Archive | Councils

Council accounts show revenue & assets up, net debt below forecast

Auckland Council released its unaudited financial results for the June year to the NZX yesterday (because the council has listed debt securities), with more detail to come in 4 weeks.

The deputy auditor-general will complete the audit and issue an audit opinion on 28 September.

Group highlights include:

  • Revenue up 11% ($424 million) to $4.129 billion, ($3.705 billion in 2016), including
    • Rates $1.641 billion ($1.564 billion)
    • Fees & user charges $1.193 billion ($1.083 billion)
  • Operating surplus $340 million before gains & losses ($250 million)
  • Net debt (after cash on hand) up $486 million to $7.969 billion, but $467 million lower than forecast
  • Surplus after tax $640 million ($231 million deficit)
  • Total assets up $2.7 billion to $47.36 billion ($44.68 billion)
  • Net assets $35.78 billion ($33.65 billion).

Auckland Council Group acting chief financial officer Matthew Walker said the group’s financial performance “shows it is balancing the need for prudent financial management with the investment required to address the growth challenges Auckland faces.

“As a successful & increasingly global city, Auckland’s population is growing rapidly. This continually adds to the demands on our transport, 3 waters & community infrastructure such as libraries & parks. Yet the group results show the council is on track to deliver its largest programme of investment ever over the next decade, based on the adopted 2015-25 long-term plan.

In the last year, the council group (including council-controlled organisations such as Auckland Transport & Watercare Services Ltd) delivered $1.66 billion of investment, including its share of the city rail link, now co-funded by Auckland Council & the Government.

Mr Walker said the council sold down part of its diversified financial assets portfolio in August 2016 and issued debt in $NZ, Euro, Norwegian kroner & $A. Meanwhile, it continued to raise debt through the Local Government Funding Agency. He said low interest rates had contributed to a lower cost of funds during the course of this financial year.

“The council maintained its credit ratings of AA (stable) from Standard & Poor’s, and Aa2 from Moody’s Investor Services, confirming our prudent fiscal management and strong debt-servicing capability. These continue to remain among the strongest credit ratings in New Zealand.

“The council has begun the development of its long-term plan 2018-28. While group debt is projected to reach $11.6 billion by 2025, it will remain at a prudent level relative to our income.
“The group’s asset base is expected to grow from $45 billion to $60 billion over that same period to 2025.”

Capex highlights:

  • $310 million on water & wastewater infrastructure
  • $200 million on parks, sports facilities, libraries, community centres & facilities
  • $430 million on roads & footpaths, and
  • $288 million on public transport.

Link: Auckland Council 30 June 2017 accounts (on NZX)

Attribution: Council accounts & release.

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Matching infrastructure to population explosion a key Goff plank

Auckland mayor Phil Goff laid out his vision yesterday to build infrastructure at a rate that would match the region’s unprecedented population growth.

Some funding mechanisms are in place, and the council & Government have agreed bigger funding streams for some areas such as transport, but their budgets still show a $5.9 billion shortfall over the next decade.

The mayor said he would seek staff advice on options for broadening the council’s revenue base, which currently relies on rates to generate almost 50% of its funding. Other options include:

  1. the further development of special purpose vehicles funded by growth infrastructure targeted rates
  2. the application of the targeted rate on accommodation to the informal sector (eg, Airbnb)
  3. the sale of non-strategic assets, and
  4. likely proceeds from various road pricing options & practicality of implementation.

The mayor wrote his 8-page report to set the process going for the council’s 10-year budget (otherwise known as its long-term plan) for 2018-28.

The process now is for the council to run political workshops through September-November, finishing with a more concrete mayoral proposal which will go to more workshops in December, then out to public consultation in March and adoption of the plan on 27 June next year.

Mr Goff wrote in his release presenting the report:

“Our vision for Auckland is a world-class city where talent wants to live. It must be the city which can keep the best & brightest of our young people in New Zealand while competing globally with other cities around the world for skills, entrepreneurship & investment.

“My key focus is to build infrastructure at a rate that matches unprecedented population growth to maintain our quality of life and make it easier to do business in our city.

“Auckland grows by 45,000 people/year and is clearly a desirable place to live. This growth creates opportunities, but it also presents challenges in housing shortages & affordability, growing traffic congestion & pressure on our environment.

“The key to tackling these issues is our ability to lift investment in our infrastructure.

“Investment in public transport, including light rail, in active transport modes like cycling & walking, and optimising our road network is critical.

“That’s why, under our latest Auckland transport alignment project, we have set aside $27 billion for capital investment in the next decade. Currently, $5.9 billion of that is unfunded and has to be found.

“I welcome the Government’s commitment to meet the larger share of that, but Auckland will also need to contribute more.

“The 10-year budget needs to consider where we source our share of the funds.

“The interim transport levy is not user-related and does not raise sufficient funds. We can’t simply impose huge general rate increases to pay for infrastructure, so some form of road pricing will be essential.

“We need to build more houses more quickly. The mayoral housing taskforce makes recommendations which we need to move to implement.

“The unitary plan enables land development, but we need to invest in infrastructure to allow houses to be built. This will involve intensification of houses, as well as new developments under the future urban land supply strategy.

“Use of targeted rates as well as special purpose vehicles through Crown Infrastructure Partners will be essential. That also applies to protecting & enhancing our environment.

“Water quality is a top priority. We need to reduce wastewater overflowing into our streams & harbours. Building new water infrastructure will be our focus, including new wastewater interceptors & green infrastructure.

“While the council is looking for new sources of infrastructure funding, we must also get better value for the ratepayers’ dollar.

“It is time to realise the benefits of amalgamation to deliver further efficiencies & economies of scale made possible by the super-city.

“Findings from our group-wide section 17A value-for-money reviews will be critical, and I want the council to develop group-wide shared services.

“APEC [Auckland will host the Asia-Pacific Economic Co-operation forum leaders’ week from 8–14 November 2021] and the America’s Cup defence add impetus to our planning and provide the opportunity to create a lasting legacy for Aucklanders.

“We have the opportunity to make Auckland more prosperous, smart, innovative, inclusive & culturally rich, with a beautiful environment and choice & opportunity for all.

“With this as our vision and the investment we need in infrastructure, we will make Auckland a world-class city.”

Image above: Auckland mayor Phil Goff, on site shortly after his election as mayor last October.

Links:
Mayoral intent for the 10-year budget (long-term plan) 2018–28
10-year budget 2018-28 road map

Attribution: Mayoral release & plan document.

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Pt England reserve law passed, but still rankles with mayor & board chair

The Point England Development Enabling Bill became law on Wednesday after a 7-month jaunt through the parliamentary process, enabling the Government to complete a Treaty of Waitangi settlement with Ngati Paoa.

The bill was introduced to Parliament on 7 December, passed its first reading 6 days later, its second reading on 23 May and committee stage on 21 June. It returned for its third reading on Tuesday and was given royal assent on Wednesday.

Auckland mayor Phil Goff and Maungakiekie-Tamaki Local Board chair Josephine Bartley said they accepted Parliament had a sovereign right to dispose of the land and they didn’t oppose the treaty settlement, but they remained concerned about the use of special legislation to lift reserve status outside normal statutory processes.

The new law allows for largescale housing development on 11.7ha of the reserve, enabling Ngati Paoa to build 300 houses on the reserve land as part of its treaty settlement.

Mr Goff said: “While the council is supportive of action to accelerate house building in Auckland, this bill raises a number of issues. This legislation prescribes to Auckland Council what it must do with land vested in & administered by the council under the Reserves Act. This prescription circumvents the statutory powers of a local authority responsible for public reserve land under the act.

“That the minister [Nick Smith, former housing minister and now Minister of Building & Construction] intends to micro-manage Auckland’s future rather than give residents the opportunity to have their say sets a worrying precedent. Going forward, the minister needs to promise Auckland that he will consult the council & Aucklanders on matters that affect their future.

“Auckland Council will now engage with the Government to ensure the loss of reserve land is properly managed and that decisions are made by locally elected representatives with public consultation.”

Ms Bartley said: “Our community has been denied the right to shape its own future. There is nothing more that residents can do now. Sadly this bill may further endanger wildlife and reduce green space in Maungakiekie-Tamaki & Auckland.”

Attribution: Parliament, council releases.

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Last-ditch attempt to derail Pt England bill questions super-city rationale

As the Point England Development Enabling Bill heads to its third reading in Parliament tomorrow – and therefore enactment – Maungakiekie-Tamaki Local Board chair Josephine Bartley posed a last-minute question about the rationale for governance changes made in 2010.

It’s not likely to change the course of the legislation, which will turn 11.7ha of the 48ha Point England Reserve over to housing, 2ha for a marae, as part of a Treaty of Waitangi settlement with Ngati Paoa.

But, in an era of carefully ensuring all those who ought to be consulted are consulted before decisions are made, Ms Bartley has asked why Building, Construction & former Housing Minister Nick Smith has usurped powers the Government gave local boards when they were established as part of the super-city governance structure.

She wrote to Dr Smith on Friday: “With the change in Local Government in Auckland in 2010, the Maungakiekie-Tamaki Local Board is responsible for local parks & reserves in our area.

“We aim to make decisions & plans for our parks & reserves based on community engagement. The minister, Dr Nick Smith, in his supplementary order paper [for the bill] circumvents this by stating that no grazing & farming will take place on Point England Reserve, and that Auckland Council must provide sportsfields on the headland where the dotterels & other shore birds are.

“As a local board, we opposed the Point England Development Enabling Bill because of the lack of consultation by the Government with our community and the dangerous precedent it sets of circumventing legislation that protects reserves.

”Again we are being stood on by Government and are being told what to do in our local reserve. If this is the case, then what was the point of the Auckland super-city structure put in place by Government to empower local decision-making?

“I have asked the minister for a meeting to remind him of the issues with this bill and his supplementary order paper on behalf of our local board & Tamaki community.”

Earlier stories:
26 May 2017: Pt England housing development bill passes second reading
19 December 2016: Bill to enable housing on Pt England Reserve passes first reading
7 December 2016: Ngati Paoa to build 300 homes on Pt England Reserve, talks continue on reserve upgrade

Attribution: Board release.

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Bob Dey Property Report diary, week 26 June-2 July 2017

The diary lists council meetings & agendas, hearings & submissions, economic release dates, events, Parliament order paper items and securities.

Council links

All Auckland Council agendas can be reached via http://infocouncil.aucklandcouncil.govt.nz/. The council livestreams (and archives) Town Hall meetings and some other meetings. You can check those at http://councillive.aucklandcouncil.govt.nz/.

Environmental Protection Authority

Board of inquiry hearing:

East-West link, hearing opens Tuesday 27 June at 9am, Ellerslie recourse, Ascot stand, and is scheduled to run for 8-10 weeks (sitting 9-5, Tuesday-Friday the first week, Monday-Thursday thereafter)
Link: Hearing index

Auckland Council

Governing body:

Thursday 29 June at 9.30am, Town Hall:
Summary of the Tupuna Maunga Authority operational plan 2017-18
Final Tupuna Maunga Authority operational plan 2017-18
10, Annual budget 2017-18 (annual plan), for adoption (detailed governing body plan & local body agreements still to come)
Revenue & financing policy
11, Rates setting 2017-18 
12, City Rail Link agreements, for approval (first in public meeting, then in confidential)

Committees:

Forums, panels & boards:

You can check council meeting agendas through this link: http://infocouncil.aucklandcouncil.govt.nz/

In this round of local board meetings, they’re considering relationship agreements with mana whenua, Auckland Transport monthly reports, local grant applications, environment work programmes (including many small projects by locals), and park, reserve, community facility & library work programmes, refreshes of the Auckland Plan maintenance contracts that start on 1 July (Project 17), and Panuku Development Auckland 6-monthly reports at some boards.

Auckland city centre advisory board, Wednesday 28 June at 3pm, 135 Albert St

Papakura Local Board, Wednesday 28 June at 4.30pm, Papakura, council service centre, 35 Coles Crescent:
14, Leona McKenzie memorial seat, Short St, Opaheke
Recommendation
Attachments
Auckland Transport processes to install a memorial seat on a street berm
Auckland Transport application for encroachment form
Information relating to applying for a corridor access request
Auckland Transport fee schedule – corridor access requests
Information from the Ministry of Education website regarding community-funded property
Maps illustrating the distance of parks to the Opaheke School 
Leona McKenzie memorial seat report considered at 26 April 2017 Papakura Local Board meeting
Local board agenda, April 2017, item 22 (pages 81-96)
Related story, 25 June 2017: Take a rest after reading this one – but not on a memorial bench

Hearings:

Meadowbank, 6-14 Meadowbank Rd, application by Meadowbank Developments Ltd (Chris Jones – Southside Group Ltd, Arcus Property Ltd – Arrow International Group Ltd, Cary Bowkett, Alistair & Warren Dryden – Dryden Developments Ltd) for 65-unit residential development comprising a 6-storey apartment building & 3-storey terrace building; council planner Catherine Raeburn has recommended consent; hearing Monday 26 June at 9.30am, Town Hall

Parnell, 24 York St, application by NYS Developments Ltd (Colin & Jan Pauling) to build 6 new residential units through the addition of 3 storeys to the existing building to create a 6-storey building with a communal rooftop area, hearing Thursday 6 July at 9.30am, Town Hall

Submissions:

Dairy Flat, 244 Postman Rd & Wilks Rd, application by Sunrise 9 Trustees Ltd (John Hamilton) for combined subdivision & land use consent for a 43-lot rural residential development, a utility lot & taxi way, including area to site hangars; submissions close Tuesday 11 July

Highbrook, 11 Cryers Rd, application by Establish ECE Ltd (Logan Whitelaw & Paul Rodgers) for a mixed use development comprising 2 buildings – Building C containing a purpose-built childcare centre  providing for 107 children and a 24/7 gym, Building B a 1402m² double-storey retail, commercial & office building; submissions close Wednesday 19 July

Whenuapai, 106 Totara Rd & 50-52 Brigham Creek Rd, application by Whenuapai Land Co Ltd (Cameron Wilson – Oyster Capital Ltd) to build Z service station; submissions close Thursday 20 July

Auctions:

Barfoot & Thompson, apartments & commercial Thursdays at 10am, residential Tuesday-Friday at 10am & 1.30pm, 34 Shortland St
Bayleys, Total Property commercial, Wednesday 28 June at 11am, residential Wednesdays at 2pm, Bayleys House, Wynyard Quarter, 30 Gaunt St
City Sales, apartments, Wednesday 5 July at 12.30pm, 445 Karangahape Rd
Colliers, commercial, Wednesday 12 July at 11am, SAP House, 151 Queen St
NAI Harcourts, Tuesday 27 June at 1pm, Takapuna, 128 Hurstmere Rd
Ray White City Apartments, Thursdays at 12.30pm, 2 Lorne St

Economy:

June

Building consents, May, Friday 30 June
Trade – overseas merchandise, May, Tuesday 27 June

July

Accommodation survey, May, Wednesday 12 July
Building consents, June, Monday 31 July
Consumers price index, June quarter, Tuesday 18 July
Dwelling & household estimates, June quarter – tables, Friday 7 July
Electronic card transactions, June, Tuesday 11 July
Household living-costs price indexes, June quarter, Thursday 27 July
Migration, international travel, June, Friday 21 July
QV house price index, Wednesday 5 July
Trade – overseas merchandise, June, Wednesday 26 July
US Federal Reserve, open market committee, Tuesday-Wednesday 25-26 July

Events:

Waterview Connection, now scheduled to open to traffic in early July

Property Council, Thursday 6 July at 7.15-9am, The infrastructure issue: holding Auckland back, Grand Millennium, 71 Mayoral Drive

HotelsWorld, Tuesday-Thursday 25-27 July, Sydney, 4 consecutive events for hotel, resort & serviced apartment operators, investors, developers, lenders & industry professionals

Facilities Integrate 2017, Wednesday-Thursday 27-28 September at 10am-5pm, Greenlane, ASB Showgrounds

Third tripartite economic summit between Auckland, Guangzhou & Los Angeles, Wednesday-Friday 27-29 September (to be confirmed), Guangzhou
Link: Auckland Council update on the tripartite economic alliance between Auckland, Guangzhou & Los Angeles

Building for better lives, Australian national housing conference hosted by Australian Housing & Research Institute, 29 November-1 December, Sydney, International Convention Centre

Parliament:

Provisional order paper, Tuesday 27 June

Government orders of the day:

1, Appropriation (2016/17 Supplementary Estimates) Bill, second reading (introduced 25 May)
2, Energy Innovation (Electric Vehicles & Other Matters) Amendment Bill, third reading
3, Point England Development Enabling Bill, third reading
4, Land Transfer Bill, third reading
6, Local Government Act 2002 Amendment Bill (No 2), second reading (report of the Local Government & Environment Committee presented 15 June)
10, Te Ture Whenua Maori Bill, committee stage
12, Appropriation (2017/18 Estimates) Bill, committee stage, estimates debate
13, Maritime Crimes Amendment Bill, committee stage
16, Rangitane Tu Mai Ra (Wairarapa Tamaki nui-a-Rua) Claims Settlement Bill, second reading (report of the Maori Affairs Committee presented 20 March)
17, Ngati Pukenga Claims Settlement Bill, second reading (report of the Maori Affairs Committee presented 3 March)
18, Ngatikahu ki Whangaroa Claims Settlement Bill, third reading
19, Ngai Te Rangi & Nga Potiki Claims Settlement Bill, second reading (report of the Maori Affairs Committee presented 21 November 2016)
21, Tauranga Moana Iwi Collective Redress & Nga Hapu o Ngati Ranginui Claims Settlement Bill, second reading (report of the Maori Affairs Committee presented 3 March)
25, Residential Tenancies Amendment Bill (No 2), first reading (introduced 23 May)
29, Ngati Tamaoho Claims Settlement Bill, first reading (introduced 22 June)
32, Commerce (Cartels & Other Matters) Amendment Bill, committee stage
33, Taxation (Income-sharing Tax Credit) Bill, second reading (report of the Finance & Expenditure Committee presented 21 March 2011)
34, Insolvency Practitioners Bill, committee stage
35, Regulatory Standards Bill, second reading (report of the Commerce Committee presented 8 May 2015)
36, Nga Rohe Moana o Nga Hapu o Ngati Porou Bill, first reading (introduced 29 September 2008)

Members’ orders of the day:

2, Private International Law (Choice of Law in Tort) Bill, Sarah Dowie, second reading (report of the Justice & Electoral Committee presented 7 June)
3, Local Electoral (Equitable Process for Establishing Maori Wards & Maori Constituencies) Amendment Bill, Marama Davidson, first reading (introduced 11 May)

Extended sittings:

Wednesday 5 July (effective Thursday 6 July from 9am):
Rangitane Tu Mai Ra (Wairarapa Tamaki nui-a-Rua) Claims Settlement Bill, second reading (report of the Maori Affairs Committee presented 20 March)
Ngati Pukenga Claims Settlement Bill, second reading (report of the Maori Affairs Committee presented 3 March)
Ngati Tamaoho Claims Settlement Bill, first reading (introduced 22 June)

Wednesday 9 August (effective Thursday 10 August from 9am):
Rangitane Tu Mai Ra (Wairarapa Tamaki nui-a-Rua) Claims Settlement Bill, committee stage, third reading
Ngati Pukenga Claims Settlement Bill, committee stage, third reading

Submissions

Friendly Societies & Credit Unions (Regulatory Improvements) Amendment Bill, submissions close Thursday 20 July
Inquiry into 2016 local authority elections, submissions close Tuesday 22 August

Submissions to MBIE on fire safety regulations

MBIE (the Ministry of Business, Innovation & Employment) began a review in 2014 of fire regulation changes made in 2012 and has developed 4 proposals to improve clauses & compliance documents; submissions opened on 15 May and close on Friday 14 July
Link: Fire programme

Securities – NZ

Arvida Group Ltd, annual meeting, Friday 7 July at 10.30am, Christchurch, The Piano, 156 Armagh St
Goodman Property Trust, annual meeting, Wednesday 2 August at 1.30pm, SkyCity Convention Centre
Kiwi Property Group Ltd, annual meeting, Friday 28 July at 10am, Christchurch, Hagley Oval Pavilion
Ryman Healthcare Ltd, annual meeting, Thursday 27 July at 10am, Rangiora, Charles Upham retirement village

You can help fill in the gaps – Got an event you want to tell the world about? Click the email tab – [email protected].

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Take a rest after reading this one – but not on a memorial bench

The family of a woman who made crossing the street to & from Opaheke School, Papakura, a safer exercise for 27 years decided to offer a seat outside the school in her memory. It turns out you could dig a rail tunnel through the middle of the city centre more easily.

Leona McKenzie died in February last year aged 82. Her family’s gift of a seat went before the local board in April and was deferred to May, but only made it back on to the board’s agenda for this week’s meeting, on Wednesday evening.

From what I can see in the many pages of documents about what you might think is a simple gift to remember a very special “lollipop lady”, everything has been done by the book. What the record to this point shows, however, is an extraordinary volume of bureaucratic input – not to mention cost to the donor.

People give to their community. Once upon a time Leona McKenzie’s family might have told the school they’d like to see a seat with a plaque on it at the school gate, the school would have thought it was a good idea and it would have been done.

Now, it’s been past the school, Auckland Transport ($1000 non-refundable deposit required for an application for an encroachment licence or lease of airspace, subsoil or road surface), Education Ministry information has been added, a map showing the distance to nearby parks & reserves has been included, mana whenua haven’t yet been consulted.

One part of this intrigues me: the Auckland Transport documentation refers to “Auckland Transport land”. So you’d be wrong in thinking Auckland Transport maintains land on behalf of its owners, the ratepayers of Auckland – or would you? The semantics can make a difference to people’s thinking & actions.

If the local board decides to fund the memorial seat from the locally driven initiatives capex budget, it runs into another problem. As the comprehensive staff report says, “There is no department to drive the project.”

The super-city was formed for the whole Auckland region in 2010 to improve the provision of services and to streamline how things are done compared to the disconnects between the previous 7 territorial councils and the regional council.

And there do need to be checks & balances. But along the journey we’ve lost our way.

Below, the document trail:
Papakura Local Board, Wednesday 28 June at 4.30pm, Papakura, council service centre, 35 Coles Crescent:
14, Leona McKenzie memorial seat, Short St, Opaheke
Recommendation
Attachments
Auckland Transport processes to install a memorial seat on a street berm    
Auckland Transport application for encroachment form   
Information relating to applying for a corridor access request    
Auckland Transport fee schedule – corridor access requests    
Information from the Ministry of Education website regarding community-funded property    
Maps illustrating the distance of parks to the Opaheke School    
Leona McKenzie memorial seat report considered at 26 April 2017 Papakura Local Board meeting   
Local board agenda, April 2017, item 22 (pages 81-96)

Attribution: Local board agendas.

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Council agrees to sell rest of its financial asset portfolio

Auckland Council’s finance & performance committee agreed yesterday to sell the final $130 million in its diversified financial asset portfolio, but it’s a decision with potential adverse consequences.

The council sold $100 million of the portfolio in May 2016, will sell a further $100 million by the end of the June 2018 financial year and agreed yesterday to sell the balance by June 2018.

The council intends to use the proceeds solely to fund public transport & stormwater infrastructure.

However, turning liquidity to use in developing hard assets could take the council closer to a net debt:total revenue ratio of 270%, and at that point the council would face a ratings downgrade.

Council treasurer John Bishop said in his report a one-notch downgrade would cost $12 million/year in extra interest costs.

Committee chair Ross Clow said the decision to divest the portfolio would help tackle Auckland’s growth: “The fund was originally set up with the express purpose of funding infrastructure across the region when needed. Given the unprecedented challenges Auckland faces, divesting of the remainder of the portfolio and using it to help fund our infrastructure programme is a prudent & sensible financial decision.”

Mr Bishop said in his report the investment fund wasn’t regarded as a strategic asset, and divesting it would give the council the opportunity to repay debt to enable additional investment in infrastructure. “However, replacement liquidity may be required to meet treasury operating limits.”

The Auckland Regional Council established the portfolio, which originally contained its stakes in Ports of Auckland Ltd & Auckland International Airport Ltd, along with an investment portfolio of New Zealand & global equities, bonds & cash. It was used it to establish Infrastructure Auckland, providing seed funds for projects that included the Britomart Transport Centre and the Northern Busway.

It’s been managed recently by 8 external fund managers, with oversight from National Australia Bank subsidiary JANA Investment Advisers Pty Ltd.

Mr Bishop said in his report: “If the portfolio was liquidated to fund a wider Auckland or New Zealand event, it is likely that financial markets would also be negatively impacted. Therefore, when the funds are needed the most, there would be likely downward pressure on the value of the portfolio, meaning the portfolio is a less preferred form of liquidity when compared to cash or committed bank lines.

“Its specific investment objective was to achieve a net return exceeding the consumer price index plus 4% over rolling 10-year periods. JANA estimates an average annual 7% return over rolling 10-year periods. The portfolio has returned 9.1%/year since November 2010, in line with benchmark & ‘market’ returns. The return for the financial year to 31 March 2017 is 5.8%.”

Both EY & Cameron Partners identified the portfolio in their reviews of council funding in 2015 as a commercial rather than strategic asset, meaning continued ownership wasn’t required to ensure delivery of key services or outcomes.

“It was noted that the rationale for holding the portfolio is weak, and it is unusual for an organisation with the objectives of Auckland Council to hold such an asset.”

Mr Bishop said alternative uses for the portfolio funds included repaying debt and accelerating infrastructure investment. However, additional liquidity support might also be required if the portfolio was divested.

“Selling it to repay debt will reduce the risk of a downgrade to the council’s credit rating profile. Under the council’s long-term plan, the ne,t debt:total revenue ratio reaches 265%, meaning little available capacity to undertake further capital investment other than what is already in the long-term plan without breaching this ratio.

“The council’s credit rating agencies have indicated downward ratings pressure if this ratio approaches 270%. Therefore any unforeseen changes to planned operating results, such as a reduction in revenue or increase in debt, could lead to a lower credit rating.

“A one-notch downgrade is estimated to cost the council a minimum 0.15% in higher interest costs, while a bigger downgrade will result in a greater increase. On the council’s current debt portfolio of $8 billion, this results in an additional $12 million/year expense once existing debt is refinanced, more than offsetting the positive return from the portfolio over time.”

Mr Bishop said that as the investment portfolio was reduced, the overhead costs (both internal & external) of administering it became more significant: “Current external overhead costs are about $1.5 million, largely represented by fees paid to JANA & the fund managers. The refined responsible investment policy also requires significantly more oversight of the portfolio, adding additional cost and diverting council staff focus away from more material matters such as managing the council’s debt portfolio, interest rate expense & credit rating profile.”

Earlier stories:
4 April 2008: Auckland Regional Holdings’ “satisfactory” half sees revenue up 45%, profit up 55% to unstated figure
2 March 2004: Auckland gets Infrastructure Auckland $45 million for interchange

Attribution: Council committee agenda & release.

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Council 2.5% rates rise & tourist-targeted rate pass

Auckland mayor won approval yesterday for a 2.5% overall lift in the rates bill for the financial year starting on 1 July, got support for the council to pay staff the “living wage” at a minimum and won what could have been a tight vote on a version of bed tax.

The bed tax will actually be a targeted rate on certain accommodation – large hotels in particular. Against claims that it might be challenged as unlawful, Mr Goff said the council had been advised that the targeted rate was a legitimate device and that it could be passed on to customers.

I’ve long questioned a bed tax as a measure of charging visitors – who you want to like you – fees on top of their already very large input into Auckland’s income, and pouring billions of dollars into Government coffers through gst.

That’s the nub of the split between supporters of a charge on tourists and opponents: the Government takes tax without having to lift a finger, but has been loathe to redistribute it – until pre-election time.

The tourist accommodation targeted rate is intended to support operation of council organisation Ateed (Auckland Tourism, Events & Economic Development Ltd), which many condemn as an unnecessary & extravagant addition to council costs. I’ll come back to that issue another day, but for the moment argue that it has value in raising the region’s economic output.

For a long time council & government talked past each other on funding, but that changed when they jointly worked on the Auckland transport alignment project last year. Although improved funding mechanisms appear to be some way off, the 2 organisations are at least still talking about it.

The budget – the council’s annual plan – returns to the council chamber on Thursday 29 June for endorsement once staff have worked through all the decisions made yesterday.

Links:
12, Final annual budget 2017-18 – Mayoral proposal   
Attachments:
Annual budget 2017-18 – Key budget & rating issues
Other rates policy issues
Implementing a living wage

Attribution: Council meetings.

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Council value for money review gets tick tomorrow

Auckland Council goes to the basics of the super-city tomorrow when its finance & performance committee will formally institute a “value for money” programme review aimed at lifting efficiency savings from $183 million in 2014-15 to $300 million/year by 2025.

The cost-effectiveness review programme also lifts the supervision of council-controlled organisations – particularly the big ones, Auckland Transport, Watercare Services Ltd & Ateed (Auckland Tourism, Events & Economic Development Ltd) – from sniping when one of those organisations steps out of line, to a closer performance audit.

When the super-city council was formed at the 2010 council elections, the new council had a number of key tasks to do, all at once: rationalise services & expenses, equalise costs to ratepayers across all the old 7 territorial council areas, and establish what the new council should & shouldn’t do. On top of that broad equalising, the council had major plans to create for specific areas and, for the whole region, the unitary plan that would combine regional policy statements & district plans in one document.

Given tight timeframes for everything it was doing, the new council didn’t try to go back to ground level in 2010 and decide then exactly what it should be doing across the whole region but, naturally, chose to work with the previous councils’ programmes and whittle them down to a consistent presentation.

Now, the work starts in earnest.

Section 17A of the Local Government Act requires councils to review “the cost-effectiveness of current arrangements for meeting the needs of communities within its district or region for good quality local infrastructure, local public services and performance of regulatory functions”. A review must consider options for the governance, funding & delivery of infrastructure, services & regulatory functions.

The review laid out for the finance & performance committee by value for money programme manager Sally Garrett introduces “a framework to evaluate expenditure and to provide greater accountability to the governing body & the ratepayer on what is being achieved with public expenditure. The objective of the programme is to analyse cost-effectiveness in a systematic manner across the Auckland Council group and to provide a basis on which more informed decisions can be made on long-term planning priorities.”

The first 3-year review programme starts with 2 phases, initially focusing on activities & services considered high priority to assist in the development of the 2018 long-term plan. Ms Garrett says in her report to the committee it’s assumed each review will take 2-4 months and that up to 4 reviews can be run at the same time.

The first 4 reviews will be:

  • 3 waters – water, wastewater & stormwater budget categories
  • Domestic waste – domestic waste services including refuse, recycling, inorganics & organic services
  • Organisational support – communications & engagement services across the council group, followed by a rolling series of reviews including transactional services, payroll, finance, information systems, procurement, human resources, customer services & legal functions, and
  • Investment attractions & global partnerships – how investment attraction & global partnership services are delivered across the group.

Under the programme, expert panels will be appointed in April-May, data for the first 4 reviews will be collected & analysed from May-August, and conclusions & recommendations will flow from July-September.

The woman managing the programme, Sally Garrett, has a long history in this type of work, first in her 5 years as a principal in Ernst & Young’s management strategy group, then for 6 years as Watercare’s business services general manager. During 3 years as an independent consultant, Ms Garrett assisted the royal commission on Auckland governance and put together the programme for Auckland City Council to manage the transition to the super-city council, including overseeing the due diligence phase and the migration of staff & assets.

She joined Auckland Council in 2012 to manage the finance transformation programme and was appointed to run the value for money programme in 2015.

Attribution: Committee agenda.

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Auditor-general argues for more Westgate deal disclosure but doesn’t see wrongdoing

Auditor-general Lyn Provost told Parliament yesterday, in a report tabled on dealings between the Waitakere City and Auckland Councils and Westgate landowner NZ Retail Property Group Ltd (NZRPG), that both councils could have made better disclosure. But she did not disclose any wrongdoing in the financial arrangements.

Image above: The Westgate layout looking down the North-western Motorway toward Henderson, as it was in 2013.

The Auditor-general’s office looked into specific aspects of Auckland Council’s project to develop a new town centre in Massey North (the council name for what NZRPG always called Westgate) after several people raised concerns about the establishment & management of this new town centre. They questioned whether the public & private costs & benefits of the project had been appropriately balanced between Auckland Council & a private developer.

Auditor-general Lyn Provost.

Mrs Provost said the focus of the office’s inquiry was on Auckland Council’s management & governance of the project from 1 November 2010, when the newly amalgamated council inherited the project from the now dissolved Waitakere City Council.

“One of the concerns raised with us was about the lack of transparency, in particular being unable to access information about the project. In our view, Auckland Council could have made more information about this development available. It is important that local authorities strike the right balance between balancing commercial sensitivity, maintaining legal privilege as appropriate and being open with ratepayers & elected officials. Such openness allows public discussion & debate, and is essential to supporting public sector accountability. This exercise has highlighted once again the importance not just of making good decisions but also of being able to show that good decisions have been made.”

The background

A block in the first Westgate stage, pictured in 2012.

Companies in the NZRPG group owned or controlled much of the land where the new town centre was to be located. As a result, Waitakere City Council entered into a memorandum of understanding with NZRPG in 2004 to establish a collaborative working relationship to design & develop the town centre. In 2010, the council & NZRPG entered into a suite of contractual arrangements for the actual development of the new town centre and the sharing of the costs between them.

“While the focus of my inquiry was on Auckland Council’s management & governance of this project from 2010 onwards, concerns were also raised about Waitakere City Council’s decision to pay the developer $6 million for a street in the existing Westgate shopping centre. Concerns had been raised about this purchase because, usually in a new development, a developer will bear the cost of constructing roads – which then vest in the council at no cost when land is subdivided.

“Accordingly, in order to provide sufficient context, my report sets out additional background detail about the decision-making process undertaken by Waitakere City Council in relation to the purchase, and the basis on which the purchase price was agreed.

“Concerns were also raised with my office about the contractual arrangements between Waitakere City Council (and, subsequently, Auckland Council), Transpower & NZRPG to relocate transmission lines passing over the development, underground. Waitakere City Council entered into an agreement with Transpower to pay the costs of the relocation.

“The evidence supports the need to relocate the power lines for the development of the town to proceed.

Development in 2015: The first stage of the North-west shopping mall completed, ground works started for stage 2 and the public square, Te Pumanawa.

“In the agreement with Transpower, Waitakere City Council accepted the primary responsibility to pay all the cost of relocating the lines – that is, its own 35% & NZRPG’s 65% share of the cost. The share of the costs to be paid by NZRPG would be recovered under a separate agreement between Waitakere City Council & NZRPG.

“Waitakere City Council was clearly aware that, in accepting the primary payment risk, it needed to protect its position in case NZRPG failed to pay its share of the costs. It put in place several mechanisms to provide this protection, including an offsetting agreement.

“Importantly however, although Auckland Transition Agency confirmed the agreement with Transpower, it did not confirm the offsetting agreement. As a result, the agreement with NZRPG to pay its share was legally invalid. As a result, the council was party to a binding contract to pay the full costs of relocating the power lines without having a corresponding binding contract in place to recover NZRPG’s share of the costs from NZRPG.”

Auckland Council inherited the project and the issue relating to the legal invalidity of the agreement, and resolved this issue by entering into a new agreement with NZRPG to share the costs.

“However, in 2012, it then decided to postpone NZRPG’s obligation to pay its share. Council documents indicate that this decision was made because it perceived a risk to the progression of the project. The result of this decision has been that the financial risk borne by the council & its ratepayers will continue until such time as NZRPG’s contribution has been fully paid. As at 20 September 2016, NZRPG had paid about $3 million of the $11.3 million it owed to Auckland Council.”

Mrs Provost said Waitakere City Council carried out several infrastructure works at its own expense, as part of its contractual relationship with NZRPG. This included construction & widening of roads, the development of intersections, provision of water supply & wastewater services, and the design & construction of the town square & library. “The intention was that the council would subsequently recover some of the costs associated with this work through development contributions to be paid by the developer….

“The calculation of development contributions in this project was not straightforward, given the complexity of assessing the balance between the public & private benefits of the development. We have been unable to ascertain or calculate the value of the development contributions, but expect it to be a significant amount of money.”

On 28 October 2010, days before Auckland Council took office, Waitakere City Council reached an agreement with NZRPG to vary the amount & timing of payments of development contributions.

This was recorded in an exchange of letters over 2 working days, but Mrs Provost said the Auckland Transition Agency didn’t confirm the decision.

“Auckland Council subsequently entered into an agreement with NZRPG to formalise the development contributions arrangements. The agreement provides for the offsetting of some of the development contributions owed, as well as the postponement of when some development contributions are to be assessed & paid.

“While there are still development contributions payable by NZRPG before the end of the project, Auckland Council has taken on a greater risk at this stage in the project by the postponement of these payments. Whether the final amount of development contributions is appropriate will need to be weighed up as part of the overall balance of costs between the parties at the conclusion of the project.”

Specific steps taken by Auckland Council

Once Auckland Council became responsible for the project, Mrs Provost said it immediately sought legal advice on the agreements it had inherited.

“It became clear that the Auckland Transition Agency had not confirmed all of the agreements, which was a prerequisite for transfer to Auckland Council. Auckland Council signed replacement agreements to ensure that they were all legally valid. In October 2011, the regional development & operations committee of Auckland Council agreed that a review into probity issues raised at the committee be conducted and that the review be reported back to the committee for further consideration. Auckland law firm Meredith Connell was commissioned to undertake that review.

“In my view, commissioning this review was good practice given the complicated matrix of arrangements between the former Waitakere City Council & NZRPG. The review put Auckland Council in a good position to understand the obligations it had inherited and any risk that it might need to manage.

“The Meredith Connell review was summarised & discussed at the public-excluded part of the June 2012 regional development & operations committee meeting. The committee agreed that the report & associated resolutions remain confidential until the reasons for confidentiality no longer exist.

“Auckland Council has since improved the contractual arrangements with NZRPG, including linking payments more directly to the delivery of work and instituting a better procurement process for subcontractors working on the new town centre.”

Auditor-general’s conclusions

Mrs Provost concluded: “The amount of information provided to the elected members of Auckland Council on this development could have been more comprehensive. Councillors have been concerned about the project and should not need to resort to me to get answers.

“In my view, the risks involved with this development warrant greater involvement by Auckland Council’s governing body in overseeing the project, including its costs. More information & clarity about the issues that management need to refer to the governing body would help this oversight.

“Public concerns have been raised with my office, and directly with Auckland Council, about the lack of transparency with this development. My office received complaints from members of the public who have been unable to access information about the project, including the Meredith Connell report. Similar concerns have been expressed to my office by council members.

“It is important that local authorities strike the right balance between balancing commercial sensitivity, maintaining legal privilege as appropriate and being open with ratepayers & elected representatives to provide transparency about the agreements they enter into and to demonstrate that they are getting value for money. Such openness allows public discussion & debate, and is essential to supporting public sector accountability.

“In my view, Auckland Council could have made more information about this development available. Auckland Council obtained the Meredith Connell advice on a confidential basis and has treated the report as legally privileged & commercially sensitive.

“Given the public interest and that commercial sensitivity has likely reduced with the passage of time, I encourage Auckland Council to consider what information it could now release – including all or some of the Meredith Connell report.”

Link:
Auditor-general’s statement & report

Attribution: Auditor-general’s office.

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