Agenda of Regional Council Meeting

Meeting of the Hawke's Bay Regional Council

Date: Wednesday 26 April 2017

Time: 9.00am

Venue:

Council Chamber

Hawke's Bay Regional Council

159 Dalton Street

NAPIER

Agenda

Item Subject Page

1. Welcome/Apologies/Notices

2. Conflict of Interest Declarations

3. Confirmation of Minutes of the Regional Council Meeting held on 29 March 2017

4. Follow-ups from Previous Regional Council Meetings 3

5. Call for Items of Business Not on the Agenda 9

Decision Items

6. Feedback on the HBRIC Ltd 2017-18 Statement of Intent 11

7. HBLASS Draft Statement of Intent 2017-18 15

8. Recommendations from the Regional Planning Committee 27

9. Capital Structure Review Advisory Committee Appointments 29

10. Affixing of the Common Seal 31

11. Appointment of Independent Directors to the HBRIC Ltd Board 33

Information or Performance Monitoring

12. Maori Committee Chairman's Report on the Meeting Held 11 April 2017 37

13. Annual Plan Progress Report for Nine Months to 31 March 2017 and Reforecasting Exercise for Financial Year ending 30 June 2017 39

14. HBRC Staff Work Programme through May 2017 61

15. Chairman's Monthly Report - to be tabled

16. Items of Business Not on the Agenda 67

Decision Items (Public Excluded)

17. Independent Director Candidates 69

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 26 April 2017

Subject: Call for Items of Business Not on the Agenda

Reason for Report

1. Standing order 9.12 states:

“A meeting may deal with an item of business that is not on the agenda where the meeting resolves to deal with that item and the Chairperson provides the following information during the public part of the meeting:

(a) the reason the item is not on the agenda; and

(b) the reason why the discussion of the item cannot be delayed until a subsequent meeting.

Items not on the agenda may be brought before the meeting through a report from either the Chief Executive or the Chairperson.

Please note that nothing in this standing order removes the requirement to meet the provisions of Part 6, LGA 2002 with regard to consultation and decision making.”

2. In addition, standing order 9.13 allows “A meeting may discuss an item that is not on the agenda only if it is a minor matter relating to the general business of the meeting and the Chairperson explains at the beginning of the public part of the meeting that the item will be discussed. However, the meeting may not make a resolution, decision or recommendation about the item, except to refer it to a subsequent meeting for further discussion.”

Recommendations

1. That Council accepts the following “Items of Business Not on the Agenda” for discussion as Item 16.

1.1. Urgent items of Business (supported by tabled CE or Chairpersons’s report)

Item Name

Reason not on Agenda

Reason discussion cannot be delayed

1.2. Minor items for discussion only

Item	Topic	Councillor / Staff
1.
2.
3.

Leeanne Hooper

GOVERNANCE & CORPORATE ADMINISTRATION MANAGER

Liz Lambert

GROUP MANAGER
EXTERNAL RELATIONS

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 26 April 2017

Subject: Feedback on the HBRIC Ltd 2017-18 Statement of Intent

Reason for Report

1. In accordance with the Local Government Act 2002 (LGA), Hawke’s Bay Regional Investment Company (HBRIC Ltd) is seeking Council’s comments, requirements and/or clarification (as shareholder) on its Draft 2017-18 Statement of Intent (SoI). The Council’s feedback is required by 1 May to enable HBRIC Ltd to consider how amendments are best incorporated into the finalised 2017-18 Statement of Intent for Council adoption on or before 30 June 2017.

Background

2. HBRC initially considered the draft SoI at its meeting on 29 March however the quorum was lost and therefore no resolutions were passed or feedback on the SoI agreed.

3. The Draft SoI is therefore now re-presented to Council to provide comments to HBRIC Ltd within statutory timeframes.

Changes to SOI from 2016-17

4. Most of the proposed changes from the previous year’s SoI relate to the updating of the SoI to reflect current circumstances, e.g. councillor directors and the Supreme Court case relating to the land exchange for the RWSS. In addition, the financial tables have been updated to reflect current projections.

5. The main section in the SoI that requires Council’s clarification and decision is around the proposed dividend level to be included in the SoI. HBRIC Ltd has included a figure of $7M for dividends but acknowledges in their letter to Council’s Chairman that:

5.1. “For planning purposes, in this Draft SoI, HBRIC has assumed the RWSS scheme will proceed within the next 12 months in terms of capital structure (HBRC equity injection) but has not included any “special dividends” from Napier Port in year 1, to underpin the Council’s required 6% on its investment in HBRIC”.

6. The Draft SoI, on pages 6 & 7, acknowledges the decision of Council on 25 June 2014, approving $80M to be invested through HBRIC Ltd for the RWSS, subject to a number of conditions precedents being met. The SoI also acknowledges Council’s resolution that HBRIC Ltd increase its annual distributions (dividends) to Council to provide a 6% long run internal rate of return to Council on the funds HBRIC Ltd draws down from Council from time to time to invest in the RWSS, up to a maximum investment of $80M.

7. The dividends included in the LTP 2015-25 were based on these assumptions. A number of actions were taken as a result of these assumptions/resolutions:

7.1. HBRIC Ltd carried out a series of negotiations with Napier Port to secure a commitment to pay a special dividend to fund the gap in return from the RWSS during the initial years of construction and water uptake. These negotiations were successful and special dividends have been paid by Napier Port during the 2015‑16 and 2016-17 years.

7.2. At the present time, Council holds $60M on bank term deposit pending drawdown by HBRIC Ltd for the RWSS. Council has assumed that these funds would be required to be drawn down prior to other shareholders and the Crown and therefore has invested these funds in short term bank deposits, which have not enabled Council to maximise return on these funds.

7.3. Where actual level of dividends paid vary from the projections in the LTP, these variations were because of delays in the financial close of the RWSS.

8. The table below shows the dividend levels in the LTP 2015-25 and the actual and reforecast levels. The Draft Annual Plan 2017-18 assumes a financial close of January 2018 for the RWSS.

2015-16

2016-17

2017-18

LTP

2015-25

$000

Actual

$000

LTP

2015-25

$000

Forecast SoI 2016-17

$000

LTP

2015-25

$000

Draft Annual Plan

$000

Dividends

7,857

7,298

11,534

9,500

12,283

10,500

(RWSS financial close delayed to 2018-19)

9,980

% of Napier Port NPAT paid as dividends

68%

77%

63%

60%

(Delay RWSS)

9. It should be noted from the table, that:

9.1. The Port dividends paid over the last two years and proposed in the Annual Plan 2017‑18 are lower than the LTP forecast. This has had the effect of Napier Port retaining a higher percentage of the net profit after tax (NPAT) to fund capital development.

9.2. Napier Port revenues have increased to reflect the tonnages redirected from Centre Port, as well as strong regional economic activity, and the letter from the Chair of HBRIC Ltd to Council’s Chairman also stated that “the Port is experiencing strong growth which is forecast to continue”.

9.3. The Annual Plan 2017-18 proposed dividend would result in only 63% of NPAT of Napier Port being paid as a dividend. If the RWSS were delayed until 2018-19 then this figure would be 60% of NPAT. These low percentages of NPAT paid as a dividend reflect the increase in profitability of Napier Port as tonnages increase. It also contributes to the ability of Napier Port to retain significant funding to support capital development.

9.4. The Consultation Document for the 2017-18 Annual Plan was issued for consultation 10 April 2017, and the dividends included in that Annual Plan $10.5M. It is important for Council to provide clarity to HBRIC Ltd on the level of dividend required to be paid during the 2017-18 year. The SoI should also incorporate a lower level of dividend ($9.98M) if the RWSS does not proceed or financial close is delayed until 2018-19; in this case Council would earn interest from funds not drawn down by HBRIC Ltd. This approach is consistent with the 2016-17 SoI.

10. The resolution of the dividend levels to be included in the 2016-17 SoI were clarified and resolved by Council using the provisions of the Local Government Act, specifically schedule 8, section 5 (attached). This section of the Act gives the shareholder of a Council Controlled Organisation (CCO) authority to resolve by resolution, any clarification or modifications that they require to be made to the SoI.

Further to Council discussions on 29 March

11. Several issues outside the scope of the 2017-18 SoI were raised at the 29 March Regional Council meeting, including:

11.1. Payment of an additional $1M Napier Port Dividend to HBRC in the 2016-17 financial year

11.2. The HBRC Capital Structure Review will be addressing ownership of Napier Port and one outcome of that review might be direct ownership by HBRC.

12. The HBRC Capital Structure – Scope and Process document will be amended to include a clause that specifically states that HBRC wants the review to look at the arguments for and against retaining ownership of PONL in HBRIC Ltd or moving to direct ownership and then report back to HBRC. Such arguments to include but not be limited to tax considerations.

13. PONL and HBRIC Ltd are Strategic Assets of HBRC. In order to significantly alter the ownership of PONL Council is required, by its own Significance and Engagement Policy plus legislation, to undertake a Special Consultative Procedure.

Decision Making Process

14. The SoI for HBRIC Ltd is required to be prepared under section 64 of the Local Government Act 2002 (the Act). This is a statutory requirement and is not subject to consultation under the provisions of the Act.

Recommendations

That Council:

1. Requires HBRIC Ltd, under the authority provided by the Local Government Act, schedule 8, section 5, to modify the 2017-18 Statement of Intent to include:

1.1 A dividend level for 2017-18 of $10.5M (if the RWSS proceeds with financial close estimated at January 2018), and $9.98M (if the RWSS does not proceed or financial close is delayed until 2018-19).

1.2 The dividend levels included in the SoI for years 2018-19 and 2019-20 are to be left as “to be advised” (TBA).

1.3 That the ability for HBRIC Ltd to borrow for investment/working capital purposes at any sum greater than 5% of the value of HBRIC Ltd be subject to Council approval.

2. Requests that HBRIC Ltd notes in the SoI, that the HBRC Capital Structure Review will examine ownership of Napier Port and that one outcome of that review might be direct ownership of Napier Port by HBRC.

3. Amends the HBRC Capital Structure – Scope and Process document to include a clause that specifically states that the review will examine the arguments for and against retaining ownership of Napier Port in HBRIC Ltd or moving to direct ownership, with such arguments to include but not be limited to tax considerations.

Authored by:

Paul Drury

Group Manager Corporate Services

Approved by:

Greg Woodham

Interim Chief Executive

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 26 April 2017

SUBJECT: HBLASS Draft Statement of Intent 2017-18

Reason for Report

1. To comply with Schedule 8 of the Local Government Act 2002 the Board of Hawke’s Bay LASS Limited, a Council Controlled Organisation, must prepare and submit a draft Statement of Intent (SoI) to its shareholders for adoption. The purpose of this paper is for Council to fulfil its governance role in providing comments on the Draft SoI for consideration by the HB LASS Board.

Background

2. HB LASS Limited was formed in December 2012 with the five Hawke’s Bay local authorities each owning a 20% shareholding. As such HB LASS Ltd meets the definition of a Council Controlled organisation (CCO).

3. The purpose of a Statement of Intent is to:

3.1. State publicly the activities and intentions of a council-controlled organisation for the year and the objectives to which those activities will contribute; and

3.2. Provide an opportunity for shareholders to influence the direction of he organisation; and

3.3. Provide a basis for the accountability of the directors to their shareholders for the performance of the organisation.

4. In accordance with the requirements of Schedule 8 of the Local Government Act each Council must consider the draft Statement of Intent. The draft Statement of Intent, for which approval is being sought, was received by Council on 5 April 2017 and sets out areas of focus for HBLASS through the 2017-18 financial year.

5. The draft Statement of Intent is appended as Attachment 1.

6. Matters for Council’s consideration could particularly (but not exclusively) include further activities it wishes to see considered by the Board for investigation. As a shareholder Council can then seek the input of these activities into the final Statement of Intent.

7. Feedback is sought from all five shareholder Councils so that a final Statement of Intent can be adopted by the Councils by 30 June 2017.

Discussion

8. The Draft SoI confirms the purpose of the HB LASS as being ‘to investigate, develop and deliver shared services, where and when that can be done more effectively for any combinations of some or all of the councils”. The HB LASS supports the Local Government Act s17A objective of local authorities to continually and periodically ‘review the cost-effectiveness of current arrangements for meeting the needs of communities within its district’. Consequently the HB LASS SoI is unlikely to fundamentally change from one year to the next.

9. The following matters are changes to the 2017-18 SoI compared to the current SoI:

9.1. “Increased value “ inserted as an expected benefit

9.2. Vision statement update to “Hawke‘s Bay Councils delivering value and service through collaboration”.

9.3. Nature and Scope of Activities updated to include “Work collaboratively to identify, assess and develop and implement opportunities. Facilitating collaboration direct with council officers who are responsible for the identified work streams and driving beneficial outcomes”.

9.4. An updated list of feasibility studies that will be considered is provided. The RFP process for Internal Audit services is currently in progress.

9.5. The publishing of a newsletter is proposed six monthly.

9.6. The level of proposed contributions from members is unchanged. Council’s contribution is set at $21,411.00.

Options

10. The options identified are:

10.1. Receive the report and provide feedback as appropriate

10.2. Do nothing

11. The preferred options is that Council receives the report, this meets the purpose of local government by exercising governance over an entity that exists to identify cost-effectives services for the member councils.

Decision Making Process

12. Council is required to make a decision in accordance with the requirements of the Local Government Act 2002 (the Act). Staff have assessed the requirements contained in Part 6 Sub Part 1 of the Act in relation to this item and have concluded:

12.1. The decision does not significantly alter the service provision or affect a strategic asset.

12.2. The use of the special consultative procedure is not prescribed by legislation.

12.3. The decision does not fall within the definition of Council’s policy on significance.

12.4. The persons affected by this decision are ratepayers in the region.

12.5. The decision is not inconsistent with an existing policy or plan.

12.6. Given the nature and significance of the issue to be considered and decided, and also the persons likely to be affected by, or have an interest in the decisions made, Council can exercise its discretion and make a decision without consulting directly with the community or others having an interest in the decision.

Recommendations

That the Hawke’s Bay Regional Council:

1. Receives and notes the draft Statement of Intent of HB LASS for 2017-18

2. Agrees that the decisions to be made are not significant under the criteria contained in Council’s adopted Significance and Engagement Policy, and that Council can exercise its discretion and make decisions on this issue without conferring directly with the community and persons likely to be affected by or to have an interest in the decision.

3. Undertakes to provide any comments on the Draft SOI to HB LASS Ltd by 1 May to enable delivery of the completed Statement of Intent to Council on or before 30 June 2017.

Authored and Approved by:

Liz Lambert

Group Manager External Relations

Attachment/s

⇩1

Draft HB LASS Statement of Intent 2017-18

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 26 April 2017

Subject: Capital Structure Review Advisory Committee Appointments

Reason for Report

1. At the Regional Council meeting on 29 March, it was resolved that Council:

1.1. Forms a Capital Structure Review Advisory Committee comprising the HBRC Chairman, Rex Graham, Chairman of the HBRC Corporate & Strategic Committee, Neil Kirton, the Chairman of Hawke’s Bay Regional Investment Company Ltd Board of Directors, the Chairman of the Napier Port Board of Directors and two suitably qualified independent members to be confirmed by Council at its 26 April meeting.

2. This item is provided for Council to agree the two independent members to be appointed to the Capital Structure Review Advisory Committee.

Financial and Resource Implications

3. Council approved an initial financial provision of $100,000 be set aside for the Review, to be further refined once the Capital Structure Review Advisory Committee has been established and agreed the final scope.

Decision Making Process

4. Council is required to make every decision in accordance with the requirements of the Local Government Act 2002 (the Act). Staff have assessed the requirements in relation to this item and have concluded:

4.1. The decision does not significantly alter the service provision or affect a strategic asset.

4.2. The use of the special consultative procedure is not prescribed by legislation.

4.3. The decision does not fall within the definition of Council’s policy on significance.

4.4. The Council resolved to appoint two independent members, so there are no other options to be considered.

4.5. The decision is not inconsistent with an existing policy or plan.

4.6. Given the nature and significance of the issue to be considered and decided, Council can exercise its discretion and make a decision without consulting directly with the community or others having an interest in the decision.

Recommendations

That Council:

1. Agrees that the decision to be made is not significant under the criteria contained in Council’s adopted Significance and Engagement Policy, and that Council can exercise its discretion and make this decision without conferring directly with the community and persons likely to be affected by or to have an interest in the decision.

2. Confirms the appointments of xx and yy as independent members of the Capital Structure Review Advisory Committee.

Authored by:

Leeanne Hooper

Governance Manager

Approved by:

Greg Woodham

Interim Chief Executive

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 26 April 2017

Subject: Affixing of the Common Seal

Reason for Report

1. The Common Seal of the Council has been affixed to the following documents and signed by the Chairman or Deputy Chairman and Chief Executive or a Group Manager.

Seal No.

Date

1.1

Leasehold Land Sales

1.1.1 Lot 381

DP 11103

CT B2/1284

- Agreement for Sale and Purchase

1.1.2 Lot 3

DP 3976

CT 54/225

- Agreement for Sale and Purchase

- Transfer

1.1.3 Lot 86

DP 13096

CT G1/271

- Agreement for Sale and Purchase

1.1.4 Lot 47

DP 14224

CT F4/1490

- Agreement for Sale and Purchase

4109

4110

4111

4112

4113

4 April 2017

5 April 2017

6 April 2017

18 April 2017

Decision Making Process

2. Council is required to make every decision in accordance with the provisions of Sections 77, 78, 80, 81 and 82 of the Local Government Act 2002 (the Act). Staff have assessed the requirements contained within these sections of the Act in relation to this item and have concluded the following:

2.1 Sections 97 and 88 of the Act do not apply

2.2 Council can exercise its discretion under Section 79(1)(a) and 82(3) of the Act and make a decision on this issue without conferring directly with the community or others due to the nature and significance of the issue to be considered and decided

2.3 That the decision to apply the Common Seal reflects previous policy or other decisions of Council which (where applicable) will have been subject to the Act’s required decision making process.

Recommendations

That Council:

1. Agrees that the decision to be made is not significant under the criteria contained in Council’s adopted Significance and Engagement Policy and that Council can exercise its discretion and make this decision without conferring directly with the community and persons likely to be affected by or to have an interest in the decision.

2. Confirms the action to affix the Common Seal.

Authored by:

Diane Wisely

Executive Assistant

Approved by:

Greg Woodham

Interim Chief Executive

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 26 April 2017

Subject: Appointment of Independent Directors to the HBRIC Ltd Board

Reason for Report

1. This report recommends the appointment of independent members to the HBRIC Ltd Board of Directors, including the appointment of the Chairman, noting the importance of resolving this issue quickly to enable the integration of a new Chairman into the Board of Directors prior to Sam Robinson’s departure as Interim Chairman on 30 June 2017.

2. Further, this report recommends that the HBRIC Ltd Constitution is amended to enable the appointment of three directors, bringing the total number of Directors to eight, and provides the Appointments Committee’s rationale for that.

Council’s Control of HBRIC Ltd

3. Council control of HBRIC Ltd is founded on its ability to appoint and remove directors from the Board of the company, Council’s Statement of Objectives for the company, the Company’s agreed Statement of Intent and its Constitution.

4. The HBRIC Ltd constitution provides for a maximum of seven directors and comprises a mix of Council and independent directors. It is critical to the success of the Board that it has a composition capable of maintaining the confidence of both the Council and the subsidiary companies.

Selection Process

5. On 22 February 2017 Council approved the membership of the Appointments Committee and the process for Recruitment, resolving that Council:

5.1. Confirms the composition of the Council Appointments Committee being two elected councillors, the current Chairman of HBRIC Ltd and one independent experienced director, being:

5.1.1. Mr Sam Robinson (current HBRIC Ltd Chairman)

5.1.2. Cr Rex Graham

5.1.3. Cr Paul Bailey

5.1.4. Independent external experienced director Mr Kevin Atkinson.

5.2. Commences the process for recruiting a Chairman of HBRIC Ltd with urgency using the process, coordinated through the HBRC Chief Executive, of:

5.2.1. The HBRC CE meets with the Council Appointments Committee to establish an agreed position on the key criteria (required skills, knowledge and experience necessary for an effective board) for the role the HBRIC Ltd Chairman

5.2.2. Upon agreement of those criteria, expressions of interest in the role of the HBRIC Ltd Chairman are sought by way of advertisements in both local and potentially national media

5.2.3. On receipt of expressions of interest a short list of candidates is compiled

5.2.4. Shortlisted candidates are interviewed by the Council Appointments Committee with the preferred candidate being recommended to the full Council for ratification

5.2.5. Given the significance of the (Chairperson) role it may be that the preferred candidate meets with the full Council prior to finalisation of the process.

6. The Appointments Committee met to establish and agree the key criteria for the roles of one Director and one Chairperson, including:

6.1. sufficient financial expertise to fill the role of HBRIC Ltd Audit Committee Chair when the current Chair retires, as of 30 June 2018

6.2. experience as a Board of Directors Chairperson.

7. Advertisements seeking suitable applicants were run in Seek, Institute of Directors and HB Today newspaper; resulting in the Appointments Committee receiving applications from 15 people. The Appointments Committee assessed all of the applications as a group on 23 March 2017 and carried out interviews with four short-listed candidates on 6 April 2017.

8. Details of the candidates’ relevant skills and experience and the rationale for the Appointments Committee’s recommendations are contained in the separate Public Excluded Agenda item “Independent Director Candidates”.

Proposal to Amend HBRIC Ltd Constitution

9. The Appointments Committee is proposing to amend the HBRIC Ltd Constitution to enable the appointment of three Independent Directors, bringing the total number of directors to eight (from 7) as follows.

9.1. The Constitution currently reads:

"8.1 Minimum and maximum numbers: The minimum number of Directors shall be three (3), and the maximum number of Directors shall be seven (7)

8.3a. HBRC shall appoint at least three (3) and up to seven (7) Directors to the Board of the Company (including the right to appoint and remove and nominate alternates) in accordance with HBRC’s Policy concerning Director appointments of existing Council Members (“Councillor Directors”), and Directors who are independent of the Council (“Independent Directors”). HBRC shall appoint a Chairperson from amongst the Directors so appointed”

9.2. Suggested change – marked up version:

"8.1 Minimum and maximum numbers: The minimum number of Directors shall be three (3), and the maximum number of Directors shall be eight (8) ~~seven (7)~~”

8.3a HBRC shall appoint at least three (3) and up to ~~seven (7)~~ eight (8) Directors to the Board of the Company (including the right to appoint and remove and nominate alternates) in accordance with HBRC’s Policy concerning Director appointments of existing Council Members (“Councillor Directors”), and Directors who are independent of the Council (“Independent Directors”). HBRC shall appoint a Chairperson from amongst the Directors so appointed”

10. That rationale for this request is twofold:

10.1. to effectively manage succession planning considering the tenure of the current HBRIC Ltd Board of Directors and the retirement of two directors within the next 12 months.

10.2. embed directors into the Board now, effectively saving the additional resources to run another recruitment process in a few months.

Term of Appointment

11. In accordance with the Policy on Appointment and Remuneration of Directors, “Independent directors will normally be appointed for periods of three years. Subject to a review of the director’s performance after each three year period, the normal tenure for a director will be six years. Following six years of service, a director may be re-appointed for a further three years as decided by Council.”

12. This means the terms of appointment of the independent directors will run until 2020, at which time their appointments will expire, but they will be eligible for consideration for re-appointment in accordance with the appointment procedures.

Fees payable to Independent Directors

13. Independent HBRIC Ltd Directors are remunerated at $30,000 per year. In addition, all expenses incurred as a result of attending to the company’s business are reimbursed in full to each and every director incurring such expenses.

14. The HBRIC Ltd Chairperson is remunerated at $54,000 per year, plus reimbursement in full of all expenses incurred as a result of attending to the company’s business.

Financial and Resource Implications

15. The cost to HBRIC Ltd of retaining the services of eight directors, including the additional $20,000 approved for Council Directors, will be $224,000 over the 12 months leading up to the HBRIC Ltd Audit Committee Chair resignation taking effect 30 June 2018.

Decision Making Process

16. Council is required to make every decision in accordance with the requirements of the Local Government Act 2002 (the Act). Staff have assessed the requirements in relation to this item and have concluded:

16.1. The decision does not significantly alter the service provision or affect a strategic asset.

16.2. The use of the special consultative procedure is not prescribed by legislation.

16.3. The decision does not fall within the definition of Council’s policy on significance.

16.4. Options that have been considered include the appointment of one Chairperson and one Independent Director to the HBRIC Ltd Board.

16.5. The decision is not inconsistent with an existing policy or plan.

16.6. Given the nature and significance of the issue to be considered and decided, and also the persons likely to be affected by, or have an interest in the decisions made, Council can exercise its discretion and make a decision without consulting directly with the community or others having an interest in the decision.

Recommendations

That Council:

1. Agrees that the decisions to be made are not significant under the criteria contained in Council’s adopted Significance and Engagement Policy, and that Council can exercise its discretion and make these decisions without conferring directly with the community and persons likely to be affected by or to have an interest in the decisions.

2. Amends the HBRIC Ltd Constitution to enable the appointment of three additional Independent Directors as follows:

2.1. “8.1 Minimum and maximum numbers: The minimum number of Directors shall be three (3), and the maximum number of Directors shall be eight (8)

2.2. 8.3a HBRC shall appoint at least three (3) and up to eight (8) Directors to the Board of the Company (including the right to appoint and remove and nominate alternates) in accordance with HBRC’s Policy concerning Director appointments of existing Council Members (“Councillor Directors”), and Directors who are independent of the Council (“Independent Directors”). HBRC shall appoint a Chairperson from amongst the Directors so appointed

3. Confirms the appointments of x and y as independent Directors on the Hawke’s Bay Regional Investment Company Ltd Board of Directors, the term of the appointments being effective x May 2017; with remuneration of $30,000 per annum plus all expenses incurred as a result of attending to the company’s business

4. Confirms the appointment of xx xx as Independent Director and Chairperson, on the Hawke’s Bay Regional Investment Company Ltd Board of Directors, the term of the appointment being effective x May 2017; with remuneration of $54,000 per annum plus all expenses incurred as a result of attending to the company’s business

Authored by:

Leeanne Hooper

Governance Manager

Approved by:

Greg Woodham

Interim Chief Executive

Rex Graham

Chairman

Attachment/s

There are no attachments for this report.

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 26 April 2017

SUBJECT: Annual Plan Progress Report for Nine Months to 31 March 2017 and Reforecasting Exercise for Financial Year ending 30 June 2017

Reason for Report

1. This report provides progress for the first nine months of the 2016-17 financial year to 31 March 2017 on both financial and non-financial performance measures. In addition, the reforecasting exercise for the financial year ending 30 June 2017 has been undertaken and is reported on.

Summary of Financial Position to 31 March 2017

2. The financial position for Council activities are on budget. Movements for the reforecast exercise are discussed later in this paper.

3. The actual deficit for the first nine months to 31 March 2017 is $4,988,000 against the pro-rata deficit of $5,085,000 giving a favourable variance of $97,000.

4. The following three graphs show this financial position by analysing groups of activities, regional income and total operating position against reforecast budget.

The sharp increases in the operating position in December and June and relate to receiving the interim and final dividends from HBRIC Ltd. The June balance reflects the reforecast net operating deficit of $697,000.

The original budgeted net operating deficit for the year was $487,000.

The significant variations of actual to pro-rata are:

4.1. Land Drainage and River Control ($57,000 unfavourable)

4.1.1. The Land Drainage and River control projects are generally on track after the reforecast process. The one exception is our engineering consulting work which is yet to be fully billed which is causing the unfavourable variance but will take place before the end of the year.

4.2. Regional Resources ($117,000 favourable)

4.2.1. Regional Land Research and Investigations ($61,000 favourable)

4.2.2. This project is seasonal and spending usually occurs later in financial year. All jobs proceeding as planned with the exception of the NIWA model for the Mohaka. The Mohaka model has just been given go ahead but completion may be delayed into 2017-18 financial year although contract should be signed before the end of 2016-17 financial year.

4.2.3. Air Quality ($55,000 favourable)

4.2.4. Surveillance monitoring and Awatoto source apportionment are the major external costs for this project and they are not due for completion until mid-2017. Costs for the source apportionment project and the planned roadside monitoring campaign will be incurred in winter, at the end of the financial year.

Reforecast Position to 30 June 2017

5. All managers have undertaken a review of revenue and expenditure budgets for the nine months to 31 March 2017 and this review has resulted in a reforecast operating account deficit of $697,000. This is an increase of $143,000 over the previous reforecast deficit reported to Council in the 30 December 2016 financial report.

6. Details of this increase in deficit are included in the Attachment 1 financial reports appended to this paper. A high level summary of the significant variances is set out below.

Unfavourable Variances

7. Council overheads have increased $342,000 over the levels included in the Annual Plan. This overspend relates to legal, payroll and recruitment expenditure. This overspend represents 2% of the $14m budgeted for these overhead costs in the Annual Plan.

8. On 29 March 2017, Council resolved to provide up to $100,000 to fund a review of the capital structure for Council and its subsidiaries. This review was not provided for in the Annual Plan 2016-17. The review is scheduled to be undertaken from May to August 2017. Accordingly, $50,000 has been included in the reforecast for 2016-17 and the remaining $50,000 will need to be funded from the Annual Plan 2017-18.

Favourable Variances

9. Considerable time has been spent with managers to review areas of the current Annual Plan budget that may be able to be reduced in order to fund the unfavourable reforecasting operating position.

10. The Annual Plan 2016-17 allowed $850,000 for the provision of regional landcare grants (project 380). Up to 31 March 2017, expenditure of only $275,000 has been undertaken. Discussions with the managers who are responsible for this project have established that known and future commitments for further regional landcare grants in the current financial year will require a further $325,000. This will enable a sum of $250,000 to be reduced from that budget to provide funding to offset other project over expenditure.

11. A further $925,000 has been provided for in the proposed Annual Plan 2017-18 for regional landcare grants.

Options to Fund the Reforecast Increase in Deficit of $143,000

12. From the perspective of exercising prudent financial management, it is important that where possible, Council fund the current year activities from within the revenue provided in the Annual Plan for that year. In this regard, it is worth noting that managers have retained in their reforecast budgets, any amounts they believe may need to be carried forward from the current financial year to the 2017-18 year. Council considers the carry forward requests from staff as part of the Annual Plan hearing submission process in June of each year. Therefore in June Council will have the opportunity to consider reducing the request for carry forward of expenditure by up to $143,000.

13. This should be achievable given the high level of carry forward expenditure approved by Council in previous years. The table below indicates the level of carry forward expenditure previously approved.

Year	Carry forward of Operating Expenditure $
2015-16	410,000
2014-15	444,000
2013-14	633,000

Financial Supporting Details

14. Attachment 1 to this report sets out the details of financial reports:

14.1. Section A – Operating Account

14.2. Section B – Balance Sheet

14.3. Section C – Capital and Borrowing

Non-Financial Performance Reporting

15. Attachment 2 to this report contains all the performance measures included in the 2016-17 Annual Plan, including narratives on progress to date for each measure. Set out below is a pie chart showing a summary of the variations to this Plan:

Land Drainage & River Control Group of Activities *Activity 3 – Other Schemes*
Performance Target	Required Action	Progress Report ( to 31 March 2017)
Develop a programme of Scheme reviews and commence review process with at least 2 Schemes	On completion of the major scheme Level of Service review, determine a Programme of Scheme reviews within available resources.	Off Track Project 240-249 Programme unlikely to be completed this financial year. Focus is on completing levels of service reviews for major schemes this financial year.
Regional Resources Group of Activities *Activity 1 – Land Management*
Performance Target	Required Action	Progress Report ( to 31 March 2017)
Sub-catchment plans implemented for 2 priority sub-catchments in the Tukituki by 2018	Continued promotion and incentivisation of Farm Environmental Management Plans (FEMPs) to be undertaken in priority catchments to achieve target of 250 FEMPs by 30 June 2017	Off Track The number of FEMP's achieved this year is well down on targets. There are approximately 50 plans either completed or nearing completion that are eligible for the FEMP incentive. Feedback from all FEMP providers is that demand for their services has increased markedly in the last few months and between them, estimate there are another 80 FEMP's on their books. The team has put significant effort into marketing and promoting FEMP uptake and the non-achievement of the target is not from a lack of effort.
Governance & Community Engagement Group of Activities *Activity 3 – Community Representation and Regional Leadership*
Performance Target	Required Action	Progress Report ( to 31 March 2017)
Two meetings held per year between HBRC and NKII Board	Schedule at least two HBRC-NKII Board meetings per year	Off Track No meetings have been successfully scheduled.
Strategic Planning Group of Activities *Activity 2 – Strategy & Planning*
Performance Target	Required Action	Progress Report ( to 31 March 2017)
Develop and complete a strategy by July 2018 in preparation for policy development within the RRMP. Strategy adopted by Council by July 2018.	Project manage the East Coast Hill Country strategy for adoption by Council by July 2018 in preparation for policy development within the RRMP	Off Track On-going progress during the reporting period has slowed given other work programme priorities. In 2015-16, an East Coast Hill Country "governance" group was formed and another remains close to official formation in Wairoa. Nevertheless, multiple synergies and relationships are being created through joint projects, and stakeholder meetings in a wide range of topics associated with hill country.
Plan change for outstanding freshwater bodies publicly notified by July 2017	Project manage the development of policy for inclusion in the RRMP and RPS including: Coordinate and integrate all the necessary inputs into the planning processes - Coordinate and undertake the required stakeholder community engagement before notification	NB: Required action statement is not unique to any single plan change project. However in relation to a plan change for outstanding freshwater bodies, work during the reporting period focused on completing work associated with the Community Environment Fund (CEF) project. Outputs of the CEF project will inform the OFWB plan change, but not deliver actual plan change content itself. Draft plan change work programme for identification of outstanding freshwater bodies was presented to RPC meeting in March. RPC requested further advice before agreeing to any particular work programme proposal. Notification date subject to RPC discussions.

Decision Making Process

16. Staff have assessed the requirements of the Local Government Act 2002 in relation to this item and have concluded that, as this report is for information only, the decision making provisions do not apply.

Recommendation

That Council receives and notes the “Annual Plan progress report for the first nine months of the 2016-17 financial year” to 31 March 2017, and the results of the reforecasting exercise up to 30 June 2017.

Authored by:

Manton Collings

Corporate Accountant

Paul Drury

Group Manager Corporate Services

Approved by:

Paul Drury

Group Manager Corporate Services

Greg Woodham

Interim Chief Executive

Attachment/s

⇩1	Financials
⇨2	Non Financial Narratives for 9 Months to 31 March 2017		Under Separate Cover

HAWKE’S BAY REGIONAL COUNCIL

Wednesday 26 April 2017

SUBJECT: HBRC Staff Work Programme through May 2017

Reason for Report

1. The table below is provided for Councillors’ information, to provide them with an indication of issues and activities of interest over the next couple of months in each area of Council.

Group	Area of Activity	Activity Status Update
External Relations	Communications	1. May monthly focus: coastal hazards and coastal marine 2. Collaborative support for Water Symposium (1-2 June) 3. Annual Plan public meetings (1-4 May)
	Transport	4. The next Regional Transport Committee meeting is scheduled for 9 June, where the strategic direction for the next Regional Land Transport Plan will be reviewed. 5. The successful provider of the new bus ticketing system for Hawke’s Bay and eight other regional councils is Init, an international transport technology provider with 30 years’ experience. Init currently supplies Christchurch’s ticketing system. The new system will be installed in Hawke’s Bay buses by June 2018 at the latest. 6. A workshop to commence development of an electric vehicles action plan will be held on 25 May.
	Governance	7. Receipt and recording of submissions on the 2017-18 Annual Plan and scheduling submissions hearings. 8. Continued support for adoption of updated Regional Planning Committee Terms of Reference at 3 May 2017 RPC meeting.
Corporate Services	Finance/ICT/ Corporate Support	9. Provide support for the Annual Plan public meetings during the first week of May 2017. 10. Provide support for the Annual Plan submission hearings 12 & 13 June 2017.
Asset Management & Biosecurity	Land Management	11. Two replacement staff will join the team in May 12. Staff are supporting several working groups for the TANK catchment plan development process 13. Final sign-off of 2016-17 RLS projects and a final push to get more FEMPs in before the end of the financial year 14. Regional Land Managers meeting in Wellington in May
Asset Management & Biosecurity	Engineering, Asset Management and Open Spaces	15. Tutira Regional Park HB Trail Running Event Sunday 23rd April 16. Freshwater Improvement Fund application for Lake Tutira Catchment in drafted, submitted 13 April. Plan “B” being worked on. 17. Tutira Regional Park post pine harvest planting options presently being prepared. 18. Open Spaces staff collaborating with HDC engineers to upgrade the Richmond Rd carpark, Waitangi Regional Park. 19. Tentative community planting dates within open space network winter 2017: 20. Waitangi Estuary wetlands (Waitangi Regional Park) – The Great Give Planting Day – Sat 6 May 2017, 300 plants. 21. Waiohiki – Community Planting Day – TBC Sat 10 or Sun 11 June, 2000 plants. 22. Whakatu – date TBC Sat 17 June, 2000 plants. 23. Waitangi Estuary wetlands (Waitangi Regional Park) – Napier Forest and Bird (Sat 24 June 2017), 2500 plants. 24. Waitangi Estuary wetlands (Waitangi Regional Park) – Clive School Planting Day – date TBC, 350-400 plants. 25. Waitangi Estuary wetlands (Waitangi Regional Park) – Porse Planting Day – Wed 28 June 2017 26. Havelock North (TBC Sat 1 Jul 2017), 2000 plants. 27. Pukahu – Hastings-Havelock North Forest and Bird (TBC Sat 8 Jul 2017), 1400 plants.
	Biosecurity	28. Cape to City a. Third phase of wireless trials continues b. Presenting at Te Papa national conference c. Second Cape to City Maori Hui is being held d. Three year post Doc from LCR and the Big Data centre starts on Pan regional predator control project. 29. Preparation of Regional Pest Management plan discussion document continues. Regional biomanagers meeting in wellington.
Resource Management	Groundwater Science	30. Additional scenarios for managing stream depleting groundwater takes are being modelled, to inform the TANK stakeholder group about the effectiveness of various mitigation options 31. Repairs and priority upgrades to SoE monitoring bores are underway. This includes 10 well casing extensions, pvc inserts or other modifications, along with 3 bore replacements (including bore 10496, Brookvale). 32. Regional shallow nitrate sampling survey is completed and report writing will commence in May 2017 33. Leapfrog geophysical modelling for Ruataniwha aquifers is underway
	Hydrology	34. Heretaunga Springs report is in preparation. 35. SOURCE modelling of river flows is in progress to inform TANK discussions on water management.
Resource Management	Water Quality and Ecology	36. Investigate water quality patterns upstream and downstream of different wintering operations 37. Replacement planting at shading trial sites 38. Evaluate performance of new fish ramps at experimental sites 39. Contribute towards work plans for Whakaki, Tutira and Whatuma Lakes for next financial year 40. Progressing towards web reporting of SOE results 41. Planned fish monitoring to evaluate effects of low flows has not happened yet for obvious reasons 42. New fish ramps survived 1 in 5 year flow events, which is a very promising outcome for this new mitigation option
	Marine & Coastal Science	43. Freshwater Improvement Fund for Ahuriri Estuary has been submitted 44. Development of the Marine Information Strategy continues 45. Providing feedback to national forum on suitable approaches for monitoring towards swimmability in the proposed changes to NPSFM
	Air & Climate Science	46. Planning is underway to undertake roadside air quality monitoring in Napier and Hastings this winter. 47. A source apportionment investigation in Awatoto is coming to a close and the sampling will end this month. 48. Arsenic monitoring will commence in Napier in May for a period of one year.
	Land Science and Terrestrial Ecology	49. The Ahuriri Catchment investigation will continue to map critical source areas (CSA) of nutrients and sediments 50. Critical source areas will also be mapped in the Lake Tutira catchment 51. Sediment modelling will continue in the TANK catchments 52. Soil quality monitoring report for extensive pasture will be completed 53. Formulation of a Heretaunga plains wind erosion monitoring programme with Landcare Research 54. Continued collaboration with Waikato Regional Council for assessments/mapping of riparian margins 55. Wetland inventory and monitoring programme continues 56. Smap (soil mapping) continues in to the north of the region. The whole region will be completed by June 2018. 57. SedNetNZ (sediment modelling) will commence from north of TANK to Mahia (TANK southwards already complete) giving full regional coverage by June 2017
Strategic Development	Resource Management Planning	58. Next TANK Collaborative Stakeholder Group meetings scheduled 27April, 30 May and 14 June. 59. Special Tribunal appointed to determine the application for Ngaruroro/Clive Rivers Water Conservation Order has yet to announce its next steps and call for submissions. 60. Staff reports to RPC in May/June likely to cover: a. framework for outstanding waterbodies in HB b. submission on Government’s ‘Clean Water’ proposals c. scope of Regional Resource Management Plan effectiveness reporting d. RPC Terms of Reference for adoption e. Napier & Hastings urban stormwater management f. update on applications made under Marine and Coastal Areas (Takutai Moana) Act for customary recognition g. Work programme and preliminary matters arising in petroleum regulation plan change preparation h. Submission on Ngaruroro and Clive rivers Water Conservation Order application. 61. Environment Court date to be confirmed to hear part of last remaining appeal (by Fish & Game) relating to wetlands in the RRMP and Plan Change 5. 62. Ongoing involvement in 6 appeal proceedings for proposed Hastings District Plan review, involving further negotiations amongst parties to resolve the last of those appeals. Most likely to be influenced by outcomes of HPUDS Review. 63. Support Stage 3 community engagement programme on Clifton to Tangoio Coastal Hazard Management Strategy project as required. 64. Support preliminary set up of joint working group for drinking water safety (feat. Reps from NapierCC, HastingsDC, HBRC, and DHB) to implement Havelock North water contamination Board of Inquiry’s recommendations. 65. Coordinate receipt of applications served on HBRC for customary recognition under the Marine and Coastal Area (Takutai Moana) Act. 3 April 2017 was deadline in MACA Act for applications to be lodged. Applications are lodged directly with the High Court and/or with Office of Treaty Settlements for direct engagement with the Crown. 66. Provide support for Heretaunga Plains Urban Development Strategy Review adoption by 3 Partner Councils, and oversight of Strategy implementation by HPUDS Implementation Working Group. 67. Collaborative development of Hawke’s Bay Biodiversity Implementation Plan, charitable trust and community forum. 68. Support preparation of planning to implement PC6 for the Tukituki River catchment (in parallel to RWSS Review). 69. Work\with consultant to prepare a regional plan change for regulation of petroleum activities in the region. Schedule a workshop with iwi authority reps to design proposal for engaging with tangata whenua in course of plan change preparation plan change. 70. Continued engagement with Councillors on HBRC Strategic Plan refresh and plan for engaging the Maori Committee and Tangata Whenua reps on the RPC in the development of the Plan.

Decision Making Process

2. Council is required to make every decision in accordance with the Local Government Act 2002 (the Act). Staff have assessed the requirements in relation to this item and have concluded that as this report is for information only and no decision is required, the decision making requirements of the Act do not apply.

Recommendation

That Council receives the HBRC Staff Work Programme through May 2017 report.

Authored by:

Drew Broadley

Community Engagement and Communications Manager

Steve Cave

Asset Manager Open Spaces

Gary Clode

Manager Regional Assets

Nathan Heath

Acting Manager – Land Management

Dr Andy Hicks

Team Leader - Water Quality and Ecology

Gavin Ide

Manager, Strategy and Policy

Dr Kathleen Kozyniak

Principal Scientist Climate & Air

Malcolm Miller

Manager Consents

Anne Redgrave

Transport Manager

Dr Jeff Smith

Team Leader/Principal Scientist – Hydrology/Hydrogeology

Oliver Wade

Environmental Scientist WQ&E

Thomas Wilding

Senior Scientist

Dr Barry Lynch

Principal Scientist / Team Leader - Land

Mark Heaney

Client Services Manager

Joyce-Anne Raihania

Senior Policy and Strategic Advisor- Maori

Dr Stephen Swabey

Manager, Science

Approved by:

Graeme Hansen

Group Manager Asset Management

Liz Lambert

Group Manager External Relations

James Palmer

Group Manager Strategic Development

Attachment/s

There are no attachments for this report.

GENERAL SUBJECT OF THE ITEM TO BE CONSIDERED	REASON FOR PASSING THIS RESOLUTION	GROUNDS UNDER SECTION 48(1) FOR THE PASSING OF THE RESOLUTION
Independent Director Candidates	7(2)(a) That the public conduct of this agenda item would be likely to result in the disclosure of information where the withholding of the information is necessary to protect the privacy of natural persons.	The Council is specified, in the First Schedule to this Act, as a body to which the Act applies.