households and businesses. Good quality means infrastructure, services and performance that are efficient and effective and appropriate to present and anticipated future circumstances. 1.4 The objective of this decision relevant to the purpose of Local Government is to support a major Hastings event that contributes to the provision of good local services by increasing economic activity, contributing to a resilient job rich district while also contributing to an appealing visitor destination. 1.5 This report concludes by recommending that the 2016/17 Annual Report be received and the Draft 2017/18 Statement of Intent be received with any feedback passed onto the directors of HOYHB. 2.0 BACKGROUND 2.1 The shareholding of HOYHB is made up of Hastings District Council, Equestrian Sport New Zealand (ESNZ) and Show Jumping Hawke s Bay (SJHB) with each entity holding one third of the allotted shares. Each shareholder has advanced $30,000 as shareholder loans. 2.2 Each shareholder is allowed up to 2 shareholder appointed directors and until recently each shareholder had been comfortable with just one representative each on the Board. In June ESNZ advised that they would be taking up the option of having a second appointed director and SJHB subsequently followed. The current Board is as follows: Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 7

8 File Ref: 17/755 Cynthia Bowers Independent (Chairperson) Vacancy Independent (Michael Whittaker resigned 21/7/17) Tim Aitken HDC appointment William Moffett SHB appointment Dirk Waldin SHB appointment Vicki Glynn ESNZ appointment Donald Robertson ESNZ appointment 2.3 The executed Shareholders Agreement provides the following in regard to the Annual Report: Annual Report: Within 90 days after the end of the each financial year, the Company will deliver to the shareholders an annual report which will consist of: A Chairman s report, containing a review of the Company operations with specific attention to the performance against the key performance indicators established in the respective Statement of Intent. Item 4 A comparison of actual performance with targeted performance. Annual audited financial accounts to be completed in accordance with general accepted accounting standards and to include: - Statement of Financial Position - Statement of Financial Performance - Auditor s Report 2.4 The executed Shareholders Agreement provides the following in regard to the Statement of Intent: A draft Statement of Intent is to be provided to the shareholders for comment three months prior to the start of each financial year. The Board will review any comments received from shareholders and approve the Statement of Intent prior to the start of each financial year. The Statement of Intent will address such matters as: Nature and objectives of the Company Mission Statement Shareholding Role Principal Objectives The Board s approach to Governance Strategic Direction Scope of Company Financial Forecasts including cashflow statement of financial position Key Performance Measures and Targets Reporting Requirements Accounting Policies Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 8

9 File Ref: 17/ CURRENT SITUATION 3.1 Annual Report 3.2 The 2016/17 Annual Report including the Chairman s report, report against Statement of Intent KPI s and the Financial Statements are attached as Attachment 1. The 2017 show was impacted by a wet weather event however due to the support of corporate sales (sponsorship and trade sites) and an increase in entries the HOYHB made a modest operating surplus of $28,686 compared to a loss of $187,472 in the previous year. In addition HOYHB earnt a further $170,538 in non-operating income bringing the total net surplus for the year to $199, Following on from the result of the previous year in July 2016 the Council contributed a $170,000 one off grant (included in the non-operating revenue figure above) to help put the Company on a much stronger financial footing. The Company started the year with negative equity of $179,176. Due to the grant above and the operating surplus the HOYHB finished the year with positive equity of $20,048. This puts the HOYHB in a good position to plan for the 2018 show. 3.4 The Statement of Intent non-financial measures have been also reported against, all of which have been achieved. 3.5 Statement of Intent 3.6 The Draft 2017/18 Statement of Intent was received by Council on August 18 th The Draft 2017/18 Statement of Intent (Attachment 2) satisfies the requirements of the Shareholders Agreement, provides a budgeted financial position for 2017/18 and includes a number of relevant performance objectives. 3.8 The financial projections outlined in the Statement of Intent project a small surplus in 2017/18 which continue into future years. The projected financial result for 2017/18 when compared to the actual 2016/17 result is achieved through increased revenue predominantly from charitable trust funding and sponsorship and trade rents. The 2017/18 forecast has held event expenses generally in line with prior year actuals. 3.9 The Key Performance Indicators contained in the Statement of Intent for 2017/18 are unchanged from 2016/ The 2017/18 Statement of Intent has included a risk assessment. This identifies a number of risks to the HOY, assesses the exposure that this creates and identified any mitigation strategies that are available. The assessed risks and mitigation strategies are in line with last year s Statement of Intent The draft Statement of Intent meets the requirements of the Shareholders Agreement. Item OPTIONS 4.1 Council can receive the HOYHB 2016/17 Annual Report. Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 9

10 File Ref: 17/ Council can receive the draft 2017/18 Statement of Intent. Council can also request directors of HOYHB to consider changes to the Statement of Intent if it wishes. The directors of HOYHB would then need to consider the request, with consideration of the wishes of the other 2 shareholders, and decide if a change is appropriate. Item SIGNIFICANCE AND CONSULTANT 5.1 The issues for discussion are not significant in terms of the Council s policy on significance and engagement and no consultation is required. 6.0 PREFERRED OPTIONS AND REASONS 6.1 The preferred option is for the 2016/17 Annual Report and the draft Statement of Intent for 2017/18 be received with any suggested changes to the Statement of Intent passed onto the HOYHB Board. 6.2 The Draft 2016/17 Statement of Intent presented by HOYHB satisfies all the requirements as set out in the Shareholders Agreement and clearly sets out the nature and scope of the HOYHB activities and its performing targets. 6.3 There are no direct financial implications for Council in receiving the Draft 2017/18 Statement of Intent for HOYHB. 7.0 RECOMMENDATIONS AND REASONS A) That the report of the Chief Financial Officer titled Horse of the Year (Hawke's Bay) Limited Annual Report for the year ended 31 May 2017 and 2017/18 Statement of Intent dated 12/09/2017 be received. B) That Council receive the Horse of the Year (Hawke s Bay) Limited 2016/17 Annual Report. C) That the Draft 2017/18 Statement of Intent for Horse of the Year (Hawke s Bay) Limited be received with any feedback passed on to the directors of Horse of the Year (Hawke s Bay) Limited for consideration. With the reasons for this decision being that the objective of the decision will contribute to meeting the current and future needs of communities for good local public services in a way that is most cost-effective for households and business by: i) supporting and attracting business, building a resilient job rich district while also contributing to an appealing visitor destination. Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 10

11 File Ref: 17/755 Attachments: 1 Annual Report for the year ended 31 May 2017 EXT /18 Draft Statement of Intent EXT Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 11

12 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 12

13 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 13

14 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 14

15 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 15

16 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 16

17 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 17

18 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 18

19 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 19

20 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 20

21 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 21

22 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 22

23 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 23

24 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 24

25 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 25

26 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 26

27 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 27

28 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 28

29 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 29

30 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 30

31 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 31

32 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 32

33 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 33

34 Annual Report for the year ended 31 May 2017 Attachment 1 Attachment 1 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 34

35 2017/18 Draft Statement of Intent Attachment 2 Attachment 2 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 35

36 2017/18 Draft Statement of Intent Attachment 2 Attachment 2 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 36

37 2017/18 Draft Statement of Intent Attachment 2 Attachment 2 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 37

38 2017/18 Draft Statement of Intent Attachment 2 Attachment 2 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 38

39 2017/18 Draft Statement of Intent Attachment 2 Attachment 2 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 39

40 2017/18 Draft Statement of Intent Attachment 2 Attachment 2 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 40

41 2017/18 Draft Statement of Intent Attachment 2 Attachment 2 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 41

42 2017/18 Draft Statement of Intent Attachment 2 Attachment 2 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 42

43 2017/18 Draft Statement of Intent Attachment 2 Attachment 2 Item 4 Finance and Monitoring Committee 12/09/2017 Agenda Item: 4 Page 43

44

45 File Ref: 17/769 REPORT TO: FINANCE AND MONITORING COMMITTEE MEETING DATE: TUESDAY 12 SEPTEMBER 2017 Item 5 FROM: SUBJECT: STRATEGY MANAGER LEX VERHOEVEN NON FINANCIAL PERFORMANCE REPORT FOR YEAR ENDED 30 JUNE SUMMARY 1.1 The purpose of this report is to update the Committee on achievement against its non-financial performance management framework. 1.2 This issue arises from legislative requirement to report against Council s performance management framework within its Annual Report. 1.3 The Council is required to give effect to the purpose of local government as prescribed by Section 10 of the Local Government Act That purpose is to meet the current and future needs of communities for good quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost effective for households and businesses. Good quality means infrastructure, services and performance that are efficient and effective and appropriate to present and anticipated future circumstances. 1.4 This report relates to all elements of the purpose of Local Government as set out in the Local Government Act This report is for information only, and contains unaudited information. The audited version will be incorporated in the Council s Annual Report for Council adoption in October BACKGROUND 2.1 The Council s Performance Management Framework has 3 levels as follows: 1) Future Goals (what we are trying to achieve over time trends and shifts) 2) Today s Promises (levels of service we have promised to the community) 3) Smart Business (internally focused on continuous improvement) 2.2 The Performance Management Framework forms part of the adopted Long Term Plan which the Council is legally required to report against annually. The Council is currently developing its Long Term Plan which provides the opportunity to amend the Performance Management Framework should Council wish to do so. 2.3 Level Two (Today s Promises) is the primary focus of this report. It captures the performance information contained within the Council s Long Term Plan (LTP) and has three separate reporting components as follows: 1) Levels of Service 2) Customer Experience 3) Key Actions Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 45

46 File Ref: 17/ Amendments to the Local Government Act 2002 introduced some changes to how Council s report against performance information. A schedule of Mandatory Measures which have been standardised across the country are required to be reported against for the second time as at 30 June In regard to the Hastings District Council, these measures cover the infrastructural activities of Water Supply, Stormwater Disposal, Sewage Disposal, and Roads and Footpaths. Item CURRENT SITUATION 3.1 A summary of Council performance is contained at the beginning of Attachment 1, and provides a high level overview of performance. 3.2 In regard to the 70 levels of service measures within the Long Term Plan, 87% of those able to be measured in 2016/17 were either fully or substantially achieved. Measures not achieved relate mainly to the impact of the Havelock North water contamination event which impacted on the number of loss of service complaints, higher water loss and timeliness in terms of restoration of service targets due to the higher number of water leaks and capacity to fix these. 3.3 In regard to the 9 customer experience measures, 8 were either fully or substantially achieved in 2016/17. The remaining measure was on the margin of being substantially achieved. 3.4 In regard to the 25 key actions contained in the Long Term Plan, all are either on-track or completed. 3.5 The summary section in Attachment 1 also provides an overview of other customer feedback, particularly in the customer service and contact centre. 3.6 The remainder of Attachment 1 contains the full performance framework which is currently being audited, and will form part of the Council s Annual Report for adoption in due course. 4.0 OPTIONS 4.1 This is a year-end report against Council s adopted performance management framework and an analysis of options is not required. 5.0 SIGNIFICANCE AND ENGAGEMENT 5.1 Reporting on achievement against Council s performance management framework does not trigger any matters of significance or any consultative provisions in the Local Government Act The Council s Annual Report (and Annual Report Summary) are the statutory documents that outline annual performance to the community. 6.0 RECOMMENDATIONS AND REASONS A) That the report of the Strategy Manager titled Non Financial Performance Report for Year Ended 30 June 2017 dated 12/09/2017 be received. Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 46

47 File Ref: 17/769 With the reasons for this decision being that reporting on performance supports the purpose of local government by ensuring that the objectives that have been set to meet the current and future needs of the community are being achieved. Item 5 Attachments: /17 Year End Non-Financial Performance Report cp Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 47

48 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 48

49 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 49

50 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 50

51 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 51

52 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 52

53 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 53

54 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 54

55 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 55

56 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 56

57 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 57

58 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 58

59 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 59

60 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 60

61 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 61

62 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 62

63 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 63

64 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 64

65 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 65

66 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 66

67 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 67

68 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 68

69 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 69

70 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 70

71 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 71

72 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 72

73 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 73

74 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 74

75 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 75

76 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 76

77 2016/17 Year End Non-Financial Performance Report Attachment 1 Attachment 1 Item 5 Finance and Monitoring Committee 12/09/2017 Agenda Item: 5 Page 77

78

79 File Ref: 17/770 REPORT TO: 2. FINANCE AND MONITORING COMMITTEE MEETING DATE: TUESDAY 12 SEPTEMBER 2017 FROM: FINANCIAL CONTROLLER AARON WILSON CHIEF FINANCIAL OFFICER BRUCE ALLAN Item 6 SUBJECT: DRAFT FINANCIAL YEAR END RESULT - 30 JUNE SUMMARY 1.1 The purpose of this report is to inform the Council of the unaudited accounting and rating result for the year ended 30 June 2017 and for the Council to allocate the reported surplus. It also seeks the approval from Council to carry forward project budgets. This report has been prepared on the basis that the Hastings District Rural Community Board has approved the recommendations submitted to it on 11 September 2017 relating to the year-end rating result for Rating Area The Council is required to give effect to the purpose of local government as prescribed by Section 10 of the Local Government Act That purpose is to meet the current and future needs of communities for good quality local infrastructure, local public services, and performance of regulatory functions in a way that is most cost effective for households and businesses. Good quality means infrastructure, services and performance that are efficient and effective and appropriate to present and anticipated future circumstances. 1.3 The rating result is favourable to budget. This is a consequence of the adoption of sound financial management including active treasury management, continued pursuit of efficiencies and delays in some projects. 1.4 The unaudited rating result for the 2016/17 year is a positive result and is as follows: Rating Area 1 Rating Area 2 Total for the District $777,411 Surplus $380,959 Surplus $1,158,370 Surplus 1.5 The report recommends that the rating surplus, is used to replenish the Council s contingency fund, reduce the deficit of the Rating Area 1 Water Supply targeted rate account and to allocate the remaining surplus in Rating Area 2 to contribute to the Infrastructure Reserve. 1.6 The report also recommends that budget allocations proposed to be carried forward from the 2016/17 year to 2017/18 to enable project completion be approved. Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 79

80 File Ref: 17/ BACKGROUND Council is provided with quarterly financial reports during the year with the unaudited year end result presented annually at the September Finance and Monitoring Committee meeting. Item Officers report on the operating financial result (Operating surplus/deficit) as well as the rating result. The operating (accounting) financial result is reported on quarterly during the year and at year end a report is prepared on the rating result in addition to the accounting result. 2.3 The rating result differs from the accounting result in respect of non-cash items such as depreciation, gains on interest rate swaps, vested assets, impairment of assets and investments and development contributions income which have no impact on setting rates and are therefore excluded from the rates calculations. The rating result reports on the variance of rates collected and net total expenditure (including capital and reserve transfers) for Council. 2.4 The Financial Reports attached to supplement this report include: Attachment 1 Interim Rating Result for the year ended 30 June 2017 Attachment 2 Dash Board Summary of Financial performance Attachment 3 Draft Unaudited Financial Statements Attachment 4 Detailed Carry Forward Schedule. 2.5 The financial reports contain summarised information. Please feel free to contact the report writer or the Chief Financial Officer directly on any specific questions from the reports before the meeting. This will ensure that complete answers can be given at the meeting on the detail that forms the basis for these reports. 3.0 CURRENT SITUATION 3.1 The 2016/17 financial year has seen a continuation of the uplift in the Hawke s Bay economy. In terms of Council performance, almost all areas of Council have met their respective revenue targets with the exception of Parking. Parking revenue is down due to the unbudgeted extension of the parking trial which had been budgeted for 6 months and was subsequently extended following Council resolution for the balance of the year. Where possible costs were reduced to offset as far as is practicable these shortfalls in revenue. 3.2 Since the financial quarterly report for the year to March 31 was presented in May, most of the issues and trends identified have remained on the same track to the end of the financial year. This report sets out the financial performance (accounting result) and the rating result for the year ended 30 June These results are unaudited and may be subject to minor adjustments. 4.0 THE RATING RESULT 4.1 Council adopts strong financial management practices. Council prepares a balanced budget to deliver Council s desired programme, including high levels of fiscal tensioning and stretch targets. In addition projects are only proceeded with after a thorough review and analysis. This also ensures that projects are Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 80

81 File Ref: 17/ not undertaken until they are required thereby deferring expenditure and reducing debt and interest costs to Council. 4.2 Interest savings of $706,854 contribute significantly to the surplus, with savings across Council contributing $451,515 to the balance of the surplus. Item 6 Interest savings are mainly due to: effective treasury management favourable market conditions with interest rates being at 30 year historical lows projects being deferred until the later part of the year or carried forward 4.3 Council has managed its interest rate risk in the short and medium term through its interest rate risk position (swaps) and Council has a strong debt maturity portfolio which is cost effective. Council s weighted average cost of funds was 4.97% at 30 June 2017 (5.30% at 30 June 2016). This is the lowest weighted average cost of funds for many years. 4.4 Overall the net interest savings were $1,175,203 of which $706,854 directly impacted on the overall rating result and includes interest income which is not budgeted for. The remainder of the savings were applicable to targeted rate accounts (Water Supply, Wastewater and Effluent Disposal) ($292,355) and due to growth projects not progressing ($175,995) and these savings were used to offset the loan funding required on growth projects which are repaid through development contributions. Budget Actual Variance INTEREST $ $ $ Interest HDC Loans* 2,421,800 1,905, ,665 Interest HDC Targeted Rate areas 1,318,300 1,025, ,355 Interest Growth Loans 787, , ,995 Interest Income* - (190,189) 190,189 TOTAL NET INTEREST 4,527,661 3,352,458 1,175,203 * Contribute to Rating Surplus 4.5 The positive result has also been due to sound management of council budgets despite the impacts of the August 2016 Havelock North water contamination event. Management have actively managed all budgets to meet the changing environment. 4.6 Officers during the year have managed budgets to meet a number of unbudgeted items that arose either as part of the normal course of business or as resolved by Council with the Havelock North water contamination event and the cashflow injection for the Horse of the Year being two significant unbudgeted events. 4.7 The rating result for the 2016/17 financial year is a positive result. Rating Area 1 Rating Area 2 Total for the District $777,411 Surplus $380,959 Surplus $1,158,370 Surplus Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 81

82 File Ref: 17/ This result compares with a $2,055,979 surplus reported in 2015/ The rating surplus is less than 1% of the total reported revenue in the 2016/17 Statement of Comprehensive Revenue and Expense. Achieving this positive result where there are continued pressures on Council funds is reflective of the prudent financial strategies adopted by Council. Item In addition to the rating surplus, the Council has received for allocation, for the first time, revenue from the surpluses generated at the Landfill. Previously surpluses generated at the Landfill were used to replay Landfill debt. The remaining debt was extinguished by application of surpluses from the 2015/16 financial year. This now leaves the Council with a decision on how to allocate revenues from the Landfill in the 2016/17 year The Landfill is essentially a joint venture between HDC and Napier City Council. Any surplus generated are split, in line with the ownership shares for each council to determine what they do with it. Within HDC ownership, there is also a breakdown between Rating Area 1 and Rating Area 2 that reflects ownership of the Landfill at the 1989 formation of the District and subsequent amendments During 2016/17 the Landfill commenced harvesting a mature forest which was completed in August. At the time of writing the net revenue from the harvest had resulted in a $1.45m return with HDC s share of that at $0.92m. While the harvest has been completed the final costs of the harvest have yet to be received so a final net position cannot yet accurately be determined. However Council will have funds to allocate In addition to the above, which is after all necessary reserve transfers have been made, there are a number of significant activities where surpluses or deficits are ring fenced and/or transferred to reserves and include: 2017 Surplus / (Deficit) Reserve Balance as at 30 June 2017 $ $ Opera House Operations 160,516 1,012,275 Targeted Rate Accounts Water Supply RA1 (2,204,785) (1,695,908) Water Supply RA2 (67,363) (243,303) Waste Water 637,574 1,048,028 Refuse & Recycling 30,196 1,365, The Landfill had another strong year with increased tonnages reflecting the buoyant economy resulting in a HDC share of surplus funds of $1.47m (excluding the harvest of the landfill forest). Council has the choice to use this landfill surplus as it sees fit. There is no reserve for the Landfill the activity is currently referred to as being in a negative debt position In allocating surpluses and reserves, Council s prudent financial policy approach has traditionally focused on debt repayment or borrowing reduction. In Rating Area 2, priority has been given to creating reserves for flood damage and infrastructure needs. Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 82

83 File Ref: 17/ In determining priorities for surplus and revenue allocation, staff advise that the following priority order would be in line with Council s prudent financial management approach: Community Health Assistance Fund (Funding RA1 and RA2) Partial rebuild of the Contingency Fund (RA1 and RA2) water supply related debt (targeted rate account deficit (RA1) Capital Reserve (RA2) other debt repayment (if any) (RA1 and RA2) Item 6 These priorities have been reflected in the recommendations set out below. 5.0 EXTERNAL DEBT 5.1 Total net borrowing as at the end of June is $60.7m which is significantly lower that what was projected in the Long Term Plan (LTP) which had forecast debt levels of $100m. Committed borrowing facilities in place are $70.7m, providing headroom of $10m. The liquidity ratio is at 116% compared to the policy minimum of 110% and is therefore above the minimum requirements set by Council. 5.2 The reduced debt levels compared to the LTP reflects the current state of a number of large projects which for a number of reasons have been deferred and include projects like the Opera House strengthening, Whakatu Arterial and Irongate and Omahu Road industrial developments. Prudent management of Council s financial affairs has created capacity for future borrowing requirements. 6.0 THE UNAUDITED ACCOUNTING RESULT 30 June June 2016 $'000 $'000 Facilities at start of year 60,741 70,741 New/matured facilities (net) 10,000 (10,000) Facilities at end of year 70,741 60,741 Borrowing at start of year 50,741 60,741 New Loans Drawn 15,000 0 Repayment of Loan (5,000) (10,000) Net borrowings at end of period 60,741 50,741 Plus unutilised facilities 10,000 10,000 Total borrowing facilities available 70,741 60,741 Liquidity Ratio 116% 120% 6.1 Set out below is a summary of the draft unaudited operating accounting result for the 2016/17 financial year. Please note that this is not the same as the rating result. Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 83

84 File Ref: 17/ Unaudited Operating Accounting Result Budget Council $ 000 Actual Council $ 000 Variance $ 000 Operating Revenue 113, ,879 13,448 Less Operating Expenditure 106, ,847 7,221 Net Surplus/(Deficit) 6,805 13,032 6,227 Gain / (Loss) Revaluations 59,562 29,118 (30,444) Net Surplus after accounting gains / losses 66,367 42,150 (24,217) Item The draft unaudited financial result for the year ended 30 June 2017 before gains or losses on revaluations is a surplus of $13.0m with favourable variance to the budget of $6.2m. 6.3 Revenue has a favourable variance of $13.4m. The increase in revenue compared to budget is made up of the following activities: NZTA Subsidies are $6.8m above budget with the Whakatu Arterial being the primary driver, note that this had been budgeted for in the previous year, Development Contributions are $2.3m above budget with large contributions received from the Irongate and Omahu Road development areas driving this increase. Fees and Charges are above budget by $4.9m. This increased revenue has been achieved across quite a number of Council activities with Rural Fire recoveries ($1.2m above budget), Landfill through increased tonnages ($1.6m) and Splash Planet attendance and insurance proceeds ($0.5m) being the larger contributors. There was also $2.4m of unrealised gains on interest rate swaps which are not budgeted for and form part of Other Revenue. 6.4 The unrealised gain on interest rate swaps is an accounting entry and reflects the potential gain available to Council of replacing all of its interest rate swaps at the prevailing swap interest rates on 30 June Council is however extremely unlikely to be put in that situation and the gain is therefore recognised as an unrealised gain. 6.5 Expenditure is higher than budgeted by $7.2m and higher than last year by $10.0m. The key drivers for this increased expenditure above budget are: Water Supply operational costs are $2.3m over budget following the Havelock North water contamination event. Event response costs which were funded from the Contingency fund, insurance proceeds, a contribution from MCDEM and allocations from last year s surplus amounted to $1.9m. Rural fire suppression costs were $1.1m over budget due to the large February fires. During the year a decision has made to expense the Civic Square redevelopment expenditure ($0.7m) as noted in paragraph 3.11, this is therefore shown as additional operating expenditure this year. Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 84

85 File Ref: 17/ Offsetting this increased expenditure was a saving against budget for finance costs of $1.0m 6.6 All asset classes are on a revolving revaluation cycle, the three water assets were revalued last year, this year the revaluation of the transportation and Parks and Reserves assets have been the major revaluation activity. The overall revaluation for the transport activities including land showed a $12.2m increase in value to $1,101m, which represents a 9.3% increase on the base asset values. The Parks and Reserves assets are valued at $31.2m which represents a 47% increase and reflects the current maturing of information and knowledge of this asset class. The overall revaluation gain as recorded in the Statement of Comprehensive Income is a gain of $26.1m compared to the LTP budget of $59.5m. Item Economic Growth and Organisational Improvement The new Economic Growth and Organisational Improvement (EGOI) Group had an overall group result of $932,906 favourable to budget. The key drivers were in the Economic Development budget with underspends with the Financial Incentives Programme of $327,500, Commercial Developments ($107,500) and China ($86,700) projects. 6.8 Corporate, Finance Services and Human Resources Included in this group of activities are the support services of Finance, HR, Democratic Support, Leadership and the Chief Executive s Office. These activities have been managed either in line with budget or slightly under budget. Also included are the Civil Defence and Rural Fire activities. 6.9 Community Facilities & Programmes This group of activities has an unfavourable variance against budget of $692,936 primarily due to the write-off of previously capitalised expenditure associated with the development of the Civic Square redevelopment project. This expenditure of $717,699, incurred between 2010 and 2015 had previously been shown as Work in Progress and included on the Balance Sheet as a fixed asset The Opera House continued to operate at levels below budget with a $231,000 favourable variance due to its continued closure. This variance was transferred to the Opera House Operations reserve which now has a balance of $1,012,275 and will be available for Council when the facility is reopened A full report for the year on Splash Planet has already been presented to Council. Both revenue and expenditure were ahead of budget with a net favourable result compared to budget of $469,000 which included insurance proceeds from the Pirate Ship of $250, Planning & Regulatory Services Planning and Regulatory revenue is $39,883 favourable to budget. Fees and charges across the group have been the main driver, with Building consents, community safety, Resource administration and environmental management finishing the year $250,389 favourable to budget. Offsetting this is lower parking Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 85

86 File Ref: 17/ revenues driven by the free parking trial and lower infringement revenues Operational expenditure for the group is unfavourable to budget by $17,645. This variance has a number of significant overs and unders which effectively net each other off. Regulatory services which includes Parking, Animal Control and Security are $228,358 favourable to budget, with lower costs in contracting and legal services in parking helping to offset the lower revenues received in that area. Environmental management is also favourable by $118,660 and is driven by vacancy and lower contracting costs. Building services are above budget by $324,739, with higher personnel and contracting costs being the main drivers. These higher costs in the building area are offset to some degree with higher than budgeted revenues earned, $100,197. Item Asset Management The Landfill received increased tonnages compared to last year and budget with $818,596 more revenue (excluding the forestry harvest) generated than last year and $1,692,265 more than budget. This increased revenue has translated into a HDC share of the surplus of $1,615, The Landfill forestry harvest had as at 30 June harvested 70% of a 43ha mature forest with HDC s share of the harvest revenue amounting to $1.17m recorded in the year ended 30 June The surpluses generated from the Landfill are released to the shareholding Council s and it is up to the two Councils as to what they decide to do with those funds. In previous years HDC has decided to repay landfill debt with those surpluses, however with all landfill debt now repaid Council can decide how it wishes to allocated those funds Stormwater expenditure is under budget by $270,029 due to HBRC Consent monitoring cost being $61,436 under budget and has been carried forward into 2017/18 to complete the Riverslea and Ruahapia assessments Effluent Disposal costs are under budget by $228,786 due to lower than budgeted electricity costs $35,766 and contracted services costs $98,179 lower than budget due to reduced monitoring and odour control costs Parks operational expenditure was $1,340,000 favourable due to a proposed grant of $1,450,000 to the Hawkes Bay Community Fitness Centre Trust carried over into 2017/18. The Maintenance Group (Council s service delivery unit) returned a $17,000 surplus, being close to breakeven as planned Building Service costs were $255,000 favourable due to lower than planned maintenance and personnel costs. Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 86

87 File Ref: 17/ The Rating Area 1 Water Supply targeted rate account has incurred a number of additional costs this year following the Havelock North water contamination event and has run at a $2.2m deficit due to increased operational costs associated with increased compliance and monitoring, treatment and pumping costs. The closing balance of this account as at year end is a deficit of $1.7m. Item Waste water incurred reduced reactive maintenance costs during the year and ran $0.6m surplus which has been left in the targeted rate account and will reduce the impact of increased expenditure expected in future years Water Contamination Event 6.13 As Council has been advised previously, the contingency budget has been assigned to meet legal, technical investigation and general incident response costs in relation to the water contamination event of August last year. Budget from the 2015/16 rating surplus was also allocated and used for the purposes for which they were set aside which included meeting increased water testing requirements, engineering and technical investigations, the remissions of the water supply targeted rate and assistance to Havelock North businesses affected by the event Officers have worked closely with the Ministry of Civil Defence and Emergency Management (MCDEM) since the event, with MCDEM agreeing to contribute $116,564 towards the welfare response. The Council was very grateful for this assistance. Council s Statutory Liability insurers have also settled on the claim for costs associated with the HBRC prosecution with $220,000 plus GST received in July The following table is a summary of the incident expenditure and the funding that has been provided for this. As at 30 June, the following expenditure had been incurred and has been provided for by a number of budget provisions as detailed above. BUDGET AND OTHER FUNDING $ EXPLANATION Water Event costs 300, Surplus allocation Business Recovery package 110, Surplus allocation Economic Development Cost centre budget 47,000 Financial Incentive carry forward allocation Contingency budget 1,188,000 CEO budget able to be applied to extraordinary events Statutory Liability Insurance 220,000 Insurance claim settled Ministry of Civil Defence & Emergency management 116,564 Funding for welfare response received Total Funding 1,981,564 EXPENDITURE Funding sources Welfare response 123,615 MCDEM $116,564 Havelock North Business Assistance 156,621 Business Recovery package plus $40k Economic Development budget Investigations 1,064,921 $300,000 from rating surplus. Contingency Budget and Insurance Claim General Incident response 277,907 Contingency budget. Legal - Government Inquiry 287,794 Contingency Budget Legal - HBRC 70,705 Prosecution costs funded by Statutory liability insurance Total Costs 1,981, Water Operations Following the August water contamination event water supply operational costs have risen significantly with chlorination treatment, increased water quality monitoring, increased water supply network maintenance and higher than normal electricity usage all contributing. As at 1 July 2016 the Rating Area 1 Targeted Rate water account had a positive account balance of $0.5m which has contributed some way towards the additional expenditure incurred. The year-end position for Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 87

88 File Ref: 17/ the RA1 Water Account is a deficit of $1.7m. In preparing the 2017/18 Annual Plan it was expected that the Water Account would be in deficit at year end and the budgeted increase in the Water Supply Targeted rate in 2017/18 for all urban properties had assumed a deficit starting point. Item The Water Account acts effectively as a separate account that often runs in deficit due to the sometimes lumpy and response oriented nature of expenditure and work. This approach allows Council to spread and recoup required funding over time without overburdening ratepayers in any one year. The current year s expenditure while unexpected at the beginning of the year, is being treated in line with this approach. However, given the projected investment on water supply facing Council, any action that Council can take to funding costs in this account now will help smooth and reduce rating impacts projected for future years. 7.0 TRANSFER TO RESERVES 7.1 Splash Planet Reinvestment The annual Splash Planet budget contains a provision of $100,000 towards new or upgraded attractions at Splash Planet. Due to the nature and cost of the attractions, this budget is not spent every year and last year the Splash Planet Reinvestment Reserve was created. The Splash Planet Reinvestment Reserve has a balance of $923,360. In addition to this annual budget, there is a standing process whereby Council considers at this time each year a transfer up to a further $100,000 to the Splash Planet Reinvestment Reserve should Splash Planet achieve a result better than budget and if the overall Council surplus is sufficient enough to allow such a transfer. However, given Council s other financial priorities, that transfer is not recommended in this year. 8.0 CARRY FORWARD SCHEDULE 8.1 Included in Attachment 4 is a Schedule of Projects and budget amounts that officers have requested to be carried forward to the 2017/18 year. Management have reviewed these requests and also compared them to project budgets in the 2016/17 year to ensure that the appropriate amount is being carried forward. 8.2 While the level of carry forwards requested at $43.5m are marginally down from last year ($51.8m), they still represent a significant increase from previous years. 8.3 The level of carry forwards from rates funding has reduced from last year to $2.6m ($4.2m last year). The significant driver of this reduction is the complete utilisation of the Contingency Fund which had been carried forward from prior years. While the table provides a summary of the major carry forward items, the $1.195m of rates carry forwards classified as other is made up of over 30 different carry forward projects. 8.4 Included in the Loan Funded carry forwards is $5.5m of net funding for the Opera House for 2017/18. It is expected that total expenditure for the Opera House and Plaza will amount to $9.0m during this period with funding from the Ministry of Culture and Heritage to be received during this time of $3.5m. The balance of this project will be re-budgeted in the Long Term Plan. Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 88

89 File Ref: 17/ Carry Forward Summary Growth $ $ Omahu 5,542,607 Lyndhurst 3,355,109 Medium Density Housing 1,385,250 Irongate 1,332,000 Havelock Hills 1,166,000 Arataki 818,813 Northwood Reserve 437,000 Iona / Middle 200,000 Subdivision Support 131,000 14,367,779 Rate Funded Youth Development 181,500 Services Review 164,000 Financial Incentives 150,000 Haumoana shingle replenishment 150,000 Waste Futures 140,000 Havelock North library reconfiguration 133,000 Henderson Rd Transfer Station 120,000 Strategy - Iona \ Middle road 113,000 Other 1,195,189 2,346,689 Rates/Subsidy Model Communities 459,896 Karamu Road 168, ,896 Loan Funded (includes NZTA subsidised) Opera House Earthquake Strenthening 5,500,000 Te Mata Water Services Upgrade 2,063,900 Heretaunga Street Water Upgrade 2,050,857 New Water Source 1,788,500 HBCFC Trust Capital Contribution 1,450,000 Railway Rd - Racecourse to Murdoch 1,313,145 Clifton Revetment 1,067,500 Te Mata Peak Upgrade 975,000 Outfall 871,000 Rising mains 864,000 CBD and Suburban Developments 535,000 Trunk Sewers 498,000 Sportspark Development - Percival Road upgrade 488,000 Eastbourne Pump station 420,873 Planned Sewer Renewals 406,000 Wastewater Network Model 348,000 Landfill Valley Development A & D 323,176 Flow Monitoring Upgrades 274,000 HB Showgrounds 250,000 Dog Pound Upgrade 226,000 Reactive Sewer Renewals 201,000 Native Tree Streets - Northwood Stormwater catchment 200,000 CBD & Suburban Re-Development-Misc Parks 175,423 Other 2,454,925 24,568,876 Reserves/Loan/Subsidy Crematorium Chapel (Reserve/Loan) 872,000 HPMV Structural Improvements (Loan/NZTA subsidised) 738,670 1,610,670 Total Carry Forwards 43,521,910 Item ALLOCATION OF RATING SURPLUS 9.1 Council s Treasury Policy states the following on the allocation of surpluses: The funds from all asset sales and operating surpluses will be applied to the reduction of debt and/or a reduction in borrowing requirements, unless the Council specifically directs that the funds will be put to another use. 9.2 The practice for Rating Area 2 has been that the surplus is transferred into the Rural Flood and Emergency Event Reserve and used to repay RA2 debt. All Rating Area 2 debt has now been repaid and the Hastings Rural Community Board recommended in 2015 that the target for this reserve be increased to Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 89

90 File Ref: 17/ $2.0m. It has been recommended to the Hastings Rural Community Board that the Rating Area 2 surplus be used to contribute to the Rating Area 2 Capital Reserve. 9.3 The Rating Area 1 surplus is usually used to repay debt although some additional projects have been funded from the surplus in the past as a way of offsetting the need for additional debt or rates funding. However the events of 2016/17 have in particular put financial pressure on the Rating Area 1 Water Supply Targeted Rate account and Council s contingency fund. Item As per 4.16 the following priorities for surplus and reserve allocations are below. Detailed comment on some of the proposed allocation decisions are: Havelock North Water Contamination Community Health Assistance Fund On June 9 th 2017 Council resolved to provide financial assistance to those people who have suffered long term health impacts caused by the Havelock North water contamination event and resolved: That Option 2 Establish a fund with a budget provision of up to $100,000, be adopted to assist those people suffering long term health impacts caused by the Havelock North water contamination event in August No budget provision was made in the 2017/18 budget and this is therefore currently unbudgeted. An allocation from the 2016/17 surplus is recommended to be set aside to provide the funds for this decision of Council It is also recommended that a Contingency Reserve be created where annual contributions can be made to build a reserve capable of meeting unforseen events. The creation of a reserve would stop the need to continually carry forward the Contingency Fund. Providing the Chief Executive delegated authority to prioritise and allocate funds would be in line with the current Contingency Fund arrangements Contingency Fund and Water During 2016/17 Council s contingency budget has been used to respond to the Havelock North water contamination event. This fund had been built up over a number of years through carrying forward the contingency budget when it had been unspent. Such an approach has enabled Council to respond to a large unforeseen event without impacting on rates or putting the Council at risk of delivering a rating deficit. The contingency fund at the start of the year had accumulated a budget of $1.1m and at year end this fund had been expensed. The 2017/18 Annual Plan has $200,000 budgeted to replenish the fund, however this does leave Council a little exposed if a major adverse event or an opportunity arose that was unexpected and unforseen. It is recommended that $500,000 be set aside from the surplus to replenish the contingency fund. It is also recommended that the balance of the Rating Area 1 surplus be allocated to the Water Supply targeted rate account Landfill additional surplus allocation Officers are strongly of the view that Council s current financial needs are in the water area. It is therefore recommended that revenues from the Landfill surplus be allocated as follows: Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 90

91 File Ref: 17/770 Total to allocate $1,615,803 Rating Area 1 Allocation to Water Targeted Rate Account $1,412,373 Rating Area 2 Allocation to RA2 Capital Reserve $203,430 Total Allocated $1,615, Item 6 In 2008 the Rural Community Board recommended to Council that the landfill rating formula be changed to designated population which is the basis for the allocation above. This recommendation was approved by Council. 9.5 Given the extraordinary events of 2016/17 and the projected increases in the Water Supply Targeted Rate in future years it is recommended that the Rating Area 1 share of the 2016/17 Landfill surplus be allocated to the Rating Area 1 Water Supply targeted rate account. It is not in keeping with sound financial management to always jam jar account for future development opportunities and create reserves for potential future expenditure. It would be considered prudent for Council to allocate this additional surplus to the Rating Area 1 water account to clear that accounts current deficit and reduce the impact of future rate increases. It is also considered prudent for the Rating Area 2 share of this surplus to be allocated to the Rating Area 2 Capital Reserve. 9.6 The Hastings District Rural Community Board will meet on 11 September 2017 and the recommendation to the Board are as follows: A) That the report of the Financial Controller titled Draft Financial Year End Result - 30 June 2017 dated 12/09/2017 be received. B) That the Hastings District Rural Community Board recommend to Council that the Rating Area 2 surplus be allocated to the Rating Area 2 Capital Reserve. The decision of the Hastings District Rural Community Board will be reported verbally to the Committee. 9.7 The recommendation of this report taking into consideration the recommendations to the Hastings District Rural Community Board is to allocate the rating surplus as per the table below: TOTAL Rating Rating Area 1 Area 2 Surplus on General Rate 1,158, , ,959 Proposed projects to be funded from surplus Community Health Assistance Fund 100,000 80,000 20,000 Contingency Reserve 500, , ,000 Rating Area One Water Supply Targeted Rate 297, ,411 - Rating Area Two Capital Reserve 260, ,959 Total Allocation 1,158, , ,959 Surplus from Landfill RA1 Water Supply Targeted Rate Account 1,412,373 RA2 Capital Reserve 203,430 Total Surplus from Landfill Allocation 1,615,803 1,412, ,403 $ Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 91

92 File Ref: 17/ SIGNIFICANCE AND CONSULTATION 10.1 This report does not raise any issues that are significant in terms of the Council s Significance and Engagement Policy that would require consultation. Item SUMMARY/ PREFERRED OPTION 11.1 It is the view of officers that this is a good financial result. Council s financial strategy is to budget for all known expenditure and when a surplus is achieved to repay debt along with meeting other particular needs. Following the extraordinary events of 2016/17 it is recommended that Council prioritise allocation of the surpluses to replenishing the contingency fund and repaying the Rating Area 1 Water Supply deficit. In Rating Area 2, allocations are recommended to the Capital Reserve as per policy The recommendations have been prepared on the basis of the recommendations to the Hastings Rural Community Board Recommendations A) That the report of the Financial Controller titled Draft Financial Year End Result - 30 June 2017 dated 12/09/2017, be received. B) That the funds arising from the Rating Area 2 surplus for the 2016/17 financial year as recommended by the Hastings Rural Community Board be re-allocated as follows: RA2 Surplus on General Rate 380,885 Allocation of Surplus: Community Health Assistance Fund 20,000 Contingency Fund Replenishment 100,000 Rating Area Two Infrastructure Fund 260,885 Allocated Surplus 380,885 C) That the rating surplus be allocated as per the following table: $ TOTAL Rating Rating Area 1 Area 2 Surplus on General Rate 1,160, , ,885 Proposed projects to be funded from surplus Community Health Assistance Fund 100,000 80,000 20,000 Contingency Reserve 500, , ,000 Rating Area One Water Supply Targeted Rate 297, ,411 - Rating Area Two Capital Reserve 260, ,959 Total Allocation 1,158, , ,959 Surplus from Landfill RA1 Water Supply Targeted Rate Account 1,412,373 RA2 Capital Reserve 203,430 $ Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 92

93 File Ref: 17/ Total Surplus from Landfill Allocation 1,615,803 1,412, ,403 D) That Hastings District Council s share of the net Landfill forest harvest be used to repay Rating Area 1 debt and contribute to Rating Area 2 Capital Reserve in accordance with the approved Rating allocation for the Landfill. Item 6 E) That the budgets as per the schedule of Carry Forwards funded by rates and loans be approved to be carried forward to the 2016/17 financial year. F) That a new Contingency Reserve be created. G) That the Chief Executive be delegated authority to prioritise and allocate expenditure from the Contingency Reserve as required. Attachments: 1 Draft Rating Result for the year ended 30 June 2017 CG Dashboard Summary of Financial Performance CG Draft Unaudited Financial Statements CG Detailed Carry Forward Schedule CG Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 93

94 Draft Rating Result for the year ended 30 June 2017 Attachment 1 Attachment 1 Item 6 Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 94

95 Draft Rating Result for the year ended 30 June 2017 Attachment 1 Attachment 1 Item 6 Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 95

96 Draft Rating Result for the year ended 30 June 2017 Attachment 1 Attachment 1 Item 6 Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 96

97 Dashboard Summary of Financial Performance Attachment 2 Attachment 2 Item 6 Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 97

98 Dashboard Summary of Financial Performance Attachment 2 Attachment 2 Item 6 Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 98

99 Dashboard Summary of Financial Performance Attachment 2 Attachment 2 Item 6 Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 99

100 Dashboard Summary of Financial Performance Attachment 2 Attachment 2 Item 6 Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 100

101 Draft Unaudited Financial Statements Attachment 3 Attachment 3 Item 6 Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 101

102 Draft Unaudited Financial Statements Attachment 3 Attachment 3 Item 6 Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 102

103 Detailed Carry Forward Schedule Attachment 4 Attachment 4 Item 6 Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 103

104 Detailed Carry Forward Schedule Attachment 4 Attachment 4 Item 6 Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 104

105 Detailed Carry Forward Schedule Attachment 4 Attachment 4 Item 6 Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 105

106 Detailed Carry Forward Schedule Attachment 4 Attachment 4 Item 6 Finance and Monitoring Committee 12/09/2017 Agenda Item: 6 Page 106