130 Council 3 February 2015

Transcription

1 130 3 February 2015 Financial Strategy DC No: 45 Purpose 1. To outline the key elements of the Financial Strategy that is to be adopted as part of the Long Term Plan in March 2015 and to consider financial expenditure related to Transportation and the Bay Oval. Executive Summary 2. This report outlines the key elements of the Financial Strategy to be adopted as part ofthe Long Term Plan (LTP) in March A Financial Strategy is required under section IOIA of the Local Government Act and is required to include quantified limits on rates, rates increases and borrowing. 4. The draft strategy will be developed and approved along with 's approved draft LTP in March. Key components of the draft strategy will be included in the consultation document and a full copy of the draft strategy will be available on the TCC website. The purpose of this paper is to outline the key components of the Financial Strategy. 5. Expenditure reduction options for Transportation have been recommended by staff where they make significant savings to the Transportation budget with a low risk to assets and a low probability of customer complaints. The staff recommended options have been included in the draft LTP financials. 6. Capital and operational expenditure to enhance the Bay Oval is also proposed for consideration by. Recommendation/s That the : a) Receive for information the key elements of the financial strategy as outlined in Section 1 ofthis report. b) Endorse Transportation savings recommended by staff and included in the Draft LTP as listed in Attachment A Table 2. c) Agree to add additional capital budget for improvements to the Bay Oval totalling $348,250 over four years from (as detailed in Attachment B) and additional opex of $62,000 per annum for maintenance of the Bay Oval training facility. Financial Strategy -1 -

2 ^^A. TauranqaCity February 2015 Discussion Section 1: Elements ofthe Financial Strategy 7. The financial strategy will be closely aligned to the consultation document and the infrastructure strategy. 8. Local Government Act 2002 Requirements As part ofthe Long Term Plan, is required to adopt a Financial Strategy. This can be split into two distinct requirements. Requirements that can be met following decisions in the LTP or previous discussions. Requirements that need further specific direction from. 9. Requirements that can be met from decisions on the LTP Requirements that are met by decisions in the LTP process include: Expected changes in population and land use and the capital and operating costs of such i.e. Growth related costs Capital expenditure on infrastructure to maintain levels of service, i.e. renewals Capital expenditure on flood protection and flood control i.e. Stormwater costs Assessment of 's ability to meet levels of service and additional demand and any significant factors that may impact on 's ability to meet these Agreement to 's Treasury Policy including: Policy on giving security for borrowings Objectives for holding and managing financial investments and equity securities - Targets for returns on financial investments and equity securities. These elements will be incorporated following 's decisions on LTP papers in February. 10. Requirements that require further Specific Direction from Requirements that need further specific direction from include: Ouantified limits on rates, rates increases, and borrowing; 11. Ouantified limits on borrowing. There is no specific direction included in the LGA with regard to how this limit may be expressed and can be in both dollar and ratio form. A ratio approach has been used in the past which is referred to in the Treasury Policy. This is also consistent with the benchmarks required to be reported on as part ofthe Annual Report. Elected Members could look to continue with the existing reference to the Treasury Policy or look to set a lower limit in the financial strategy in line with the projections in the draft LTP reflecting a lower debt to revenue ratio e.g. 230% Financial Strategy - 2 -

3 ^^A. TauranqaOty X^x 3 February 2015 Net interest expense as a percentage of revenue is also included in the Treasury Policy and could be incorporated into the financial strategy. This is required to be reported on in the Annual Report. Recommended ratios will be included when the draft is adopted. 12. Quantified limits on rates Again the LGA is silent in terms of how these limits are set noting that the limits need to be reported on in each Annual Report. The current approach is to use the total rate requirement as adopted in the LTP. 13. Ouantified limits on rates increases A number of options exist for stating this limit including A fixed amount A percentage increase that relates to inflation plus allowance for other increases (current approach is CPI plus 2% plus growth) A percentage increase made up of components of price increase, growth increase and level of service increase 14. No specific recommendations on the financial strategy are made at this time. Each of the above options will be presented once decisions on the LTP have been made in February. Section 2: Other Financial Matters 15. This section identifies options for expenditure reductions in Transportation and additional expenditure at the Bay Oval. Transportation Savings 16. has directed staff to provide options for reducing the proposed Transportation budget for the Long Term Plan (LTP). 17. Opportunities for cost savings and budget deferrals in the capital programme for renewals and minor projects and in the operational programme for maintenance and operations are considered and recommendations made. Discussion 18. Attachment A, Table 1 shows the ongoing savings from earlier decisions. 19. A range of further savings have been identified and considered for inclusion in this LTP. The staff recommended options are summarised in Table 2 of Attachment A and include: Deferral of the budget for upgrading LED streetlights to year four of the LTP moving $500,000 ($260,000 after subsidy) per year from years 2 and 3 to years 10 and 11. Reduced the frequency of refreshing road markings, saving $140,000 (around $71,000 after subsidy) per year Financial Strategy - 3 -

4 ^ 142 TauranqaOty 3 February 2015 ' Moving the footpath construction budget into the Minor Improvements budget to attract NZTA subsidy and saving $90,000 to $93,000 per year. 20. The expenditure reduction options above have been recommended as they make significant savings to the Transportation budget with a low risk to assets and a low probability of customer complaints. The staff recommended options have been included in the draft LTP financials. 21. A range of other options are also available. These are summarised in Table 3 of Attachment A. as identified below. These options are considered to pose a risk to safety, assets or whole of life cost or because they will lead to a significant increase in customer dissatisfaction and complaints. 22. Further detail regarding the Transportation activity expenditure programme is provided in Attachment A. Bay Oval Additional Expenditure 23. Following the success of the recent international cricket matches at Bay Oval, staff worked with Bay Oval Trust on improvement opportunities that would improve the public experience of the park as well as helping to improve the profile of the Bay Oval as a premier facility for sporting events. 24. A number of projects with wider park/public benefit were identified. These include projects to improve park access and profile as well improving park security through perimeter fencing. The total cost of proposed work is $348,250 over 4 years commencing in 2015/16 as detailed in Attachment B. 25. Operational funding is proposed for maintenance of the grass cricket training facility. Initial cost estimates are $62,000 per annum. 26. The costs proposed are indicative and are subject to further review by staff. Options Decision 1 - whether to endorse Transportation savings recommended by staff and included in the Draft LTP as listed in Attachment A, Table 2 and/or include further savings from those identified in Attachment A Table 3. See Attachment A of this report. Financial Strategy - 4 -

5 4^ February 2015 TauranqaOty Decision 2 - whether to add additional capital budget for improvements to the Bay Oval totalling $348,250 over four years from (as detailed in Attachment B) and additional opex of $62,000 per annum for maintenance ofthe Bay Oval training facility. Option Pros Cons Status Quo - can choose to not add additional capital budget for improvements to the Bay Oval totalling $348,250 over four years from and/or additional operational funding of $62,000 to the Parks and Recreation activity for Bay Oval training facility maintenance. No additional expenditure. No enhancement of Bay Oval. 2. can choose to add additional capital budget for improvements to the Bay Oval totalling $348,250 over four years from and/or additional operational funding of $62,000 to the Parks and recreation activity for Bay Oval training facility maintenance. Enhancement of Bay Oval. Additional expenditure. Consideration strategic Context 27. This report identifies elements of the financial strategy which are required under the Local Government Act 2002 Section 101A to be prepared as part of the Long Term Plan. Significance and Engagement 28. The Financial Strategy is significant as it identifies limits on rates, rates increases and borrowing over the period of the long term plan. Key components of the financial strategy are intended to be identified within the consultation document of the draft Long Term Plan. Financial Strategy

6 TauranqaCity 14i 3 February 2015 Implementation 29. The Financial Strategy will be presented to in early March 2015, and will be available on the website during the consultation process. Any expenditure adjustments agree as a result of this report will be incorporated in the draft Long Term Plan prior to consultation. Attachments No. Title Transportation savings Objective: ID: A B Bay Oval Expenditure proposals Objective ID A Signatories Author Authoriser Kathryn Sharplin, Financial Controller Martin Parkes, Manager Transportation Kiri Pope, Manager Parks and Recreation Paul Davk^on, Chief Financial Officer Financial Strategy -6

7 4^ TauranqaOty Attachment A: Transportation Expenditure Previous savings continued through this LTP Table 1, below identifies the savings made to the transportation budget from the 2012/22 LTP and subsequently. Table 1 - Ongoing transportation savings (since budgets) Option description Aiter tiie balance of reseals and OPEX vs pavement reiiabilltation to reduce the overaii pavement maintenance and renewal budpet Ciiange tlie 'iii<e for liise" pavement LoS to increase tiie proportion of ttie networit ttiat can be ctiip sealed FReduce the TravelSafe budget and rationalize the programme / bringing services in-house (since 2011/12 budget) iviowing and vegetation control - ongoing budoet reductions Changes to the NZTA funding assistance rates (estimated based on 2012/13 budget) Savings (Savings after NZTA subsidy) 2015/16 / /18 $550,000 $550,000 $550,000 ($427,500) ($634,750) ($699,000) Ongoing $550,000 ($827,500) $340,000 $340,000 $340,000 $340,000 ($180,200) ($176,200) ($173,400) ($166,600) $350,000 $350,000 $350,000 $350,000 ($185,500) ($ ) ($178,500) ($ ) $220,000 $220,000 $220,000 $220,000 ($116,600) ($114,400) ($112,200) ($107,800) $407,021 $546,055 $685,089 $936,156 ($407,021) ($546,055) ($685,089) ($936,156) staff recommended options The following options are recommended for implementation through this LTP and have already been included in the corporate planning database. They are identified as making good cost savings with minor negative impacts on assets and customer expectation. Table 2 - Staff recommended savings incorporated Into LTP financials Option description Savings (Savings after NZTA subsidy) Pros Cons 2015/16 / /18 Ongoing Defer budget for LED upgrade to next LTP. Continue to 0 $500,000 $500,000 replace failed lanterns with LED and alter IDC to require LED for new developments (reducing future upgrade costs). (0) ($260,000) ($255,000) Reduced frequency of re-marking of road markings and use $140,000 $140,000 $140,000 $140,000 long-life road markings at arterial and collector intersections as ($74,200) ($72,800) ($71,400) ($68,600) appropriate Move footpath construction budget into minor improvements to attract NZTA subsidy * Deferral - requires additional budget in years 10 and 11. 0*. Defers CAPEX (0)- Allows time to re-negotiate power charging structure Allows time to Improve specification of lanterns and maximize economy of scale Reduced ongoing costs $89,300 $91,200 $93,100 $93,100 Cost saving to TCC ($89,300) ($91,200) ($93,100) ($93.100), Maintain existing programmes at lower cost Delayed reduction in energy consumption Delay in achieving long-term savings on power, maintenance and renewals Trial may not be successful leading to safety Issues and customer complaints Additional options The following options could make additional savings from the transportation activity. However they are not recommended due to a risk to the asset, a potential Increase in whole of life costs or a reputational risk to. None Table 3 - Additional options for savings from the transportation budget (not recommended by staff) Option description Liltely savings (Savings after NZTA subsidy) Issues 2015/16 / /18 Ongoing 1 i^aintain existing l<erb and channel budget and programme (no additional stormwater budget) 2 Defer Devonport Road/Elizabeth Street intersection renewal to year two $250,000 -$250,000* of the LTP ($132,500) (-130,000)' 3 Reduce sign renewals programme by $35,000 35,000 35,000 ($18,550) ($18,200) 4 Reduce the level of service and remove foolpath and street fumiture edging except in high-profile areas. Retain kerb and channel edging throughout networi( $250,000 $250,000 $250,000 $250,000 ($250,000) ($250,000) ($250,000) ($250,000) ,000 J9L 35,000 ($17,850) ($17,150) $250,000 $250,000 $250,000 $250,000 ($238,250) ($238,000) ($237,750) ($237,250) Lose opportunity to attract NZTA subsidy on stonnwater upgrades (attracting subsidy currently appears unlikely) Could increase the time tai<en to achieve stormwater upgrades f\^aintains existing LoS as opposed to increasing LoS - possible reputationalrisl<if fiooding occurs IVIinor increase in OPEX Possible level of service and safety issues Lose opportunity to remove sign clutter and reduce future OPEX and renewals costs. Lil<ely to be a significant rise in customer complaints Reduced level of service Footpaths lose usable width (risl< to asset) Loss of amenity Objective ID: A o I 3

8 Option description Liltely savings (Savings after NZTA subsidy) Issues 5 Reduce the minor projects budget $150,000 $150,000 $150,000 $150,000 Lose momentum in improving road safety record - possible increase in crashes and safety risi<s ($79,500) ($78,000) ($76,500) ($73,500), Relationship issues with i<ey road safety partners and our communities do to a reduced financial commitment to Delete footpath construction budget and deliver programme from existing minor improvements budget 'Deferral - requires additional budget in year 2 $230, , , ,000 ($230,000) ($190,000) ($190,000) ($190,000) ongoing safety improvements Lose ability to maximize extemal investment by malting a share of larger projects funded by developers or other parties (opportunity costs) Reduced ability to address safety issues as they emerge - possible increase in crashes Reputational risk as lose flexibility to deal with and prioritise transportation and safety issues in our communities Less flexibility in minor improvements programme Reduction in funding available for minor improvements (with issues as outlined for option 5) Reduction in funding available for footpath construction programme leading to possible safety issues and customer complaints. Accessibility and safety issues where footpath lini<s are missing or Incomplete

9 Attachment B: Bay Oval Expenditure proposals Project description Justification Budget Year Funding Source Improve vehicle access to public toilets and maintenance shed Excessive wear and tear in summerand winter negatively impacts turf (in a very high profile location) 30, m wide reinforced concrete perimeter walkway. Some minor Perimeter walkway bund contouring is required at northern end of embankment, 100, m wide reinforced concrete walkway connecting Maunganui Rd Linkage walkway off Maunganui Rd to pavilion 32, Multi Use building/shelter to be used by both winter and summer sports. Power supply to enable shelter to be used for event Pergola Structure/Ticketing office Maunganui Rd ticketing and use for weekend sports. 15, Way-finding lighting adjacent to pathways (Maunganui Rd Passive Lighting linkage and perimeter) 25, rnprove park visibility off Maunganui Rd and Kawaka Street Signage and improved visibility ofa high profile entrance. 20, % TCC ($20k), 50% Private (S20k) Install turf irrigation throughout the embankment for improved Embankment irrigation aesthetics 70, Permanent fencing to secure site along boundary of hockey turf development 15, Install pipe and mesh boundary fencing adjacent to railway Operational Funding Provide maintenance funding for practice wickets at local level of service Current lack offence makes site security difficult dunng events. 40, , Per annum ongoing 0) o 3" 3 (D rf UJ