Emergency Works Bespoke Application

Transcription

1 Appendix 2 A January 2018 P Murphy Senior Investment Advisor System Design and Delivery NZ Transport Agency Private Bag PALMERSTON NORTH 4442 Dear Paul Emergency Works Bespoke Application The Gisborne District Council (Council) wishes to apply for an emergency works - Bespoke application and asks that the Transport Agency considers the following: 1. The scope of the bespoke application to include Cyclones Debbie and Cook and the July 2017 rainfall event for a total of $9.1m. 2. The costs associated with repairs to the network are listed under One Network Roading Classifications and identified forestry routes below. Cyclones Debbie and Cook and July 2017 Event ONRC Category Total Identified Forestry Routes Alternative Route for SH2 Arterial $0 $0 $0 Primary Collector $240,000 $80,000 $0 Secondary Collector $2,138,647 $1,301,992 $454,000 Low Volume $3,299,271 $1,557,426 $0 Access $3,431,172 $664,000 $0 Total $9,109,090 $3,603,418 $454, Council seeks the following relief: 1) The repairs for roads leading to identified forests routes at 100% FAR to a total of $3,603,418. 2) The repairs for Tiniroto Road which is an alternative route when SH2 is closed at 100% FAR to a total of $454,000. 3) The remaining $5,051,672 would be at the enhanced FAR of 83%. 4) The bespoke agreement to commence at the date of the agreement for a period of two years. 5) To keep the scope of this application open until the end of this financial year 2017/18 to cover any future emergency events. PO Box 747 Gisborne 4040 New Zealand PHONE FAX gdc.govt.nz

2 2 Council has submitted an enhanced local road maintenance programme as part of the Draft Regional Land Transport Plan (RLTP) which includes an increased emergency works and local roads maintenance allocation. To fund the local share the impacts will be: To set rates take increases at 5% per annum for the first six years, reducing to 4% from the seventh year. To extend Council s historically low debt levels in line with debt levels of other councils to enable funding of critical activities and infrastructure. This indicates Council s long term financial commitment to supporting its future roading infrastructure needs but the bespoke application will address the immediate crisis. This investment will be viewed as value for money because deferring emergency works repairs until the next RLTP may see more of the network degrade at a faster rate and require a larger investment to reinstate it. This approach also provides a best for customer outcome. I would welcome meeting with you again to discuss this proposal and to present our submission to the Transport Agency. Please feel free to give me a call. For your information Council will also be making two other funding requests: cost scope adjustment to the Gisborne Regional Land Transport Plan an application to accelerate the transition of its revised FAR. I look forward to discussing this further. Yours sincerely Dave Hadfield General Manager Tairāwhiti Roads

3 1. BACKGROUND The Gisborne District Council (Council) seeks a bespoke arrangement for hardship reasons under the definition of a series of large events. The purpose of the request will minimise the impact of impending rate increases on the community and deliver safe roads for heavy transport users. Over the last 18 months the Gisborne District had four emergency works applications funded by the Transport Agency. A summary of the approved applications are funded below: $ 1) Gisborne rain event 8 July ,979,220 2) September ,980,952 3) Cyclones Debbie and Cook ,809,090 4) 21 September 2015 rain event 580,765 Total Approved $12,350,027 In July 2017, the district had another severe weather event causing damage to the value of $3.3m. The application will be submitted in February 2018 and if it is approved the total emergency work costs over the last two financial years would total $15.3m or specifically for 2017/18 to $10.1m. The 2017/18 emergency works total costs and potential Funding Assistance Rates (FAR) is tabled below. Activities FAR Total Cost Transport Agency September $835,321 $526,252 $309,069 Cyclones Debbie and Cook 63 $924,279 $582,296 $341,983 Cyclones Debbie and Cook 83 $4,884,811 $4,054,393 $830,488 Gisborne rain event 8 July $205,000 $170,150 $34,850 July 2017 Rainfall event 83 $3,300,000 $2,739,000 $561,000 Totals $10,149,411 $8,072,091 $2,077,320 Council has reached the point where it cannot afford its local share (even with the enhanced FAR) and has stopped further repair works. Council acknowledges this strategy has significant risk. With the impending winter more road closures are inevitable, levels of service will falter and stakeholders like the forestry industry will be severely impacted. President of the New Zealand Forest Owners Association Peter Clark said There is real concern in the forest industry that some roads will be closed because of their state, and that would be highly disruptive for everyone getting trees out of the forest. One of the recommendations of the latest NZ Transport Agency Investment Audit Report confirmed that some improvements are needed in how we manage the network. Council is following accepted practice in network management. However we are concerned that the increase in heavy vehicles associated with forestry operations will negatively impact the condition of the network and present a risk to the Agency s investment.

4 2 Forestry operations in the Gisborne region are expected to nearly double from 2.5 million tonnes to 4.5 million tonnes in the near future. The majority of this harvesting will begin on local roads before joining the state highway network en route to processing sites. Our field inspection found a number of low volume roads where traffic, especially heavy vehicles associated with forestry activities, had increased markedly to the point the pavements were in distress and presented a safety risk to users. Non-forestry roads, sealed and unsealed, were generally found to be in good condition. This is the rationale for the 100% FAR for identified forestry routes. Tiniroto Road is an alternative route when there are road closures on SH2 between Wairoa and Gisborne and that is why it is proposed that this also be funded at 100% FAR. The remaining emergency works were defined under the One Network Roading Classifications to provide benchmarking if the Transport Agency receives any future bespoke applications from other councils. The district also had an abnormal autumn/winter for March July 2017 that required additional maintenance requirements for the network, refer rainfall figures below. This removed Council s ability to reduce roading maintenance in other work categories to fund the emergency works repairs. Council has submitted an enhanced roading programme as part of the Draft Regional Land Transport Plan , which includes an increase in its emergency works allocation. Therefore, we are confident that we can manage an ongoing series of events in the future if this programme is adopted.

5 3 2. EMERGENCY WORKS EXPENDITURE BEYOND COUNCIL S ABILITY TO RAISE LOCAL SHARE 2.1 Operational Position Council s Assets & Infrastructure Committee considered Report Cyclones Debbie & Cook Emergency Works at its meeting on 30 November The report stated that the existing $2m budget for emergency works had been exhausted. Several options were provided to the Committee but the following option one was adopted. The following explains what Option one is: Staying within Council s existing 2017/18 budget where possible (current operational position). Due to the financial shortfall, all flood damage work has now placed on hold, tenders withdrawn and contractors decommissioned. The remaining storm damaged sites will either be cordoned off or have more permanent fencing installed to make them safe. Council will complete a total of $2.9m repairs this financial year but will then have to stop further repairs as it will not have enough local share to complete the work. The rate impact of the events is detailed below. Emergency Works Total Cost Transport Agency Totals $10,149,411 $8,072,091 $2,077,320 For the 2015/18 National Land Transport Programme, Council has rated the following: Year FAR Annual Budget Transport Agency 2017/18 63% $2,000,000 $1,260,000 $740,000 Even with the enhanced FAR this leaves Council with a deficit of $1,337,320 which is equivalent to a 2.05% rates rise for Gisborne District residents. To complete the 2016/17 emergency works repairs and with the enhanced FAR Council had a local share deficit of $732,388 for the emergency works category. (Details are provided in Appendix 1). 2.2 Hardship The rating provision of subsidised local roads and emergency reinstatement is tabled below: Rates Funding Source Categories of Rateable Land Weightings Capital Value Revenue (excl. GST) Millions Provision of Roads and Residential/lifestyle 1 $3,467,102 Footpaths Industrial and Commercial 2 $966,318 Horticulture and Pastoral 1.5 $2,479,099 Forestry 5 $1,042,255 Sub Total $7,954,774 Unformal Annual General Charge $1,776,226 Total $9,731,000

6 4 Using the current FAR, Council will require an additional $1,337,320 to complete the repair work. This represents an additional 13% of the total annual roading rates. (This excludes the local share deficit of $732,388 for 2016/17 financial year). This series of events is causing a different type of crisis. The emergency works roading deficits are ever increasing and therefore Council is unable to maintain levels of services for heavy transport users. Council s 2017/18 Annual Plan had the total rates of $54.4m plus GST ($62.5m), which covers both regional and territorial responsibilities. Emergency Total Rates Total Roading rates % Pre Event % Post % Increase in Works millions Event local share Totals $54.4 $9,731, The increases in local share required to reinstate the transport network as a percentage of the local authority revenue is 2.46%. This is similar to and ranges around 2.3% to 4% for previously approved bespoke applications for Whanganui, Rangitikei and South Taranaki District Councils. 3. LOCAL ROADS MAINTENANCE PROGRAMME Council submitted its final Draft Regional Land Transport Plan bid in December While not pre-empting the national moderation process, the bespoke criteria requires the estimated annual emergency works local share by applying the policy over the next three years relative to Council s local roads maintenance programme and its annual revenue. The information is supplied but conditional on the following: This does not pre-empt the outcomes of the Draft Regional Land Transport Plan and Draft Long Term Plan. Council will also be applying for an application to accelerate the transition of its revised FAR. 3.1 Proposed Emergency Works Allocations Council will be implementing several measures to rectify the emergency works and other network issues as part of the Draft Regional Land Transport Plan Council s Activity Management Plan (AMP) reflects the expenditure over the last three National Land Transport Programmes (NLTP).

7 5 Council will be seeking an increase from $2.0m to $3.0m per year to adjust expenditure levels with operational spends. The present and future allocations are tabled below. RLTP FAR Actual Emergency Works Allocations Transport Agency 2015/16 61% $2,000,000 $1,220,000 $780, /17 62% $2,000,000 $1,240,000 $760, /18 63% $2,000,000 $1,260,000 $740,000 Draft RLTP FAR Proposed Transport Agency 2021 Emergency Works Allocations 2018/19 64% $3,000,000 $1,920,000 $1,080, /20 65% $3,000,000 $1,950,000 $1,050, /21 66% $3,000,000 $1,980,000 $1,020, Proposed Local Roads Maintenance Allocations Council will be seeking an enhanced programme the details are tabled below: RLTP FAR Annual Budget Transport Agency 2015/16 61% $17,196,000 $10,489,560 $6,706, /17 62% $17,995,998 $11,157,518 $6,838, /18 63% $17,596,002 $11,085,481 $6,510,520

8 6 Draft RLTP FAR Annual Budget Transport Agency 2018/19 64% $25,529,000 $16,338,560 $9,190, /20 65% $25,772,000 $16,751,800 $9,020, /21 66% $25,513,000 $16,838,580 $8,674,420 The information shows the substantial future investment that Council (in partnership with the Transport Agency) is proposing to invest to meet the present and future needs of the network. 3.3 Existing and Future Gisborne District Council s 2017/18 Annual Plan had the total rates of $54.4m plus GST ($62.5m). The proposed rate take for 2019/20 will be $57m. This is subject to Long Term Plan (LTP) approval. 3.4 Financial Position and the Ability to Raise Rates At its meeting on 25 January 2018, Council considered Report Draft Financial Strategy for Consultation. This report outlines Council s financial vision for the next ten years and the impacts on rates, debt, levels of service and investments. Key recommendations in the strategy are to: focus Council expenditure firmly on critical infrastructure and services that are core Council activities set rates take increases to a maximum of 5% per annum for the first six years of the LTP, with the potential to reduce this to as low as 4% from the seventh year extend Council s historically low debt levels in line with debt levels of other councils to enable funding of critical activities and infrastructure

9 7 ensure that those who benefit from the services and infrastructure Council provides pay the costs associated with the provision of those services and infrastructure increase the focus on securing funding from alternative revenue streams (other than rates). The strategy shows that Council is seriously addressing its investment with its core activities (not just roading related) and is confident that we can manage an ongoing series of events if this programme is adopted. The bespoke application will enable Council to get through this recovery process until the LTP and NLT are adopted. Points of the Financial Strategy which are relevant to the bespoke application are: Roading Debt Levels and Emergency Events Council s opening debt leading into the LTP is higher than was forecasted. It is higher mostly due to unplanned roading expenditure that occurred in the financial year ending 30 June Roading overspends resulted in a $4.6m deficit in the roading activity, and as such have led to a higher opening debt position for Council. Over the course of the LTP, the operational overspend in 2016/17 will be rated to be paid back in the form of principal repayments made on internal loans. It is expected that Council will need to review its roading budget in particular and increase its bid to the Transport Agency to better provide for this in the coming years. The frequency of these weather events and the damage they cause is forecast to continue. Grant funding and alternative income streams thus become critical to help fund those projects that are not core infrastructure but still meet the needs of the community. Rates Affordability and Debt Given the demographic projections for Te Tairāwhiti, Council needs to be aware of the pressures on the community in terms of rates affordability. An ageing and working population, with largely static incomes, is not well placed to absorb significant rates increases. Over the last ten years Council has tried to keep rates increases to a minimum. Holding rates increases at 2% is not sustainable and will not help fund core infrastructure or maintain levels of services at current levels. A significant increase in core infrastructure costs and a tougher regulatory environment means it is vital that Council looks to other avenues to raise funds rather than through rates. Current projections suggest rates increases of 4.5% 6% pa plus growth is proposed for the LTP. Council needs to continue to operate within a fiscal envelope that meets our needs over the next ten years and matches the community s ability to pay. Social Deprivation Index The district scores highly on the social deprivation index. Income levels are below national medians, with a median household weekly income of $1,400 in 2017 for both Hawkes Bay and Gisborne combined, compared to $1,578 nationally. This highlights rates affordability as a particular concern and focus for Council.

10 8 Supporting Maori Economic Development Gisborne has the highest proportion of Māori of all regions, with 49% identifying as Māori in the 2013 census compared to 16% nationally. Key legislation governing Council s functions emphasise the significance of Māori cultural values in resource management and participation in decision-making. The district also has a high proportion of Māori land comprising approximately 18% of the district s land area, which continues to have its challenges in terms of productivity and development. Debt from unpaid rates on Māori land continues to be an issue even though we have a high uptake of landowners utilising whenua rahui and other support mechanisms. Council needs to continue to support the development of Māori land to help grow whanau and hapū, encourage economic growth and in turn help grow the Council s rates revenue base. 4. CONTINUE TO PROVIDE APPROPRIATE LEVELS OF SERVICE ON ITS NETWORK OVER THE NEXT THREE YEARS The inability to repair the network is causing considerable strain with stakeholders. The following is an extract from the Gisborne Herald dated August Roads Crisis Too Big For Us The forestry industry says the region s roading crisis is too big for Council and Tairāwhiti Roads to handle alone. A new report entitled Roads in Crisis prepared by Eastland Wood Council (EWC), in association with Federated Farmers, forestry owners and forestry management companies, calls for a joint approach to improving the roads and suggests the Government should be approached to take charge. The region s roads have become a problem that exceeds the role and responsibility of Tairāwhiti Roads and Gisborne District Council to make change. It is paramount that others step in to assist the process, the report says. It points out that forestry, trucking and farming operations are all affected by the region s poor roads. This is a major regional and national problem that requires the council, Tairawhiti Roads, and the forestry and farming sectors, along with central government, to start the process of solving this with appropriate collaboration of stakeholders. EWC chief executive Prue Younger said it was important to note that the report was not about throwing stones but about recognising the scale and urgency of the problem. We want to collaborate to find the solutions and work as a region to support an approach to central government to make that change to the process. Ms Younger said it was now time to act and for the industry to drive a collaborative approach to change the roading crisis. A successful bespoke application will assist the recovery process with stakeholders.

11 9 4.2 Further Mitigation Measures During the 2016/17 financial year the Council could have closed roads (leading to forests) using its existing Traffic and Parking Bylaw but our legal and consultation processes with stakeholders were not ready at the time. Council s Assets & Infrastructure Services Committee has asked staff to reconsider this option leading to the 2018 winter season as a tool to ensure budgets are kept to the NLTP allocations. President of the New Zealand Forest Owners Association Peter Clark said There is real concern in the forest industry that some roads will be closed because of their state, and that would be highly disruptive for everyone getting trees out of the forest. We intend to report back to the Assets & Infrastructure Committee in March 2018 to determine if this option can be implemented. 5. INTERVENTION HIERARCHY 5.1 Local Roads Maintenance Allocation The hierarchy encourages that reinstatement and maintenance activities should take priority over improvements. These series of events combined with an abnormal 2017/18 winter and high export prices for logs has placed pressure on the unsealed network. Council s objective is to meet its 2017/18 local roads maintenance allocation of $17.59m as any increase has local share consequences. One of the recommendations of the latest Investment Audit Report confirmed that some improvements are needed in how we manage the network. Council is following accepted practice in network management. However we are concerned that the increase in heavy vehicles associated with forestry operations will negatively impact the condition of the network and present a risk to the Agency s investment. Forestry operations in the Gisborne region are expected to nearly double from 2.5 million tonnes to 4.5 million tonnes in the near future. The majority of this harvesting will begin on local roads before joining the state highway network on route to processing sites. Our field inspection found a number of low volume roads where traffic, especially heavy vehicles associated with forestry activities, had increased markedly to the point the pavements were in distress and presented a safety risk to users. Non forestry roads, sealed and unsealed, were generally found to be in good condition. Therefore the ability to reduce local maintenance roads expenditure to offset additional emergency works is limited. There is very little risk to the Transport Agency that Council would implement a limited pull back on maintenance if a bespoke agreement is granted. There is a strong demand from stakeholders to ensure minimum levels of service are maintained (refer to Section 4 Appropriate Levels of Service).

12 Capital versus Operational Costs The Gisborne NLTP has several improvements for 2017/18 in progress. WC Activity Total Cost Progress 324 HPMV bridge strengthening $260,000 Tenders closed construction to proceed in February required for continued forestry harvests. 324 Streetlight upgrade to LED $300,000 Project 80% complete. 341 Minor Improvements $1,200,792 Projects at different construction phases but under way. 357 Resilience Improvements $540,000 Projects 50% complete, required to alleviate future emergency works 452 Walking and Cycling Improvements $2,274,778 Design phase underway, driver is the Crown funds of $355k have to be spent this financial. Part of project will be delivered in 2018/19. Total $5,779,762 The improvements are essential for the: heavy transport industry to maintain momentum gaining electricity savings to lower ongoing maintenance costs reduce our increasing deaths and serious accidents on the network alleviate the scale of future emergency works applications Crown funds for walking and cycling projects have to be allocated this financial. The deferring of improvements to pay for operational activities (like emergency works) is not straightforward as one activity may be funded through loans, the other depreciation. Unfortunately they are not transferable. 6. TIME FRAME AND PROGRAMMING As discussed previously all works have been placed on hold and sites made safe with the appropriate traffic management in place. This strategy can suffice in the short term but during another emergency event more damage can occur further increasing the repair value. The high risk sites as determined by the maintenance network team have been made safe. The regulatory environment has become tougher. Council released its Proposed Gisborne Regional Freshwater Plan in Emergency works repairs that were permitted now require a resource consent. For the 2017/18 emergency event we now require 36 resource consents to complete works near waterways and/or in land overlays which are susceptible to erosion. Though we have put on hold on any further works, we are still processing the consents for these sites. Staff are applying for a global consent for any future emergency events but it does put further delays to implementing repairs so our preference is that the bespoke agreement date start at the date of the agreement.

13 11 Under the current policy the enhanced FAR stop at the end of the corresponding financial year. Our bespoke application would ask that this continue as part of any successful agreement to allow for the large number of repairs to complete balanced against available resources. 7. SHORT TERM ENHANCED EMERGENCY WORKS FAR The policy allows for front-loading arrangements with Council s local share likely to be delayed and spread over an extended period. Council s preference is not to adopt this option as we still have to manage future emergency events under the existing policy. A frontloading arrangement could see Council having to find the local share to pay its share of the arrangement plus fund subsequent repairs. Council has submitted an enhanced local roads maintenance and improvement programme as part of the Draft RLTP and if successful will assist the recovery process. Our preference is for a short term enhanced emergency works FAR over a two year period. 8. INTEGRATED TRANSPORT PRIORITY PLAN (ITPP) AND STATE HIGHWAY BUSINESS CASES Council would like to acknowledge the effort the Transport Agency staff have invested in these planning documents. There is a risk that this short term relief package may be dismissed as long-term remedies will be included in these documents. The planning documents may be completed within two years, the actual physical delivery of works is still uncertain.

14 APPENDIX /17 YEAR - EMERGENCY WORKS FINANCIALS Event FAR Total Cost Transport Agency Council Rates Total Claim to Date September $3,980,952 $3,264,381 $716,571 $3,145,631 Gisborne Region Rain Event 8 July 2016 Gisborne Region Rain Event 8 July 2016 Rain event of 21 September $595,385 $488,216 $107,169 $595, $1,178,835 $730,878 $447,957 $1,178, $580,765 $360,074 $220,691 $580,765 Total Emergency Works $6,335,937 $4,843,549 $1,492,388 $5,500,616 For the 2015/18 National Land Transport Programme, Council rated the following: Year FAR Annual Budget Transport Agency 2016/17 62% $2,000,000 $1,240,000 $760,000 Even with the enhanced FAR Council had a local share deficit of $732,388 for emergency works category which it had to pay as part of the 2016/17 roading overspend. This is equivalent to a 1.1% rates rise for Gisborne District residents.